1

Making Nonprofit Satellite Account:Japanese Experience

Naoto Yamauchi, Osaka University

October 11, 2006Working Party on National Accounts, OECD

2

What is Nonprofit Satellite Account ?

A satellite account of nonprofit institutions is a comprehensive statistical system to describe activities of the nonprofit sector, in consistent with 1993 SNA.

It has been proposed by the UN Statistics Division in collaboration with Johns Hopkins CNP team.

3

UN Handbook

For inplementation, Handbook on Non-profit Institutions in the System of National Accounts was released in 2003.

It is a manual of estimation procedures, and contains definition, classification, key variables and tables, data collection strategy etc.

4

Why Nonprofit Satellite Account ?

Civil society, nonprofit and nongovernmental sector: an emerging force worldwide

Increased policy interest But, insufficient statistical information Need comprehensive and detailed statistical

system, preferably consistent with SNA

5

JHCNP and Satellite Account

Johns Hopkins Comparative Nonprofit Sector Project (JHCNP) is a unique private initiative, and has produced statistics on nonprofit sector for well over 30 countries including Japan since 1990s.

At the new phase of the project, they call on national statistical offices to prepare a “satellite account” on the nonprofit sector and philanthropy as part of their regular economic data gathering and reporting.

6

Towards More Comprehensive Picture Nonprofit satellite account will pull together a

much more comprehensive and reliable picture of the nonprofit sector than has ever been available by estimating scale and structure of the sector.

As part of this process, statistical agencies are also called on to estimate the scale and value of the volunteer effort these organizations mobilize and to include this in estimates of economic activity (from JHCNP website).

7

Countries involved To date, following 26 countries have committe

d to implement Nonprofit Satellite Account. Argentina, Australia, Belgium, Brazil, Canada,

Camaroon, the Czech Republic, France, Ghana, India, Israel, Italy, Japan, Kenya, Kyrgyzstan, Korea, Mali, Morocco, New Zealand, Peru, Philippines, Slovakia, South Africa, Uganda, the United States, and Zimbabwe

8

Japanese Experience

Activities of nonprofit sector and roles of civil society have received increased attention by policy makers and researchers since mid 1990s.

Local governments (many suffered from serious financial problem) have tried to contract out various activities to local nonprofits.

9

Important Events for Nonprofits 1995:　 Disaster relief & urban reconstruction in

wake of Kobe Earthquake 1998:　 Implementation of the Law to Promote

Specified Nonprofit Activities (“NPO Law”) 2000:　 Nursing Care Insurance System begins 2001:　 Tax-deductible donations for selected

public benefit nonprofit corporations begins 2003:　 Implementation of amended NPO Law 2006:　 Enactment of the New Public Benefit

Corporations Act

10

Increasing Number of Nonprofit Corporations

1,1762,470

3,703

5,328 5,3064,800

3,475

1,9803,156

5,626

9,329

14,657

19,963

24,763

28,238

1,1760

5000

10000

15000

20000

25000

30000

1999 2000 2001 2002 2003 2004 2005 2006

Annual # of accreditations Cumulative # of accreditations

Source: Cabinet Office Website(Data as of August 31, 2006)

11

Research team for Japan

Economic and Social Research Institute (ESRI) of the Cabinet Office officially committed to implement nonprofit satellite account project.

They started two year (2005-2006) project, by contracting out to private research institute.

Research team of 7 economists and practitioners has been set up.

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Working Definition in the Handbook

NPI must fulfill the following; Organizations Not-for-profit and non-profit distributing Institutionally separate from government Self-governing Non-compulsory membership

13

Treatment of NPIs in the 93SNA source:JHCNP

Non-financialcorporations

sector

Financialcorporations

sector

Generalgovernment

sector

Householdssector

NPISHsector

(S.11) (S.12) (S.13) (S.14) (S.15)

Corporation C1 C2

Governmentunits

G

Households H

Non-profitinstitutions

N1 N2 N3 N4 N5

Sectors of the SystemType ofinstitutionalunit

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Institutional Units Cross-Classified in 93SNA source: JHCNP

Non-financialcorporations

sector

Financialcorporations

sector

Generalgovernment

sector

Householdsector

NPISHsector

Corporation

Non-financialcorporations and

quasi-corporations

Financialcorporations and

quasi-corporations

Governmentunits

Governmentunits and socialsecurity funds

Households Households

NPIsNon-financialmarket NPIs

Financial marketNPIs

Nonmarket NPIscontrolled and

financed mainlyby government

Nonmarket NPIsserving

households

SectorType of

InstitutionalUnit

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ICNPO:International Classification of Nonprofit Organizations 1. Culture & Recreation 2. Education & Research3. Health 4. Social Services 5. Environment6. Development & Housing7.Law, advocacy and politics8. Philanthropic intermediaries and voluntarism

promotion9. International 10. Religion 11. Business and professional associations, unions12 Not elsewhere classified

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Relation between ICNPO　 and Primary Statistics

Survey on PrivateNonprofit Orgs

Basic Survey on CivicOrgs

Today’s Private SchoolFinances

Survey on MedicalEconomics

1) Culture/Recreation X X

2) Education/Research X X X

3) Health Care X X X

4) Social Services X X

5) Environment X

6) Development/Housing X

7) Law, Advocacy, Politics X

8) Philanthropic Intermediary, Voluntarism Promotion

X X

9) International X

10) Religion X

11) Business & Professional Associations, Labor Unions

X

12) Other X

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Three Versions of Accounts Suggested in

the Handbook

1993 SNA basis SNA + non-market output of market NPIs SNA + non-market output of market NPIs

+ value of volunteer labor

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Non-market output of market NPIs

Non-market output of market NPIs (eg. free phone consultation by private hospitals) is not counted under 1993 SNA, but should be counted under nonprofit satellite account.

