U.S. Department of Commerce

Federal, State, and Local Governments
Government Finance and Employment Classification Manual
Chapter 8 - Expenditure


Contents and Abstract:

8.1 Expenditure Definition
8.11 Refunds and Correction Transactions

8.2 General Expenditure

8.3 Liquor Store Expenditure

8.4 Utility Expenditure
8.41 Intergovernmental Expenditure Codes for Utilities
8.42 Joint Utility Projects (Public or Private)

8.5 Insurance Trust Expenditure

8.6 Character and Object Categories
8.61 Construction Data Improvement


8-1 Cross-Classification of Expenditure and Function Codes


8-A Description of Character and Object Categories

In providing a wide range of services to the public, a government may perform in different ways. Take, for instance, public welfare services, which may be provided directly with the government's own employees, be funded through intergovernmental expenditures, or constitute direct cash payments to welfare recipients.

The Census Bureau's classification system for government finances attempts to measure not only the types and levels of government services but also how they are performed. This is achieved through statistics on government expenditure that are reported on the basis of purpose (or function) and on the nature of the expenditure involved (or character and object).

Chapter 4 provides a detailed description of the various functional categories the Bureau uses for reporting expenditure statistics. This chapter focuses on the definition of expenditure, its various types, and descriptions of the character and object categories.

8.1 Expenditure Definition

Expenditure includes all amounts of money paid out by a government during its fiscal year--net of recoveries and other correcting transactions--other than for retirement of debt, purchase of investment securities, extension of loans, and agency or private trust transactions. Under this definition, expenditure relates to external payments of a government and excludes amounts transferred to funds or agencies of the same government (other than payments to intragovernmental service funds; see Section 6.62).

Expenditure includes payments from all sources of funds, including not only current revenues but also proceeds from borrowing and prior year fund balances. Note, however, that the Bureau's finance statistics do not relate expenditure to their source of funding.

Expenditure includes amounts spent by all agencies, boards, commissions, or other organizations categorized as dependent on the government concerned (see Chapter 3). Stated in terms of the accounting procedures from which these data originate, expenditure covers outlays of all accounting funds of a government other than intragovernmental service (revolving), agency, and private trust funds.

Expenditure of business-type activities of governments (utilities and other commercial or auxiliary enterprises) is reported on a gross basis. That is, related revenues are not deducted from their expenditures to derive net expenditure amount.

The following types of outlays are excluded from expenditure:

  • Loans or other extensions of credit, except contingent loans and advances to other governments which are reported as intergovernmental expenditure (see Section 6.41).
  • Refunds of revenues collected during the same fiscal year, which are deducted from gross receipts of revenue item involved (see Section 6.54).
  • Erroneous payments and other outlays that are recovered during the same fiscal year, which are deducted from the expenditures that originally included them (see Section 6.54).
  • Purchase of securities for investment purposes. Recorded loss on the sale of investments, however, is treated as an expenditure.
  • Payments for the retirement of debt principal (long- or short-term), which are reported with debt statistics (see Chapter 9). Interest on debt, however, is reported as an expenditure.
  • Transfers to other agencies or funds of the same government, except for intragovernmental service funds and utilities operated by the same government (see Sections 6.6 and 8.4 ).
  • Agency or private trust transactions, i.e., where the government is acting on behalf of others (see Section 6.5).
  • Noncash transactions, such as provision of perquisites, technical services, commodities, property, noncash gifts or bequests, and other "payments in kind." The cost of items distributed in-kind are treated as purchase of goods and services (i.e., as a current operations expenditure).

Government expenditures are categorized according to their functional purpose and by character and object. The census codes resulting from this cross-classification are listed in Table 8-1. All expenditure falls into one of the four sectors of government described in Chapter 3. Note that how an expenditure is financed does not determine necessarily its expenditure classification--e.g., administration of an insurance trust system from insurance trust revenue is treated as a general government expenditure.

8.11 Refunds and Correcting Transactions

Expenditure data are adjusted for refunds and other correcting transactions, including those originally made in prior fiscal years. See Section 6.54 for details.

8.2 General Expenditure

General expenditure comprises all expenditure except that classified as liquor store, utility, or insurance trust expenditure. As noted above, it includes all such payments regardless of the source of revenue from which they were financed. General government expenditures are classified by function and character and object.

8.3 Liquor Store Expenditure

Liquor store expenditure comprises only outlays related to the establishment and operation of liquor stores owned and operated by state and local governments, including amounts for purchase of liquor for resale. It excludes expenditures for enforcement and licensing under liquor laws, even if financed by liquor store sales (reported as general expenditure); transfer of surplus or earnings of the liquor store system to the parent government (an intragovernmental transfer); and state liquor store earnings that are distributed to local governments (reported as General Local Government Support expenditure, code 30).

8.4 Utility Expenditure

Utility expenditure comprises outlays for the purchase or construction of utility facilities, interest on utility debt (including utility debt held by other funds of the same government), and production or acquisition and distribution of utility commodities and services for sale to the general public or to other governments by the four types of state and local government utilities recognized by the Census Bureau: water supply, electric power, gas supply, and public mass transit systems. Utility expenditure is reported on a gross amount without deducting its related revenue.

