Non-profit institutions satellite account
23.75 A Non-profit institutions satellite account, highlights non-profit institutions (NPIs) within the national accounting framework. This account records the activities of market and non-market NPIs. The concepts and methods used in the Australian NPI satellite account are based on The Handbook on Non-profit Institutions in the System of National Accounts. The handbook was endorsed by the United Nations Statistical Commission in 2002. Chapter 23 of the 2008 SNA discusses and summarises non-profit institutions satellite accounts.
23.76 An NPI satellite account provides a means by which the economic aspects of NPIs can be drawn out and analysed separately within the structure of the main accounts. One of the major features of an NPI satellite account is that it is set within the context of the whole economy, so that NPIs' contribution to major national accounting aggregates can be determined.
23.77 The NPI satellite account has two dimensions. The first is referred to as measurement on a national accounts basis. This is equivalent to production and other economic aggregates as defined in the national accounts. Therefore, the estimation of output is based on whether the NPI is a market producer or a non-market producer in accordance with the ASNA. Consequently, NPI gross value added and NPI GDP are also consistent with the ASNA.
23.78 The second dimension is referred to as measurement on an NPI satellite account basis. This dimension extends the boundary of national accounts to include values for the non-market output of market producers and NPI services provided by volunteers. Measurement on an NPI satellite account basis provides a more complete picture of the value of NPIs to society than is evident in estimates included in the national accounts.
Non-market output of market producers
23.79 The non-market output of market producers measures that component of the output of market NPIs which is not captured when output of market units is valued under the standard SNA convention of valuation by sales. The handbook argues that if such an adjustment is not made to value any non-market output produced by market units, then the value of the output of market NPIs is understated as such units can produce significant amounts of output which are supported by charitable contributions or other transfers that is not evident in sales revenue.
23.80 The non-market output of market producers is valued as the difference between the output of market units when calculated by the standard SNA valuation method for non-market units of cost summation, and output as calculated by the standard SNA method for market units of valuation by sales. Where output on a cost valuation basis exceeds output on a sales valuation basis, the difference is taken to be the non-market output of market producers. Where output on a sales basis exceeds output on a cost basis, non-market output of market producers is assumed to equal zero.
23.81 The UN handbook recognises that as volunteer labour is critical to the output of NPIs and their ability to produce a level and quality of service, it is important to capture and value this activity in the NPI satellite account. The handbook proposes three methods by which volunteer services can be valued. Each method involves assigning a wage rate to the total number of hours worked by volunteers.
23.82 The first such valuation method mentioned in the UN handbook is referred to as the "opportunity cost" approach. The notion behind this approach is that each hour of volunteer time should be valued at what the time is worth to the volunteer in some alternative pursuit. The applicable wage rate at which an hour of volunteer time is valued in this instance is therefore the wage rate associated with the usual occupation of the volunteer. The handbook recognises that while theoretically desirable for some analytical purposes, this valuation approach is not often used. The ABS has considerable reservations as to the appropriateness of this valuation method, as it assumes that paid work is foregone in order to undertake voluntary work. Most workers, however, have limited choices in the hours they work and are more likely to be giving up leisure time for voluntary work. This being the case, the opportunity cost should not be based on the wage they receive in the market but on the value they place on leisure. Valuation of goods and services at market prices is fundamental to national accounting. In this context, two volunteers involved in identical unpaid activity should be valued at the same hourly rate irrespective of what they could each earn in their paid occupations. Additionally, this method raises the issue as to which is the appropriate wage rate to apply to those volunteers who do not have a usual occupation, for example those who are retired or unemployed or otherwise not in the labour force.
23.83 The second valuation method proposed in the UN handbook is the "replacement cost" or "market cost" approach. This approach recommends that each hour of volunteer time be valued at what it would cost the organisation to replace the volunteer with paid labour. The applicable wage rate at which an hour of volunteer time is valued in this instance relates to the particular activity being undertaken by the volunteer. While this method is preferred over the opportunity cost approach, the value of volunteer services may be under or over-estimated using this approach depending on variations in the productivity of volunteers compared with labour provided to the market sector. The estimate of volunteer services included in this satellite account is based on this approach.
23.84 The UN handbook recognises that both the opportunity and replacement cost methods require more information on the activities in which volunteers engage than is likely to be available in most countries. Where detailed data on volunteering are not available, the handbook recommends a fall-back option which values each hour of volunteer time at the average gross wage for the community, welfare and social service occupation category. It argues that the work of volunteers is most likely to resemble this occupation category, and that the associated wage rate is conservative, and typically towards the low end of the income scale, but not at the very bottom.
23.85 The classification system used in the Australian NPI satellite account is a reduced version of the classification that is recommended in the UN handbook, the International Classification of Non-Profit Organizations (ICNPO). ICNPO is fundamentally an activity classification, although inclusive of some purpose criteria. ICNPO permits a fuller specification of the components of the non-profit sector than the ANZSIC. In some instances, the detailed ANZSIC codes cut across several ICNPO groups and subgroups. In keeping with the current availability of data, a number of the broad level ICNPO groups have been combined, and estimates are not produced for classifications below the group level. A full version of ICNPO and the concordance between ICNPO and the ANZSIC classification are shown as part of the satellite account publication.
23.86 Data on voluntary work was collected using an activity classification which is similar to ICNPO, at least at the group level. A concordance between ICNPO and the type of organisation for which volunteers worked is also available.
