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Federal, State, and Local Governments
Government Finance and Employment Classification Manual
Chapter 3 - Framework of Census Statistics on Governments
Contents and Abstract:

3.1 The Basic Unit of Reporting: The Government Entity
3.11 Types of Government Entities
3.12 Definition of a Government Entity
3.13 Dependent Agencies Checklists
3.14 Parent Government Concept
3.15 Joint Activities of Governments
3.2 The Four Sectors of Government Activities
3.21 General Government Sector
3.22 Utilities Sector
3.23 Liquor Stores Sector
3.24 Insurance Trust Sector
3.3 How Census Bureau Statistics Relate to Original Data Sources
3.31 Federal Government Statistics
3.32 Broad Coverage of Activities
3.33 Treatment of Accounting Funds
3.34 Terminology and Classification
3.35 Reporting Periods
The definitions and concepts comprising the Census Bureau's classification system on government finances and employment are established upon a framework whose understanding is as important as the system itself.

The focus, or basic reporting unit, of these statistics is the government entity, defined by the Bureau using the guidelines below. Data are assembled for these individual entities which also serve as building blocks to produce larger aggregations of data--county area, state totals, and national figures--by themselves or according to the various types of governments the Bureau recognizes.

As a group, governments are multi-functional organizations, providing a wide range of services to a broad group of people. The Bureau classifies their activities into four major sectors of government, three of which pertain to specialized functions.

Finally, Census Bureau statistics on governments are not mere reproductions of the data found in original government data sources. In order to produce meaningful comparisons among all governments, the Bureau applies consistent standards of coverage, terminology, and reporting periods that often result in data that differ from those reported by governments themselves.

3.1 The Basic Unit of Reporting: The Government Entity

The focal point, or basic reporting unit, of Census Bureau statistics on public finances and employment is the individual government. This entity includes not only the central government but also those agencies, institutions, and authorities which are connected to it.

To determine which of the many organizations with governmental or quasi-governmental character should be included in its statistics on the public sector, the Bureau has created the set of criteria below.

3.11 Types of Government Entities

Government services are provided through a complex structure made up of numerous public bodies and agencies. The Census Bureau identified 87,504 governments during the 1997 Census of Governments. In addition to the Federal Government and the 50 state governments, the Bureau recognizes five basic types of local governments, as follows (per 1997 Census):

  • County Governments (3,043), which exist in all states except Connecticut and Rhode Island and in the District of Columbia, are created to provide general government activities in specified geographic areas. They include entities called boroughs in Alaska, parishes in Louisiana, and counties in all other states.

  • Municipal Governments (19,372), which are established to provide general government services for a specific population concentration in a defined area. They include cities, boroughs (except in Alaska), villages, and towns (except in the six New England states, Minnesota, New York and Wisconsin). Composite city-county governments are treated as municipal governments for Census Bureau purposes.

  • Township Governments (16,629), which are established to provide general government services for areas without regard to population concentrations. They include towns in the six New England states, Minnesota, New York and Wisconsin, and townships in eleven other states.

  • Special District Governments (34,683), which are established to provide only one or a limited number of designated functions and having sufficient administrative and fiscal autonomy to qualify as independent governments.

  • School District Governments (13,726), which are created to provide public elementary, secondary, and/or higher education and having sufficient administrative and fiscal autonomy to qualify as independent governments. They exclude school systems that are "dependent" on a county, municipal, township, or state government.

3.12 Definition of a Government Entity (See Note 1)

In summary, a government entity is defined for Census Bureau reporting as follows:

A government is an organized entity which, in addition to having governmental character, has sufficient discretion in the management of its own affairs to distinguish it as separate from the administrative structure of any other governmental unit.

Thus, to be regarded as a government for Census Bureau purposes, an entity must possess all three of these critical attributes: existence as an organized entity, governmental character, and substantial autonomy. Each is explained below.

Existence as an Organized Entity:

Evidence of this attribute is provided by the presence of some form of organization and the possession of some corporate powers, such as perpetual succession, the right to sue and be sued, have a name, make contracts, acquire and dispose of property, and the like.

Designation of a class of governments in law as "municipal corporations," "public corporations," "bodies corporate and public," and the like indicates that such units are organized entities. On the other hand, some entities not stated specifically by law as corporations do have sufficient powers to be recognized as governments.

