- Sailendra Pattanayak
- Published Date:
- April 2018
Accounting basis: Defined in 2000 by the International Federation of Accountants’ (IFAC) Public Sector Committee (PSC), the predecessor of the International Public Sector Accounting Board (IPSASB), as “the body of accounting principles that determine when the effects of transactions or events should be recognized for financial reporting purposes. It relates to the timing of the measurements made, regardless of the nature of the measurement.” There are many variations of the concept of the accounting basis. The PSC identified two basic reference points (cash and accrual) and two variations (modified cash and modified accrual).
Accounting policies: According to IPSAS, “the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.”
Accounting system: The set of accounting procedures, internal mechanisms of control, books of account, and plan and chart of accounts that are used for administering, recording, and reporting on financial transactions. Systems should embody double-entry bookkeeping, record all stages of the payments and receipts process needed to recognize accounting transactions, integrate asset and liability accounts with operating accounts, and maintain records in a form that can be audited.
Accrual accounting: Accrual accounting systems recognize transactions or events at the time economic value is created, transformed, exchanged, transferred, or extinguished, and all economic flows (not just cash) are recorded.
Accrual reporting: Reporting based on accrual accounting systems.
Advance release calendar: A calendar that indicates the dates on which regular publications of statistics or other fiscal data will be available to the public.
Annual financial statements: A comprehensive presentation of the government’s financial position and financial performance at the end of each fiscal year, which in most countries are subject to audit by the supreme audit institution before being submitted to the legislature for review and subsequently published. Where accrual-basis accounting is used, the annual financial statements will usually include a balance sheet, an operating statement, a cash-flow statement, and notes. Where cash-basis accounting is used, the statements will comprise a cash receipts and payments or operating statement.
Appropriations: An authority under a law given by the legislature to the executive, valid for a specified period of time, to spend public funds for a specified purpose. Annual appropriations are made through annual budget laws. Supplementary budgets/appropriations are sometimes made by the legislature and amend the annual budget law. A standing appropriation is sometimes used for authority extending beyond a single budget year under separate legislation (e.g., social security laws). In some countries, such as the United States, the term authorization is used to denote a general law setting up a program and permitting appropriation, but not giving any specific authority to spend. In most countries, agencies and departments require specific executive authorization (“apportionment, allotment, or warrant”) before they may incur an obligation against an appropriation.
Assets: Any economic resource controlled by an entity as a result of past transactions or events and from which the economic owner may obtain future economic benefits over a period of time. Types of financial assets include cash, deposits, loans, bonds, shares and other equities, financial derivatives, and accounts receivable. Examples of non-financial assets include buildings, machinery, equipment, inventories, valuables, land, subsoil mineral deposits, and leases.
Augmented balance: The overall balance plus any losses incurred by the central bank, and any issuance of government debt to recapitalize public financial institutions not recorded in the overall balance.
Balance sheet: A comprehensive and consolidated statement of the assets, liabilities, and net worth of the government or the public sector drawn up at a defined point in time, usually the end of the fiscal year.
Borrowing: Includes all direct borrowing by public sector entities, such as bonds, treasury bills, and bank loans, as well as indirect borrowing such as accounts payable, including expenditure arrears and unpaid tax refunds.
Budget calendar: A calendar indicating the key dates in the process of preparing and approving the budget. This calendar would include the date on which the budget circular is issued; the time period during which the finance ministry discusses the budget submissions of ministries, departments, and agencies; the date on which the draft budget should be submitted by the executive to the legislature; the period during which the legislature holds bud-get hearings; and the date on which the budget appropriations bill should be passed by the legislature.
Budget documentation: The documents that are published with the executive’s annual budget submission to the legislature or that are related to the process of preparing the budget. In addition to the draft appropriation bill, these documents could include a fiscal strategy statement, a medium-term budget framework, a fiscal risk statement, and a report on the execution of the budget for the previous year.
Budgetary central government: The ministries, departments, agencies, and other entities belonging to the central government whose spending, revenues, and borrowing activities are included in the central government’s annual budget. There may be extrabudgetary entities whose activities are excluded from the annual budget, and thus from the definition of budgetary central government.
Cash accounting: An accounting system that recognizes transactions and events when cash is received or disbursed.
Cash reporting: Reporting based on cash-accounting systems.
Central government: All government entities that are included in the budgetary central government, plus any units funded by extrabudgetary funds and nonmarket nonprofit institutions that are controlled by the central government. Depending on legal arrangements, social security funds are often considered part of central government.
Chart of accounts: A financial organization tool that provides an organized and coded listing of all the individual accounts that are used to record transactions and make up the ledger system.
Commitments: A stage in the expenditure process at which a contract or other forms of planned expenditures are approved before work is performed or goods and services are delivered. A commitment thus entails a potential obligation for a government to pay in future when the contract is honored by its counterpart. A commitment is not equivalent to a liability. The term is also used in a more general sense to mean firm promises of the government made in policy statements. Since commitments usually mature as payments, their control is an essential part of expenditure control and prevention of expenditure arrears.
Consolidation: A process of presenting the assets, liabilities, revenues, and expenditures of a group of public-sector entities (often a controlling government unit and its controlled entities) as if they constituted a single entity. Internal transactions and balances should be eliminated.
Contingency funds or reserves: A separate fund or a budget provision set aside to meet unforeseen and unavoidable requirements that may arise during the budget year. Certain types of contingency (e.g., meeting loan guarantee obligations) may be specified as a potential use for such funds.
Contingent liabilities: Obligations that are contingent on the occurrence of some uncertain future event (e.g., the calling of a government guarantee). They are therefore not yet liabilities, and may never be if a triggering event does not materialize. Contingent liabilities may be explicit (i.e., established by law or through a contract between the government and a third party) or implicit (e.g., based on a public expectation that the government will provide support to an entity should it be in financial difficulties).
Data Dissemination Standards: Standards that enhance the availability of timely and comprehensive statistics, and which contribute to sound macroeconomic policies and the efficient functioning of financial markets. The Special Data Dissemination Standard (SDDS) is a set of global benchmarks, developed by the IMF, for disseminating macroeconomic statistics to the public. The Enhanced General Data Dissemination System (e-GDDS) is a framework for countries with less developed statistical systems to improve data transparency and governance by publishing essential data for the analysis of macroeconomic conditions. The SDDS Plus Standard is the highest tier of the SDDS and is aimed at economies with systemically important financial sectors.
Debt Sustainability Analysis (DSA): The Debt Sustainability Framework (DSF), developed by the World Bank and the IMF, guides the borrowing decisions of low- and middle-income countries, matching their financing needs with their current and prospective ability to repay debt. The DSA is a tool that is used as part of the DSF to conduct a structured examination of a country’s debt sustainability.
