General government accounts
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General government accounts
0.2 Subject area
0.3 Responsible authority; office, division, person etc.
Guðrún Ragnheiður Jónsdóttir
The Department of National Accounts and Public Finance
telephone: +354 528 1121
0.4 Purpose and history
The government sector comprises those activities in the economy that are mainly financed by tax revenue. One of the main purposes of keeping accounts of the general government is to give an overview of its revenue, expenditure, assets and liabilities and of its main balances, i.e. the operating balance and net lending / borrowing balance. The accounts are produced in line with the IMF's GFSM 2001 standard on the government finances (The Government Finance Statistics Manual, 2001), the European System of Accounts form 1995 (ESA 95) and the Classification of the Functions of Government (COFOG) issued by the United Nations. These standards can be found on the following websites.
In accordance with GFSM 2001, the revenue is classified into four main sources of revenue, i.e. tax revenue, social contributions, grants and other revenue. Similarly, the expenditure is classified according to both economic types and functions (in line with the COFOG classification). The accounts are produced for the general government as well as for its subsectors, i.e. budgetary central government, social security funds and local governments. These accounts date back to 1945, but historical time series exist as far back as 1870. From 2004, quarterly revenue and expenditure accounts are produced and published for the general government and its subsectors. The most recent revision of the general government accounts is from the beginning of 2007 and comprises the period 1998-2006. Prior to that revision comparable data on a more aggregated level exists back to 1980.
0.5 Users and application
The general government accounts are used for various purposes, for both short and long term economic analysis. They illustrate the government performances during the year and over longer periods, as well as showing its financial impacts. They show the scope of the government in the economy in the form of total revenue, total taxes, total expenditure, etc. The accounts also provide information on the governments' financial assets and liabilities and its part in the financial market.
The government accounts enable an analysis of the economic performance for the last quarter, the last year and over longer period. They are the base that economic models and forecasts are built on either for the general government or its subsectors. The Ministry of Finance and the Central bank use government accounts for forecasting and in preparations of the budget. The financial sector, labour and business organisations and other organisations use government accounts to analyse the developments of the government sector and its economic performance. International organisations like UN, IMF, OECD and EU use the government accounts for analysing their economic impacts and to compare their developments with other nations.
A wide variety of sources are utilised for producing the government accounts. Among the most important sources are:
· The budgetary central government annual account (The State Account)
· The annual accounts of the largest municipalities
· The aggregation of local government annual accounts (The Union of Local Authorities in Iceland)
· The annual accounts of the State Social Security Institute
· The annual report on the Communal Equalisation Fund
· The annual report on the Pension Funds (The Financial Supervisory Authority)
· Consumer price index and building cost index
· Wage price index
0.7 Legal basis for official statistics
See Act No. 163/2007 regarding Statitsics Iceland.
0.8 Response burden
The government accounts are mostly based on administrative accounting data from the subsectors of the general government. The local government quarterly accounts are, on the other hand, based on a sample where a questionnaire is submitted to the largest municipalities. Therefore, the response burden can be considered as minimal and mostly restricted to the compilation of quarterly accounts.
0.9 EEA and EU obligations
Council Regulation (EC) No 2223/96 of 25 June 1996 stipulates that the national accounts and therefore government accounts in EU and EEA are compiled in accordance with the definitions in the EU's "European System of National Accounts ESA95", which is a European version of the UN's "A System of National Accounts 1993". ESA95 was adopted in Iceland in 2000.
Commission Regulation (EC) No 1889/2002 of 23 October 2002 on the implementation of Council Regulation (EC) No 48/98 completing and amending Regulation (EC) No 2223/96 with respect to the allocation of financial intermediation services indirectly measured (FISIM) within the European System of national and regional Accounts (ESA) was implemented in Icelandic national accounts in March 2006 and figures back to 1980 revised accordingly.
Commission Decision of 17 December 2002 further clarifying Annex A to Council Regulation (EC) No 2223/96 as concerns the principles for measuring prices and volumes in national accounts. The Decision is quite extensive; Statistic Iceland has already implemented parts of it and intends to implement most of it in the next few years.
Finally see Regulation (EC) No. 1392/2007 of the European Par5liament and of the council of 13th of November 2007 amenidng the Council Regulation (EC) No. 223/96 with respect to the transmission of National Accounts data.
1.1 Description of content
The government finances are meant to give a good overview of the general government sector, its revenue and expenditure and its economic impacts. The key indicators are total revenue, total expenditure, total liabilities, the operating balance and the net lending / net borrowing balance. Both revenue and expenditure are classified by economic type to show their economic impacts. The expenditure is as well classified by functions to give an overview of where money is spent.
The revenue and expenditure are presented in nominal values at current prices as well as in various real terms to give a better indication of their developments. In that respect, they have been deflated by the price index of government final consumption and the consumer price index. Thus the share of government expenditure of Gross Domestic Product (GDP) is calculated and its growth rate. Although most of the government statistics are based on administrative data, some data need to be estimated. Such estimates are mostly based on methodology or treatments developed in line with the international standards, like the GFSM 2001 and ESA 95. For example, an estimate of write-offs of the government tax claims and of the central and local governments' pension liabilities.
