METAC Workshop March 14-17, 2016 Beirut, Lebanon National Accounts Compilation Issues Session 8: General Government

General Government - topics Principal function Government institutional units Government units as producers Government quasi- corporations Sectors and sub- sectors Output

Principal function to assume responsibility for the provision of goods and services to the community or to individual households to redistribute income and wealth by means of transfers, and to engage in non-market production.

Government institutional units … make three different kinds of final outlays: free provision to the community of collective services such as public administration, defense, law enforcement, etc.; provision of goods or services free, or at prices that are not economically significant, to individual households; transfers paid to other institutional units, mostly households, in order to redistribute income or wealth.

Government units as producers Three options for government unit to intervene in the sphere of production: It may create a public corporation whose corporate policy, including pricing and investment, it is able to control; – Government units vs Public corporations It may create an NPI that it controls; it may produce goods or services itself in an establishment that it owns but that does not exist as a separate legal entity.

Government quasi- corporations Three criteria to consider government establishments as quasi- corporations, outside the General Government: – the unit charges prices for its outputs that are economically significant; – the unit is operated and managed in a similar way to a corporation; and – the unit has a complete set of accounts that enable its operating surpluses, savings, assets and liabilities to be separately identified and measured.

General government sectors and sub- sectors General Government sector consists of the following resident institutional units: all units of central, state or local government all non-market NPIs that are controlled by government units social security funds (SSF), either as separate institutional units or as part of any or all of central, state or local government. Unincorporated enterprises owned by government units that are not quasi-corporations must be included in the general government sector.

General government sectors and sub- sectors all SSFs showed together as one subsector Central government – Of which NPIs State government – Of which NPIs Local government – Of which NPIs SSF SSFs allocated to other sub- sectors Central government, incl. SSF – Of which NPIs State government, incl. SSF – Of which NPIs Local government, incl. SSF – Of which NPIs

Central Government … consists of the institutional unit or units making up the central government plus those non-market NPIs that are controlled by central government The political authority of central government extends over the entire territory of the country. Its political responsibilities include: – national defense, – maintenance of law and order, and – relations with foreign governments

The composition of Central Government central group of departments or ministries that make up a single institutional unit plus, other institutional units – Often the departments / ministries are not separate institutional units capable of owning assets, incurring liabilities, engaging in transactions, etc., independently of central government as a whole. – Departments of central government are often deliberately dispersed geographically and located in different parts of the country, but they nevertheless remain parts of a single institutional unit such as branch offices or agencies in different parts of the country, including military bases or installations that serve national defense purposes, these must also be counted as parts of a single institutional unit for central government

The composition of Central Government In addition to government departments and ministries, there may be agencies of central government with separate legal identity and substantial autonomy – often established to carry out specific functions such as road construction or the non-market production of health or education services if the services they produce are non-market and if they are controlled by central government.

State government … consists of state governments that are separate institutional units plus those non-market NPIs that are controlled by state governments … exercising some of the functions of government at a level below that of central government and above that of the governmental institutional units existing at a local level – whose fiscal, legislative and executive authority extends only over the individual “states”, those that have federal constitutions, into which the country as a whole may be divided.

Local government … consists of local governments that are separate institutional units plus those non- market NPIs that are controlled by local governments – … whose fiscal, legislative and executive authority extends over the smallest geographical areas distinguished for administrative and political purposes They are often heavily dependent on grants or transfers from higher levels of government, and they may also act as agents of central or regional governments … but they also may carry out activities financed by their own resources: museums, schools, health care…

Social security funds … consists of the social security funds operating at all levels of the government; – managing social insurance schemes that cover the community as a whole or large sections of the community and are imposed and controlled by government units They should be organized separately from the other activities of government units and hold their assets and liabilities separately from the latter and engage in financial transactions on their own account

Government output As non-market producers, the output of government units is estimated as the sum of costs, including: – Intermediate consumption; – Compensation of employees; – Consumption of fixed capital – Other taxes (less subsidies) on production Even though a non-market establishment may have sales receipts, its total output covering both its market and its non-market output is still valued by the production costs. The residual between the total output and the sales receipts and charged fees is other non- market output of the government representing government final consumption expenditures for individual and collective services

Data sources Linkages with Government finance statistics, GFS Output is not recorded as such in GFS. – Nevertheless, the total output of the general government sector can be determined as follows: Market output: output of market establishments, plus market sales (incidental and imputed) of non- market establishments; Output for own final use: data available directly from the details of GFS expenditure; Other non- market output: calculated residually as the total output of the general government sector minus output for own final use and market output.

Data sources Linkages with GFS statistics, cont.: Intermediate consumption: – Use of goods and services (GFS expense item 22) minus the portion of goods purchased for resale that was actually sold during the reporting period (reduction in GFS item due to sales); – Goods and services used in own-account capital formation (GFS memorandum item 3M12); – FISIM and Insurance services, should be a part of the calculations for the economy as a whole Consumption of fixed capital – should be equal to the consumption of fixed capital [GFS] (23) plus the consumption of fixed capital recorded as a component of own-account capital formation in GFS (GFS memorandum item 3M13).

Data sources

References 2008 SNA, Chapter 4: F; Chapter 6: E, GFS Manual

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