Handbook on Nonprofit Institutions in the System of National Accounts

STD/NA(2002)38

HANDBOOK ON NONPROFIT INSTITUTIONS IN THE SYSTEM OF NATIONAL ACCOUNTS

I.Genesis and purpose of the Handbook

1.The Handbook on nonprofit institutions in the system of national accounts recommends statisticai standards and guidelines for the development of data on Nonprofit Institutions (NPIs) within the SNA. It was prepared in close collaboration between the Economic Statistics Branch of the United Nations Statistics Division (Cristina Hannig, Karoly Kovacs, Jan van Tongeren and Vu Viet) and the Johns Hopkins University Center for Civil Society Studies ( Helen Tice, Lester Salamon and Helmut Anheier). Throughout the development of the Handbook (1999-2002) guidance has been given by a consultative group which met in New York at the United Nations three times, in april 1999, june 2000 and july 2001. A draft of the Handbook was tested in 2000-2001 by the national statistical offices in eleven developed or developing countries (Australia, Belgium, Canada, Israel, Italy, Mozambique, Netherlands, the Philippines, South Africa, Sweden, Thailand). Then the UNSD convened a meeting of SNA experts to review the draft Handbook on July 10-12 2001; it was cleared by the Intersecretariat Working Group on National Accounts and finally approved for publication in march 2002. Slated to be published by the UN in early 2003, the final text of the Handbook is available online at

2.The fundamental aim of the Handbook is to answer to the growing interest that statisticians, policy makers and social scientists have in organisations that are neither market firms nor state agencies. It has been prepared “to help national statistical offices to collect and provide more comprehensive data on nonprofit institutions in an attempt to respond the analytical needs of policy makers who are searching for ways to improve public services and reduce the size of the government” (E/CN.3/2002/Add.1) Because of their distinctive features as private institutions serving public purposes, they offer advantages which explain recent initiatives to promote NPIs and increase the need for better information on this set of institutions and the role that they play in particular fields ( health, education, social services). Yet, according to SNA rules, most of these organisations are splitted among corporate, government and household sectors and are therfore invisible: the non profit institutions serving households (NPISH) sector, the sole visible one, represents only a small portion of the NPIs.(SNA93 4-54 to 4-67)

3.The Handbook gives guidelines for the establishment of a NPI satellite account by regrouping those non-profit units that are assigned to other institutional sectors in the SNA together with those of the existing (but not fulfilled by all countries) NPISH sector into one single NPI sector. Furthermore, two conceptual changes to the SNA are introduced in the satellite account:

an imputation of volunteer labour which is a common and important feature of NPIs activities

An imputation of non-market output provided by market NPIs by operating expenses. This imputation is designed to take account of non-market activities provided free to users by market NPIs, such as educational and health institutions. Recall that in the central framework market producers cannot have a non-market output while non-market producers can provide an auxiliary market output.

II.Main features of the Handbook on nonprofit institutions in the system of national accounts

A.Definition of the nonprofit sector

4.The SNA defines NPIs mainly by the non-distribution constraint:

Non-profit institutions are legal or social entities created for the purpose of producing goods and services whose status does not permit them to be a source of income, profit or other financial gain for the units that establish , control or finance them. In practice their productive activities are bound to generate either surpluses or deficits but any surpluses they happen to make cannot be appropriated by other institutional units. (SNA 4-54)

5.This definition contains some ambiguities with respect to the borders between NPIs and both corporations and governments. So the working definition of the satellite is the following: the nonprofit sector consists of units that are:

a) Organisations

b) Not-for-profit and non-profit distributing

c) Institutionally separate from govenment

d) Self-governing

e) Non-compulsory

6.This definition is illustrated by examples and applied to organisations which are on the borderline of NPIs and either the corporate, government or household sectors (cooperatives, mutuals, self-help groupd, social ventures, quangos, universities, hospitals,

Indigenous or territorial groups…)

B.Classification

7.The SNA identifies two bases for classifying NPIs, one according their economic activity (International Standard Industrial Classification, ISIC) the other according their function or purpose. (Classification of the Purposes of Nonprofit Institutions serving Households, COPNI). The first is more general,and has limited detail on the services that NPIs typically provide; the second is specific to NPISH. That is why the Handbook uses the International Classification of Nonprofit Organisations (ICNPO) originally developped by the Johns Hopkins Nonprofit Sector Comparative Project and used for data collection by ISTAT and Statistics Canada. ICNPO is build on ISIC as the primary classification and much more detailed. Tables relating the three classifications are given in the Handbook.

C.Key variables and tables

8.The SNA system is well suited for organising economic information on NPIs: production, revenues, outlays, consumption and accumulation, assets and liabilities. However the satellite account has to cope with three challenges:

the unavailability of sufficient data on NPIs to fill the full SNA data set

the issue of the specific imputations of the satellite account (monetary value of volunteer work and evaluation of the non-market production of the “market NPIs”

the need to look beyond monetary values to other indicators of NPI impact and performance.

9.In view of these challenges, the Handbook proposes a progressive strategy:

firstly a short form, focused on the most essential and/or readily available variables and relationships, (mainly monetary flow variables, number of organisations, paid and volunteer employment). This short form includes the two imputations above described

secondly the fully elaborated satellite account ( the same items, plus balance sheets items and more detailed monetary flow variables, detailed data on volunteering and volunteers, on members and memberships, on giving and givers )

and finally a set of extensions variables ( the same items plus data on clients and users, and also physical measures of capacity and output for NPIs and other sectors)

10.In addition to the standard SNA variables, the Handbook recommends two imputations:which are extensions of the production boundary:

the non-market output of“ market NPIs”:The SNA values the output of market producers by their sales revenue. Yet these NPIs can also produce a significant non-market output supported by charitable contributions or other transfers. This non-market output has to be measured by operating expenses as other non-market output. Where costs exceeds sales, the difference between cost and sales is taken to be the measure of the non-market output. This additional output becomes household final consumption and a transfer of equivalent amount from NPI corporations to households balances the two accounts. However, where sales exceeds cost, non-market output is assumed to be zero

the imputed value of volunteer employment is a measure of the cost of the volunteer labor used by NPIs as well as a measure of the value of the donation by the household providing the labour input, which is a transfer payment. The estimation procedure recommended is valuing volunteer time by the average gross wage , social contributions included for the community, welfare and social service occupation category. Volunteer time is defined in relation with the UN international classification of time-use

11.The main tables of the NPI Satellite Account, short form, will be presented as well as some empirical results from testing the Handbook during the OECD Meeting of National Accounts Experts ( Paris, october 2002)

12.For additional information , contact Dr. Helen Tice phone: 1-4 10-516-2897, fax:1-410-516-7818 ou e-mail:.