REVIEW OF ECONOMIC PERSPECTIVES – NÁRODOHOSPODÁŘSKÝ OBZOR,
VOL. 13, ISSUE 1, 2013, pp. 43–57, DOI:10.2478/v10135-012-0015-5
Transparency in the Allocation of Municipal Grants
for Sports and Voucher Systems in the Czech Republic
Marek Pavlík1
Abstract: This paper will assess transparency in the decision-making process in sports
grants allocation. In comparison with other parts of the public sector, surprisingly little
is known about transparency in the sports sector. An increasing portion of public funds
is spent on sport grants; this establishes the necessity for research. Can any positive
effects of sports grants be expected to appear without transparency in the decisionmaking
process? An examination of the process in reality is crucial for future public
resources allocation. Based on the general assumption that NGOs are important actors
in economic and political development, we address the Czech Republic at the municipal
level.
The main goals of this paper are to assess the transparency of the allocation of public
grants for sport organizations on the municipal level in the Czech Republic and to
discuss one possible method for improving system transparency and efficiency:
vouchers.
We discuss sport vouchers as a possible tool for improving transparency. Vouchers
solve the problem of transparency in the decision-making process by transferring the
purchasing power to the client. Although using sports vouchers as a tool for allocating
public resources is quite rare, there are a few examples of this practice in the Czech
Republic. We established two research questions: (1) Do sport clubs perceive the
allocation of sport grants at the municipality level as transparent? (2) Do sport clubs
consider a voucher system as helpful for the transparency? To answer these questions,
we discuss the theory and specific conditions in the Czech Republic; we perform a
survey among sport clubs and we examine examples of voucher implementation; and
we discuss the general consequences of our results.
Key words: Public sector; public finance; grants; sport; NGO; allocation rules;
municipality; transparency, vouchers
JEL Classification: H76, L3, L83
1
Masaryk University, Faculty of Economics and Administration, Lipová 41a, Brno
602 00, pavlik@econ.muni.cz
REVIEW OF ECONOMIC PERSPECTIVES
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Introduction
Transparency in the allocation of public grants is important topic in most democratic
countries. The post-communist European countries face problems of transparency as
well as corruption in various parts of the public sector (see Transparency International's
2011 annual report). This paper will investigate transparency in the decision-making
process in sports grants allocation. In comparison with other parts of the public sector,
surprisingly little is known about transparency in the sports sector.
An increasing portion of public funds is spent on sports grants; this establishes the
necessity for research. The EU believes that “in grassroots sport, equal opportunities
and open access to sporting activities can only be guaranteed through strong public
involvement” (Commission of the European Union; p. 13, 2007a). Can any positive
effect be expected to appear without transparency in the decision-making process?
Exploring the reality is crucial for future public resources allocation. Research results
have raised arguments against the support of sport activities/organizations from public
budgets because little or no positive economic impacts were proved (e.g. MARTIN 2001,
JONES 2002) and the process of grants allocation is more a political than a rational
economic process (KANTOR 1995). There are at least three possible perspectives on the
problem of grants allocations for sports organizations: 1) grants are useful and benefit
society; it is also a traditional part of state activities; 2) grants can be useful and benefit
society under specific circumstances; 3) grants have no real effect, it’s a kind of a fiscal
illusion; grants are the result of political decisions without connections to any economic
or non-economic benefit for society. If there are to be any positive effects, the
transparency of the decision-making process is a necessary condition (Stirton & Lodge,
2001). Based on the general assumption that NGOs play important roles in economic
and political development (Brown & Kalegaonkar, 2002), we address the situation at the
municipal level in the Czech Republic which is usually perceived as a partner of NGOs.
The main goals of the paper are to assess the transparency of the allocation of public
grants for sports organizations on the municipal level in the Czech Republic and to
discuss one possible method of improving transparency: a vouchers system.
