Contents and Abstract:|
6.1 Primary Basis of Government Finance Statistics
- 6.11 Four Sectors of Government from a Finance Viewpoint
6.2 Accounting Basis
- 6.21 Accounting Funds (or Entities)
- 6.22 Cash vs Accrual Basis of Accounting
- 6.23 Generally Accepted Accounting Procedures (GAAP)
6.3 Major Finance Concepts
- 6.31 Statistical Nature of Data
- 6.32 Current Dollars
- 6.33 Noncash Transactions
6.4 Intergovernmental Transactions
- 6.41 Intergovernmental Fiscal Relations (Type 1)
- 6.42 Fiscal Agents for Other Governments (Type 2)
- 6.43 Purchases from Other Governments (Type 3)
- 6.44 Netting Out Duplicative Intergovernmental Transactions
- 6.45 Payments to Other Government Insurance Trust Systems
6.5 Agency, Private Trust, Investment, and Other Transactions
- 6.51 Agency Transactions
- 6.52 Private Trust Transactions
- 6.53 Investment Transactions
- 6.54 Adjustment and Correction Transactions
6.6 Internal Transfers
- 6.61 Interfund Transactions
- 6.62 Intragovernmental Service Funds (Revolving Funds)
- 6.63 Interdepartmental Charges
6.7 Miscellaneous Topics
- 6.71 Suspense Transactions
- 6.72 Capital and Operating Leases
- 6.73 Anomalies of Government Finance Statistics
- 6.74 Exhibit Statistics
6-A Examples of Accounting Funds and Their Treatment in
Census Bureau Statistics on Government Finances
The Census Bureau collects four types of finance data about state and
local governments: revenues, expenditures, indebtedness, and cash and securities
. Each type is described in detail in the next
four chapters. This chapter provides a general overview of government finances, the
accounting practices of governments, and how the Bureau's finance statistics relate
to the accounting systems from which they originate.
The primary basis of the finance statistics reported by the Census Bureau relates to
all external transactions of a government exclusive of agency, private trust, and
investment transactions. The income concept of "revenue," the outgo concept of
"expenditure," and the concept of government indebtedness pertain to nearly all
accounting funds and accounts and to all boards, commissions, and other agencies of
a government, as established using the criteria discussed in
Chapter 3. Moreover, these figures are net of any duplicating amounts resulting from
transactions between funds or agencies of the same government.
As described in Section 3.2, the activities of
governments are divided into four sectors for Census Bureau purposes. This section
provides additional information about these sectors in terms of how they apply to finance
General Government Sector: General government is comprised of all external transactions except those defined as being in the sectors for Liquor Stores, Utilities, and Insurance Trust. Within the totals of government revenue and
expenditure, internal transfers (e.g., interfund transactions) are "netted out."
Therefore, "general revenue" and "general expenditure" represent only revenue from
external sources and expenditures to individuals or agencies outside the government,
and do not directly reflect any "transfer" or "contributions" to or from the
utilities, liquor stores, or insurance trust sectors. See
Section 6.6 for more information on internal transactions.
Utilities Sector: In the primary classification of government revenue and
expenditure, the term "utility" is used to identify certain types of revenue,
expenditure, and debt categories. Utility revenue relates only to the revenue from
sales of goods or services and by-products to consumers outside the government.
Revenue arising from outside other aspects of utility operations is classified as
general revenue (e.g., interest earnings). Utility expenditure applies to all
expenditures for financing utility facilities, for interest on utility debt, and for
operation, maintenance, and other costs involved in producing and selling utility
commodities and services to the public (other than noncash transactions like
depreciation of assets). Utility revenue and expenditure are reported on a "gross"
basis--i.e., without offsetting revenue with its related expenditure or expenditure
with its related revenue.
Liquor Stores Sector: Liquor stores revenue relates only to amounts received
from sale of goods and associated services or products. Liquor store expenditure
relates only to amounts for purchase of goods for resale and for provision,
operation, and maintenance of the stores. Any associated government activity, such
as licensing and enforcement of liquor laws or collection of liquor taxes, are
classified under the general government sector.