Earmarked taxes: Taxes raised and allocated by a mechanism specified in policy or law to specific expenditure programs, often through an extrabudgetary entity (see extrabudgetary entities).
Economic classification: A classification that identifies the types of expense incurred according to the economic process involved; for example, the payment of wages and salaries or the purchase of goods and services or plant and equipment. The term is generally used to identify the nature and economic effects of government operations.
Expenditure (or payment) arrears: Amounts that are both unpaid and past the due date for payment. Payment arrears represent the stock of invoices that have not been paid by the date specified in a contract, within a normal commercial period for similar transactions, or within a specific period set by laws and regulations. Examples of arrears include bills overdue from suppliers, overdue salaries or transfers, or overdue debt repayment or debt service payments.
Extrabudgetary entities: Entities that operate under the authority or control of government whose budgets are not included in the annual budget of the government that is submitted to the legislature. Such entities may not be subject to the same level of scrutiny or accounting standards as those included in the annual budget. A wide variety of extrabudgetary arrangements are used, including extrabudgetary funds (e.g., social security funds) set up under separate legislation that may or may not have a separate annual appropriation, or extrabudgetary accounts.
Financial derivative: A financial instrument whose value is derived from one or more underlying assets and through which specific financial risks (e.g., interest rate risk, foreign exchange risk, equity and commodity price risk, and credit risk) can be traded in financial markets. Examples include futures, swaps, and options.
Fiscal aggregates: Summary fiscal indicators, including on the flow-side total expenditure, total revenue, net lending/net borrowing, and the overall fiscal balance, and on the stock-side gross and net debt, total assets, total liabilities, and net worth.
Fiscal council: A permanent agency with a statutory or executive mandate to assess publicly and independently from partisan influence the government’s fiscal policies, plans, and performance against macroeconomic objectives related to the long-term sustainability of public finances, short- and medium-term macroeconomic stability, and other policy objectives. The council may also be mandated to prepare short- and medium-term macroeconomic and fiscal forecasts that are used by the government in preparing the budget, or to validate the government’s own forecasts.
Fiscal forecasts: Forecasts of the main fiscal aggregates (revenue, expenditure, borrowing, and public debt), and their components such as revenue by categories of tax and nontax revenue, and expenditure by administrative, functional, and economic classification.
Fiscal legislation: Laws or regulations relating to the formulation of fiscal policy; principles of fiscal responsibility; the preparation, approval, and execution of the budget; and the accounting, reporting, and auditing of fiscal information.
Fiscal policy targets and rules: Medium-term objectives or targets for key fiscal indicators such as debt, the fiscal deficit, revenue collection, or expenditure. These targets may include limits on the growth rate or level of these indicators and be formalized as rules that are set in legislation or in pronouncements by the government. In addition, the government may legislate or announce procedural rules for the conduct of fiscal policy, for example, transparency in policymaking, timely disclosure of fiscal information, or the correction of fiscal imbalances within a specified period.
Fiscal reports: Retrospective reports on fiscal developments, including in-year and year-end budget outturn/execution reports, fiscal statistics, and annual financial statements.
Fiscal risks: Potential shocks to government revenues, expenditures, assets, or liabilities that may cause fiscal outcomes to depart from expectations or forecasts. Fiscal risks can be classified into macroeconomic risks that arise when forecasts of key macroeconomic variables are different from forecast; or specific risks such as the realization of contingent liabilities, natural disasters, or other uncertain events such as the bailout of a public corporation or financial institution.
Fiscal statistics: Retrospective reports on the government’s financial performance that provide fiscal data based on international statistical standards such as the IMF’s Government Finance Statistics Manual (GFSM, 2001 or 2014), or the System of National Accounts (SNA, 1993 or 2008), or the European System of National Accounts (ESA, 1995 or 2010).
Fiscal sustainability: The ability of a government to sustain its current spending, revenue raising, and other policies without threatening government liquidity or solvency, or defaulting on some of its liabilities or promised expenditures.
Fiscal transparency: Fiscal transparency refers to the information available to the public about the government’s fiscal policymaking process; the clarity, reliability, frequency, timeliness, and relevance of public fiscal reporting; and the openness of such information. Clarity is the ease with which reports can be understood by users. Reliability is the extent to which reports are an accurate representation of government fiscal operations and finances. Frequency (or periodicity) is the regularity with which reports are published. Timeliness refers to the time lag involved in the dissemination of these reports. Relevance refers to the extent to which reports provide users (legislatures, markets, and citizens) with the information they need to make effective decisions. Openness refers to the ease with which the public can influence and hold governments to account for their fiscal policy decisions.
Functional classification: The functional classification of expenses provides information on the purpose for which an expense was incurred. The United Nations’ Classification of Functions of Government (COFOG) is a detailed classification of the functions, or socioeconomic objectives, that general government entities aim to achieve through various kinds of expenditure. It is generally used to measure the allocation of resources by government for the promotion of various activities and objectives (e.g., health, education, transportation, and communication).
General government: All resident institutional units that fulfill the functions of government as their primary activity. The general government sector comprises the following: all entities of the central, state, regional, provincial, municipal, or local government; all extrabudgetary entities, including social security funds, at each level of government; and all nonmarket nonprofit institutions that are controlled and financed mainly by government units. Therefore, the general government sector can also be defined as all the public institutional entities and units that are nonmarket producers. It does not include public corporations that are market producers, even when these companies are owned and controlled by the government.
Governance: The process by which decisions are made and implemented. Within government, governance is the process by which public institutions conduct public affairs and manage public resources. Good governance refers to the management of government in a manner that is essentially free of abuse and corruption, and with due regard for the rule of law.
Government guarantee: The most common type is a government-guaranteed loan, which requires the government to repay any amount outstanding in the event of default. In some contracts with a public or private sector entity (e.g., PPPs), the government may provide a guarantee that requires it to pay compensation if the revenue outturn or quantity demanded is below the guaranteed level. Similarly, contracts may also contain exchange rate or price guarantees.
Government (or general) ledger accounts: The book where all transactions by the central government, as a debit or a credit, are recorded. The government ledger is generally maintained by a government’s general accounting office.
Gross (net) debt: All liabilities that require the payment of interest and/or principal by the debtor to the creditor at a date or dates in the future. Thus, all liabilities in the government finance statistics (GFS) system are debt, except for shares and other equity and financial derivatives. Net debt is calculated as gross debt minus financial assets corresponding to debt instruments. For some purposes, it may be useful to calculate debt net of highly liquid assets, which is, in most cases, is equal to gross debt minus financial assets in the form of currency and deposits. However, in some cases, debt securities held for debt management purposes could be included as highly liquid financial assets.
International Financial Reporting Standards (IFRS): A set of accounting standards issued by the International Accounting Standards Board (IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards.
