NATURE OF GOVERNMENT FINANCE STATISTICS
DISTINCTION BETWEEN GFS AND THE GFS SYSTEM
1.1 The term ‘government finance statistics’ refers to statistics that measure the financial activities of governments and reflect the impact of those activities on other sectors of the economy. The acronym ‘GFS’ is used throughout this manual to refer to government finance statistics. The term ‘the GFS system’ is used to refer to the data system that supports GFS. The data system includes the concepts and classifications applied, sometimes called the ‘statistical framework’, and the sources of data and methods used to compile the statistics. The subject of this manual is the GFS system in Australia but the discussion also embraces GFS, the product of that system.
1.2 The GFS system covers all activities of governments that can be measured in money terms. The system focuses on monetary measures of transactions and other economic flows that involve governments, and the money values of assets and liabilities held by governments. Examples of activities covered by GFS include government spending, lending, taxing, and borrowing. As well, the statistics include information about the value of government investments and debt.
1.3 The need for financial measures of government activities in their own right arises from the unique legislative and regulatory authority that governments can exercise over other institutional units in the economy. Australia’s GFS serve to meet the community’s demand for standardised and detailed financial information about the activities of all Australian governments.
UNDERLYING STATISTICAL STANDARDS
1.4 The Australian GFS system is based on two important international statistical standards:
1.5 SNA93 can be seen as an ‘umbrella’ standard with which a number of other international statistical standards are ‘harmonised’. The harmonised standards use SNA93 statistical concepts and, to a degree, use common classifications and items, enabling links between the harmonised system and the SNA to be readily established. The IMF standard for GFS is such a harmonised system.
- the system of national accounts embodied in System of National Accounts 1993 (SNA93), issued jointly by the United Nations (UN), the International Monetary Fund (IMF), the Commission of European Communities, the Organisation for Economic Co-operation and Development (OECD) and the World Bank;
- the international statistical standard for compiling GFS developed, in consultation with member countries, by the IMF. The current version was released in 2001, and it replaced the first version released in 1986. The 2001 version is more compatible with SNA93 and is better able to meet current requirements for fiscal analysis.
1.6 SNA93 is a statistical framework relating to the whole of an economy and covers government activities only as a component. SNA93 also differs from the GFS system in that its central focus is on economic concepts such as production, whereas the GFS system concentrates mainly on fiscal concepts such as revenues and expenses. Nevertheless, the GFS system is designed to provide data that can be used in compiling the national accounts and the two data systems have many concepts in common. Appendix 1 provides a broad description of relevant elements of the national accounting standards set out in SNA93.
1.7 The IMF GFS standard is widely accepted internationally as an appropriate framework on which to base the preparation and presentation of GFS. A feature of the standard is its attention to the special nature and role of governments and the statistical requirements that their unique features imply. The ABS provides GFS to the IMF for publication with similar statistics for all IMF member countries. Because these statistics are prepared according to the IMF standard, they can be used to compare Australian government finance with the government finance of the other member countries. In publishing GFS for Australia, the ABS includes minor adaptations of the IMF standard to meet local needs. Appendix 2 provides a description of the IMF GFS standard with appropriate references to the SNA discussion where SNA concepts are used in the GFS system.
1.8 Harmonisation of the GFS system with the SNA ensures that users of GFS can relate the statistics to national accounts data for the whole economy and other sectors. International statistical standards relating to balance of payments and monetary and financial statistics are also harmonised with the SNA. Therefore, where these statistics use concepts that are also used in the GFS system, the concepts are defined in the same way as in the GFS system. Harmonisation enables the ABS’s use of GFS data as the major source of information about government activities recorded in the Australian national accounts.
SCOPE OF GFS
1.9 Government activities covered by the GFS system include not only the functions of government departments and authorities that are financed primarily from taxation (called ‘non-market’ units in SNA93) but also the operations of government-owned corporations and authorities, that are described as ‘market’ units in SNA93. Distinctions are made in the statistics between the operations of such market-oriented units owned by governments and all other government units. Market-oriented units are further sub-divided between those with primarily financial functions, such as government-owned banks and insurance companies, and other market units, such as government-owned utilities. All three levels of government (national, state and local) are covered by the statistics and separate data are compiled for each level of government and for each jurisdiction (i.e. the Commonwealth, each state and territory and the multi-jurisdictional sector which includes public universities).
RELATIONSHIP TO ACCOUNTING STANDARDS
1.10 The main sources of information for compiling GFS in Australia are the data systems that support the public accounts of the Commonwealth, and each state and territory government. These accounts are largely geared towards financial accountability and control and are in a format reflecting accounting standards and legal and administrative imperatives in each jurisdiction. In compiling the statistics, the ABS makes use of the accounts of other government authorities that fall within the scope of the GFS system but are not covered by the public accounts and keep their own particular forms of financial accounts. Also used are local governments’ accounts, which are kept in a form dictated by administrative requirements and accounting standards.