Scope of the NPI satellite account
23.87 The Australian NPI satellite account does not attempt to measure the universe of entities that could be defined as NPIs. This is partly for practical and partly for conceptual reasons.
23.88 The UN handbook defines non-profit institutions in paragraphs 2.15 to 2.19 as organisations which are:
- not-for-profit and non-profit-distributing;
- institutionally separate from government;
- self-governing; and
23.89 This definition forms the basis of what is included within the scope of the NPI satellite account.
23.90 Organisational existence means that in order to meet the definition of an NPI, an entity must have some institutional reality and a meaningful organisational boundary separate and distinct from its members.
23.91 For the purposes of the satellite account, a practical means to identify that an entity meets this criterion is the existence of an ABN. Without an ABN, an entity cannot have employees or accept tax deductible donations. There are many non-profit groups in Australia who do not have an ABN, some of which if examined closely could be argued to have a separate organisational existence. The economic significance of such units is likely to be negligible if such groups are unable to employ or accept tax deductible donations.
Not-For-Profit and Non-Profit Distributing
23.92 To meet the definition of an NPI, an entity must be both not-for-profit and non-profit-distributing. This means that the organisation does not exist primarily to make a profit, and any surplus it accumulates must not be distributed to owners or members.
23.93 For the purposes of the satellite account, this means that units are excluded from the scope of the account if they are able to distribute surpluses to members, either on an ongoing basis or on liquidation. The handbook mentions that to the extent that they are able to distribute profits to members, co-operatives and mutual societies are excluded from the NPI sector. Also excluded from the satellite account on this basis are strata titles, credit unions and building societies and any other units classified to either the finance or insurance industries such as religious charitable development funds.
Institutionally separate from Government
23.94 To meet the definition of an NPI, an entity must be institutionally separate from government. This means that the organisation must have sufficient discretion with regard to both its production and use of funds, and that its operating and financing activities cannot be fully integrated with government finances.
23.95 For the purposes of the satellite account, this means that any unit classified to the general government sector is excluded on the basis that if the unit is sufficiently controlled by government to be included in the general government sector, its finances are integrated with those of the government and the unit is not sufficiently separate from government to satisfy this criterion.
23.96 To meet the definition of an NPI, an organisation must be self-governing. This means that the organisation must be able to control its own activities and is not under the effective control of any other entity.
23.97 To meet the definition of an NPI, an organisation must be non-compulsory. This means that membership or contributions of time and money cannot be required or enforced by law or otherwise made a condition of citizenship. A unit is still considered to be an NPI if membership is a necessary condition to practice a particular profession. For the purposes of the satellite account, this means that professional associations are within scope.
Sources and methods
23.98 The NPI satellite account has been compiled from a variety of data sources, including ABS economic and social collections. The sources used to compile the various data contained in the satellite account are outlined below.
23.99 The bulk of the data contained in the NPI satellite account are monetary aggregates. This includes data about income, use of income, capital expenditure and asset stocks, as well as the national accounting measures of output of goods and services and gross value added.
23.100 The main data source for the NPI satellite accounts is the annual Economic Activity Survey or EAS. Over 4,000 NPIs were surveyed in the 2012–13 EAS, almost double the number of NPIs that were included in the 2006–07 survey. The survey covered all employing and significant non-employing non-profit organisations and collected a range of information from a sample of these organisations, including detailed information about their financial performance over the reporting period. The identification of NPIs on the ABS Business Register of organisations was reviewed and improved. This review led to the removal of some organisations, which are not NPIs for the purpose of the NPI Satellite Account, from the EAS and NPI organisation counts for 2012–13.
23.101 Micro non-employing non-profit organisations with turnover below a set threshold were excluded from the scope of the 2012-13 EAS. Information for these organisations was therefore taken from Business Activity Statement (BAS) data as collected by the Australian Taxation Office. Data available from BAS records included in the satellite account relate to sales and service income, labour costs (wages, salaries and superannuation), non-capitalised purchases and capital expenditure. Data for other survey questionnaire items, including transfers and donations paid and received, were not available from BAS records, nor was a suitable imputation method apparent for these items.
Employment and volunteers
23.102 Data in respect of permanent full time, permanent part time and casual paid employees of NPIs were also collected as part of the EAS. Given the nature of the administrative arrangements for deducting tax with respect to paid employees, the ABN based survey frame should cover all employing NPIs.
23.103 The 2006–07 EAS also collected information as to the number of volunteers that each organisation surveyed reported had worked for their organisation during the reporting period. More detailed information on volunteering was available from the ABS publication, Voluntary Work, Australia 2006 (cat. no. 4441.0); estimates from this publication were used for the satellite account. For this reason, the 2012–13 EAS did not collect information about volunteers. Updated estimates on voluntary work will not be available until 2015. Once the voluntary work data are available, the ABS will compile the number and contribution of volunteers to non–profit organisations for 2012–13. These data will be released in a second issue of this publication in June 2015.
23.104 The compilation of data about the value of volunteer services involves taking information on the annual hours volunteered from the General Social survey and assigning a wage rate from the Employee Earnings and Hours publication. As detailed in the conceptual framework appendix, the Handbook on Non–Profit Institutions in the System of National Accounts recommends three alternative methods for estimating the value of volunteer services (see also paragraphs 23.61 to 23.64).