International Public Sector Accounting Standards (IPSAS): A set of accounting standards issued by the IPSAS Board for use by governments and other public-sector entities in the preparation of general purpose financial reports. These standards are comparable to the IFRS that relate to private-sector entities.
In-year fiscal reports: Budget outturn/execution reports and fiscal statistics that are produced every month or quarter within the financial year, and also include full-year reports that are produced shortly after the end of the financial year.
Liability: In the GFSM, a liability is established when an entity is obligated, under specific circumstances, to provide funds or other resources to another entity. Liabilities include Special Drawing Rights (SDRs); currency and deposits; debt securities; loans; equity and investment fund shares; insurance, pension, and standardized guarantee schemes; financial derivatives and employee stock options; and other accounts payable. In IPSAS, a liability is defined as a current obligation of an entity for an outflow of resources that result from a past event. At a minimum, the balance sheet (statement of financial position) should include line items of transfers payable, payables under exchange transactions, provisions, and other financial liabilities.
Macroeconomic forecasts: Projections of key macroeconomic variables such as GDP, consumption, investment, employment, inflation, interest rates, exchange rates, and developments in the world economy. Such forecasts are an important input for making projections of fiscal aggregates such as public spending, revenue, borrowing, and debt.
Macroeconomic risks: Risks that arise when the forecasts of macroeconomic indicators (GDP, employment, exchange rates, etc.) differ from the outturns.
Major audit qualifications: Major audit qualifications include any of the following: (i) a disclaimer audit opinion; (ii) an adverse audit opinion; and (iii) any other audit qualification, the financial impact of which has been estimated by the auditor to be of the order of one percent of GDP or larger.
Major revisions: Revisions to historical fiscal statistics that are large enough to have a macro-critical impact on the key fiscal aggregates, and in particular, any revision of the order of one percent of GDP or larger.
Medium-term budget framework (MTBF): A set of institutional arrangements for prioritizing, presenting, and managing revenue and expenditure over a period of three to five years.
Moral hazard: The possibility that a signal or expectation of future government support may induce an undesirable change in the behavior of the management of a public or private sector entity or enterprise. For example, the entity may be encouraged to engage in more risky activities because some of its potential losses are seen as being effectively underwritten by the government.
Multi-annual contracts: Contracts between the government and the private sector with a term of more than a year, such as PPPs, long-term leases, and medium- or long-term procurement arrangements.
Natural resource company (NRC): A nonfinancial public corporation (state-owned enterprise) that is involved in the exploration, extraction, processing, or sale of minerals or oil.
Net/gross operating balance: A summary measure of the sustainability of the reporting sector’s or subsector’s operations. It is represented by the change in net worth due to transactions (calculated as revenue minus expense). The gross operating balance equals revenue minus expenses excluding the consumption of fixed capital.
Net lending/borrowing: A summary measure indicating the extent to which the government is either putting financial resources at the disposal of other sectors in the economy or abroad, or is utilizing the financial resources generated by other sectors in the economy or from abroad. It may therefore be viewed as an indicator of the financial impact of government activity on the rest of the economy and the rest of the world. Net lending/borrowing equals the net operating balance minus net investment in nonfinancial assets. It is also equal to the net acquisition of financial assets minus the net incurrence of liabilities.
Net worth: Total assets less total liabilities at the end of an accounting period. Some analysis focuses on only the financial assets of the general government sector rather than its total assets. As a result, net financial worth is defined as the total value of financial assets less total liabilities.
Nondebt liabilities: Liabilities that do not require payment(s) of interest and/or principal by the debtor to the creditor at a date, or dates, in the future. They include equity and investment fund shares (which entitle its holders only to dividends and a claim on the residual value of the liabilities), and employee stock options (which do not supply funds or other resources, but rather shift the exposure to risks from one party to another).
Nonmarket nonprofit institutions (NPIs): Legal or social entities created for the production of nonmarket goods and services, but whose status does not permit them to be a source of income, profit, or other financial gain for the entities that establish, control, and mainly finance them. An entity is a nonmarket producer if most of its output is not sold at an economically significant price. NPIs controlled by the government are classified in the general government sector.
Nonperforming loan: Nonperforming loans are those for which: (i) payments of principal and/or interest are past due by three months (90 days) or more, (ii) interest payments equal to three months’ (90 days) interest or more have been capitalized (reinvested in the principal amount) or payment has been delayed by agreement, or (iii) evidence exists to reclassify a loan as nonperforming even in the absence of a 90-day past-due payment, such as when the debtor files for bankruptcy.
Outputs and outcomes: In a performance-assessment framework for government, outputs are defined as the goods or services produced by government agencies (e.g., an increase in the number of teaching hours delivered, or in the volume of welfare benefits assessed and paid), and outcomes are defined as the effects on social, economic, or other indicators arising from the delivery of outputs (e.g., an increase in a country’s PISA scores, or improved social equity).
Overall balance: This term corresponds to the GFSM 1986 terminology of “Overall Deficit/Surplus,” which is defined as revenue plus grants received less expenditure less “lending minus repayments.” The balance so defined is equal (with an opposite sign) to the sum of net borrowing by the government, plus the net decrease in government cash, deposits, and securities held for liquidity purposes. The basis of this balance concept is that government policies are held to be deficit- or surplus-creating, and thus the revenue or expenditures associated with these policies are “above the line.” Borrowing or a rundown of liquid assets, however, is deficit financing or “below the line.” It should be noted that the term lending minus repayments included above the line covers government transactions in debt and equity claims on others undertaken for purposes of public policy rather than for management of government liquidity or earning a return.
Participatory budgeting: A form of budgeting in which citizens’ groups and other nongovernmental organizations participate directly in the process of preparing the budget or in monitoring its implementation. Public participation has proven especially valuable in providing feedback on the quality and timeliness of delivery of key public services in areas such as agriculture, education, the environment, and health.
Primary balance: Equals net lending/borrowing excluding interest expense or net interest expense.
Program budgeting/program classification: Presentation of proposed expenditures in a budget according to the intended objectives and results of the associated programs, which may be defined as groups of related activities carried out by a government. A program classification applies this principle across all government activities. Program budgets allocate expenditures by program and are often associated with performance budgets, or results-based budgets in which indicators are used to measure whether expenditure policies and programs are achieving their desired objectives, outputs, or outcomes.
Public corporation: A legal entity that is owned or controlled by the government and that produces goods or services for sale in the market at economically significant prices. There are two main classes of public corporation: nonfinancial corporations and financial corporations.
Public-private partnership (PPP): A group of long-term arrangements where the private sector supplies infrastructure assets and services that have been traditionally provided or financed by the government. PPPs typically comprise a long-term contract between a private party and a government entity for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance.
