12 KINESIOLOGIASLOVENICA4 (1998)1 : 12-16 FUNDING OF SLOVENIAN SPORI DURING TRANSITION Jaka Bednarik Krešimir Petrovic Raiko Šugman FINANCIRANJE ŠPORTA V SLOVENIJI V OBDOBJU TRANZICIJE ABSTRACT Slovenia started its economic transition as the most developed, decentralised and market-oriented for- mer socialist economy. lts model of organising and fund ing sports was also very different to typical cen- tralised socialist systems. During the transition pro- cess, major changes have been needed due to the further commercialisation of sport, whilst the basic structure has remained the same. The aim of this pa- per isto analyse the financingof sport organisation in this transition period in Slovenia. Detailed analysis of the financial reports of almost 2000 sports organisations in Slovenia in 1977 reveals important differences in the structure of expenditure among differentsports. These findings reflect differ- ent levels of professionalism among various sports. Slovenian sports organisations mainly finance them- selves through their own activities. There are differ- ent levels of commercialisation among various sports. The fina! structure of the private financial sources w ill be known as soon as ali private funding sources of Slovenian sport will be analysed. Keywords: Financing, Sports organisation, Funding, Expenditure University of Ljubljana - Faculty of Sport, Gortanova 22, 51-1000 Ljubljana, Slovenia phone: + + 386 61 140-10-77 fax: + + 386 61 448-148 e-mail: Jakob.Bednarik@sp.uni-lj.si IZVLEČEK Slovenija je pričela proces ekonomske tranzicije kot najbolj razvita, decentralizirana in k tržni ekonomi- ji usmerjena država »Vzhodne Evrope«. Njen model organiziranosti in financiranja športa je bil precej drugačen od tipičnega sociali stičnega modela. Kljub temu pa bodo za komercializacijo športa potrebne spremembe. Namen pričujočega članka je, da v času teh sprememb ocenimo financiranje športnih organizacij v Sloven iji. Analiza na skoraj 2000 športnih organizacij v Slo- veniji je pokazala razlike v porabi med posameznimi športi. Posamezni športi imajo različen nivo profe- sionalizacije. Športne organizacije v Slovenij i se financirajo pretežno z lastno dejavnostjo. Nivo komercializaci- je ni isti pri vseh športih . Končna ocena strukture pri- vatnih virov bo možna, ko bomo v Sloven iji ana- lizirali vse možne privatne finančne vire športa. Ključne besede: financiranje, športne organizacije, prihodek, odhodek Jaka Bednarik, Krešimir Petrovic, Rajko Šugman FUNDING OF SLOVENIAN SPORT DURING TRANSITION lntroduction The Slovenian economy's transition involves two key processes that are continuing and cannot be ig- nored: the transition from a self-management style socialist economy into a free market economy and the transition from a regional into an autonomous national economy. lf we were to focus only on the economic aspect of the transitional problems of sport we could, for example, find that prior to the beginning of the transitional period, sport activities had mostly been organ ised and supported by vol- untary work, while the organ isational system of sporting activities was generally unclear. Ali the same, it remains true that Slovenia currently follows a model of sports funding regulation characteristic of the states of the European Community. Sports or- ganisations are mostly financed by private sources, whilst in relation to public funding sources at local levels predominate. How does Slovenian sport's transition in the context of today's multi-party, parliamentary and marketsys- tem compare to the former self-management and planning system? Primarily this is reflected in the changed system of sports funding, in the state's role in the sporting arena, in increased legal regulation and in significantly more sports-related actors espe- cially in the private sector. In this paper we evaluate one aspect of changes to the system of financing. For this purpose, we have analysed the funding and expenditure of sports or- ganisations in Slovenia. M ethods The analysis of the annual accounts (balances) of sports organ isations included ali possible forms of sports organ isations - total 1948: srna II and big clubs, compan ies and public institutions (Table 2.). Analysis for 1997 encompassed 87.6% of sports organisations 13 registered underthe new Law on Clubs, which is sig- nificantly more than in 1995 (about 35%) (2). Clubs are obliged to follow a special accountingstan- dard requiring, among other things, clubs to prepare annual reports based on account books and annual inventories. They contain a balance sheet, a profit and loss