Insurance Trust Sector: Insurance trust revenue comprises only (1) retirement
and social insurance contributions, including unemployment compensation "taxes"
received from employees and other government or private employers, and (2) net
earnings on investments set aside to provide income for insurance trusts (see
Note 1). Transfers or contributions from other funds of the same
government are not classified as insurance trust revenue but rather are reported
under special exhibit categories (see Chapter 11).
Insurance trust expenditure comprises only benefit payments and withdrawals of
contributions made from retirement and social insurance trust funds. Costs for
administering insurance trust systems are classified under the general government sector.
The major source of these finance statistics is the governments' own accounting
systems, either directly or through intermediate reporting systems like central
Governments administer their finances through accounting devices called "funds" (not
to be confused with the use of the term "funds" for monies). Funds are established
to support specific activities or to attain certain objectives, the most important of
which is accountability of public monies. The focus of the government's own
reporting system, therefore, is on the transactions and condition of these funds.
In contrast, the Census Bureau public finance statistics are organized to show a
government's finances in their entirety, with emphasis on the general government
sector and without distinguishing the various accounting funds. In other words, the
fund accounting nature of government reports disappears in Census Bureau statistics.
State and local government accounting reports and records may provide data on a cash,
accrual, or modified accrual basis. For a particular government, the basis of
reporting may differ among funds. Census Bureau statistics generally adopt whatever
basis the government itself uses so long as that basis (1) conforms to generally
accepted accounting procedures and (2) is applied consistently from year-to-year.
Because of the growing standardization of accounting methods by governments (see
below), this means that most finance statistics pertaining to governmental fund types
are based on the modified accrual basis; proprietary (enterprise) fund types are
based on the full accrual basis; and fiduciary fund types are recognized on the
basis consistent with the fund's accounting measurement objective. It should be
noted that some governments may still use cash basis accounting because of
constitutional provisions or other state law (see Note 2).
A major change in government accounting over the last decade or two has affected
greatly the Census Bureau's public finance statistics. This is the adoption of
generally accepted accounting procedures (GAAP) under the aegis of the Government
Accounting Standards Board (GASB). Previously, the accounting rules for governments
were broad enough that they could develop their own unique form of accounting for
their finances. Each financial report, for instance, looked different and reported
varying degrees of detail.
Now, more governments have adopted the GAAP for their reporting systems which has
had a profound effect on the Bureau's data collection efforts. On the one hand,
finance data are being recorded by governments in a more consistent fashion. Yet,
the products of this system result in a lower level of detail than in the past,
forcing the Bureau to rely less on published financial reports and more on internal
accounting records of governments (such as computer reports). This has both
complicated the work involved and forced the elimination of certain categories of
data, especially in the debt and cash and securities area.
The collection and use of Census Bureau finance statistics requires an understanding
of certain major concepts. Some of these may have different meaning when used in
Although the original source of data for these finance statistics are accounting
records of governments, the data derived from them are purely statistical in nature
and cannot be used as financial statements or to measure a government's fiscal
condition. For instance, the difference between a government's total revenue and
expenditure cannot be construed to be a "surplus" or "deficit."
Finance statistics published by the Bureau are in terms of current dollar
amounts--i.e., they have not be adjusted for price and wage changes that may have
These finance statistics exclude noncash transactions, such as technical aid,
depreciation of fixed assets, payments-in-kind, loan guarantees, and the like.
A major category of both revenue and expenditure involves intergovernmental
transactions. Governments have important fiscal relations among themselves,
generally of three types. First, they transfer monies to other governments to enable
the receiving government to perform specific public functions or to provide for its
general financial support (Type 1). Second, they act as agents for other governments
in financial matters (Type 2). And, third, they purchase commodities, property, and
services from other governments much as they do from private suppliers (Type 3).
Only the first type of transactions is classified by the Census Bureau as
intergovernmental revenue and expenditure. How each of these three types of
intergovernmental transactions is handled is described below.
The Census Bureau definition of intergovernmental transactions is limited to monies
paid to or received from other governments for performing specific governmental
functions or for general financial support, whether the activity is undertaken on
behalf of the paying government or whether such funds are regarded as assistance for
the support of activities of the receiving government. They are classified in the
general government sector no matter their purpose (including utilities). Examples of
Type 1 intergovernmental transactions include the reimbursement of one government by
another for tuition costs, hospital care, boarding prisoners, construction of public
improvements, etc.; grants in aid; payments-in-lieu-of-taxes, and the like.