Public sector: The public sector consists of all resident institutional units controlled directly or indirectly by resident government entities—namely, all entities of the general government sector and resident public corporations.
Quasi-fiscal activities (QFAs): Operations carried out by public corporations to further a public policy objective that worsens their financial position relative to a strictly commercial profit-maximizing level. QFAs can take a variety of forms, including selling goods and services (e.g., energy, water) at less than their commercial cost or paying more than commercial prices to selected suppliers.
Sensitivity analysis: In macroeconomic and fiscal forecasting, a “what-if” type of analysis to determine the sensitivity of the forecast outcomes to changes in the assumptions or parameters. If a small change in a parameter results in a relatively large change in the outcomes, the outcomes are said to be sensitive to that parameter.
Specific fiscal risk: A fiscal risk that is related to specific sources and triggering events, such as the calling of a guarantee, a natural disaster, or the rescue of a bank.
Special Drawing Right (SDR): The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. SDRs can be exchanged for freely usable currencies. The value of the SDR is based on a basket of five major currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound.
Subnational governments: Decentralized government entities, created by constitution or law, units that have legislative, judicial, or regulatory authority over a geographically delineated part of the country. These entities are governed by bodies whose members are elected by universal suffrage of persons resident within the delineated area, and have some autonomy with respect to budgets, staff, and assets. Subnational governments include state, provincial, or regional governments, as well as municipalities and other local governments.
Supplementary budgets/appropriations: See appropriations.
Supreme Audit Institution (SAI): Highest national auditing authority within the constitutional system that is responsible for auditing the management of public funds. SAIs may perform compliance, financial, or performance audits. They should be organizationally, administratively, and financially independent of the government. Most SAIs are members of the International Organization of Supreme Audit Institutions (INTOSAI), which acts as a professional standard-setting body.
Tax arrears: Taxes due to government but not paid within the prescribed time.
Tax expenditures: Revenue foregone, atributable to provisions in the tax law that allow special exclusions, exemptions, deductions, credits, concessions, preferential rates, or deferral of tax liabilities for select groups of taxpayers or specific activities. These exceptions may be regarded as alternatives to other policy instruments, such as spending or regulatory programs.
User charges: Payments made by consumers, both individual and companies, to meet all or part of the cost of goods and services provided to them by the public sector.
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Basel Committee on Banking Supervision:
Federal Tax Expenditures: https://www.fn.gc.ca/purl/taxexp-eng.asp
Customs Cooperation Council:
Declaration of the World Customs Organization: http://www.wcoomd.org
European System of Accounts (ESA2010):
Fiscal governance in the EU Member States: http://ec.europa.eu/economy_finace/publications/european_economy/public_finaces2006_en.htm
Extractive Industry Transparency Initiative (EITI):
Global Initiative for Fiscal Transparency (GIFT):
Hong Kong SAR:
Data Quality Assessment Framework: http://dsbb.imf.org/pages/dqrs/dqaf.aspx
Dissemination Standards: http://dsbb.imf.org/Default.aspx
Fiscal Transparency http://www.imf.org/external/np/fad/trans/
GFS Manuals and Guides http://www.imf.org/external/pubs/ft/gfs/manual/gfs.htm
Public Investment Management: http://www.imf.org/external/np/fad/publicinvestment/
Standards and Codes: http://www.imf.org/external/standards/index.htm
International Budget Partnership:
ISSAI Framework: http://www.issai.org/
International Public Sector Accounting Standards Board (IPSASB):
New Zealand Treasury:
Directorate for Public Governance: http://www.oecd.org/gov/
Budgetary governance: http://www.oecd.org/gov/budgeting/principles-budgetary-governance.htm
Budget transparency: http://www.oecd.org/gov/budgeting/best-practices-budget-transparency.htm
Recommendations and Guidelines on Regulatory Policy: http://www.oecd.org/gov/regulatory-policy/recommendations-guidelines.htm
South African Treasury: http://www.treasury.gov.za
Office for Budget Responsibility: http://obr.uk/
Classification of the Functions of Government: https://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=4
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Congressional Budget Office: http://www.cbo.gov/
Federal Accounting Standards Advisory Board: http://www.fasab.gov/
Taxpayer Advocate Service: https://www.irs.gov/taxpayer-advocate
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Note: Page numbers followed by “b” indicate boxes, “f” indicate figures, “t” indicate tables, and “n” indicate footnotes.
Accounting basis, 22f, 50b
Accounting policies, 21, 23
Accounts Chambers, Russia, 87b
Accrual accounting, 19, 21–23, 22f, 39, 40, 107n122
Accrued expenditures, 23. See also Expenditures
Accrued revenue, 23. See also Revenue(s)
Action areas for disaster risk management, 128
Administrative classification, 35, 35t, 36–38. See also Budget classifications
Aggregate projections of revenue, expenditure, and financing, 63
Alternative macroeconomic scenarios, 102–3
Annual budget estimates, 53
Annual Budget Law (LOA) of Brazil, 57b
Assets. See also Liabilities
fiscal reports coverage, 18–21
fiscal risk management, 115–18
legal framework for acquisition and disposal of, 118
valuation, 19, 21
opinions on financial statements, 48t
aligning reporting standards, 52b
budget laws and fiscal risk disclosure, 98b
business investment in GDP, 61b
Final Budget Outcome, 52b
intergenerational report, 110b
tax expenditures, 27n49
Austria, statement of financial position, 20b
Balance sheets. See also Assets; Liabilities
extending scope of analysis of, 117–18
fiscal report coverage of, 17–19
management of, 118
steps establishing full, 19
trends in, 18b
Bank of Finland, 126b
Bank of International Settlements (BIS), 39n62
Bank statements, 19
Best Practices for Budget Transparency (OECD), 2, 4n15, 34t, 54t, 68t, 84t, 100t
Binding framework, 62b. See also Medium-term budget framework (MTBF)
Annual Budget Law (LOA), 57b
budget documentation, 57b
budget execution reports, 30b
budget laws and fiscal risk disclosure, 98b
Length-of-Service Guarantee Fund, 57b