Because such non-market output, often supported by charitable giving, is important part of NPIs, although that may not show up in sales revenue.

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Relationship between NPI and Market/ Non-Market Output

Market Output Non-Market Output

Market NPI X X

Non-Market NPI X

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Institutional Sectors and Market, Non-Market Categorization of Japanese NPIs

NPI Institutional Sector Market vs. Non-Market

Medical Corporations Non-Financial Institutions

Market

Producers of Nonprofit Services Serving Households

NPISH Non-Market

Producers of Nonprofit Services Serving Businesses

Non-Financial Institutions, Financial Institutions

Non-Market

Incorporated Nonprofits Households, NPISH Non-Market

Unincorporated Voluntary Associations

Households, NPISH Non-Market

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Valuing Volunteer Labor

Because volunteer labor is so important for nonprofits, imputed value of volunteering is counted under nonprofit satellite account.

Volunteer time is valued based on the replacement cost (not opportunity cost) method, using average wage of welfare and social service field.

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Scale and Structure of Japan’s NPIs

The scale of Japan’s NPI in 2003

inc. non-market output of market NPIs Output: 36.3 trillion yen Employee compensation: 19.1 trillion yen Gross value added: 20.8 trillion yen

compared to NPISH: 9.8 trillion yen

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1) Expenditure

16,83022,300

27,82935,052

18,87017,555

13,695

15,344

363

237557611

0

10,000

20,000

30,000

40,000

50,000

60,000

1990 1995 2000 2003

BillionYen

Property Income Payments

Contributions, Subsidies, Othertransfers (payments)Operating Expenses

Expenditure & Revenue Structure of NPI

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2) Revenue

13,69118,451

22,23227,447

24,053

24,82422,161

26,835

678

1,754 632

2,578

0

10,000

20,000

30,000

40,000

50,000

60,000

1990 1995 2000 2003

BillionYen

from property income

from contributions, subsidies,donationsfrom sale of services

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2,092 2,644 3,797 3,903

4,245

6,043

8,558

11,119

3,407

4,292

5,071

5,669

0

0

0

35

0

116

0

0

0

5,000

10,000

15,000

20,000

25,000

1990 1995 2000 2003

BillionYen

UnincorporatedNonprofit Orgs.

Specified nonprofitcorp.

Survey on PrivateNonprofit Orgs.

Medical Corp.

School Corp.

Gross Value Added by Type of Organization

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Gross Value Added by Field of Activity

2,100 2,657 3,817 3,935

4,2876,103

8,62611,257

1,555

2,010

3,099

3,580751

688

829

602

719

694

868

740

601

502

512

458

0

5,000

10,000

15,000

20,000

25,000

1990 1995 2000 2003

Billion Yen

Other11:Professional orgs., Trade Unions10:Religion4:Social services3:Health care2:Education and research

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NPIs including Imputed Value of Volunteering 2003 in billion yen

NPI of SNA standard,NPI including nonmarket output ofmarket NPIs

Value ofvolunteering

NPI includingvolunteering

Total 20,842 1,808 22,650(1)Culture and recreation 72 212 284(2)Education and research 3,935 334 4,269(3)Health 11,257 94 11,351(4)Social services 3,580 479 4,059(5)Environment 52 213 265(6)Development and housing 11 254 265

(7)Law, advocacy and politics

2 114 116

(8)Philanthropic intermediaries and voluntarism promotion

40 - 40

(9)International 4 0 4(10)Religion 751 107 858

(11)Business and professional associations, unions

719 - 719

(12)Not elsewhere classified 420 - 420

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Growth of NPIs overtime

In Japan growth rate of value added of NPIs has been much higher than GDP, since 1990s including the period so called “lost decade.”

As a result, relative size of gross value added produced by NPIs to GDP has increased from 2.2% in 1990 to 4.2% in 2003.

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5.90 6.07 6.15

2.2

2.6

3.4

4.2

-1

0

1

2

3

4

5

6

7

1990 1990-1995 1995-2000 2000-2003

Ann

ual g

row

th r

ate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

ratio

of

NP

I to

GD

P

NPI growth rate

GDP growth rate

ratio of NPI to GDP

Growth rate of NPI &GDP

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Issues for discussion (1) Unit of estimation is ambiguous Establishment vs. institution vs. activity ‘Non-profit-distribution’ can be applied to

institution, although the Handbook suggests establishment as unit of estimation

Valuing volunteering is inconsistent While unpaid volunteers are valued, paid

volunteers (paid but much lower than the market rates, common in Japan) are not be valued.

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Issues for discussion (2)

Definition of NPIs is still amboguous

Eg. Are national universities NPIs due to incorporation or general government ?

ICNPO: demerit of hybrid system

Eg. Should NPI for international healthcare classified as international or healthcare?

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In Conclusion

Nonprofit satellite account (NSA) provides very useful information on the nonprofit sector

It would be useful to produce NSA regularly (eg. every 5 years)

More countries are welcome to NSA implementation. The more countries involved, the richer the international comparative statistics.