51 Sever, I., Bednarik, J., & Šugman, R. (2000). The financing of sports organisations in Croatia and… KinSI 6(1–2), 51–56 THE FINANCING OF SPORTS ORGANISATIONS IN CROATIA AND A COMPARISON WITH SLOVENIA FINANCIRANJE [PORTNIH ORGANIZACIJ V HRVA[KI IN PRIMERJAVA S SLOVENIJO Ivo Sever* Jakob Bednarik** Rajko [ugman** Abstract The principal aim of the article is to analyse the finan- cing of sports organisations in Croatia and to draw a comparison with the financing of sports organisations in Slovenia. The analysis involved those sports orga- nisations in Croatia and Slovenia which provided the final balances of their accounts for 1998. Sports organisations in Croatia are mostly financed through their own activities. Accordingly, one can conclude that their model of financing resembles the European model of sports financing. The Slovenian and Croatian models of income and expenditure of sports organisations are very similar. Slovenian sports organisations are relatively more financed by private sources. Keywords: Croatia, Slovenia, financing, sports orga- nisation, funding, expenditure Izvle~ek Glavni namen sestavka je analizirati financiranje {port- nih organizacij v Hrva{ki in ga primerjati s financira- njem {portih organizacij v Sloveniji. Analiza je bila opravljena na {portnih organizacijah na Hrva{kem in v Sloveniji, ki so v letu 1998 oddale zaklju~ne ra~u- ne. [portne organizacije na Hrva{kem se financirajo pre- te`no z lastno dejavnostjo. Glede na to lahko zaklju- ~imo, da model financiranja {portnih organizacij na Hrva{kem odgovarja evropskemu modelu financiranja {porta. Slovenski in hrva{ki model prihodkov in od- hodkov {portnih organizacij sta si zelo podobna. Slo- venske {portne organizacije se v ve~ji meri financira- jo iz privatnih virov. Klju~ne besede: Hrva{ka, Slovenija, financiranje, {portne organizacije, prihodek, odhodek *University of Rijeka, Faculty of Economics, Rijeka, Croatia **University of Ljubljana, Faculty of Sport, Ljubljana, Slovenia Contact address Jakob BEDNARIK Fakulteta za {port, Gortanova 22, SI-Ljubljana, Slovenia Tel: +386 1 540-10-77 Fax: +386 1 540-51-93 e-mail: jakob.bednarik@sp.uni-lj.si (Received: 25. 11. 1999 – Accepted: 13. 11. 2000) 52 INTRODUCTION Croatia has recently been examining its attitudes to- wards sport, as have EU member-states and, above all, those countries in transition (Bednarik, Petrovi~ and [ugman, 1998; [ugman and Bednarik, 1998; Krawczyk, 1997). From that aspect, one might expect society’s attitude towards sports to be more ”respon- sible”, reflected in a more widespread offer of this public positive source. Nevertheless, generally spea- king each public service (meaning its creation or pro- duction) should be financed from public sources, which also applies to sports (Andrija{evi~, 1999). The problem then is one of how? The very same question has been asked for a long time already by European sports associations (Andreff, 1994; Coocke, 1993). To- day, this is the core question of the societies in tran- sition, including Croatia. It involves assessing which factors have given us the situation that we have today. Certainly, all societies are examining the current si- tuation regarding sport. Here, we have to deal with various uncertainties, and at this level we lack the principles of good behaviour. This is especially true of the clubs or associations which emerged from the days of strictly state-financed sport and now wish to be oriented according to the new values and stan- dards in sport (Krawczyk, 1997). This situation is mainly the consequence of insufficient scientific re- search in that area of public activity. Only a few up- to-date analyses exist at the moment which could be of help in drawing comparisons (Andreff, 1994; Bed- narik, Petrovi~ and [ugman, 1998; [ugman and Bed- narik, 1998; Cingiene, Kavaliauskas and Sukys, 1997; Davies, 1997; Kokolakakis, 1997; Kolimpalis, 1999; 14 th Informal Meeting of European Sports Ministers, 1994). Despite that, we are not in a position to outli- ne the development of sports without first having ans- wers to certain questions. On the brink of the transi- tion period from the 80s to the 90s, it became clear that one of the main issues in dealing with sports is how to overcome