1.2 Statistical concepts
The concepts used in the government accounts are first and foremost in line with the IMF´s GFSM 2001 framework, which is based on the System of National Accounts from 1993 (SNA 93) and the ESA 95. The GFS framework emphasises the general government revenue and expenditure accounts, which in a way resemble the accounting structure of business accounting, and it also emphasises the accumulation accounts. The main characteristics of these accounts can be described as follows:
The revenue account:
The government revenue is classified into four main sources, i.e. tax revenue, social contributions, grants and other revenue. The following website of IMF gives a detailed description of the different types of revenue. http://www.imf.org/external/pubs/ft/gfs/manual/pdf/ch5.pdf.
- Tax revenue is defined as those compulsory transfers from other sectors of the economy where the taxpayers receive nothing direct in return. The tax revenue is further broken down into six subcategories, i.e. income tax, payroll tax, property tax, taxes on goods and services, taxes on international transactions and other taxes.
- Social contributions, like tax revenue, are compulsory levies, but the payer receives certain protection (benefits and services) against certain social risks. When measuring tax burden, social contributions are included.
- Grants comprise current and capital transfers from other subsectors of the general government and as well similar transfers from foreign governments and international organizations. The receiver pays nothing direct in return.
- Other revenue is classified into five subcategories, i.e. property revenue, sale of goods and services, fines and penalties, voluntary transfers and miscellaneous revenue and unidentified revenues.
The expense account:
The general government expense is divided by economic type into eight main categories, but the net acquisition of nonfinancial assets is classified into capital account. The expense categories are compensation of employees, use of goods and services, consumption of fixed capital, interest, subsidies, grants, social benefits and other expense. Each category has its particular economic impacts. The following website of IMF describes further the different types of expense. http://www.imf.org/external/pubs/ft/gfs/manual/pdf/ch6.pdf
- Compensation of employees: Compensation of employees is the total remuneration, in cash or in kind, payable by the government as an employer to an employee in return for work done by the latter. Also included is the value of the social contributions payable by employers: these may be actual social contributions payable by employers to Social Security schemes or to private funded social insurance schemes to secure social benefits for their employees; or imputed social contributions by employers providing unfunded social benefits.
- Use of goods and services: The government purchase of goods and services for own production or transfers is recorded under this category.
- Consumption of fixed capital is the decline during the course of an accounting period in the value of fixed assets owned and used by a general government as a result of physical deterioration, normal obsolescence, or normal accidental damage.
- Interest needs no further explanations.
- Subsidies are current unrequited payments that a government makes to enterprises on the basis of the levels of their production activities and the quantities or values of the goods or services they produce, sell, export or import.
- Grants are noncompulsory current or capital transfers from one government unit (domestic or foreign) to another government unit or an international organisation.
- Social benefits are defined as transfers in cash or in kind to protect the entire population or specific segments of it against certain social risks. They are classified further into social security benefits, social assistance benefits and employer social benefits.
- Other expense: The expense that does not fall into above categories is classified here. This includes current transfers of other than social nature and capital transfers other than grants, as well as fines and penalties and tax payments by governments.
The capital account:
The government net acquisition of nonfinancial assets is classified into capital account and is divided into four subcategories, i.e. fixed assets, inventories, valuables and nonproduced assets (see following website). http://www.imf.org/external/pubs/ft/gfs/manual/pdf/ch8.pdf
The financial account:
The financial account comprises transactions in both financial assets and liabilities, which are further classified into seven different instruments. The stock figures on assets and liabilities are in the balance sheet. http://www.imf.org/external/pubs/ft/gfs/manual/pdf/ch9.pdf
The COFOG classification:
The government total outlays (expense plus net acquisition of nonfinancial assets = expenditure) are classified by functions into ten main categories in accordance with the COFOG classification, and further classified into various subcategories. The main emphasise is on the gross expenditure without subtracting sale of goods and services and the received capital transfers. http://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=4
Various indicators are used to measure the government performance and its financial impacts. The most common ones are the net operating balance, the net saving and the net lending / net borrowing balance. The operating balance is the difference between total revenue and total expense and is a summary measure of the ongoing sustainability of government operations. It measures the surplus the government has from operations to invest in nonfinancial and financial assets. The government net saving equals operating balance less net capital transfers. The net lending / net borrowing measures the difference between total revenue and total expenditure and indicates whether the government is putting financial resources at disposal of other sectors in the economy or is utilising the financial resources generated by other sectors. It also measures the financial impact of government activity on the rest of the economy.
2.1 Reference periods
The reference period of the figures in the annual government accounts is the calendar year and for the quarterly government accounts the quarter in which the economic activity occurs. As far as possible the accrual accounting principle is used, not cash accounting.
2.2 Process time
The first results for each year are published as preliminary data in middle of March the following year, i.e. 75 days after the end of the reference year. Final data are published as actual data in mid September, i.e. 240 days after the end of the reference year. The data are revised occasionally if necessary.
