The most important characteristics of the nonprofit sector, 2020

In 2020, there were 60,673 nonprofit organisations in Hungary, little fewer than a year earlier. One-third of them functioned as foundations and two-thirds as community nonprofit organisations. Practically, the determining factors of the sector remained unchanged: classical NGOs were in the highest number, while nonprofit enterprises realised the highest revenues. In connection with the pandemic, the number of volunteers for NGOs decreased by 15%, compared to 2019.

The weight of the nonprofit sector within the national economy is on a steady path

In 2020, a total of 60,673 organisations operated in the nonprofit sector, 217 fewer than a year earlier, which was considerably below the decrease measured in 2019 (–601). The number of organisations was continuously decreasing since the early 2010s, which was due to the effect of Act CLXXV of 2011 on the Freedom of Association, Nonprofit Status and the Operation and Support of Civil Organisations (hereinafter as: Nonprofit Law).The Nonprofit Law states that as a consequence of the failure to submit the mandatory annual financial statements, the court initiates the termination or deletion of these organisations.[1]

Nevertheless, the basic characteristics of the image of the sector remained unchanged: by type of organisation, the vast majority of the total nonprofit organisations, some 87% still belonged to the classical civil sector (private foundations, associations and federations) in 2020. These organisations tended to have low revenues, while nonprofit enterprises, which were in a much lower number (nonprofit economic organisations, public and asset management foundations) realised high revenues (on average, HUF 320 million).According to organisational forms, private foundations as well as associations and federations are among classical non-governmental organisations. Nonprofit business companies include nonprofit enterprises as well as public and asset management foundations. Public and asset management foundations are mainly specialised in public tasks and support, founded by the government or any local government and play a marginal economic role compared to nonprofit companies. The third group of nonprofit organisations is made up of advocacy groups (public bodies, employer, employee and professional organisations).[2]

The increase in real value of the total revenues of nonprofit organisations – calculated with prices in 2010 – was slowing since 2017. Compared to 2019, it totalled 3.7% in 2020. The earlier extreme revenue increase was the consequence of the structural transformation of nonprofit companies and the emergence of some private foundations established with considerable capital stock. The number of employees saw highs and lows in the past years – due to the rearrangement of nonprofit organisations and their spreading within the public employment sector. After a decline in 2019, a slight growth of 1.6% could be observed again in 2020.

Figure 1
Changes in key indicators of the nonprofit sector

Based on he revenue-to-GDP and average employment rate, the sector’s share in the national economy increased evenly between 2015 and 2018, and then, after a year of decline, with slow expansion, it reached its highest ever level of 4.44% in 2020. The sector’s revenue-to-GDP ratio had already varied around 5% in the preceding three years, and by 2020 it exceeded that rate (5.4%). Also, the employment rate was slightly higher than a year earlier, and although the weight of the nonprofit sector within the national economy also increased, the changes in these rates were not significant but rather reflected the stabilisation processes of the sector.

Figure 2
The economic weight of the nonprofit sector in the national economy

Two-thirds of nonprofit organisations kept operating as partnerships

In 2020, of 61 thousand civil and other nonprofit organisations one-third (20 thousand organisations) operated as foundations and two-thirds (41 thousand) as corporate nonprofit organisations.A corporate nonprofit organisation is defined as a nonprofit organisation based on association and membership such as associations, federations, public bodies, employer’s, employee’s and professional interest representations, unions and nonprofit organisations.[3] In line with previous years, a significant part of the foundations pursued activities related to

  • education (33%),
  • social services(16%), and
  • culture (15%).

Among corporate nonprofit organisations

  • leisure (22%) and sports associations (22%), as well as
  • cultural organisations (17%) were again the highest.
  • The large number of organisations related to cultural, as well as sports and leisure time activities is also reflected in the amount of the revenue they generate. The organisations of municipal development, economic development, social welfare and environmental protection do not rank in terms of the number of their organisations, but on the basis of their total income they stand out from the other groups of activities.
Figure 3
Distribution of the number and total revenue of nonprofit organisations by main group of activity, 2020

The share of public benefit organisations stagnates

As a result of legislative changesThe Nonprofit Act has entirely reinterpreted the term ‘public benefit’. First, it became single-stage (the ‘prominent public benefit’ status ceased to exist); second, the acquisition of the legal status is subject to the conduction of public benefit activities related to public duties and the annual fulfilment of certain criteria. Since the legal provision set a 2-year phasing-out period for the introduction of the new public benefit system, it practically became effective from 2014.[4] in the sector, according to data in 2015, barely more than a fifth of registered organisations had a public benefit status, down from 55% in the “phasing out” year of 2013. In the following years, no significant change occurred, the share of nonprofit organisations was about 21% in 2020, too. It has slowly been becoming steady since 2015, and it is not expected to considerably change until the following law amendments.