Obviously, the mere right to exist is not sufficient. Where a former government has ceased to operate--i.e., receives no revenue, conducts no activities, and has no current officers-- it is not recognized as an active government.

Governmental Character:

This characteristic is indicated where officers of the entity are popularly elected or are appointed by public officials. A high degree of responsibility to the public, demonstrated by requirements for public reporting or for accessibility of records to public inspection, is also taken as critical evidence of governmental character.

Governmental character is attributed to any entities having power to levy property taxes, power to issue debt paying interest exempt from Federal taxation, or responsibility for performing a function commonly regarded as governmental in nature. A lack of these attributes or of evidence about them, however, does not preclude a class of units from being recognized as having governmental character, if it meets the indicated requirements as to officers or public accountability. Thus, some special district governments with no taxing powers provide electric power or other public utility services that are also widely rendered privately; they may be recognized as local governments because of provisions as to their administration and public accountability.

Substantial Autonomy:

This requirement is met where, subject to statutory limitations and any supervision of local governments by the state, an entity has considerable fiscal and administrative independence. Fiscal independence generally derives from power of the entity to determine its budget without review and detailed modification by other local officials or governments, to determine taxes to be levied for its support, to fix and collect charges for its services, or to issue debt without review by another local government.

Administrative independence is related closely to the basis for selecting the governing body of the entity. Accordingly, a public agency is recognized as an independent government if it has independent fiscal powers and in addition (1) has a popularly elected governing body; (2) has a governing body representing two or more state or local governments; or (3) even in the event its governing body is appointed, performs functions that are essentially different from those of, and are not subject to specification by, its creating government.

Conversely, separate existence is not attributed to entities which lack either fiscal or administrative independence. Some local government agencies having considerable fiscal autonomy are classified as dependent agencies of another government rather than as governments because one or more of the following characteristics is present:

(1) Control of the agency by a board composed wholly or mainly of parent government officials.

(2) Control by the agency over facilities that supplement, serve, or take the place of facilities ordinarily provided by the creating government.

(3) Provision that agency properties and responsibilities revert to the creating government after agency debt has been repaid.

(4) Requirements for approval of agency plans by the creating government.

(5) Legislative or executive specification by the parent government as to the location and type of facilities the agency is to construct and maintain.

(6) Dependence of an agency for all or a substantial part of its revenues on appropriations or allocations made at the discretion of another state or local government.

(7) Provision for the review and the detailed modification of agency budgets by another local government. County review of agency budgets in connection with statutory limitations on tax rates, however, is not, by itself, sufficient to establish lack of fiscal autonomy.

Other Factors:

Applying the above criteria usually involves little difficulty in many instances, but the variety of provisions regarding local government entities and particularly some of the resultant shadings of autonomy leave the classification of some types of entities subject to considerable judgment. In such cases, the Census Bureau has taken account of (a) local attitudes as to whether the type of unit involved is independent or not, and (b) the effect of the decision upon collection and presentation of statistics on government finances and employment.

Noncritical Characteristics:

In addition to the essential characteristics above, there are other common attributes that are not essential for the identification of governments. Among them are geographic area, population, taxing power, and internal uniformity of taxation and services.

Most, but not all, governments serve and operate primarily within a specific geographic area for which a population can be determined. Some entities having all essential characteristics of local governments, however, do not possess this attribute, but at best can be associated only with an area unrelated to specific population concentration (e.g., a special district for toll road and bridge facilities). Even those governments which can be directly associated with a defined territory for certain purposes, such as property taxation, often own and operate facilities or provide services on one basis or another to residents of adjoining territory.

Although most governments have the authority to levy taxes, this power is not an essential attribute. Even those governments that have property taxing powers and serve a precisely determined area do not always provide a single level of taxation and services throughout the area concerned. Differential taxation often occurs legally where annexation or other boundary changes place a burden of debt service on part but not all the territory. Moreover, subordinate "districts" are sometimes provided for, with regard to particular types of improvements or government services, resulting in differences of tax level within the total area served by the government.

3.13 Dependent Agencies

The Census Bureau's definition of a government entity, therefore, includes not only the central government but also agencies that are "dependent" on the government, using the criteria above.