the consequences of a situation in which we must deal with an increasing number of participants and, on the other hand, the downturn in the availability of financial resources for funding sports activities. Certain analyses claim that the economic downturn (recession) of that period led the public fi- nance situation into a crisis which even sport could not avoid. Such evaluations simplify the problem of public support of sport. The problem is much deeper and very complex. It is a result of the doctrinal point of view, and the economic and political pragmatism of Neo-liberalism against public services, which have been incorporated in European societies through the functioning of a social state over the last 60 years. The question therefore arises as to what source of public service support for Croatian sport should be establis- hed in the future. There are two alternative answers here: either we follow a Neo-liberal model oriented towards radical marketing, including sports activities (as in certain Western countries); alternatively sport should be handled by society, above all in the area of social values of special interest to youth and the sports recreation of older people, clubs or associations etc. With reference to the problems outlined above, the main aim of the article is to analyse sport organisa- tions’ financing in Croatia and to compare it with the European system, as well as the financing of sports or- ganisations in Slovenia. Namely, we shall deal with two countries in transition which started the process at the beginning of the last decade from the same star- ting points. METHODS The analysis of the annual accounts of sports organi- sations included all non-profit sports organisations (clubs, associations and public institutes) in Croatia (1675) and Slovenia (1984). Non-profit sports organisations are obliged to follow special accounting standards requiring, among other things, non-profit sports organisations to prepare an- nual reports based on the accounting books and an- nual inventories. They contain a balance sheet, a pro- Sever, I., Bednarik, J., & Šugman, R. (2000). The financing of sports organisations in Croatia and… KinSI 6(1–2), 51–56 Public service total Central government Local government million kuna % million kuna % million kuna % EDUCATION AND SCIENCE 5,316.5 39.2 4,495.4 49.2 821.1 18.6 HEALTH 253.1 1.9 180.1 2.0 73.0 1.7 SOCIAL SECURITY 4,244.7 31.4 981.8 43.6 262.9 6.0 HOUSING AND COMMUNAL INFRASTRUCTURE 2,296.8 17.0 25.1 0.3 2,271.7 51.4 CULTURE 1,084.4 8.0 396.9 4.3 687.5 15.6 SPORT 343.1 2.5 49.2 0.5 293.9 6.7 TOTAL 13,538.6 100.0 9,128.5 100.0 4,410.1 100.0 Table 1: Expenditure of all public services’ budgets in Croatia in 1997 SOURCE: Annual Budgetary Report 1998 53 fit and loss account, and the disclosure of the finan- ces available. In Tables 2 and 4, the income and expenditure of the sports organisations analysed are shown according to the items included in the annual accounts. Some items in the accounts of Slovenia and Croatia are not the same, hence the tables have not been merged. Table 4 does not contain expenditures since public institutions in Slovenia do not show items within their expenditure breakdowns that are comparable to the accounting items of associations. The analysis of annual accounts is based on data from 1998, while data for 1997 is mentioned only by way of comparison. From the legal viewpoint, the analysis should contain all (financially active) non-profit sports organisations in Slovenia and Croatia. In the main, studies of the economic aspects of sport use indirect methods to estimate funding sources and destinations (Andreff, 1994; Cingiene, Kavaliauskas and Sukys, 1997; Davies, 1997; Kolimpalis, 1999). The method applied in this study is a direct one be- cause it analyses the annual accounts of sports orga- nisations (Bednarik, Petrovi~ and [ugman, 1998; [ug- man and Bednarik, 1998; Taks, De Jaeger, Laporte and De Knop, 1999). Public funds allocated to sport in Slovenia in 1998 were evaluated on the basis of information from the Ministry of Education and Sport, local communities, the Foundation for the Financing of Sports Organisa- tions, and those ministries employing athletes – defen- ce, finance, and internal