account, and disclosure of ava ilable finance. The annual accounts analysis is based on data from 1997. In this way, from a legal-formal viewpoint, the analysis should contain all (financially active) sports clubs. It should be pointed out that the analysis does not conta in ali possible financial transactions such as those performed outside the legal f inancial-man- agement framework and not shown in the sports or- ganisations' accounts. We note thatclosing balances were mostly presented by the larger, financially more significant and more active sports organisations. Most research into the economic aspects of sport use indirect methods to estimate funding sources and destinations (3, 4, 5, 6). The method applied in this study is direct because it analyses the annual ac- counts of sports organisation. The advantage of such an analysis is identifying the exactstate of ali legal fi- nancial sources and not only their estimation. On the other hand, there is a disadvantage of such an anal- ysis. It is a limited report which excludes funding from the black economy in sport. At the same tirne, it does not enable us to determine the exact struc- tu re of the private sources that the sports organisa- t ions gain through their own activity. Results The combined total income of sports o rganisations in 1997 was almost 18 mi II ion SIT (Table 2) which is 0 .619 % of GD P (table 1 ). Sports organisations' in- come stayed in the same ratio to GDP in 1997 as in 1995.(2). Table 2: Overall fund ing and expenditures of sports clubs, companies and public institutions in 1995 and 1997 in(IXK))~T ,1N11u1cmi index o( gmwrh in% COMPANIES PUHLIC Sl'URTSCLUIIS TOTAL COMl'ANl[S PUHLIC SPURTs TUTAL i.:omp pul~i, ~ports ltllal INSTITUTIUNS INSTITUTIUNS CLUHS irblil duh.; numhL>r ,)( ~ports 11r~~nisa111n~ 117 11 lttl~I W4H 1995 1997 1995 1997 1995 1997 1995 1997 1995 1997 1995 1997 1995 1997 1995 1997 1997 1997 1997 1997 /95 /95 /95 /95 l. OVERALLFUNDlNG (from 1.1 tol.41 151 1652 1789983 1358494 1626421 12252730 14569902 15127376 17986306 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 118.4 119.7 118.9 118.8 1.1 Private funding 1338797 1586973 1304784 1548896 8137152 9856768 9475949 11443741 88.6 88.7 96.0 95.2 66.4 67.7 68.8 70.0 118.5 118.7 121.1 120.8 1.2 Other funding 35145 72046 25214 55516 2686153 3364267 2721298 3436313 2.3 4,0 1.9 3.4 21.9 23.1 19.8 210 205 220.2 125.2 126.J 1.3 Publicfunding 137710 130964 28496 22009 748758 671417 886468 802381 9.1 7.3 2.1 1.4 6.1 4.6 6.4 4.9 95,1 77.2 89.7 90.5 1.4 Transferred mean: o o o o 680667 677450 680667 677450 O.O O.O O.O O.O 5.6 4.6 4.9 4.1 o.o O.O 99.5 99.5 II. OVERALL EXPENDITURES 1606334 1863039 1331956 1577150 11651051 13880601 14589341 17320790 100.0 100.0 100.0 100.0 100.0 100.0 1000 1000 116.0 118.4 119.1 118.7 14 Table 1: Distribution of sports funding in Slovenia in 1995 and 1997 SLO SLO in95 in 97 S tate budget (%) 5.5 4.2 Local budl!et (%) 20.9 20.8 Total pub lic fu nding (%) 26.4 25.0 To tal private funding (%) 73.6 75.0 TOTAL(%) 100 100.0 Total funding GDP (%) 0.6 0.6 Public funding GDP (%) 0.16 0.15 According to analyses of the Ministry of Education and Sports performed on the basis of data collected in local communities and using ou r own data, Slovenian sports organ isations received about 4.5 million SIT from local communities and the central government. This represents 25 % of all income of sports organ isations and 0.155 % of GDP. According to this data, the share of public finances has not es- sential ly changed compared to 1995 (2) and the ra- tio of public fund ing to GDP has also not changed. Total income for all sports branches is not distributed as could be expected on the basis of the number of proposes. Most income is created by individual sports, fol lowed by collective sports, sports unions at 13 Spori for all 31,0% • Collective sports 13,0% O lndividual sports 42,6% Figure 1: The structure o( active sports organisations in 199 7 0 Spon lor all 12,9% • Mef1talsports 0,4% • Spori unlons on thelOcallevel 15,(% • Companies 10,0% m,:- Olndivktuall?0ft$ 31,0% • Collecliveaports: 21,4% Figure 2: Overa// (unding o( sports organisations in 199 7 Jaka Bednarik, Krešimir Petrovic, Rajko Šugman FUNDING OF SLOVENIAN SPORT DURING TRANSITION O Sport for an 11,9% • Mental sports 0.4% • Sport unions on the loeal level 15,0% • Companles 10.8% • Public Figure 3: Overa// expenditure of sports organisations in 199 7 lnd!Vldual Collective Mental Sport for Sport sports sports sports ali unions oo ...1oca, 1e,e1 • Material costs • Product costs O Wort cosls • 1nvestments • T~es • Other • Financing costs Figure 4: The structure of expenditure of sports organisations in 1997 the local level and in 4th place is sports for ali which is, by the number of organisations involved, the sec- ond most numerous group (Figure 2). Bycomparing Figures 1 and 2, it can be stated that the relatively »rich« sports organisations are sports un ions at the local level, institutions and collective sports, the »poor« ones are organ isations in the group of sports for all and mental sports. The fact that sports unions at the local level have a relatively large income shows that many of them stili acquire funding from the sta te which they distribute among sports organisations in the local community. The overall funding o n particular groups are dis- t ributed simi larly to overal l expenditure (Figures 2 and 3 ). Obviously, most sports organisations spend their income in the current year (Table 2) . Regard i ng expenditu re, we must po i nt out that they include practically no amortisation of sports facilities and investment activities of sports organisations (Figures 4, 6, 9). On the one hand, there are no clear methodologi- ca l solutions regarding the fol lowing investments (distribution and control of expenditure in terms of efficiency and balance sheets), on the other, invest- ment activities regarding sports facili ties are regulat- ed and supervised (followed) by other activities (e.g. education) and by forms of ownership (e.g. local Jaka Bednarik, Kreši mir Petrovic, Rajko Šugman FUNDING 0F SL0VENIAN SP0RT DURING TRANSITI0N • Shooting 2,5% • Other 15,9% • Skiing 34,0% Figure 5: Overa// funding of individual sports organisations in 1997 "11•··1••1·•·11 . .. · :I "•,., · '.I .. 1 : • ,· · .. 1 · • '..· ... , 1. . .. . •~ 1 1 ,.bi'-"'- It l 'f"I • • !!':\ . . ,. 1 " š • , ,J. dJ l~.1.IL., '" i "o '" '" C "' "' "' .. "' ;; C C ~ .. C .s .s c i .C u " .. i ~ e :;;; o C o !! .. .. " ,. .. E "' " .. " 1D u :, I .C a: " "' "' o .. 2 • M11ert1I casts • Product costs O Work costs • Jnvestmenls • T&xes • Olher • Ftnanclng costs Figure 6: The structure of expenditure of individual sports organ- isations in 1997 communities). Examples include branches of col- lective sports requiring larger and more expensive facilities, but which show almost no amortisation or investment funds (in total only about 1 % of tota l ex- penditure) (Figure 4, 9). Analysing the income and expenditure of individu- al sports branches, alpine skiing significantly stands out regarding its importance, representing up to 34% of the income of ali branches (Figure 5), among col- lective sports this position is held by basketball and football (soccer) with 32.9% and 30.5% respective- ly of ali col lective sports income (Figure 8). lf we consider the share of work costs within total ex- pend iture to evaluate the level of professionalism of a given sports bran eh, the following can be noted: • among significant individual sports branches, the level of professionalism is highest in alpine skiing and tennis (Figures 6 and 7) • among the collective sports, the level of profes- sional ism is highest in football (soccer) and bas- ketball (Figures 9 and 1 O). The ratio of central government to local government funding of Slovenian sports organisations is 1 :4.9 (Table 1 ). Slovenian sports organisations mostly fund themselves th rough their own activities (table 1 ). • Tenis 9,7% 15 • Motor raclng a Athlatlc l ,Z1:J Bowls • Bowllng S,8% l ,S% 2,0% O Coll • Cycllng 1.1% 4,3% • Skllng 41,2% • Equestrlan 4.1% O Avlallon 4 ,4% Figure 7: Work expenditure of individua/ sports organisations in 1997 • Handball O Other O lce Hockey 1,9% 7,5% • Football 30,5% Figure 8: Overa/1 funding of collective sports organisations in 1997 Jce Hockey lutslball Football Vollr,ba.11 HandbaU Otlw1 • llat•dal tula• S.Me• costs • Work co1t1 • lmorU•atlon and lnvntmanls co•t• Tutt II Olller • flnanclng co• t• Figure 9: The structure of expenditure of col/ective sports organ- isations in 1997 iJOther 0,6% Cillce Hockey 8,5% • BaskelbaH 28,7% Figure 1 O: Work expenditure of collective sports organisations in 1997 16 Pub lic funding and income from own activities are not directly comparable between states in absolute sums due to their different sizes and levels of devel- opment. However, comparisons in relation to GDP do make sense. Compared to Western Europe (1 ), the levels of ali funds including public funding for sportare lower in Slovenia. It must be noted that the calculation of funds in- tended for sport (measured asa percentage of GDP) from our data could be methodically questionable. The financial reports