Another form of intergovernmental transaction involves the sharing of tax proceeds
with other governments, typically by the state government. A portion of the sales
taxes, for instance, collected by the state often may be redistributed to the local
governments where they were collected. Whenever a government distributes some share
of a tax it imposes and collects, its payments are reported as intergovernmental
expenditure and the receiving governments' receipts are reported as intergovernmental
revenue. As described in Section 6.42, the retention
of taxes collected by a government acting as an agent for another is not reported as an
Generally, loans and advances to other governments are not treated as
intergovernmental transactions except for one unique type: "contingent" loans or
advances. Similar to grants-in-aid, contingent loans are made by a government to
another without any fixed provisions about its repayment. Designed to assist
governments in financing public projects, they are used for such purposes as public
works, planning advances, housing development, etc. In all these cases, repayment of
money advanced depends on certain contingencies or conditions at a later date. Thus,
to ensure that these transactions are reported somewhere in the Bureau's
classification system, they are reported as intergovernmental revenue and
expenditure rather than as a debt transaction (see Note 3).
Finally, the Census Bureau definition of intergovernmental transactions excludes the
sale of marketable securities to other governments (interest bearing or noninterest
bearing if the latter have fixed repayment conditions). Instead, they are treated
as investment or debt transactions--i.e., as neither revenue nor expenditure.
Type 2 intergovernmental transactions rarely are classified as intergovernmental
revenue or expenditure for Census Bureau purposes.
Governments sometimes act as fiscal agents for other governments. Such relations are
excluded from the Bureau's definition of intergovernmental transactions. One common
example is the collection and retention of withholdings from employee pay for taxes
owed to other governments (such as Federal social security "taxes"). These are
treated as an agency transaction and are excluded entirely from the Bureau's
statistics (see Section 6.51 below).
Governments also act as fiscal agents to collect taxes that are imposed or
authorized by another government. These are reported as taxes by the authorizing
government; for the collecting agent they are excluded except for the following: If
the collecting government is allowed to retain part of the tax proceeds (e.g., as
reimbursement), then that amount is reported as tax revenue by the collecting
government. In neither case is the money treated as an intergovernmental
Thus, if a state government imposes, authorizes, or requires local governments to
collect a specific tax and permits the local government to retain all or part of its
collections, then this local share is classified as tax revenue of the local
government, not as intergovernmental revenue.
This same treatment applies where a state government retains part of a
locally-imposed tax or where a local government retains a portion of tax proceeds
collected for another local government.
Type 3 intergovernmental services are not classified as intergovernmental revenue or
expenditure unless they involve government services (other than utilities).
Governments may purchase property, commodities, and utility services from other
governments much as they do from private vendors. Similarly, governments may levy
taxes on facilities of other governments in the same manner as on privately-owned
facilities. Because a government's records ordinarily do not distinguish between
private and governmental purchasers or taxpayers, these types of transactions are not
reported as intergovernmental revenue and expenditure in Census Bureau statistics.
Instead, they are treated in the same manner as those involving the private
sector--e.g., as tax or charge revenue by the receiving government and as direct
expenditure by the paying one.
On the other hand, purchases of governmental services (e.g., police and fire
protection) from other governments usually are identified as such in a government's
records. Thus, reimbursement of one government by another for such services (other
than utilities) is reported as an intergovernmental transaction, to the extent such
items are identifiable in the governmental records used by the Bureau.
Intergovernmental transactions receive special treatment whenever data for individual
governments are grouped, or aggregated, for publication purposes. Transactions
among governments within the same group are "netted out." For instance, data for all
local governments within a state are net of revenue and expenditure between them
(i.e., only amounts to and from the Federal and state governments are included).
This procedure avoids the duplication that would result if the published data
included both the intergovernmental payment made by the one government and the direct
expenditure from that money by the receiving government.