affairs. RESULTS The total income of non-profit sports organisations in Slovenia in 1998 was 0.568 % of GDP (Table 4). In Croatia the total income of non-profit sports organi- sations in 1998 (Table 2) was 0.533 % of GDP (Table 2). It is clear (see Tables 2 and 4) that in relation to GDP in 1997 and 1998 non-profit sports organisa- tions in both countries disposed of approximately the same amount of money. The difference in the pro- portion of GDP between the two countries is not big. According to the analysis of the Ministry of Education and Sport (Tr{kan and Cankar, 1999), we can estima- te that the sports organisations analysed in Slovenia were given some SIT 4.99 billion from public sources in 1998, which comprises 24.3 % of the total income of sports organisations or, in other terms, 0.15 % of GDP (Table 3). If these figures are compared to those on sports organisations in Croatia (Table 2), where the corresponding level is 0.18 % of GDP , we find that Slovenian sports organisations are financed with pub- lic funds to a smaller extent. The investment expenses are relatively low (Tables 2, 4) and indicate the fact that non-profit sport organi- sations in Croatia and Slovenia do not spend money on the maintenance and reconstruction of sports fa- cilities. Labour costs in Slovenia (Table 4) represent 16.8 % of all expenses of sport associations and clubs. Accor- dingly, we can conclude that the rate of professiona- lisation in Slovenian sport is relatively high. A very si- Sever, I., Bednarik, J., & Šugman, R. (2000). The financing of sports organisations in Croatia and… KinSI 6(1–2), 51–56 Table 2: Income and expenditure of non-profit sports organisations in Croatia in 1997 and 1998 (in current prices) income / expenditure 1997 1998 million structure million structure kuna % kuna % PROPOSING ENTITIES 1679 TOTAL INCOME 671.5 100.0 738.2 100.0 – from the budget 247.7 36.9 242.9 32.9 –contributions4.30.62.60.4 – membership fees 56.0 8.3 67.5 9.1 –own activities115.717.3192.726.1 – other 247.7 36.9 232.4 31.5 TOTAL EXPENDITURE 691.6 100.0 721.0 100.0 – material expenses 245.6 35.4 256.2 35.5 – salary of employed 96.0 13.9 117.4 16.3 – non-material expenses 141.8 20.5 156.0 21.6 – transfers 107.8 15.6 91.4 12.7 – investments 14.3 2.1 7.8 1.1 – other 86.2 12.5 92.3 12.8 % GDP 0.538% 0.533% Table 3: Public funds for sport in Slovenia in 1998 source of funds total funds funds received by sports organisations Local communities7,530,945,801 SIT3,681,065,542 SIT Ministry of Education and Sport - sports department 1,342,177,000 SIT 1,142,177,000 SIT Other ministries 160,000,000 SIT Foundation for the Financing of Sports Organisations 171,215,150 SIT 171,215,150 SIT Ministry of Education and Sport - sports classes 500,000,000 SIT TOTAL 9,704,337,951 SIT 4,994,457,692 SIT % GDP 0.30% 0.15% 54 milar situation exists in Croatia, where labour costs represent 16.3 % of all expenses (Table 2). DISCUSSION All the financial flows among sports organisations in Slovenia and Croatia are included in the incomes dis- played in Tables 2 and 4. This involves not only the income that sports organisations get from other non- sports organisations, but also the income that sports organisations get from other sports organisations (Bed- narik, Petrovi~ and [ugman, 1998). Therefore, the es- timate of SIT 18.5 billion for Slovenia (Table 4) and kuna 738.2 billion for Croatia (Table 2) slightly overe- stimates the real funding available to sports organisa- tions. On the other hand, it is true that certain finan- cial flows in sport exist outside sports organisations, and probably a share of those involve the grey mar- ket (Bednarik, Petrovi~ and [ugman, 1998). From that aspect, the incomes in Tables 2 and 4 are underesti- mated. All in all, the analysis herein is currently the most objective in estimating the income of sports or- ganisations in Slovenia and Croatia. Sport as a public service is financed by public funds within the framework of public services. The offer of public services in sport depends on financial sources at the regional and local levels’ public authorities. The kind of financing in Croatia (Table 1) is similar to that seen in EU countries (Andreff, 1994; 14th Informal Meeting of European Sports