Coverage

How is government defined in GFS, and which units are included in the coverage of government as defined ?

Government might be defined in terms of three characteristics; (i) its powers, (ii) its functions, and (iii) its motivation.

The first of these characteristics refers to the governments’ power to raise taxation or other compulsory levies, and the power to pass laws and regulations which impact other units behavior. The second refers to the governments’ functions which is to produce non-market goods and services for individual or collective consumption and redistribute income and wealth through the transfer of taxation and other compulsory levies to other units of the economy. The third refers to the motivation of government, that government focus on policy purposes rather than profit.

The various subsectors of general government that GFS covers are the following;

1) Central government, 2) State, provincial or regional governments, 3) Local governments, and 4) Supranational authorities (European Union).

At each level the units included may be either budgetary (covered by a central budget) or extra-budgetary (have their own budget).

Social security schemes are separated out from other extra-budgetary funds for GFS compilation purposes, but are included with the level of government at which they operate - central, state, or local.

Supra-national authorities encompasses the operations within a county of those bodies which, through agreements with national governments, have been endowed with the authority to raise taxes or other compulsory contributions, make expenditures as and carry out other activities for the achievement of specified purposes, within the territory of more than one country. At present, only a few countries are affected by this treatment of supra-national authorities – exclusively, members of the European Union.

GFS excludes from government any monetary authorities’ activities undertaken by government units like issue of currency, management of gold and foreign reserves, as well as transaction with the IMF. Excluded are also any banking functions by government units involving acceptance of demand, time and savings deposits from the public. However, lending bodies with only government funds as well as saving bodies with liabilities other than time-/saving deposits and which proceeds channeled to government are included.

Included in GFS’s definition of government are also departmental enterprises, but on a net basis only. Departmental enterprises are industrial or commercial units closely integrated with the rest of the government, they are likely to hold small working balances, and are mainly engaged in supplying goods and services to other units of government or to the public (operating on a small scale). Departmental enterprises should be distinguished from quasi-corporations which are grouped together with legal corporations in the corporate sector. Quasi-corporations are in general expected to keep a full set of accounts, profit and loss statements as well as balance sheets, however, they may include enterprises engaged in selling goods to the public on a large scale without maintaining all accounts.

Non-profit institutions serving households mainly financed and effectively controlled by government are included in the government sector.

Government employee pension funds which are entirely invested with the employing government are part of government sector, while any other insurance or pension fund activities owned and controlled by government are excluded from government sector.