5256.0 - Australian National Accounts: Non-Profit Institutions Satellite Account, 2006-07  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 18/09/2009   
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APPENDIX 5 SCOPE OF AUSTRALIAN NPI SATELLITE ACCOUNT


INTRODUCTION

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. Decisions made around scope can significantly affect the size of the NPI sector, particularly with regard to units such as universities and public hospitals and the correct or theoretically desirable classification of units is far from clear cut in some instances.


DEFINITION OF AN NPI

The Handbook defines non-profit organisations 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
  • Non compulsory.

This definition forms the basis of what is included within the scope of the NPI satellite account. Each criterion and its conceptual and practical implications is discussed below.


ORGANISATIONAL EXISTENCE

The first criterion noted in the Handbook refers to organisational existence. This 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.

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 can not 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. However, if such groups are unable to employ or accept tax deductible donations then the economic significance of such units is likely to be negligible.


NOT-FOR-PROFIT AND NON-PROFIT DISTRIBUTING

The next criterion discussed in the Handbook is that in order 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.

For the purposes of the satellite account, this meant that a number of units were excluded from the scope of the account on the basis that 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, cooperatives 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. According to ABN counts, there are currently approximately 103,000 strata titles in Australia, and according to the Australian Prudential and Regulatory Authority (APRA), as at June 2007 there were 143 credit unions and 14 building societies in Australia. Credit unions and building societies received interest income of $2,747.2 million and $1,351.2 million respectively in 2006-07.

Consistent with the previous NPI satellite account, any units classified to either finance or insurance were also excluded from the scope of the satellite account. There are a number of religious charitable development funds operating in Australia which are classifiable to the Financial corporations sector. According to APRA, there are approximately 55 of these funds in Australia.


INSTITUTIONALLY SEPARATE FROM GOVERNMENT

The third criterion discussed in the Handbook is that in order to meet the definition of an NPI, and 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.

For the purposes of the satellite account, this meant that any unit which was classified to the General government sector was 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.


SELF GOVERNING

The fourth criterion discussed in the Handbook is that in order 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.


NON COMPULSORY

The final criterion mentioned in the Handbook is that in order to meet the definition of an NPI, an organisation must be non compulsory. This means that membership or contributions of time and money can not be required or enforced by law or otherwise made a condition of citizenship. However, a unit is still considered an NPI if membership is a necessary condition in order to practice a particular profession. For the purposes of the satellite account, this meant that professional associations are within scope.


SUMMARY

When all of the above criteria have been considered, the overall scope of the NPI satellite account is:
  • all organisations registered for an ABN;
  • which are not-for-profit and non-profit-distributing; and
  • institutionally separate from government; and
  • self governing; and
  • non compulsory.

These criteria limit the scope of the NPI satellite account to all non profit organisations registered for an ABN which are classified to either the Non-financial corporations sector or the Non-profit institutions serving households sector.