macroeconomic forecasts, 60b
sensitivity analysis in fiscal risks statement, 102b
Budget annexes/supplementary statements, 53
Budgetary central government, 13b
Budgetary contingencies, 113–15
Budget/budgeting. See also Fiscal forecasts/ forecasting and budgeting
components to be included, 53
difference between fiscal forecasts, fiscal reports, and, 50–52, 50b
policy orientation, 73–84
timeliness of, 72–73
Budget classifications, 34–38
administrative, 35, 35t, 36–38
economic, 35, 35t, 36–38
functional, 35, 35t, 37–38
program, 35, 35t, 38
Budget execution reports, 9
Budget provisions, 111b
Budget system law, 69b
Budget unity, 55–58
Business investment, 61b
legislature power to amend budget, 70b
statistical integrity, 47b
from financing activities, 23
from investing activities, 23
from operating activities, 23
Cash flow statement, 23
Cash holdings, 19
Central Africa Economic and Monetary Community (CEMAC), 17b, 64b, 71b
Directive on Transparency and Good Governance, 98b
Central/national government entities, 13b, 16
Charter of Budget Honesty Act (1998) of Australia, 98b
PPP management, 123b
public investment projects, 67b
structural balance rule, 77b
Citizen’s guide to budget, 82, 82b
Classification of fiscal information, 34–38. See also Budget classifications
Code of Good Practices on Transparency in Monetary and Financial Policies (IMF), 112t
budget execution reports, 30b
fiscal policy objectives, 77b
monitoring regime for subnational governments, 133b
natural disasters risk management, 129b
Comparability of fiscal data, 50–52
Congressional Budget Office (CBO) of US, 88b
Contingencies. See Budgetary contingencies
Contingent claims analysis (CCA), 126b
Controller and Auditor-General (CAG) of New Zealand, 50b
Core Principles for Effective Deposit Insurance Systems, 112t
budget execution reports, 30b
medium-term budget framework (MTBF), 63b
Cost-benefit analysis (CBA), 65, 66b, 67
Côte d’Ivoire, fiscal risks disclosure, 106b
Country Procurement Assessment Report (CPAR), 54t
Coverage of fiscal reports, 10–27
examples of difference in, 11f
standards, norms, and guidance material, 10–11t, 28t
tax expenditures, 24–27
Credibility of fiscal forecasts and budgets, 84–93
forecast reconciliation, 91–93
independent evaluation, 85–88
standards, norms, and guidance material, 84–85t
supplementary budget, 88–91
Cyprus, budget laws and fiscal risk disclosure, 99b
Data Dissemination Standards (IMF), 28t, 44–46, 44t
Data Quality Assessment Framework (DQAF), 34t, 44t, 46
Deadlines for fiscal report publication, 28
Debt, 18b, 19. See also Liabilities
data collection, 19
disclosure and analysis, 116–17
Debt sustainability analyses (DSA), 117b
fiscal implications of change in, 108b
long-term projections, 107
Direct controls, ceilings, or caps, 111b. See also Fiscal risk management
Disaster and Emergency Management Administration Presidency (AFAD), Turkey, 129b
Disaster risk management, action areas for, 128
Draft budget legislation, 53
East African Community (EAC), 17b
Economic and Monetary Union for Central Africa (CEMAC), 64b
Economic classification, 35, 35t, 36–38. See also Budget classifications
Economic efficiency, 78b. See also
Performance information, on budget
Economic growth, long-term projections, 107
Economy, 78b. See also Performance information, on budget
Effectiveness, 78b. See also Performance information, on budget
Efficiency, 78b. See also Performance information, on budget
Environmental consideration, long-term projections, 107
Environmental risks, 128–29
European Statistics Code of Practice, 34t
European System of Accounts (ESA), 42
European System of Accounts 2010 Transmission Program, 16b
European Union (EU)
absolute error ex post real GDP forecast accuracy, 59f
general government consolidation, 16–17b
optimistic bias in forecast accuracy, 60f
stock of government guarantees in, 119f
Excessive Deficit Procedure (Maastricht Treaty), 16b
Expenditures. See also Revenue(s)
budget documentation, 55–58
forecast reconciliation, 91–93
medium-term projections of, 62–64
Explicit risks, 104
disclosure of, 105
External audit, 47–49
Extrabudgetary central government, 14b
Extrabudgetary funds (EBF), 15b
budget documents incorporating, 56–57
Extractive Industries Transparency Initiative (EITI), 113t, 126, 127
Financial crisis of 2008, 2
Financial management information system (FMIS), 30
Financial Sector Assessment Programs (FSAP), 124
Financial sector exposure, 124–26
Financial system, 100b
Financing, budget documentation of, 55–58
forecast reconciliation, 91–93
medium-term projections of, 62–64
Financing activities, cash flows from, 23
financial stability reports, 126b
presentation of forecast reconciliations, 93b
reconciliation of fiscal data, 40–41b
Fiscal coordination, 130–37
public corporations, 134–37
standards, norms, and guidance material, 130t
subnational governments, 131–33
Fiscal councils, 85–86
Fiscal data, comparability of, 50–52
Fiscal forecasts/forecasting and budgeting, 53–93. See also Budget/budgeting
credibility of, 84–93
difference between budgets, fiscal reports, and, 50–52, 50b
macroeconomic forecasts, 58–61
policy orientation, 73–84
standards, norms, and guidance material, 54–55t
Fiscal legislation, 68–71
budget system law, 69b
powers of legislature to modify budget, 69, 70b
timing of budget submission, adoption, and publication, 69
Fiscal policy objectives, 74–77
Fiscal reports/reporting, 9–52
difference between fiscal forecasts, budgets, and, 50–52, 50b
as foundation of good fiscal management, 9
frequency and timeliness, 27–33
Fiscal Responsibility and Budget Systems Law of Cyprus, 99b
Fiscal Responsibility and Transparency Law (FRTL), 77b
Fiscal Responsibility Law (2000) of Brazil, 98b
costs of realizations, 96f
country’s vulnerability to, 95
disclosure and analysis, 96–97 (See also Fiscal risk disclosure and analysis)
government’s ability to respond, 96
macroeconomic, 95, 101–3 (See also Macroeconomic risks)
specific, 95, 104–7. See also Specific fiscal risk
Fiscal risk disclosure and analysis, 96–97
institutional arrangements, 98
long-term sustainability analysis, 107–10
macroeconomic risks, 101–3
outline of a comprehensive statement of, 99–100b
specific fiscal risk, 104–7
standards, norms, and guidance material, 100–101t
summary reporting, 98–99
Fiscal risk management, 97, 110–29
asset and liability management, 115–18
budgetary contingencies, 113–15
environmental risks, 128–29
financial sector exposure, 124–26
institutional arrangements, 98
instruments for, 111b
natural resources, 126–28
public-private partnerships (PPP), 121–24
standards, norms, and guidance material, 112b
Fiscal rules, 75, 75b
Fiscal statistics, 9
government agency and, 46
integrity of, 44–47
professionally independent body and, 46, 47b
professional practices of agency producing, 45b