of sports organisations relied on also include those funds that sports organisations transfer to public institutions w hich are usually the owners of sports faci li ties. These financial transac- tions within the sports sector were eliminated, but probably not completely. From this aspect, the funds intended for sport (measured as a percentage of GDP) are overestimated. On the other hand, the da- ta underlying this research only include legal funding of sports organisations. From existing data, it can al- ready be inferred that the black economy in the sports sector isa bigger phenomenon than in the na- tional economy asa whole, where the black econo- my is estimated at between 15 to 30% of GDP From th is point of view, the funds intended for sports (measured asa percentage of GDP) are underesti- mated. Taking into account both effects, it can be concluded that fu nds i ntended for sports (measured asa percentage of GDP) are quite objectively esti- mated. Discussion The analysis of the final accounts of sports associa- tions for 1997 encompassed all possible organisa- tional forms of sports organ isations. In 1997 more fi- nal accounts were prepared by sports organisations than in 1995 (2) . The sample included 87.6 % of ali associations regi ste red u nder the new Law on CI u bs and, accordingly, we conclude that financial disci- pl ine has sign ificantly improved since 1995 (2). 1 n any event, it is possible to assert that the size of the black economy in sport is still larger than that found on average across the whole national economy. Such financial management of sports organisations is not in the long-term interest of the development of Slovenian sports since it will have to adapt to new rules of a legal state and a free-market economy. Correct and transparent (control) financial manag- ingwill not only have to be performed for public sub- sidies but in the complete management of sports o r- ganisations. Managementthat is in accordance with financial regulations w ill, with the increased com- Jaka Bednarik, Krešimir Petrovic, Rajko Šugman FUNDING OF SLOVENIAN SPORT DURING TRANSITION mercialisation of sport, also be in the interests of big- ger sponsors and similarly oriented investors. The final financial reports do not reveal the structure of private sources financing Slovenian sports organ- isations. lf it were the case that most private sources come from households, then we are dealing with the model of sports fund ing that is common in European Community countries. lf it is the situation that most private sources involve enterprises, then we are dealing with the characteristics of the American model of sports funding. In the former social ist Slovenian system, big enter- prises together with loca l governments mostly fi- nanced the public good of the local community to w hich they belonged. Commercia l interests were simply not involved in this model of sports fund ing. That is why the Slovenian model was and remains unlike the American one. The fact is that Sloven ian enterprises' commerciali- sation has not yet finished and thatonly a few bigen- terprises fund sports in the region to w hich they be- long. Some new unreported data show us that en- terprises are the main private funding source of Slovenian sports. Accordingly, it appears that the Slovenian model of sports funding has not funda- mentally changed during the tirne of transition. The Slovenian model is also not that close to the European model either. The fina! answer w ill be known as soon as ali private funding sources of Slovenian sports are analysed. References 1. Andreff W. The Economic lmportance of Sport in Europe: Financing and Economic lmpact. Bruse!: Committee for the Development of Sport of the Council of Europe, 1994 2. Bednarik, J., Jagodic T., Pečar J., Plesec B., Potočnik J., Simoneti M. Ekonomski pomen slovenskega športa: Financiranje športnih organizacij. Ljubljana: Faculty of Sport, 1997 3. Cingiene V, Kavaliauskas S., Sukys S. Sport Sponsorship: Situation Analysis among Leading Lithuanian Companies. In: Proceedings of the 5th Congress of the European Association for SportManagement. Glasgow: 1997: 41 -48 · 4. Davies L. The Economic lmpact of Sport in the City: A Case Study of Sheffield. In: Proceedings of the 5th Congress of the European Association for Sport Management. Glasgow: 1997: 49-55 S. Kokolakakis T. The Economic lmpact of Sports in UK. In: Proceedings of the 5th Congress of the European Association for Sport Management. Glasgow: 1997: 192-197 6. Krawczyk Z. The lmage of Sport in Eastern Europe. Kineziologija 1997; 28(2): 76-83