Figure 4
Changes in the share of public benefit and prominent public benefit nonprofit organisations within the whole sector

Repeated revenue growth in the nonprofit sector

In 2020, of organisations within the sector,

  • 92% made a full cashflow,
  • 1.4% recorded only revenue,
  • 4.4% recorded only expenses, and
  • 2.6% were not engaged in any financial activities.

In 2020, the total revenue of nonprofit organisations was more than HUF 2.6 thousand billion, an increase of 7.7% at current prices and 3.6% in real terms compared to the previous year. As in recent years, the proportion of organisations with annual revenues below HUF 500 thousand remained significant, accounting for over 38%.

Figure 5
Distribution of nonprofit organisations by size of revenue, 2020

Rise in the proportion of funds arising from state subsidies in 2020, too

Compared to 2019, the proportion of funds arising from state subsidies increased by 2.5 percentage points. In 2020, 48% of the annual revenue of the entire sector came from state or municipal budgets, which meant a surplus of HUF 123 billion. Additionally, this resulted in a decrease in the share of own (core business, entrepreneurial) revenues from 42% in the previous year to 40%, with the sector’s support rateThe share of total (state and private) support in the total revenue.[5] increasing by 2.0 percentage points to 59% year-on-year. Compared to earlier years, the proportion of business revenue in the classic civil sub-sector grew from the one measured in 2019; however, the majority of this (3.5%) came from three large foundations. In the meantime, these foundations were transformed into another legal form (asset management foundation). Therefore, the proportion of business revenue of the classic civil sub-sector fell to 7.9% in 2020.

In 2020, nearly 14 thousand organisations benefited from the HUF 292 billion grant funding earmarked for this purpose via applications, which was a significant increase of HUF 23 billion compared to the previous year.

During the period under review, 8,203 organisations provided cash or in-kind donations. Out of the HUF 245 billion support, HUF 210 billion was offered in cash.

Figure 6
Distribution of revenues in nonprofit organisations by source, 2020

156 thousand employed persons and 311 thousand voluntary helpers

In 2020, the total number of people employed in the nonprofit sector was 156 thousand, including

  • 106 thousand main job holder full-time employees, and
  • 50 thousand non-main job holder part-time employees.

The combined performance of the sector corresponded to 128 thousandCalculated number of full-time employees: the number of full-time (main job holder) employees plus the half of of the part-time (main job holder) employees, one-tenth of non-main job holder employees and the total annual work performance of public workers converted into the number of full-time employees working eight hours per day.[6] full-time jobs.

Although main job full-time employment is the most prevalent in all three segments, the share of part-time employees accounts for one-third of the total at nonprofit organisations. At NGOs, this atypical form of employment is even more common. One explanation for this is that many are carrying out ancillary labour activities as retired people, or as disadvantaged, disabled workers or workers with special needs.

Figure 7
Share of full-time employees

The human resources of the classic civil sector differed both in volume and form from the rest of the sector.

  • The total number of people employed in the classic civilian field was some 54 thousand persons (41 thousand calculated full-time employees).
  • Volunteers helping foundations and associations account for the vast majority (95%) of the volunteer workforce in the entire sector.

In 2020, the estimated number of volunteers was 311 thousand persons in the sector. The 43 million working hours performed by them corresponded to the working hours of more than thousand full-time employees,This calculated value expresses how many main job holder full-time employees are replaced with volunteers by the organisations.[7] and the estimated value of their work was HUF 83 billion.When calculating the value of voluntary work, we multiply the estimated number of annual voluntary working hours with the hourly rate calculated on the basis of the average annual wage measured in the nonprofit sector.[8] Help offered by residents is particularly significanr for small organisations.

Figure 8
Composition of human resources in the nonprofit sector based on the cost of working time, 2020

The human resources of the classic civil sector significantly differ from business companies and interest representations. While in case of the latter ones paid labour force accounts for the high rate of human resources (above 90%) and volunteering is less typical, 30% of the labour demand of NGOs are ensured by voluntary activities. This also means that -, besides the financial supports that are also important – this “time donation,” which is mostly directed here, is essential for the operation and sustainability of the foundations and associations.