for effective fiscal management, 1
Fiscal Transparency Code (IMF), 1–4, 2b
revised, architecture of, 3f
Fiscal Transparency Evaluations (FTE), 5–6, 6f
Fixed framework, 62b. See also Medium-term budget framework (MTBF)
Flows, coverage of, 21–24. See also Cash flows
Forecast reconciliation, 91–93
legislature power to amend budget, 70b
program classification, 38b
tax expenditures, 27n49
Frequency of fiscal reports, 27–33
in-year reports, 28–30
Functional classification, 35, 35t, 37–38. See also Budget classifications
G20 countries, timeliness of budget, 72, 73b
General government sector, 14b
consolidated data for, 16–17
assessments of the governments’
macroeconomic and fiscal forecasts, 87b
debt sustainability analyses (DSA), 117b
Parliamentary Budget Office (PBO), 87b
Germany, legislature power to amend budget, 70b
Global Initiative for Fiscal Transparency (GIFT), 81n102
principles of public participation, 81b
Government Finance Statistics Manual (GFSM), 4n15, 5b, 10t, 13, 15n29, 34, 35, 101t, 112t, 130t
Government financial statements, 9
Greece, budget execution reports, 30b
Gross basis, 55, 55n74
Gross revenues, budget documentation of, 55–58
annual publication of, 119–20
as common source of fiscal risk, 118
fiscal risk management, 118–21
Guatemala, public sector institutions coverage in fiscal reports, 12f
Guidelines for Fiscal Risk Disclosure and Management (IMF), 130t
Guidelines for Public Debt Management, 112t
Guidelines on the Corporate Governance of State-Owned Enterprises, revised 2015 (OECD), 130t
Guide on Coverage and Sectorization of the Public Sector (IMF), 11t
fiscal legislation for budget process, 71b
monitoring regime for subnational governments, 133b
subnational government, 133b
Implicit risks, 104–5
Independent evaluation of fiscal forecasts and budgets, 85–88
compared with alternative forecasts, 86–87
fiscal councils, 85–86
independent entity, 87–88
institutional measures, 86
legislature power to amend budget, 70b
tax expenditures, 26b
Indicative framework, 62b. See also Medium-term budget framework (MTBF)
Input, 78b, 79. See also Performance information, on budget
Integrity of fiscal reports, 43–52
comparability of fiscal data, 50–52
external audit, 47–49
statistical integrity, 44–47 (See also Fiscal statistics)
International Budget Partnership, Open Budget Survey, 2–3, 28t, 55t, 68t, 74t, 85t
International Financial Reporting Standards (IFRS), 17
International Public Sector Accounting Standards (IPSAS), 4n15, 10–11t, 50, 100t, 112t, 121, 130t
characteristics for financial reporting, 33b
International Standards of Supreme Audit Institutions (ISSAI), 4n15, 44t
Investing activities, cash flows from, 23
Investment projects, 64–67
Chile and Korea, 67b
cost-benefit analysis (CBA), 65, 66b, 67
In-year reports, frequency of, 28–30
Ireland, budget execution reports, 30b
Italy, legislature power to amend budget, 70b
administrative and economic classifications, 37b
material variation to approved budget, 90b
open discussion of budget issues, 83b
public investment projects, 67b
Legal claims, 100b
The Legal Framework for Budget Systems: An International Comparison (Lienert and others), 67t
Legislation. See Fiscal legislation
Lending programs, 99b
Length-of-Service Guarantee Fund, Brazil, 57b
Liabilities. See also Assets; Debt
fiscal reports coverage, 18–21
fiscal risk management, 115–18
public debt, 18b
Lithuania, annual report of public corporations, 137b
Local Government Act, Iceland, 71b
Long-term sustainability analysis, 107–10
Macroeconomic forecasts, 58–61
Macroeconomic risks, 99b
fiscal risk analysis, 101–3
probabilistic fiscal forecasts, 103
scenario analysis, 102, 102b
Macroeconomic statistics, 42
Malawi, presentation of output information, 80b
Manual on Sources and Methods for the Compilation of COFOG Statistics (EUROSTAT), 34t
Marketable debt instruments, 18b
Medium-term budget framework (MTBF), 53, 62–64
Costa Rica, 63b
terms and concepts, 62b
Medium-term debt management strategy (MTDS), 116b
Medium-term fiscal framework (MTFF), 53, 62b
Medium-Term Macroeconomic Program, Norway, 127b
Methodology for Assessing Procurement Systems (MAPS, MAPS2), 55t
The Mexico Declaration on SAI Independence, 44t, 47
Mining investment, 61b
Ministries of finance, 105
National Audit Act (2008) of Uganda, 49b
National Budget, Norway, 127b
National Disaster Fund, Colombia, 129b
National Disaster Management Strategy, Turkey, 129b
National Plan for Disaster Prevention and Assistance, Colombia, 129b
National Planning Authority, Uganda, 84b
Natural disasters, 100b, 128–29
Natural resources, 126–28
EITI, 113t, 126, 127
long-term projections, 107
aligning reporting standards, 52b
budget laws and fiscal risk disclosure, 99b
Controller and Auditor-General (CAG), 50b
investment statement, 118b
macro-fiscal scenario analysis, 102b
Public Finance Act of, 118b
nonfinancial assets, 20–21
valuation of, 19, 21
Nonmarketable debt instrument, 18b
Nontax revenue, 23, 23n42
budget documentation, 56
reporting on natural resources, 127b
state ownership strategy, 136b
Office of Budget Responsibility (OBR) of UK, 88b
Office of the Auditor General (OAG), 49b
One-off guarantees, 119
Operating activities, cash flows from, 23
Orderliness of budget process, 67–73
fiscal legislation, 68–71
standards, norms, and guidance material, 67t
Organisation for Economic Co-operation and Development (OECD)
benchmark tax system by, 25b
Best Practices for Budget Transparency, 2, 4n15, 34t, 54t, 68t, 84t, 100t
Guidelines on the Corporate Governance of State-Owned Enterprises, revised 2015, 130t
Methodology for Assessing Procurement Systems, 55t
Other accounts payable, 18b
Outcome, 78b, 80. See also Performance information, on budget
Output, 78b, 80. See also Performance information, on budget
Parliamentary Budget Office (PBO) of Georgia, 87b
Performance indicators, 79
Performance information, on budget, 77–80
input, 78b, 79
key terms related to, 78b
outcome, 78b, 80
output, 78b, 80
program classification, 78b
Performance reporting, 79
consolidated financial statements, 32b
fiscal policy objectives, 77b
performance information and budget process, 80b
tax expenditures, 26b
Petroleum Resources on the Norwegian Continental Shelf, 127b
coverage of flows, 23b
debt sustainability analysis, 109b
fiscal risk statement, 102–3b, 106b
Planning ministry, 65n88
Policy objectives. See Fiscal policy objectives
Policy orientation, of fiscal forecasts and budgets, 73–84
fiscal policy objectives, 74–77
performance information, 77–80
public participation, 81–83
standards, norms, and guidance material, 74b
budget documentation coverage, 58b
budget execution reports, 30b
historical revisions to fiscal data, 43b
tax expenditure and, 27b
Principles of Budgetary Governance (OECD), 11t, 28t, 100t