Ministers, 1994) where, in those countries with a federal constitution, the as- sociations of sports federations function as an additio- nal source of financing. Yet, regardless of the source of funding, in relation to other social areas such as education, health, social welfare etc., sport is in an inferior position. Generally, this has become the case irrespective of levels of the offer and finances. The same relationships are also characteristic of the Croa- tian system of sports financing (Table 1). In competing with other social activities (public servi- ce offers), sports activities in Croatia have been in a better financing position at the local level compared with others at the regional level (Table 1). The princi- pal reason is that the local community authorities have a broader mandate and more responsibilities invol- ving sport in comparison to the regional level bud- gets. Hence, the financial situation of Croatian sport is quite identical to the situation in most EU countries (Andreff, 1994; 14th Informal Meeting of European Sports Ministers, 1994). That is an important issue in conceiving the funding of Croatian sport for the next century. Nevertheless, the financial situation of sport can be evaluated by analysing the volume and struc- ture of income and expenditure of sports organisa- tions in Croatia. The structure of sources of income for sport organisa- tions in Croatia is in a way similar to those in other Eu- ropean countries (Andreff, 1994; 14th Informal Mee- ting of European Sports Ministers, 1994). However, the most important source of income – households’ contributions – is hidden, as shown earlier in the analysis. And, what is even worse, methodologically speaking that source of funding is not included (ex- cept in the part representing membership fees and entrance ticket revenues). Nevertheless, it is worth mentioning that public sources (regional and local le- vels) have provided slightly more than 1/3 of all inco- Sever, I., Bednarik, J., & Šugman, R. (2000). The financing of sports organisations in Croatia and… KinSI 6(1–2), 51–56 Table 4: Income of all non-profit sports organisations in Slovenia in 1997 and 1998 (sports clubs, sports associations and public institutes) In SIT, thousands STRUCTURE IN % INDEX of GROWTH % Institute institute SPA SPA total total Institute institute SPA SPA total total institute SPA total 1997* 1998* 1997 1998 1997 1998 1997* 1998* 1997 1998 1997 1998 1997/98 1998/97 1998/97 Number of proposing entities 25 1959 I. TOTAL INCOME 1623638 2067230 14713361 16419034 16336999 18486264 100.0 100.0 100.0 100.0 100.0 100.0 127.3 111.6 113.2 1.1 Income from sales 1546132 1940321 10018396 10994539 11564528 12934860 95.2 93.9 68.1 67.0 70.8 70.0 125.5 109.7 111.8 1.2 Other income 55498 87298 3405601 4123611 3461099 4210909 3.4 4.2 23.1 25.1 21.2 22.8 157.3 121.1 121.7 1.3 Income from financing 22008 39611 642362 512505 664370 552116 1.4 1.9 4.4 3.1 4.1 3.0 180.0 79.8 83.1 1.4 Transferred funds 0 0 647002 788379 647002 788379 0.0 0.0 4.4 4.8 4.0 4.3 0.0 121.9 121.9 II. TOTAL EXPENDITURE 1573852 2023952 14051709 15435316 15625561 17459268 100.0 100.0 100.0 100.0 100.0 100.0 128.6 109.8 111.7 2.1 Material expenses 1927169 2153774 13.7 14.0 111.8 2.2 Service expenses 6030842 6827855 42.9 44.2 113.2 2.3 Labour costs 2226296 2588772 15.8 16.8 116.3 2.4 Amortisation and investments 1144870 981350 8.1 6.4 85.7 2.5 Taxes 123693 207376 0.9 1.3 167.7 2.6 Other expenses 2432310 2506462 17.3 16.2 103.0 2.7 Financing expenses 166529 169727 1.2 1.1 101.9 2.8 Unexpected expenditure 0 0 0.0 0.0 0.0 % GDP 0.562% 0.568% * public institutions do not keep data on expenditures 55 me over the last two years. This is much higher than in the 13 European countries analysed, where the ma- ximum rate was 1/4 of the sources income (Andreff, 1994; 14 th Informal Meeting of European Sports Mi- nisters, 1994). In Slovenia it is impossible to precisely identify the share of income from the state budget, i.e. public fi- nances, and the share of income created through their own activities from the annual accounts of sports or- ganisations. For that reason, the analysis was done on the basis of the expenditure of ministries and local communities (Table 3). We can