The determination of an agency's dependence or independence for Census Bureau purposes is not made on an ad hoc basis, however. Rather, a separate unit within Governments Division identifies and classifies the agencies that are dependent on a government.

3.14 Parent Government Concept

One by-product of this broad definition of a government entity is the concept of the parent government. Governments operate using a wide variety of organizational units to fulfill their duties. The core of the government to which these organizations are attached (as defined above) is often referred to as the "parent" government. Thus, a dependent agency or school often is described in terms of the relationship to its parent government.

3.15 Joint Activities of Governments

Governments sometimes cooperate to carry out specific projects or activities--e.g., city-county health departments or hospitals, joint bridge authorities, joint interstate agencies, consortia, and councils of government.

The participating units may carry out this joint activity in various ways, each of which affects the reporting of finance and employment statistics for the participating governments:

  1. They may establish an independent special district to carry out the activity, in which case the related finances and employment are assigned to that government unit. Their financial transactions with the special district are treated as intergovernmental revenue and expenditure.

  2. One of the governments may be solely responsible for administering the activity but the other governments share its financial support. In such situations, all its activities are assigned to the administering government with the other governments' shares being reported as intergovernmental transactions.

  3. The participating governments may create a separate organizational body that is neither independent nor dependent on any one member but is jointly administered by all of them. These types of joint activities provide special problems in a classification system whose focus is the individual government entity. Such joint activities, therefore, are classified on the basis of the circumstances involved in each case. In general, the treatment of these joint activities depend on their magnitude:

    • A joint inter-local agency having substantial financial activity or employment or which issues substantial debt which is not in the name of any of the participating governments is assigned for Census Bureau purposes as a dependent agency of one of the participating governments. Its activities are classified in the same manner as the second case cited above.

    • A joint inter-local agency not having substantial financial activity or employment is allocated to each of the participating governments to the extent of their respective participation, as follows:

      1. Revenue of each parent government should include any taxes or other receipts it collects to turn over to the joint agency or activity.

      2. Borrowing and debt of each parent government should include any debt it issues or guarantees on behalf of the joint agency or activity.

      3. Direct expenditure of each parent should include any amount it pays (e.g., for salaries and other expenses) on account of, and any contributions it makes directly to, a joint agency or activity. Such amounts are classified according to the function involved and as appropriately as possible by character and object.

      4. Parent government data should exclude any revenue or expenditure of the joint agency or activity, as such, and any joint agency debt not issued in the name of, or guaranteed by, the parent government.

      5. Employees and employee payrolls of joint agencies should be reported as part of the government which issues employee paychecks or, if the joint agency issues paychecks, allocated to the sponsoring governments on the basis of their financial contribution to the "joint" activity.

3.2 The Four Sectors of Government Activities

Since the early 1950's, government activities have been categorized into four mutually exclusive sectors: general government, utilities, liquor stores, and insurance trust systems. Not all of these four sectors, however, apply to every type of data the Bureau collects, as depicted by the chart below:
Type of Data General Utility Liquor Store Insurance Trust
  Cash and Securities

"Y" means data are collected for that sector and type of data.
"N" means data are not collected for that sector and type of data.
"(1)" Included in data for general government sector.

3.21 General Government Sector

The general government sector includes all activities not defined in the utilities, liquor stores, or insurance trust sectors. For Census Bureau purposes, government-operated lotteries are included in this sector.

3.22 Utilities Sector

For Census Bureau reporting of government statistics, this sector comprises just four types of governmental activities and no others:
Water supply Gas supply
Electric light and power Public mass transit
Such systems must be either owned and operated by a government or owned and operated under contract by a private firm where the government maintains day-to-day financial oversight.

Except for these four types of utilities and the liquor stores sector below, all commercial-type activities of a government-- airports, toll roads and bridges, housing projects, parking facilities, port facilities, lotteries, Federal Government corporations (e.g., TVA), and the like--are classed in the general government sector.

3.23 Liquor Stores Sector

This sector covers only the liquor store systems owned and operated, at present, by seventeen state governments and local governments in a few states. Any associated government activities, such as licensing and enforcement of liquor laws and collection of liquor taxes, are classified in the general government category.

3.24 Insurance Trust Sector

The insurance trust sector comprises two major groups of systems:

  • Public employee retirement systems, embracing both contributory and noncontributory systems administered by a government for public employees (including employees of other governments).