The evidence that there is a transparent environment in grants allocation does not mean
that the positive effect on society automatically appears… but it is one of the key
conditions. If the Czech Republic fails in the field of sports grants allocation
transparency, we can seriously doubt the positive effects of grants in the other postcommunist
countries. Examining this key condition is one step on the way to answering
“What should we do with grants for sport? How should we allocate them? Which
criteria should be relevant?” Without answers to these questions, the continuation of
public grants allocation is like playing tennis blindfolded and being surprised when the
ball is not hit.
Wolman and Spitzley (1999) recommended that future research should focus on
participants and their interests in a conflict and on how the conflict is resolved. Our
research adds the problem of transparency as a variable affecting participant behaviour
and wider policy outcomes (positive effects for society). We discuss sports vouchers as
a possible tool for improving transparency. The use of vouchers in public resources
allocation was originally introduced in the education system. One of the earliest
Volume 13, Issue 1, 2013
45
suggestions for the government use of vouchers, made by (Friedman, Friedman, 1982),
was as a way to fund education without excessive government intervention in the
education market. Vouchers typically transfer purchasing power to the client.
The healthcare sector is another possible voucher market that has been extensively
explored. Health vouchers could be used as a tool for increasing patient choice in
healthcare providers or targeting subsidies to the poor and/or high risk and vulnerable
groups (see more in Gorter et al 2003), and well-structured vouchers may provide
transparent funding of healthcare services (Wilson 1999; Peacock & Segal 2000). The
use of sports vouchers as a tool for public resource allocation is quite rare, though early
attempts were made in the USA and there are examples of sports vouchers in the Czech
Republic. Crompton (1983) noted that “there is a danger that resources may be allocated
to the most persuasive rather than the most responsive organizations”. Valkama &
Bailey (2001) categorise sport vouchers as service vouchers within the public sector;
however, they see vouchers as a useful tool for employers to motivate/reward
employees. Their taxation of vouchers enables the possibility of using vouchers as an
allocation tool similar to school vouchers.
The vouchers represent a possible answer to the transparency problem. Neither
transparency nor the voucher system has yet been researched in the sport sector. We
established two research questions:
- Do sport clubs perceive the allocation of sport grants at the municipality level
as transparent?
- What are the (dis)advantages of the voucher system in the opinions of sport
clubs, and what is the practice of municipalities which use the voucher system
for sport grant allocation?
To answer these questions, we discuss the theory and specific conditions in the Czech
Republic; we perform a survey among sport clubs and examine examples of the voucher
system implementation; and we discuss the general consequences of our results.
Public financing of sport organizations in the Czech Republic
There are many opportunities for Czech sport organizations to receive some kind of
grant (see Table 1); however, each decision about grant allocation should be based on
the same principle: the application of definite examination rules which respect the goals
of the sport policy. The sports organizations are not only non-governmental; they can
also be for-profit organizations. The following analysis is focused only on NGO sport
organizations for two reasons: (1) with the exception of some professional sports clubs,
the NGO legal form has a strong majority, particularly due to tax preferences; and (2)
the non-profit legal form is usually a condition for grants, especially at the municipal
level.
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Table 1: Review of sport NGOs and their public sector partners
Type of sport
NGO
Description Subsidizer
Decision
maker
General Sport
Associations
(GSA)
There are nine GSAs which
encompass all sport branches
unions/federations in the Czech
Republic. These nine were
stakeholders of the biggest
lottery company in the Czech
Republic. Their role consists of
providing financial and nonfinancial
support for sport
unions/federations. It seems that
their role has been decreasing
since 2011.
Ministry of
Education,
Youth and Sport
Ministry of
Defence
Ministry of the
Interior
EU
funds/projects
Ministry
committee
Sport branch
federations /
unions /
associations
Members of one of the GSAs.
Each sport union/federation
incorporates sport clubs in the
given sport branch. These
unions/federations can be divided
into regional sub-
unions/federations.