Classical NGOs representing 87% of nonprofit organisations managed 38% of the sector revenue

In 2020, the number of organisations classified in the civil sector (classic private foundations and associations) nearly equalled the number of the previous year: 53 thousand. Out of this, some 19 thousand organisations were foundations and nearly 34 thousand were associations (federations), as in the previous year.

In terms of revenue share, the group is underrepresented: in 2020 classical NGOs representing 87% of nonprofit organisations could manage 38% of the amounts received. Two-thirds of their income still came from grants:

  • HUF 393 billion from the state,
  • HUF 198 billion from the private sector.

Compared to previous year, state aid and private support increased by HUF 39 billion and HUF 6 billion respectively.

In the case of the classic sub-sector largely consisting of associations, the amounts received from membership fees were not negligible in 2020, either (HUF 32 billion). The presence of foundations, however, implied the opposite movement of grant-related funds; an amount of HUF 107 billion was spent to help individuals and institutions in 2020. Considering expenses, the proportion of the sub-sector approximately corresponded to the share measured in case of incomes.

Figure 9
Key indicators for the sectorial weight of classical NGOs in the nonprofit sector, 2020

The impact of the Covid19 pandemic on the support of NGOs

The activity and work of NGOs can be facilitated by the population with voluntary work (donating time) as well as cash and in-kind contribution (monetary and other donations). The measures and restrictions introduced as a result of the Covid19 pandemic beginning in 2020 made the performance of voluntary activity difficult, and the revenue and income loss caused by the disease and the temporary or ultimate reduction of jobs also projected a decline in private donations.

At NGOs, the number of volunteers decreased from 347 thousand to 294 thousand by 2020. Calculating with the hourly rate of the year 2019, the value of work fell from HUF 70.4 billion to HUF 64.9 billion, and the donations paid by citizens (at real value) only totalled HUF 34.6 billion, compared to HUF 42.6 billion in 2019.

Therefore, the pandemic negatively affected the contribution of the population: it caused a loss of 15% in the number of volunteers and 18% of material help in 2020, compared to previous year. Although the amount of voluntary work also decreased by 8.0%, it is only half of the decline that could be observed in the number of helpers. In consequence, the average annual work amount assumed per person increased from 126 hours to 136 hours, which means that in 2020 fewer persons assumed more efforts to help civil persons. This specific additional work also contributed to the weight of time donation slightly increase – from 62% to 65% – in the composition of citizens’ help, compared to financial support.

Figure 10
Changes in citizens’ contribution among classical NGOs, 2019–2020

[1]:↑ The Nonprofit Law states that as a consequence of the failure to submit the mandatory annual financial statements, the court initiates the termination or deletion of these organisations.

[2]:↑ According to organisational forms, private foundations as well as associations and federations are among classical non-governmental organisations. Nonprofit business companies include nonprofit enterprises as well as public and asset management foundations. Public and asset management foundations are mainly specialised in public tasks and support, founded by the government or any local government and play a marginal economic role compared to nonprofit companies. The third group of nonprofit organisations is made up of advocacy groups (public bodies, employer, employee and professional organisations).

[3]:↑ A corporate nonprofit organisation is defined as a nonprofit organisation based on association and membership such as associations, federations, public bodies, employer’s, employee’s and professional interest representations, unions and nonprofit organisations.

[4]:↑ The Nonprofit Act has entirely reinterpreted the term ‘public benefit’. First, it became single-stage (the ‘prominent public benefit’ status ceased to exist); second, the acquisition of the legal status is subject to the conduction of public benefit activities related to public duties and the annual fulfilment of certain criteria. Since the legal provision set a 2-year phasing-out period for the introduction of the new public benefit system, it practically became effective from 2014.

[5]:↑ The share of total (state and private) support in the total revenue.

[6]:↑ Calculated number of full-time employees: the number of full-time (main job holder) employees plus the half of of the part-time (main job holder) employees, one-tenth of non-main job holder employees and the total annual work performance of public workers converted into the number of full-time employees working eight hours per day.

[7]:↑ This calculated value expresses how many main job holder full-time employees are replaced with volunteers by the organisations.

[8]:↑ When calculating the value of voluntary work, we multiply the estimated number of annual voluntary working hours with the hourly rate calculated on the basis of the average annual wage measured in the nonprofit sector.

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