  • Social insurance systems, including the Federal Government's Social Security and Medicare program (OASDHI), veterans' life insurance, and railroad retirement; and state government workers' compensation and miscellaneous insurance trusts. Note that for Census Bureau purposes these types of social insurance systems are not applied to local government finances (other than for the District of Columbia's unemployment compensation plan).

To be categorized as a insurance trust for purposes of Census Bureau statistics, a system must meet all five characteristics of a social insurance trust described in
Section 11.1.

Note that the insurance trust category applies only to the government actually administering the system. A government's participation in an insurance trust administered either privately or by another government is not treated as an insurance trust activity of the participating government. Generally, it would be treated as a current operations expenditure for the paying activity in the general government, utilities, or liquor stores sector.

No employment activity is associated with this sector; employees involved in administering insurance trust systems are classed in the general government sector.

3.3 How Census Bureau Statistics Relate to Original Data Sources

Federal, state, and local governments issue their own reports and financial statements, sometimes in great detail. The Census Bureau often relies on these reports or on the accounting or payroll reporting systems that generate them as a major source of its statistics (see Note 2). Despite the use of the governments' own reports or reporting systems, Census Bureau statistics produced from them often do not agree with those issued by the governments themselves.

The major reason for this seeming disparity is one of the major purposes of this classification system: to provide finance and employment statistics that are consistent for all governments surveyed. Governments differ greatly in their size, activities, organization, responsibilities, and the internal methods they use to report them. The financial structure and reporting systems devised by governments also differ widely, being designed mainly to enforce fidelity and to help officials to plan and administer the affairs of the government effectively.

Amongst this diversity, the Census Bureau collects statistics which must be presented in a consistent and uniform manner for all governments covered. Thus, a government's original data are re-categorized within a standard framework based on the common nature of particular activities or transactions in order to overcome barriers to both useful summation and direct comparisons that result from the varied nature of government records and reports.

Thus, the Bureau often recasts the data extracted from original sources in the ways described below.

3.31 Federal Government Statistics

The primary focus of Census Bureau statistics about governments is on state and local governments. Data for the Federal Government are collected for some surveys, primarily to provide a total picture of government activity in the national economy.

The classification system used by the Census Bureau for categorizing state and local government activities differs in a number of important respects from the classification scheme used in the United States Budget (the primary source of Federal Government finance data). Accordingly, it is necessary to recast Federal data as presented in this source to produce statistics that are consistent with those for state and local governments.

This involves (1) grouping individual Federal receipts and expenditures for various agencies and appropriations according to the functional framework described in Chapter 4 and (2) applying certain adjustments to many of those items to derive finance amounts consistent with those reported for state and local governments. These adjustments take into account the following major differences between the Federal reporting scheme and the Census Bureau's classification system.

Treatment in Federal Reporting System Treatment in Census Bureau Classification System
Government enterprises are reported on net basis--plus or minus--in terms of their effect on budget expenditure. Includes gross revenue and expenditure of government enterprises (except for loans and investments).
Receipts below are offset against expenditure, thereby reducing total Federal expenditure: (a) various enterprises or market-oriented activities; (b) interest on loans made by Federal agencies; (c) sales of products or property; (d) other reimbursements from non-Federal sources (such as from employees for quarters and subsistence provided). Receipts are reported as revenue and added back to expenditure shown in Federal sources. See Sections 7.1 and 8.1 for discussions of gross receipts and gross expenditures.
Interfund and intragovernmental transactions are included in agency receipts and expenditures (but excluded from budget totals). Excludes all interfund and intragovernmental transfers (see Section 6.6).
Includes interest on debt that has accrued but not been paid. Interest on debt reported on actual disbursement basis.
Net excess of loan disbursement or repayment activities of loan accounts is added to expenditures or to receipts in developing budget totals. Loan transactions are excluded.

3.32 Broad Coverage of Activities

As noted in
Section 3.1, the Census Bureau applies a broad definition of what constitutes a government entity; therefore, our statistics are generally more inclusive than those of any central report or records of a government. They include data drawn not only from the central records of a government's principal finance or payroll offices, but also those of dependent educational institutions, semi-autonomous boards, special authorities, and the like.

