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Non-profit institutions satellite account

Australian System of National Accounts: Concepts, Sources and Methods
Reference period
2020-21 financial year

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.

Volunteer services

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.