1.11 The accounts that are the main sources of information for compiling GFS in Australia generally comply with Australian accounting standards for government entities. The accounting concepts established by these standards are generally consistent with the statistical concepts employed in GFS. In developing Australia’s GFS system, the ABS has worked closely with government accountants and the Australian Accounting Standards Board and has endeavoured to identify and document the small number of unavoidable differences between the GFS system and accounting standards.
1.12 Although accounting standards impose a high degree of uniformity on government financial reporting, government financial reports generally do not contain the degree of classificatory detail and the focus on particular economic and fiscal measures that GFS provides. Only the GFS system provides data that can be used for international comparisons and can be related to economic data included in the national accounts. Recognising this fact, the May 1991 Premiers’ Conference resolved that the Commonwealth and each state and territory government should compile information on a ‘GFS’ basis for inclusion in their budget documents as a statistical supplement to the usual financial information. Users of the budget documents can use the supplementary data to compare GFS for the jurisdiction of their interest with GFS released with the budget documentation of other jurisdictions.
BASIS OF RECORDING
1.13 In the past, government accounts were maintained primarily on a cash basis and only cash flows and selected balances were recorded. Similarly, the GFS system was primarily a cash-based system. Accounting standards now require that governments prepare financial statements on an accrual basis and that supplementary information about cash flows be produced. Because the SNA employs an accrual basis of recording, harmonisation of the GFS system with SNA93 has required the transfer of the GFS system to an accrual basis. Under the GFS accrual system, all economic events that create, transform, exchange, transfer or extinguish economic value are recorded, whether or not they are associated with cash flows. All such events are recorded at the time at which they occur rather than when associated cash flows occur. As well, the system records all assets and liabilities of economic value whereas, in the past, only selected financial assets and liabilities were recorded. Cash flows continue to be recorded in a supplementary statement. Australia’s GFS system has moved to a basis of accrual recording that reflects considerable alignment with the Australian accounting standards and meets the requirements of the IMF and the SNA.
1.14 In broad terms, the primary use of GFS is in fiscal analysis or the analysis of government financial data for the purpose of developing government economic policy. Fiscal analysts focus on measures that are indicative of the financial situation of governments and the impact of government operations on the rest of the economy. While a wide range of financial information is required to meet the needs of fiscal analysts, a prominent feature of fiscal analysis is the use of key indicators that provide a convenient summary of financial outcomes. These indicators are called ‘analytical balances’ because they are derived as the balance between broad aggregates (e.g. revenue and expense) in the system. In the past, analysts have focused on the cash surplus or deficit generated by government operations. The GFS system now provides a suite of analytical balances that summarise various aspects of government operations. These include accrual and cash measures of the fiscal outcome and measures of governments’ financial position.
PURPOSE OF THIS MANUAL
1.15 This manual is intended as a general reference document for users and compilers of GFS. For users, the manual provides a detailed account of the concepts underlying GFS, the sources of data employed and the methods used to compile the statistics. As such, the manual should assist users to obtain a deeper understanding of the nature and content of the statistics than can be obtained from the ABS publications in which the statistics are presented. For compilers, the manual is intended to serve as a training aid and as a working reference on matters of technical detail. Compilers in both the ABS and the Commonwealth, state and territory treasuries should be able to use the manual for these purposes.
ORGANISATION OF THIS MANUAL
1.16 This manual has been structured to provide a logical sequence of discussion of the concepts, sources and methods used in the compilation of GFS. The following structure has been used:
A glossary of terms used in the manual is provided at the end of the publication, together with a list of documents referred to in the manual.
- Chapter 1 (this chapter) discusses the nature of GFS and the purpose and organisation of this manual;
- Chapter 2 describes the ABS analytical framework for GFS, including the adaptations of the IMF framework which have been incorporated.
- Chapter 3 deals with data sources and the collection methodology used in Australia’s GFS system;
- Chapter 4 covers methods used in compilation;
- Chapter 5 describes the statistical output of the GFS system;
- Chapter 6 analyses the accuracy, reliability and timeliness of the statistics;
- Chapter 7 outlines in more detail the relationship of Australia’s GFS system with the IMF GFS standard, the Australian System of National Accounts and Australian accounting standards relating to government;
- Appendix 1 provides a broad description of relevant elements of the national accounting standard set out in SNA93;
- Appendix 2 provides a description of the IMF GFS standard with appropriate references back to the SNA discussion where SNA concepts are used in the GFS system;
- Appendix 3 presents the classifications used in compiling GFS;
- Appendix 4 includes a technical note and guidelines on treatment of tax, refunds, allowances, rebates and credits in GFS and a description of the treatment of HECS in GFS.
An index of all technical terms is also included.