In particular, Census Bureau statistics on public debt cover debt instruments that have been issued by authority of the government (with or without its full-faith and credit) which may be omitted from the government's own central report or records. The largest category of indebtedness today, Public Debt for Private Purposes, includes debt that often is not viewed by the issuing government as its own despite the use of its governmental powers to grant the debt its critical tax-exempt status. A government's central records or finance reports may also exclude particular revenue or expenditure items maintained in separate records but which are incorporated into Census Bureau statistics.

3.33 Treatment of Accounting Funds

As described in Chapter 6, governments administer their finances through accounting devices called "funds." These funds are established to support specific activities or to attain certain objectives. Governments maintain numerous accounting funds and issue financial reports designed to reveal the operation and status of each fund, individually and on a consolidated basis.

Census Bureau finance statistics, in contrast, are organized to show information for each government as a single financial entity, not to distinguish the activities of any particular accounting fund or group of funds. Government accounting also identifies financial transactions that occur between these funds. As discussed in Section 6.6, the Bureau generally ignores (or "nets out") such transactions to avoid duplication. Census Bureau statistics on functional expenditures for an activity, for instance, may summarize outlays from numerous accounting funds (except interfund activities). Even when a government's own financial report combines its funds, the basis for doing so may differ from that applied by the Bureau.

Moreover, the methods the Bureau uses to produce financial statistics from these accounting statements cause the data to lose their accounting nature completely. For these reasons, users can derive limited information about the fiscal condition of the government, such as budget surplus or deficit or the operating balance of a fund at the end of the fiscal year.

3.34 Terminology and Classification

Governments vary in the terms they apply to similar items and transactions. They also differ in the bases used to classify activities or transactions for their own records and published reports.

The Census Bureau applies a uniform terminology and classification system to its data collection. For instance, a "public utilities tax" reported by three state governments may be classified for Census Bureau purposes as a gross receipts tax in one state, a license tax in a second, and a property tax in the third. Similarly, the term "current operation" may be used by a government in a different sense, including intergovernmental transactions or cash assistance payments, both of which are excluded from the Bureau's definition of current operations. Similarly, some governments may define payrolls to include the employer share of fringe benefits, which falls outside the scope of the Census Bureau definition.

In both its finance and employment statistics, the Bureau emphasizes the functional nature of activities by combining finances and employment from all accounting funds by all agencies according to the functional categories described in Chapter 4. But governments also vary in how they organize their activities. Some governments have departments devoted to a single activity (e.g., "highways" or "solid waste management") that directly corresponds to a Census Bureau category. In other cases, an agency may be responsible for a wide variety of functions (e.g., "transportation" or "human resources"), requiring the Bureau to distribute data on its activities among numerous Census categories. Often, statistics for a Census function may be a composite of multiple agencies of a government--e.g., "highways" employment may include a highways department, toll road authority, and bridge commission.

3.35 Reporting Periods

Just as the Census Bureau applies standard definitions to its classification of government activities, it uses a common definition for the reporting periods that the data cover. In some cases, this may also explain disparities between Census and a government's own statistics.

Finance data:Through the fiscal year 1963 finance survey, the Bureau collected data for governments' fiscal years that ended in a particular calendar year. Effective with the fiscal 1963-64 survey, the Bureau began using governments' fiscal years that closed within the 12-month period ending on June 30. Thus, the reporting period for fiscal year 1996-97 data includes government's fiscal years that ended between July 1, 1996 and June 30, 1997. There are a few exceptions to this rule, primarily for the Federal and state governments and the District of Columbia.

Dependent agencies of a government do not always share the same fiscal year period as their parent government. In those case, data are for the agency's fiscal year that ended within the 12-month period ending on June 30, which may be earlier or later than the parent government's own fiscal year.

Employment data:Employment and payroll data are based on the one pay period that includes March 12 of the survey year. The payroll data are converted to a one month figure using a conversion factor based on the pay period (see Chapter 5 for details).


  1. This section is based on Appendix B to the 1997 Census of Governments report, Government Organization (Vol. 1, No. 1). citation.

  2. A major trend in the compilation of finance data on governments, particularly for state and large city and county governments, is the use of internal accounting reports rather than published financial statements. In some cases, these are generated specially for the Census Bureau. citation.

Source: U.S. Census Bureau, Governments Division
Created: November 16 2000
Last revised: November 03 2011