Utility expenditure excludes any identifiable costs for providing services or commodities to the parent government, which are reported at the function using them. For example, the cost of water used by a fire department is classified as a Fire Protection expenditure, code E24.

The following expenditures are excluded from the utility sector:

Utility expenditure is categorized according to the type of utility involved and by character and object.

8.41 Intergovernmental Expenditure Codes for Utilities

Effective with fiscal year 1987-88 data, the Bureau created intergovernmental expenditure codes for utility purposes. Despite the fact that these categories possess utility function codes (L91, M92, R93, etc.), they are classified as general government expenditure. Note that these categories are used to record intergovernmental transactions that were being reported previously under other intergovernmental expenditure codes (primarily General Government, NEC, code 89, and Transit Subsidies, code 47).

Purchase of utility services or commodities from another government continues to be recorded as a current operation expenditure of the functionbenefitedd.

8.42 Joint Utility Projects (Public and Private)

Because of the massive size of utility facilities (especially electric power), governments sometimes enter into joint construction projects with other private or public utilities. Below are two possible situations and their proper classification for Census Bureau purposes:

8.5 Insurance Trust Expenditure

Insurance trust expenditure consists of social insurance payments to beneficiaries, public employee retirement annuities and other benefits, and withdrawals of insurance or employee retirement contributions. In effect, it only includes amounts paid to beneficiaries or members of the systems.

The following are excluded from insurance trust expenditures:

  • Costs of administering insurance trust programs, including management of investments (classified as a general government expenditure).
  • Contributions to a government's own insurance trust funds (an intragovernmental transfer).
  • Contributions or other payments to insurance trust funds administered by another government (classified as current operation expenditure when such amounts represent employer contributions on behalf of the contributing government's employees and as agency transaction when such amounts represent sums withheld from employee salaries and wages).
  • "Pay-as-you-go" plans or "gratuities" to former employees--i.e., payments not involving a plan of employee assessments or accumulation of retirement reserves (classified as current operation expenditure).
  • Group insurance premiums covering the government's own employees and contributions to private insurers or to public employee association retirement systems (classified as current operation expenditure).

Insurance trust expenditure is classified according to the major types of insurance trust systems recognized by the Census Bureau.

8.6 Character and Object Categories

As noted above, all expenditure amounts are classified by function and by character and object. The character and object classification reflects the time period benefited by the expenditure and the kind of payment involved. It consists of the following categories:

Code Character and Object Category
Direct Expenditure Categories:
E Current Operations
E-I-J Assistance and Subsidies
I Interest on Debt
-----Capital Outlay:
F Construction
G Purchase of Land and Existing Structures*
K Purchase of Equipment
-----Insurance Trust Expenditure:
X Public Employee Retirement Systems
Y All Other Insurance Trust Systems
Intergovernmental Expenditure Categories:
L To State Government
M To Local Government, N.E.C.
N To General Purpose Governments (County, Municipal, or Township)
Q To Independent School Districts
R To Special Districts
S To the Federal Government

* The use of the "G" code for purchase of land and existing structures applies only during the original compilation of data for state and largest city and county governments. When these data are inserted into the Bureau's computerized records, they are combined with purchase of equipment data ("K" codes) to produce a category called "Capital Outlay Other Than Construction." The equipment only category ("K" codes), therefore, becomes a subcategory under this one in all subsequent computer files, printouts, and publications. For all other governments, the "G" code represents the purchase of land, equipment and existing structures--i.e., all capital outlays other than construction.

As indicated by the above chart, two prefix codes have double meanings. The "E" prefix is used both for assistance and subsidies and for current operations . There are, however, just four assistance and subsides codes that use the "E" prefix:

E19 - Education assistance
E67 - Categorical cash assistance
E68 - Noncategorical cash assistance
E84 - Veterans' bonuses

Similarly, the "I" prefix is also used both for assistance and subsidies and for interest on debt. There are, however, just five codes for interest on debt:

I89 - Interest on general debt
I91 - Interest on water supply utility debt
I92 - Interest on electric power utility debt
I93 - Interest on gas supply utility debt
I94 - Interest on public mass transit systems utility debt

Note that all the remaining "I" codes relate to assistance and subsidies expenditure of the Federal Government. See Chart 8-A for a detailed description of each character and object category.

8.61 Construction Data Improvement

During the 1987-88 Annual Survey of Government Finances, the Bureau undertook a major review of the elements comprising construction expenditure data. The review, in general, corroborated the historical integrity of the construction data. The review did lead to the clarification of activities classified under this category in one important area: centralized engineering, design and planning, and contract supervision activities whose major purpose is to support public capital projects should be classified under construction. Previously, their treatment varied between construction and current operations. This finding primarily affected the Highways function.

This review also affected the classification manual by incorporating more detailed definitions of the items comprising the different capital outlay character and object categories.

Source: U.S. Census Bureau, Governments Division
Created: November 16 2000
Last revised: October 31 2011