Regional
municipalities
Ministry of
Education,
Youth and Sport
EU
funds/projects
Representative
body
Sport clubs Basic unit. Most sport clubs are
NGOs; however, some of them
operate as ltds, joint stock
companies, or sole proprietors.
Regional and
local
municipalities
EU
funds/projects
Sport federation/
association
Representative
body
Source: author
The role of municipalities in the process of subsidizing sport NGOs is all the more
important because sport NGOs receive grants and non-financial support from
municipalities more frequently than they receive support from their own sport
federation/association; see Figure 1. Our study shows important information about the
failing system of internal support within the sport federation. It could be expected that
the internal support system within the sport federation and association would be more
supportive and generous than municipal support. However, sport federations can also be
recipients of public grants; the only difference is the system of redistribution. Nemec et
al (2000) showed that there is a risk of high dependence on public budgets for sport
clubs in the Slovak Republic.
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Figure 1: Comparison of support received from local municipalities and sport
federations (in percentage of respondents 2011)
Source: author
In the following text, we focus mainly on sport organizations and their relations and
experiences with government at the local level. This step allowed us to compare the
declared attitude of municipalities with sport clubs’ opinions and experiences.
Research methodology
The results are based on two separately performed analyses. The first analysis presents
the results of our survey among sport clubs. The second analysis involved examples of
sport voucher implementation in the Czech Republic.
1. Questionnaire research among sport clubs
This is the key part for assessing the difference between declared principles and reality
as perceived by sport clubs. The questionnaire research was conducted among sport
clubs in the Czech Republic in spring 2011. A list of 19 questions was sent to 1567
sport clubs; 430 completed forms were returned. Of those 430 respondents, 406 were
listed as having a non-profit legal form. It is difficult to estimate the total number of
sport organizations in the Czech Republic, hence we cannot evaluate if the answers
were enough for a representative sample. The questionnaire was sent to approximately
60% of the sport organizations enrolled in the Czech Sports Association (ČSTV). ČSTV
includes 72 sport federations and it is estimated that 70% of athletes are members of the
ČSTV.
We estimated that the 430 respondents represent approximately 58,000 registered
members of sport clubs. However, there are an estimated 2.5 million members of sport
REVIEW OF ECONOMIC PERSPECTIVES
48
organizations. We analysed responses to six questions: (1) “Did you receive support2
from your municipality?”; (2) “Did you receive support from your sport
federation/association?”; (3) “How should grants be allocated?”; (4) “How are grants
allocated in reality?”; (5) “Have you noticed any problems with corruption in relation to
sport grants allocation?”; and (6) “What do you think about using vouchers for the
allocation of grants?”
Respondents (sport clubs) had the opportunity to answer a question about how grants
should be allocated. They were allowed to choose more than one answer, and their
contributions to the final percentage were calculated on the principle that one club has
one suffrage; thereby, if there were four possible answers, each answer was calculated
as one quarter for each category. All answers were anonymous.
2. Analysis of examples of voucher systems used for sport grants at the municipal
level in the Czech Republic
We gathered information about three municipalities which had implemented voucher
systems and one municipality with a proposed voucher system. All information was
verified in September 2012 through publicly available documents.
Research results
The results show an unsatisfactory situation in the Czech Republic. The questionnaire
revealed that 76% of sport clubs regularly apply for grants. All answers indicated that
respondents expect transparency, i.e. clear criteria which are crucial for grants
allocation. The option of an open-ended answer was never used for expressing a
preference for any kind of clientelism or corrupt activities. Most sport organizations
expect definite criteria for grants allocation (see. Fig.2). As with other answers, we see
the typical conflict of evaluating the criteria. What is most important: the number of
youth, the number of members, the popularity of the sport, or something else?
Figure 2: How should grants be allocated (opinion of sport clubs in 2011)?
