Making Nonprofit Satellite Account Japanese Experience Naoto Yamauchi

Making Nonprofit Satellite Account: Japanese Experience Naoto Yamauchi, Osaka University October 11, 2006 Working Party on National Accounts, OECD 1

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. n It has been proposed by the UN Statistics Division in collaboration with Johns Hopkins CNP team. n 2

UN Handbook For inplementation, Handbook on Non-profit Institutions in the System of National Accounts was released in 2003. n It is a manual of estimation procedures, and contains definition, classification, key variables and tables, data collection strategy etc. n 3

Why Nonprofit Satellite Account ? Civil society, nonprofit and nongovernmental sector: an emerging force worldwide n Increased policy interest n But, insufficient statistical information n Need comprehensive and detailed statistical system, preferably consistent with SNA n 4

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 1990 s. n 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. n 5

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. n 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). n 6

Countries involved To date, following 26 countries have committed to implement Nonprofit Satellite Account. n 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 n 7

Japanese Experience Activities of nonprofit sector and roles of civil society have received increased attention by policy makers and researchers since mid 1990 s. n Local governments (many suffered from serious financial problem) have tried to contract out various activities to local nonprofits. n 8

Important Events for Nonprofits 1995: 　Disaster relief & urban reconstruction in wake of Kobe Earthquake n 1998: 　Implementation of the Law to Promote Specified Nonprofit Activities (“NPO Law”) n 2000: 　Nursing Care Insurance System begins n 2001: 　Tax-deductible donations for selected public benefit nonprofit corporations begins n 2003: 　Implementation of amended NPO Law n 2006: 　Enactment of the New Public Benefit Corporations Act n 9

10

Research team for Japan Economic and Social Research Institute (ESRI) of the Cabinet Office officially committed to implement nonprofit satellite account project. n They started two year (2005 -2006) project, by contracting out to private research institute. n Research team of 7 economists and practitioners has been set up. n 11

Working Definition in the Handbook NPI must fulfill the following; n Organizations n Not-for-profit and non-profit distributing n Institutionally separate from government n Self-governing n Non-compulsory membership 12

Treatment of NPIs in the 93 SNA source: JHCNP 13

Institutional Units Cross-Classified in 93 SNA source: JHCNP 14

ICNPO: International Classification of Nonprofit Organizations 1. Culture & Recreation 2. Education & Research 3. Health 4. Social Services 5. Environment 6. Development & Housing 7. Law, advocacy and politics 8. Philanthropic intermediaries and voluntarism promotion 9. International 10. Religion 11. Business and professional associations, unions 12 Not elsewhere classified 15

Relation between ICNPO　and Primary Statistics 16

Three Versions of Accounts Suggested in the Handbook n 1993 SNA basis n SNA + non-market output of market NPIs + value of volunteer labor 17

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. n Because such non-market output, often supported by charitable giving, is important part of NPIs, although that may not show up in sales revenue. n 18

Relationship between NPI and Market/ Non-Market Output Market NPI Non-Market NPI Market Output Non-Market Output X X X 19

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 20

Valuing Volunteer Labor Because volunteer labor is so important for nonprofits, imputed value of volunteering is counted under nonprofit satellite account. n Volunteer time is valued based on the replacement cost (not opportunity cost) method, using average wage of welfare and social service field. n 21

Scale and Structure of Japan’s NPIs The scale of Japan’s NPI in 2003 inc. non-market output of market NPIs n Output: 36. 3 trillion yen n Employee compensation: 19. 1 trillion yen n Gross value added: 20. 8 trillion yen compared to NPISH: 9. 8 trillion yen n 22

Expenditure & Revenue Structure of NPI 23

24

Gross Value Added by Type of Organization 25

Gross Value Added by Field of Activity 26

NPIs including Imputed Value of Volunteering 2003 in billion yen 27

Growth of NPIs overtime n n In Japan growth rate of value added of NPIs has been much higher than GDP, since 1990 s 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. 28

Growth rate of NPI &GDP 29

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 n 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. n 30

Issues for discussion (2) Definition of NPIs is still amboguous Eg. Are national universities NPIs due to incorporation or general government ? n ICNPO: demerit of hybrid system Eg. Should NPI for international healthcare classified as international or healthcare? n 31

In Conclusion Nonprofit satellite account (NSA) provides very useful information on the nonprofit sector n It would be useful to produce NSA regularly (eg. every 5 years) n More countries are welcome to NSA implementation. The more countries involved, the richer the international comparative statistics. n 32