Non-profit organization’s endowment as a source of financing to improve its sustainability

Abstract

Non-profit organizations are an important part of the economy and are needed to fulfill many beneficiary roles that neither market, nor state would fill. Non-profit organizations in Slovakia became important after the 1989 Velvet revolution, the dissolution of the Czechoslovakia and creation of the free and democratic Slovak Republic. Ever since them, non-profit played a role in everyday life of people in Slovakia. Non-profit organizations exist with the aim of providing generally beneficiary services without the aim of making profit for their founders – which is what makes them distinct from for profit businesses. However, non-profit organizations need funding for their operations in the same way as any other organizations. They need to pay their bills, salaries, purchase materials, services, etc. Because of their non-profit nature, the sources of financing for these costs are different. The aim of this paper was to look at the endowment of non-profit organizations and its investment as a source of non-profit financing and the current situation in Slovakia regarding it use. We analysed financial statements of foundations available through Finstat.sk database. We found that the use of investing the endowment for self-financing of non-profit organizations is almost non-existent in conditions of Slovak non-profit sector, with only 13,7% of organizations having any long-term financial assets and only 3,9% having any substantial gains from them. Further, we proposed a framework for possible use of the endowment as a source of funding for more non-profit organizations in order to improve the financial situation and sustainability of the non-profit sector.