Source: author
2
Support means financial grants and/or non-financial support
Volume 13, Issue 1, 2013
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The question of how grants are allocated in reality was asked of all the sport clubs, not
only those that had applied for grants in the previous two years; see Figure 3. There are
two reasons for this:
The sport club could have its own experience from more than two years ago.
The sport club could be informed by other sport clubs. When we calculated the
results only for those sport clubs that applied for grants in the previous two
years, there was no significant difference.
Figure 3: How are grants allocated in reality (opinion of sport clubs in 2011)?
Source: author
Sport organizations have to provide a lot of information about themselves and about the
purpose of their grant application, but in most cases they have no information about the
examination criteria and preferred allocation alternatives. This situation inevitably leads
to a point where the majority of potential recipients begin to perceive the process as
non-transparent and potentially corrupt.
The decision-making process usually involves three steps: (1) A hearing with the sport
(or education) committee which is an adviser for the municipal body. The committee
usually concludes the hearing with some recommendations for the council and the
representative body of the municipality. This hearing is not open the public. (2) The
proposal submitted by the committee is discussed by the council of the municipality and
it is concluded with recommendations for the representative body. This process also
does not permit public access. (3) The representative body makes a decision, usually in
accordance with the recommendations of the council and the committee. The results of
the decision-making process are then announced.
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Corruption
Although respondents perceive the system as a non-transparent, only 13.3% reported a
direct experience of corruption. In combination with symbolic3
corruption, we can
estimate that at least 30% of respondents had to face a non-transparent environment; see
Table 4. The absence of corruption does not mean that the system can be considered as
transparent.
Table 4: Have you noticed a problem with corruption in relation to sport grants?
Answer Number %
Yes 57 13.3
Yes, but symbolic rather than effective corruption 75 17.4
No 298 69.3
Total 430 100.0
Source: author
Vouchers – opinion of sport clubs
The question about vouchers as a possible solution to the transparency problem was
presented without additional information for respondents. We thus have to evaluate the
results taking into account the possibility that some of respondents had no knowledge of
the voucher system.
Figure 4: Using vouchers for grants allocation (opinion of sport clubs in 2011)
Source: author
3
In this case, the term “symbolic corruption” refers to the situation when decision makers receive
gifts (before or after deciding) that could be considered as reciprocal. The word “symbolic” refers
to the fact that the gift is usually of little financial value (like a bottle of whiskey or a box of
chocolates).
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The surprising opinion that vouchers could discriminate against clubs participating in
less popular sports has strong roots. We can see normative issue behind this answer. If a
sport is popular, then it has better access to private resources and therefore a less
popular sport (but also producers of positive externalities i.e. health, lifestyle) should be
supported. On the other hand, if a sport is popular, it means that people are interested in
this sport and therefore it is reasonable to support it. The problem is obvious in the case
of vouchers: less popular sports have fewer members and hence they receive fewer
vouchers.
Considering actual experiences with corruption and the opinions of sport clubs on how
grants are actually allocated, we find interesting differences in the opinions of sport
clubs that support the idea of the voucher system. The first result can be seen in Fig. 5,
where “voucher supporters” more often perceived grant allocation as a result of
informal relationships with the decision-makers. Experience with corruption is also
higher in the group of “vouchers supporters” (See Table 5).
Figure 5: Opinions of sport clubs on the voucher system in percentage in 2011
Source: author
Table 5: Experiences of sport clubs with corruption
Have you noticed any
problems with
corruption in relation to
sport grants?
Vouchers
supporters
Total results Difference
Yes 11 14,67 57 13,26 1,41
Yes, but symbolic rather
than real
16 21,33 75 17,44 3,89
No 48 64,00 298 69,30 -5,30
Total 75 % 430 %
Source: author
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Vouchers for sport in the Czech Republic
The idea of vouchers used for grant allocation is not new in the Czech Republic. The
following list presents the practice of selected municipalities where part of the total
financial resources dedicated to sport is allocated to voucher programs.
