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

2. 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. 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. 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. 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. 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. 7 Countries involved To date, following 26 countries have committed 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. 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. 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. 10

11. 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.

12. 12 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. 13 Treatment of NPIs in the 93SNA source:JHCNP

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

15. 15 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

16. 16 Relation between ICNPO and Primary Statistics

17. 17 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

18. 18 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.

19. 19 Relationship between NPI and Market/ Non-Market Output Market OutputNon-Market Output Market NPIXX Non-Market NPIX

20. 20 Institutional Sectors and Market, Non-Market Categorization of Japanese NPIs NPIInstitutional SectorMarket vs. Non- Market Medical CorporationsNon-Financial Institutions Market Producers of Nonprofit Services Serving Households NPISHNon-Market Producers of Nonprofit Services Serving Businesses Non-Financial Institutions, Financial Institutions Non-Market Incorporated NonprofitsHouseholds, NPISHNon-Market Unincorporated Voluntary Associations Households, NPISHNon-Market

21. 21 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.

22. 22 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

23. 23 Expenditure & Revenue Structure of NPI

24. 24

25. 25 Gross Value Added by Type of Organization

26. 26 Gross Value Added by Field of Activity

27. 27 NPIs including Imputed Value of Volunteering 2003 in billion yen

28. 28 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.

29. 29 Growth rate of NPI &GDP

30. 30 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.

31. 31 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?

32. 32 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.