Productivity, 78b. See also Performance information, on budget
Program classification, 35, 35t, 38. See also Budget classifications
key characteristics of, 78b
Publication of fiscal reports, 27–33
in-year reports, 28–30
year-end reports, 31–33
Public corporations, 14b, 100b, 134–37
commercial accounting standards, 17
compliance with IFRS, 17
liabilities of financial and nonfinancial, 134b
Public debt, 18b, 99b. See also Debt; Liabilities
incurrence and management of, 116
long-term projections, 107, 108, 109b
Public Debt, Guarantees, and Grants, 123b
Public Expenditure and Financial Accountability (PEFA), 5b, 28t, 34t, 44t, 54t, 68t, 74t, 84t, 130t
Public Finance Act 1989 (Section 26G), of New Zealand, 99b
Public Finance Act of 2015 (PFA), Iceland, 71b
Public Financial Management Act of Sierra Leone, 99b
Public Investment Management Assessment (PIMA), 5b, 54t
Public investment plan (PIP), 65n88
Public participation, in budget process, 81–83
citizen’s guide to budget, 82, 82b
fiscal management process, 81
GIFT’s principles of, 81b
Public-private partnerships (PPP), 100b, 121–24
complementary ways of ensuring transparency, 121
debt-like and/or guaranteed obligations, 121
PFRAM, 5b, 112t, 122b
publication of rights, obligations, and other exposures under, 122–24
Public-Private Partnerships Fiscal Risks Assessment Model (PFRAM), 5b, 112t, 122b
Public Sector Debt Statistics: Guide for Compilers and Users (PSDSG), 11t
Public Sector Debt Statistics: Guide for Users and Compilers (IMF), 112t
Public sector entities, coverage of, 12
compliance with IFRS, 17
consolidation of stocks and flows within, 15, 15b
subsectors, 12, 13–14b
Quality of fiscal reports, 33–43
classification, 34–38 (See also Budget classifications)
historical revisions, 41–42, 43b
internal consistency, 38–40
standards, norms, and guidance material, 34t
Quasi-fiscal activity (QFA), 137
fiscal data, 38–40
key measures, 38–39
stock-flow adjustments, 39, 40
Regulations, incentives, and other indirect measures, 111b. See also Fiscal risk management
Resource Accounts, Norway, 127b
Revenue(s). See also Expenditures
budget documentation of, 55–58
forecast reconciliation, 91–93
medium-term projections of, 62–64
Revenue loss from tax expenditures, 24–27. See Tax expenditures
Risks. See Fiscal risk(s)
Risk transfer, sharing, or insurance mechanisms, 111b
Role of Handbook, 6–7
Rolling framework, 62b. See also Medium-term budget framework (MTBF)
Romania, identification of changes in aggregate-level forecasts, 92b
Accounts Chambers, 87b
budget execution reports, 30b
scrutiny of macroeconomic and fiscal projections, 87b
Scenario analysis, 102, 102b
Sector working groups, Uganda, 84b
Sendai Framework for Disaster Risk Reduction (UN), 113t, 128
Brazil’s statement of fiscal risks, 102b
budget documentation, 102–3
government’s debt holdings, 117
long-term sustainability analysis, 109
Philippines’ fiscal risk statement, 102–3b
Sierra Leone, budget laws and fiscal risk disclosure, 99b
Social security funds, 12, 14b
budget documentation, 57–58
GFSM 2014, 15n29
long-term sustainability analysis, 109–10
contingency reserve access criteria, 114b
medium-term expenditure projections, 64b
public disclosure of fiscal information, 83b
South Africa National Treasury, 83b
Special drawing right, 18b
Special purpose funds, 15b. See also Extrabudgetary funds (EBF)
Specific fiscal risk, 95, 97
explicit and implicit risks, 104–5
monitoring and managing, 111, 111b
Sources and magnitude, 104, 104b
summary reporting of, 104–7
Staff Guidance Note for Public Debt
Sustainability Analysis in Market Access Countries (IMF), 101t
Standardized guarantees, 119
Standing Orders of the Althingi (Parliament), Iceland, 71b
State Ownership Policy, Norway, 136b
Statistical integrity, 44–47. See also Fiscal statistics
Statistics. See Fiscal statistics
Statistics Canada, 47b
Stock-flow adjustments, 39, 40
Stocks, coverage of, 17–21
Subnational government, 10
consolidated data for, 16
fiscal risks, 100b, 104, 105, 131–33
information on, 131–33
Peru’s compliance with fiscal rules, 77b
public sector, 12, 14b
Supplementary budget, 51b, 88–91
effective control by the legislature, 89–90
modifications to appropriations, 88
new emergency policy priorities, 89
prior to material changes, 90–91
regularizing expenditure exceeding approved budget, 90
timing of approval of, 88, 89f
unexpected macroeconomic developments, 89
Supreme audit institution (SAI), 7, 43, 47–49, 81
System of National Accounts (SNA), 42
Tanzania, fiscal risks disclosure, 106b
Tax Administration Diagnostic Assessment Tool (TADAT), 5b
Tax arrears, 135
annual publication, 26
control on, 26–27
estimation methods, 25
expiration dates, 27n50
grouped by sector/policy area, 26
revenue loss from, 24–27, 25f
Tax Expenditures in OECD Countries, 11t
Tax revenue, 23, 56
Technical efficiency, 78b. See also Performance information, on budget
Technical Notes and Manuals, 11t, 34b
of budget documents, 72–73
of fiscal reports, 27–33
Treasury Single Account (TSA), 19
budget classifications, 37b
legislative authorization to changes in expenditures, 91b
expenditure rules/fiscal targets, 76b
extrabudgetary funds (EBF), 16b
legislature power to amend budget, 70b
natural disasters risk management, 129b
Turkish Catastrophe Insurance Pool (TCIP), 129b
Constitution (1995), 84b
contingent liabilities related to PPP, 123b
external audit, 49b
National Audit Act (2008), 49b
Office of the Auditor General (OAG), 49b
sector working groups, 84b
United Kingdom (UK)
budget execution reports, 30b
fan charts of macro-fiscal aggregates, 103b
Office of Budget Responsibility (OBR), 88b
Whole of Government Accounts System of, 17b
United States (US)
Congressional Budget Office (CBO), 88b
disclosure on guarantees, 120–21b
User charges, 23b, 56n75
West Africa Economic and Monetary Union (WAEMU), 17b, 71b
Whole of Government Accounts System of United Kingdom, 17b
World Bank Catastrophe Drawdown Option, 129b
Year-end reports, timeliness of, 31–33
List of Tables
List of Figures
List of Boxes
Ideally, the information should be published online for ease of public access. This ensures that budget documents are not available at the discretion of governments to only a privileged few that have access to ministries of finance/government agencies. Some countries also have freedom of information legislation that requires government agencies to make available to the public on request any information they hold, subject to certain clearly specified exceptions (which generally include national security, obligations of confidentiality to a third party, law enforcement, and personal privacy). Such legislation can create a presumption in favor of public release and place the onus on government to demonstrate an overriding public interest in case of nondisclosure.