The voucher system has been implemented in three cities: Hodonín, with 25 thousand
inhabitants and the longest tradition in voucher system (since 2008), Opava (58
thousand inhabitants), and Poděbrady (almost 14 thousand inhabitants). One city
(Prostějov,4
with 44 thousand inhabitants) is considering implementing the voucher
system. Each city created its own system; however, we can find similarities. The
voucher system is based on the following principles in all these cities: the person with
the right to the voucher has to visit the municipal office and pick up the voucher; the
voucher (one or all parts) is given to the sport club preferred by the voucher bearer; and
the sport clubs submit the vouchers to the municipality, on the basis of which they
receive financial support. However, Opava (Opava 2013) bypassed the first step; the
prospective recipient can print the voucher and give it to the sport club. The
municipality is responsible for duplicity check.
The value of the voucher can be set explicitly before distribution (Prostějov) or derived
from the total amount dedicated to subsidies and the number of vouchers presented by
the sport club (Hodonín – ex post 85 euro per voucher in 2012; Opava). Based on the
information available, the value of vouchers allocated for one child (recipient) is 40-100
euro per year. Although vouchers are usually considered to be more transparent than the
standard grant system, we noticed some difficulties when seeking information about
vouchers on the web pages in these cities. Some information (e.g. the number of
received vouchers, the number of supported children) was not easy to find. We also
found some information unclear from the point of view of the sport club. Ex ante
determination of the voucher value is probably more transparent for sport clubs;
however, from the point of view of the municipality, it can cause surplus budget issues.
All the cities use vouchers as a supplementary method for allocating financial support
for selected groups of recipients. However, in some cases, if a club receives a direct
grant from the municipality budget, then it is excluded from the voucher system
(Opava5
). Other differences can be found in the system variables.
The first variable in the voucher system is the target group as defined by the age of the
prospective recipient. Hodonín6
and Opava enabled vouchers only for the age group
ranging from 6 to 18 (19) years; Poděbrady does not apply any age restriction. An
alternative approach of the cities can be seen also in the possibility to get the voucher
even if the recipient does not have a permanent address in the city (Hodonín).
Another variable is the divisibility of the voucher into parts (Hodonín and Opava enable
division into two parts, Poděbrady7
into three parts). The divisibility of the voucher
means that each part of the voucher can be given to different organizations or all parts
4
Bursa 2012
5
Opava (2012; 1), Opava (2012; 2), Opava (2013;1)
6
Hodonín (2012; 1), Hodonín (2012; 2), Hodonín (2012; 3), Hodonín (2012; 4)
7
Poděbrady 2012;1
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53
can be given to one subject only. Table 6 summarizes the available data about the
practice in the municipalities presented.
Table 6: Main differences among the voucher system in analysed municipalities
City
Determination
of the value
of voucher
Expenditure
on one
recipient in
CZK (2012)
Target group
Number of
parts
Number of
supported
recipients
(2012)
Hodonín
Floating
(ex post)
2118 Age 6-18 2 875 (2009)
Opava
Floating
(ex post)
1000 Age 6-19 2 966
Poděbrady
Floating
(ex post)
NA No age limit 3 N/A
Prostějov
(proposal)
Fixed
(ex ante)
- Age 6-19 2 Source:
author
Summary of findings
We identify a lack of transparency and showed potential space for the voucher system
as a tool for increasing transparency. Only 23% of respondents stated that grant
allocation is done according to clear criteria (methodology). Another important finding
is that almost 30% of respondents experienced some form of corruption. Despite
unpromising finds, we proved that there is a relatively good relationship between clubs
and municipalities (at least in comparison with relationship with sport federations). The
role of municipalities in sport support has a long tradition and cooperation with nonprofit
organization is a part of modern society.
The vouchers system may be a part of this relationship. We discovered that the sport
clubs have a somewhat skeptical position, and we would probably discover the same
opinion from municipalities. However, most of this skepticism could result from
insufficient information.
