1

Session No.7

Paper No.1

Country: Hungary

Non-profit Sector Statistics in Hungary

Eva Kuti and Peter Pukli

HCSO

Historical Overview

  1. Statistics on voluntary associations has a long tradition in the Hungarian statistical service. The first two surveys took place in 1862 and 1878, the first one was carried out by the Statistical Committee of the Hungarian Academy of Science, while the second was completed by the HCSO. In this initial phase the statistical data collection had two equally important functions: the results of the surveys provided data for statistical analyses and also served as a register of the associations. The supplied information (the name, address, activity, date of foundation, number of members, income, expenses and property of the association) apart from satisfying the inquiries of the contemporary users of statistics provide a useful source for historical analysis, since the HCSO repeated the voluntary association survey in 1932, 1970, 1982 and 1989 with a similar content. Unfortunately, no survey of a similar scale is available about foundations.
  1. After the political changes of 1989 striking development has taken place in voluntary activity in Hungary. The new legal environment created for associations and the numerous tax advantages offered to them resulted in an unexpected growth of the non-profit sector. The scope and scale of the changes were clear signs of the citizens’ intention to actively and directly influence the transition process. The number of NPIs was five times higher in 1997 than it was in 1989. Similar development has taken place in the population of the market sector. Many new units were born and the ownership and activity of the old units of the former state sector have changed significantly.
  1. Monitoring the above mentioned movements and judging the borderline cases between the market and non-profit sectors were great challenges for the statisticians. The experts of the HCSO realized that the former survey frame could not any longer be used for estimation of the performance of the whole non-profit sector. This is why an annual general survey and a set of satellite surveys of NPIs had been developed and the first full-scale survey relating to NPIs was implemented in 1992.

1. table

The number of NPIs in Hungary between 1862 and 1996

Year / Foundations and public law foundations / Voluntary associations and other non-profit organizations / Total
1862 / . / 319 / .
1878 / . / 1 917 / .
1932 / . / 14 365 / .
1970 / - / 8 886 / 8 886
1982 / - / 6 570 / 6 570
1989 / 400 / 8 396 / 8 796
1990 / 1 865 / 14 080 / 15 945
1991 / 6 182 / 17 869 / 24 051
1992 / 9 703 / 21 528 / 31 231
1993 / 11 884 / 22 926 / 34 810
1994 / 14 216 / 26 107 / 40 323
1995 / 15 650 / 27 685 / 43 335
1996 / 17 109 / 28 207 / 45 316

Concepts and scope of NPIs in the Hungarian statistical practice

  1. To be in line with the SNA concepts and definitions was a fundamental aspect when the statistical system of the NPIs was developed. To define whether a unit is a market NPI serving business or an NPI controlled by government or an NPI serving households was an important issue in the developing work of the methodology of NPIs statistics. The classification of the units according to the SNA sectors are supported by the relevant characteristics of the annual survey of NPIs (the sources of incomes and receipts).
  1. The definition of the non-profit sector as generally applied in international practice includes the following elements:
  • Prohibiting the distribution of profit

Non-profit institutions differ from the companies of the market sector in that they do not distribute the arising profit of their activities among the founding members or units that established, financed or created them.

  • Independence

This independence designates primarily a functional, economical and management autonomy. They are legal entities, whose existence is recognised independently of the persons, corporations on government units that establish, finance, control or manage them.

  • Institutionalisation

The direction of NPIs is done by a group of officers or a body elected by the members. Their operation rules are documented.