Quarterly government accounts statistics are published 75 days after the end of the quarter. At the same time the previous quarters are revised. Quarterly data is also revised according to revisions of annual data.
The Government Accounts are published according to Statistics Iceland advance release calendar.
2.4 Frequency of releases
See section 2.2.
3.1 Accuracy and reliability
In the beginning of 2007, the government accounts were published in line with GFSM 2001 framework, which is mainly based on SNA 93 (ESA 95) and emphasises the revenue and expenditure accounts which in a way resemble the accounting structure of business accounting. The general government and its subsectors were revised back to 1998 in line with this new manual. A new revenue classification was implemented as well as expenditure classifications by economic type and functions (COFOG).
The revision back to 1998 gave a welcome opportunity for more thoroughly screening of each expense item than the previous working methods had allowed. Particularly, regarding the expenditure classification by economic type of the budgetary central government and also regarding some data areas concerning the local governments. The consistency between years was also increased by using more advanced data processing technique.
3.2 Sources of errors
Some inaccuracy exists in the source data that affect the accuracy of the government accounts figures. For example, the accounting data should be on an accrual basis in the government accounts as in the national accounts. In this respect some inconsistency exists in the accounting systems of the governments, although most of the accounting figures are recorded on accrual basis. Regarding the recording of tax revenues, it is recommended that only those tax revenues likely to be collected should be recorded. Tax coefficients are used to estimate the appropriate tax amounts that need to be recorded. Also, some inaccuracy exists regarding the recording of pension liabilities. The principle is that all pension liabilities created in the accounting period related to current work should be recorded as expense and liabilities. Actuarial calculations are used for approaching these liabilities.
Some inaccuracy exists regarding the data collection from the local governments, particularly regarding the net acquisition of nonfinancial assets. Therefore, a large sample from the municipalities is needed regarding the estimate of transactions in nonfinancial assets, which is then grossed up to total. Similarly, some inaccuracy exists regarding the local governments' transfers like subsidies, income transfers and capital transfers, which are not available direct from their account systems. Such transfers must be estimated based on their accounting data.
3.3 Measures on confidence limits/accuracy
No specific measurements on confidence limits and accuracy in Icelandic government accounts have been carried out.
4.1 Comparison between periods
It is a fundamental idea when compiling government accounts that the figures to the largest possible extent are comparable over time. However, fundamental changes of sources or classifications can upset the comparability. In cases where this happens the solution is to calculate one year according to both methods and connect the results on that year by chain-linking.
4.2 Comparison with other statistics
In the recent years, the various institutions working with the government data at different levels have cooperated and tried to reconcile their data classifications and presentation. This cooperation has resulted in harmonized and consistent revenue and expenditure classifications. Therefore the comparability of the government statistics as presented by these institutions is adequate and discrepancies have been recorded. Internationally there is a high degree of comparability with the government accounts of other countries whereas the same standard is applied.
4.3 Coherence between preliminary and final statistics
The preliminary statistics for the government accounts are published within three months from the end of the reference period. The preliminary statistics on the budgetary central government and the social security funds are based on administrative accounts, which are a mixture of accrual and cash accounts. The statistics on the local governments are, on the other hand, based on a sample from the largest municipalities. The actual final statistics on an annual basis are published within nine months after the end of the reference year and are based on administrative accrual accounts. Relatively good coherence is between preliminary and final statistics.
5.1 Forms of dissemination
· News, released on Statistics Icelands website
· Statistics, categorised statistical web tables
· Statistical Series, Hagtíðindi
· Statistical Yearbook of Iceland, Landshagir
· IMF, OECD and Eurostat databases, accessible on their websites.
· OECD: National Accounts of OECD countries, Volume I and II
· IMF Yearbook
· Nordic Statistical Yearbook
5.2 Basic data; storage and usability
Source data is stored at Statistics Iceland. Access to more detailed data than has already been published is granted on an individual basis. In these cases the main principle is to uphold the confidentiality of the data in guidance with Statistics Iceland Rules of Procedure for Treating Confidential Data, which can be accessed on Statistics Iceland's website.
The main publications about methods used in compilation of government and national accounts in Iceland are:
- General Government Accounts (few issues), The National Economic Institute, Reykjavík
- Gross National Income Inventory (ESA95) Iceland, Statistics Iceland, from March 2004 is on Statistics Iceland's website. A very detailed description of methods used for compilation of national accounts at current prices. This report is requested by Eurostat and the structure of it is laid down by Eurostat. Similar report exists for all the member states of European Economic Area.
- National Accounts 1945-1992 (in Icelandic); National Economic Institute, Reykjavik August 1994.
- Description of method used for chain-linked volume measures, Statistical series: Gross Domestic Product - preliminary data 2004 - revision 1990-2004, 13 September 2005.
- Description of method used for allocation of financial intermediation services indirectly measured (FISIM), Statistical series: Gross Domestic Product 2005 - provisional data, 14 March 2006.
5.4 Other information
Further information about specific parts of the government finance statistics are given by the staff of the unit of public finance and sector accounts, see list of staff.
© Hagstofa �slands, �ann 24-6-2013