Based on analysis of the voucher systems in municipalities where the system has come
into practice, we created the summary provided in Table 7. We assume that the voucher
system may be more transparent; however, it probably increases the total administrative
stress for the municipality, sport clubs, and the citizens in the target group of the
voucher program. But the example of Opava showed that this administrative stress can
be minimized and transferred to the municipality. All municipalities use the voucher
system together with the grant system based on requests by clubs, whilst the decision is
made by the municipality body.
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54
Table 7: Advantages and disadvantages of vouchers in sport
Advantages (benefits) Disadvantages (costs)
Recipients Motivation to continue or
start with sport
Freedom of consumer choice
Indirect involvement in
public affairs
Time (and cost) for collecting the
voucher from the local municipality
Sport clubs
/organization
Increasing interest in services
granted by the voucher
Guaranteed support not
dependent on a political
decision-making process
Administrative stress
Economic costs of administration
The risk that no public resources
would be gained if no vouchers
from members were gathered
Vouchers are set to a fixed amount
of money, hence cost differences
among sports are not taken into
consideration
The value of the voucher can be
floating (derived from the number
of collected vouchers), and thus the
sum of money can be unpredictable
State / local
municipality
Establish a transparent
system based on inhabitants’
revealed preferences instead
of on a political decision
Absence of the necessity to
formulate a clear sport grant
policy – consumer choice
determines allocation
Direct economic cost:
Costs of distribution of vouchers
Increasing of administrative stress
especially if vouchers are used in
combination with the previous
system
Other impacts
Vouchers cannot be used in
investment decisions
Source: author
Considering opinions of sport clubs we identified three important variables:
- Vouchers may increase transparency
- Vouchers may induce new administrative stress
- Vouchers may discriminate against “small sports”
The administrative stress can be minimized through a benchmark of voucher systems
already implemented. And the problem of “small” sport clubs/branches (i.e. less popular
sports or clubs with a small number of members) can be solved (if it is the preference of
a municipality) by the grant system based on the request and decision-making process
of a municipality body. Or we can accept the premise that clubs with more members
(inhabitants of the municipality) gather more vouchers and hence they have right to
receive higher financial support.
Volume 13, Issue 1, 2013
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Conclusion
We investigated the opinions of sport clubs related to the problems of transparency,
including corruption, and to a possible solution – the voucher system. Without
transparency, any positive effects for society induced by grants for sport organizations
can hardly be expected. Information was collected via a questionnaire given to 430 sport
clubs during spring 2011. We found a critical lack of transparency in the decisionmaking
process in the Czech Republic. In other words, we played tennis blindfolded
and we missed the ball.
The analyses performed showed serious problems with the transparency of the decisionmaking
process. However, we found that at least some information about general grant
principles is available, which is encouraging. We could anticipate that transparency
problems are closely related to the availability of publicly displayed information
provided by the municipality (i.e. granting principles, methodology of decision-making,
review of allocated grants). Considering the increasing portion of public resources spent
on sport, we pointed out the necessity of research. We are convinced that finding the
roots of the transparency problem and the uprising pressure on public resources is
necessary before any changes could be made.
One of the challenges for the theory is to suggest an administratively simple but
transparent system for the decision making concerning grants. Under specific
conditions, the voucher system can be a tool for improving transparency of the system.
The challenge for the public sector is the implementation of this system. We conclude
that inspiration could be found in alternative theories and comparisons of the best
practices among Czech and other European countries. Considering that any
implementation of such a system would be strictly voluntary (at least in the Czech
Republic), we have to rely on the hope that most municipalities really want to maximize
the positive effects of grant allocation. Questions like “How can we support sport
through public budgets?” or “How can we increase the transparency of such support?”
are still alive. If we ever want to improve sport support and achieve positive effects for
society, we have to stop non-transparent grant allocation and consistently seek best
practices.
REVIEW OF ECONOMIC PERSPECTIVES
56
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1054449
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