  1. At the beginning there were only two legal forms for establishing non-profit units: the association and the foundation. Since 1994 on the basis of the Civil Code new forms have been introduced such as public law foundations, public law associations and public benefit companies.
  1. Associations are autonomous organizations formed voluntarily for a purpose agreed upon by their members and stated in their founding articles. Associations must have registered members who organize to actively pursue the associations' aims. Although membership organizations are not necessarily called voluntary associations and special laws and government decrees apply to some of them, the basic legal regulation of voluntary associations nevertheless applies to all such organizations including professional societies, sports clubs, self-help groups, trade associations, chambers of commerce, trade unions, social or cultural clubs, and so on. The organizations can be formed around common hobbies, personal problems, age, interests, residence, support for particular institutions, concerns, professions or occupations.
  1. Foundations are organizations with endowments established to pursue durable public purposes. Their founders can be either private persons, corporations or government. Unlike associations, foundations do not have members. They can take many different forms, however: operating foundations (e. g. foundations operating schools, nursing homes, health and cultural institutions; providing social services; publishing books and journals; managing cable television networks and local radio stations, etc.); "fund-raising" foundations exclusively supporting public institutions such as libraries, theatres, museums, schools, universities, hospitals, or research institutes that established them; other groupof"fund-raising" foundations pursuing particular aims or projects such as the creation of monuments, organizations of festivals, or development of art collections; grant-making foundations that support either projects or organizations; and corporatefoundations mostly supporting present or former employees of the company.
  1. Public law foundations are established to take over some government tasks, i. e. tasks which are defined in law as government responsibilities (e.g. education, healthcare, public safety, etc.) Their founders can only be the Parliament, the general and local governments. The public law foundations are kept financially accountable by the State Comptroller's Office.
  1. Public law associations can only be created by the Parliament through passing a specific law on their establishment. The Academy of Sciences , the Chambers of Commerce, and chambers of some professions (e. g. doctors, lawyers, architects, etc.) have been transformed into public law associations since the creation of this legal form. The government may let public law associations exercise some authority over their members (e. g. official registration, quality control, the issue of licenses, etc.)
  1. Public benefit companies are not-for-profit organizations established in order to produce public goods and to meet public needs. The profit of their occasional unrelated business activities must also be used to pursue their public purposes. They are not allowed to distribute profit to their owners. They can be established by either private persons or organizations.
  1. For the statistical analyses NPIs are classified into five groups, as it follows:

2. table

The structure of NPIs by legal forms, 1996

Type of NPIs / Number of organizations
Foundation / 16 392
Associations / 27 245
Of which
Trade unions and other organizations representing the interests of employees / 1 985
Chambers of Commerce and other trade associations representing the interests of employers / 1 023
Public law foundation / 717
Public law associations / 618
Public benefit companies / 344
Total / 45 316

Statistical surveys on NPIs

  1. As it was mentioned a new annual survey was introduced in 1992 to compile statistics on the NPIs. Since then both the methodology and the questionnaire have been modified but the majority the characteristics has remained unchanged.
  1. The survey covers all types of NPIs. Beside the identification part (name address, ID code, etc.) the list of characteristics is divided into three modules. In the first module characteristics concerning the legal form, number of members, number of persons employed and the activities of the unit can be found. In the second module income and expenditure data are requested. In the third module characteristics concerning the financial, non-financial assets and liabilities and the investments are titled.
  1. Hungarian non-profit sector compared to the NPIs in the developed countries has some specific characteristics. The most striking of these differences is the relatively low share of the Hungarian voluntary organizations in health and education, which are the most important fields of activities of non-profit organizations in the developed countries. This difference is explained by the state monopoly of education end health care under state socialism. While voluntary organizations as service providers were tolerated in culture and even promoted in sports, recreation and emergency prevention, they were not allowed to establish schools and hospitals. Although this state monopoly was broken in 1989, the non-profit service provision could not rapidly develop because it would have needed a lot of investment and there was very little capital available for the possible non-profit entrepreneurs. Similarly, the state monopoly of housing and urban services prevented Hungarian NPIs to play a more active role in development and housing, and thus contributed to keep their share relatively low in this field compared to other countries.

3. table

The structure of NPIs by fields of activity, 1996

Fields of activity / Number of organizations
Culture / 4 680
Religion / 1 227
Sport, recreation, hobby / 14 404
Education / 5 105
Research / 959
Health / 1 913
Social services / 3 496
Civil emergency prevention, fire-fighting / 1 134
Environmental protection / 984
Development of settlement / 1 673
Economic development / 672
Public security, protection of laws / 1 746
Granting for public purposes / 701
International relationships / 618
Business federation / 5 396
Politics / 608
Total / 45 316
  1. In 1997 45 000 questionnaires were sent to the respondents. The non-response rate was very high, only 22 000 forms were returned. In the case of such a high rate of non-response the usually used "cold-deck" and "hot-deck" imputation technics can not be applied for production statistics. In order to gain acceptable estimation on the performance of the non-profit sector a sophisticated multiplying system was developed. The NPIs were classified according to their legal form, their activities and the types of their location (capital, towns or villages). Multipliers were calculated for each cell of the matrix table and were used to estimate the main indicators of NPIs.

The present statistical register of NPIs

  1. The official registration of NPIs is conducted by Supreme Court with the exception of public benefit companies which are recorded by Court of Registration. NPIs are obligated to report on the changes relating to their operation to one of the previously mentioned courts. Unfortunately, the registration rules do not specify the detailed procedure referring to making reports on changes and in practice there is no legal consequence in default of sending updated information to the courts.
  1. The computerised register of the Supreme Court contains the following information:

the serial number of registration,

the name and address of the organisation (the changes in name of streets and settlements have not been updated),

the date of registration and closing-down (in most cases there is no information about closing-down),

the name and address of person(s) representing the organisation.