An important exception to the above involves payment by one government to an
insurance trust system administered by another, most commonly public
employee-retirement systems. The payment by one government, either on behalf of its
employees who are members of the plan or for general financial support, to another
government's insurance trust is treated as a current operation expenditure of the
paying government (for the function involved) and as an insurance trust revenue of
the receiving government, not as intergovernmental transactions.
The purpose of this treatment is to avoid an imbalance between intergovernmental
revenue and expenditure. Since intergovernmental revenue and expenditure are "two
sides of the same coin," in theory (or a perfect data collection system) the two
should always equal. Also, contributions for an insurance trust system are insurance
trust revenue so long as they come from outside the administering government. To
avoid the imbalance between intergovernmental revenue and expenditure that would
result if the payment of the contribution were treated as an intergovernmental
expenditure and the receipt were treated as an insurance trust revenue, neither of
these transactions is treated as intergovernmental.
Government accounting records from which the Census Bureau derives statistics
contain a wide variety of fiscal transactions, not all of which fall within the
scope of the finance survey. This section discusses those types of transactions that
Agency transactions are excluded from financial statistics produced by the Census
Agency transactions represent financial activities involving the receipt, holding,
and disbursement of monies which a government undertakes for other governments in
the capacity of an agent--e.g., transactions undertaken without discretion on the
part of the agent government. Generally, monies received from other governments or
individuals for transmittal to other governments or individuals are classified as
agency receipts, and the corresponding payments as agency disbursements, if the
intermediate government has no discretion in determining either the amounts of such
payments or the recipients (see Note 4).
The most common agency transaction involves the collection of taxes for other
governments. Often, for example, a county government will collect general property
taxes on behalf of all governments levying such taxes within its area. These
collections are classified as tax revenue of the final recipient governments (i.e.,
the ones levying the tax) and are omitted from the finance statistics of the county
government (i.e., the collecting agent). Another typical example is the withholding
of Federal Social Security taxes from public employees salaries and their
disbursement to the Federal Government. Still another type is where the county
government acts as an agent of the state government in distributing aid to other
local governments within its boundaries.
Census Bureau finance statistics also exclude transactions arising from agreements
between the Federal Government and state or local governments whereby the latter
agree to serve as agents in transmitting Federal payments to individuals (e.g.,
various Federal benefit payments to veterans). These are reported as Federal
Government direct expenditure and as agency transactions of the state or local
Private trust transactions are excluded from financial statistics produced by the
Private trust transactions comprise accounting funds that receive and disburse
assets held in trust for a particular individual or corporation, such as when a
government assumes the obligation of applying money to a specified use benefitting
the private party for whom the fund was established, or when the government holds
deposit or other monies pending fulfillment of certain conditions or pending
determination of ownership. Essentially, they are funds through which the government
acts as a trustee or agent on behalf of private individuals or corporations.
The receipts and payments arising from investment transactions are excluded from
Census finance statistics except for any recorded profit or loss when they
Investment transactions involve the purchase and sale of securities for investment
purposes, extension of loans to individuals, and receipts resulting from repayment
of such loans. Their exclusion does not apply to purchase and sale of realty or
tangible personal property not for investment nor to the extension and repayment of
contingent loans and advances to another government.
Census Bureau finance statistics represent transactions that are net of refunds or
other correcting adjustments. Adjustment transactions are not reported separately
in Census statistics; instead, they reduce or increase amounts reported as revenue
and expenditure. The exact treatment of such transactions depends on when the
refund or correction occurred--i.e., whether it was in the same fiscal year or a
prior fiscal year.
Same fiscal year adjustments: Revenue amounts represent gross collections
less any refunds paid out during the same fiscal year. Expenditure amounts represent
gross disbursements less any amounts refunded for payments made in the same fiscal
year. Also, interest earnings on investments and interest payments on debt are
adjusted for accrued interest on securities purchased and on debt obligations issued,
Prior fiscal year adjustments: The refund of an expenditure made in a prior
fiscal year is treated as Miscellaneous General Revenue (code U99). The
refund of a revenue other than taxes is treated as miscellaneous general
expenditure (code E89). Refunds of prior year tax collections are treated as
offsets to current year tax collections.
The chart below summarizes the rules for reporting refund and correction