estimate that the to- tal public sports finances in Slovenia (direct and indi- rect) constitute 0.30 % of GDP (Table 3). Public funds for physical education within the education system are not included in the above figures. Sports organi- sations in Slovenia receive only a proportion of all public sports finances. We can estimate that direct and indirect public finance for sports organisations in Slovenia represents 0.15 % of GDP (Table 3), consti- tuting 50 % of total public sports financing. To simplify the situation in Slovenia, income from the sale of goods (Table 4) could be seen as an indicator of the commercialisation of the activities of sports or- ganisations in Slovenia. We could even claim that the rate of commercialisation can be measured by the share of income from sales in the total structure of in- come of sports organisations in Slovenia. Table 4 in- dicates that the income from sales of all sports orga- nisations represents 70.0 % of the total income structure of non profit sports organisations in Slovenia. Accordingly, the analysis of public financial sources makes us conclude that sports organisations acquire 27 % of all their income from that source (see above and table 3 and 4). Further, we can conclude that the share of income from sales gives an adequate measu- re of the rate of commercialisation. We also found that the estimate of the share of finances from public sources in Slovenia, using figures obtained from the ministries, is relatively reliable. The total income from sales (70 % – the sample of final accounts of sports or- ganisations), plus the funds from public sources (the sample of the ministries, 27 %) gives us 97 %. The re- maining 3 % of funds (Table 4) represents the transfer of funds in 1998. Considering these figures and Tab- le 2 (lines 3 to 6), we can conclude that Slovenian sports organisations have a little higher rate of com- mercialisation than Croatian sports organisations. CONCLUSIONS We can conclude that the Slovenian and Croatian models of income and expenditure of sports organi- sations are very much alike. Slovenian sports organi- sations are financed more from private sources (ap- prox. 73 %). From that aspect, Slovenia’s model of fi- nancing sports organisations is closer to the European model (on average, public funds in Europe represent 1/4 of all financial resources), than the Croatian mo- del (public funds represent around 33 % of all funds). Nevertheless, we can say that both the Croatian and Slovenian models of financing sports organisations are very similar to the European model. Moreover, we have to bear in mind that the European analysis (An- dref, 1994) includes all possible sources of sports fi- nancing, from the state to local authorities, games of chance, companies (where TV rights can be included) and households. All of those funds are not allocated directly to sports organisations. Thus, household ex- penditure on sports products does not represent a fi- nancial source for sports organisations but is mostly for those companies dealing with the sale of such artic- les. It is the same situation with households’ expen- diture on leisure-time activities. Had we also analysed these expenditures in Slovenia and Croatia and inc- luded them, like in the EU methodology, among the private sources of sport, we would have identified a much higher share of sports financing coming from private sources. Yet that could not be considered wit- hin this analysis of the financing of sports organisa- tions, which is of course the aim of this article. In any event, the analysis of European sports finan- cing (Andreff, 1994; 14 th Informal Meeting of Euro- pean Sports Ministers, 1994) has shown that the sports movement is logically closely linked to economic de- velopment levels, and consequently also to the struc- ture of society (high rate of sports services consump- tion by households) in urban areas. At the same time, it proves that economic terms and conditions are highly relevant to the functioning of sport. 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Zagreb: Ministarstvo financija Republike Hrvat- ske. 56 Sever, I., Bednarik, J., & Šugman, R. (2000). The financing of sports organisations in Croatia and… KinSI 6(1–2), 51–56