  1. The register of SC is available for the HCSO and an essential but not a sufficient data source for the statistical work as it was justified by the experiences from the non-profit surveys.
  1. The non-profit register of the HCSO contains the data of all NPIs. The register serves three purposes:

compiling the list of address for the dispatching of the questionnaires,

provides fundamental information relating to the non-profit sector (number of organisations, forms of organisation, their location and field of activity) for statistical analysis,

provides leading indicators for estimation.

  1. The primary source for the statistical register is the computerised register of NPIs conducted by the Supreme Court. This is where the primary data relating to the newly registered organisations originate from, together with the rare information supplied to the Court about changes in the data of organisations. After the transportation of data to the statistical database the activity code of the organisation is determined by statistician experts based on the brief description of activity in the Supreme Court file. The organisations are informed about their activity code when the annual questionnaires are sent out and they are required to confirm it or to indicate if they find it unsatisfactory, in which case they are requested to provide a detailed description of their activity to make the classification more accurate.
  1. To complement the files coming from the Supreme Court and for the maintenance of the NPIs register three different sources are used:
  • 23. The Business Register of the HCSO which contains NPIs recorded by the Tax Authority. The link of the Business Register and the Register of the Supreme Court is hindered by the lack of a common identifier enabling the connection via the computer. For establishing link between the two registers the name and the location of the NPI can serve as guidance. This means manual rather than computerised work because of the numerous divergences in spelling and formatting or the inaccurate use of names. However, when the link is successfully established the information provided by the Business Register can be utilised not only for updating the NPI register but the statistical database of NPIs as well since there are plenty of NPIs who notoriously reject answering the statistical questionnaires but sustain a regular relationship with the Tax Authority.
  • 24. The annual non-profit surveys which provides all identifying data of the units. Based on the obtained answers the data of register are controlled and some additional parameters such as statistical ID code, telephone number, electronic mail address are recorded. Information about the termination or suspension of their activity is registered, even if no official announcement has been made toward the Court. (There are over 4.000 NPIs in the Supreme Court Register, although the news about their termination had been communicated toward the HCSO.) There are also a few thousands NPIs from whom no completed questionnaire has been obtained since 1992. These are theoretically existing organisations since the questionnaires are delivered to them by post year after year, but the relating data in the register cannot be updated, their existence is not confirmed.
  • 25. Finally, useful sources for the maintenance of the Non-profit Register are the journals, official lists of addresses, newsletters that are published by the NPIs themselves or their umbrella organizations.

Experiences and conclusions

  1. The most important experiences of the annual surveys can be summarised as follows:
  • 27. The majority of the NPIs are small in size so they have no staff for bookkeeping or any other administrative work. The annual questionnaire of HCSO having 63 characteristics is a heavy burden for respondents to fill in. This is the main reason of the rather high non-response rate. Instead of the present exhausting (inefficient) full scale survey a stratified sample survey should be designed on the basis of the revised and updated register.
  • 28. Taking the heterogeneity of the sector into account the use of unified form is not a proper solution for surveying their service activities in detail. These questions should be included in tailor made forms in each type of NPI.
  • 29. During data editing and processing statisticians must use sophisticated cross-checking and validity checking techniques to improve the bad quality of data caused by the lack of expertise of the respondents.
  • 30. The administrative work of foundations functioning in connection to schools, hospitals or companies is often done by the “mother institute”, who frequently put its own ID number on the questionnaire instead of the ID code of the foundations. The same mistake often occurs in the case of local organisations being independent legal entities but they have a main headquarters.
  • 31. There is a great number of NPIs who neither respond to the statistical questionnaires nor maintain any relationship with the Tax Authority, consequently no data is available about them even in the Business Register. It shows that the official register of the Supreme Court itself could not provide a proper survey frame for the data collection: since it is not updated it contains a number of dead units and some important parameters (type of activity) are missing.
  • 32. The principal step in the improvement should be to develop the co-operation with the Supreme Court in order to build up a bridge between the SC register and the BR of HCSO with the help of the ID code number.
  • 33. On the basis of Economic Census 1997 the NPIs register have to be revised and should be inserted into the Business Register. New round of investigation should be implemented supported by interviewers to make contact with the units which are not included in the BR and gave no answer to the annual questionnaire. For the new units "register updating" questionnaire should be sent requesting the parameters missing from the Supreme Court register.