The Fiscal Transparency Code complements other standards and helps to anchor the work of other organizations in the fiscal area. It reflects the IMF’s focus on macro-critical issues. To minimize overlap and ensure that various standards are fully aligned, IMF staff has worked closely with relevant stakeholders.
Each dimension focuses on a key attribute of the respective pillar, whereas a principle typically highlights a specific output or observable characteristic under the respective dimension.
Pillar IV has undergone two rounds of public consultations, has been tested in several countries, and will be finalized at end-2018.
Achieving the advanced practice would require enhanced institutional capacity and resources and therefore should receive priority only after a country has successfully implemented the good practice under the respective principle of the Code.
The IMF’s Government Finance Statistics Manual (GFSM) in fiscal statistics; International Public Sector Accounting Standards (IPSAS) in government accounting; International Standards of Supreme Audit Institutions (ISSAI) in external audit; and OECD Best Practices for Budget Transparency in the budget area.
For published FTE reports, see http://www.imf.org/external/np/fad/trans/.
For further information, see “The 2017 Joint Review of the Standards and Codes Initiative—Policy Area Background Paper.”
Each pillar contains three to four dimensions, and each dimension, two to four principles.
In addition to national/central governments, most elements of the Code can be applied to subnational governments, and their compliance with recommended fiscal transparency practices should be encouraged.
Regional bodies play an increasingly important role in harmonizing fiscal reporting practices and enforcing transparency standards among their member states. These regional harmonization efforts are typically most extensive in monetary unions where timely reliable, and comparable fiscal data from member states are needed to monitor and enforce regional fiscal convergence criteria. Examples of regional bodies include the European Union, the West African Economic and Monetary Union (WAEMU), the Eastern Caribbean Currency Union (ECCU), the Central African Economic and Monetary Community (CEMAC), and the East African Community (EAC).
Once Pillar IV is finalized, it will be integrated into the Handbook by providing detailed guidance on specific principles and practices applicable to resource-rich countries, which are not already covered by the other three pillars.
Standards such as the special data dissemination standard (SDDS) set the government obligations regarding data compilation and dissemination.
For example, fiscal targets focusing on general government deficit and debt may stir governments to shift debt-creating fiscal activity into public corporations, as it was apparent in the 2008 sovereign debt crisis in Europe.
The national statistics agency and/or ministry of finance should maintain a list of all public sector entities, classified according to their economic nature.
Two key criteria for classifying an entity as part of general government and/or public sector are the control test (i.e., whether an entity is controlled by the government and is therefore part of the public sector) and the market test (i.e., whether that entity is part of the general government sector or is a public corporation). The classification of entities in the public sector should be subject to regular review to reflect any change in the entities’ status resulting from commercialization, privatization, or acquisition by the government.
Consistent with the 2008 SNA, the GFSM 2014 allows for social security funds to be accommodated in two alternative subsectors of general government. Either these entities can be combined as a separate subsector (this is often the case for countries that compile fiscal statistics in the context of national accounts) or they can be classified according to the level of government that organizes and manages them and, therefore, be combined with the other entities at the same level. This manual adopts the later approach as it helps provide the full picture at each level of government.
Turkey meets “good practice” under this principle as it produces consolidated general government fiscal data (see IMF, 2017d). The Box 2.5 under “basic practice” discusses, however, how Turkey has rationalized its EBFs over the years.
This requires the identification and elimination of all intra- and intersectoral flows and stocks. These transactions include grants, interest, dividends, taxes, and any purchases/sales of goods and services by one entity from another, as well as changes in stock positions (including loans and other accounts receivable/payable, and the acquisition or disposal of assets from one entity to another).
This requires the identification and elimination of all intra- and intersectoral flows/transactions. These transactions include grants, subsidies, interest, dividends, taxes, and any purchases/sales of goods and services by one entity from another, as well as changes in stock positions (including loans and other accounts receivable/payable, the acquisition or disposal of assets from one entity to another, and purchases of equity or other investment by a government entity in a public corporation).
International Financial Reporting Standards are prepared by the International Accounting Standards Board (IASB). See http://www.ifrs.org.
Valuing assets and liabilities is not straightforward. Various methods exist for valuation as discussed in Chapter 3 of the GFSM 2014 or IPSAS 29.
Net financial worth is defined as the total value of the financial assets minus the total value of liabilities. This balancing item is often cited because of the general government and public sector’s influence on a country’s financial system and also because of the difficulties in valuing government-specific nonfinancial assets with unique characteristics.
While these liabilities are actual liabilities, the fact that their measurement rests on various assumptions and methods often creates difficulties in estimating their outstanding value. This is the reason why they are considered an element of the advanced level of practice.
For more information on valuation methods for nonfinancial assets, including a detailed description of the three methods mentioned in this paragraph, see Bova and others (2013).
For this purpose, an “economic event” is an event that results in the creation, transfer, or destruction of economic value. Economic events can include the delivery of a taxable service by a private company (for which the government accrues tax revenue), performance of a public service by a government employee (for which the government accrues a salary and perhaps a pension expense), or the loss or theft of a government asset such as a vehicle or equipment (for which a reduction in the asset stock will be recognized).
These other economic events are real and can be connected to previous or subsequent cash impacts, for example, depreciation usually represents the allocation of the cost of an asset over its useful life, and revaluation or impairment may reflect a changed view of the (cash) amount that can be recovered from the asset when sold.
Nontax revenues comprise revenue from the sale of goods and services, and other items (rent, interest, dividends, etc.). Where fiscal reports cover the whole public sector, the nontax revenue received by public corporations—such as petroleum companies, railways, and postal services—is likely to be significant. Sales of public assets may also generate significant financial inflows but have no impact on a country’s net worth and are therefore excluded from revenue, as defined in the IPSAS and GFSM 2014.
See, for example, Australia’s Charter of Budget Honesty Act, 1998, and the U.S. Congressional Budget and Impoundment Control Act, 1974.
International comparability of tax expenditure estimates is significantly limited by the different approaches undertaken by different countries when preparing tax expenditure reports.
From an economic management point of view, a comparison of tax expenditures with peers also facilitates an analysis of its appropriateness.
For example, health, social security, and support to industry.
It could reveal, for example, that high-income households benefit more than needier households from tax credits and that the later group would be better served by family allowances targeted to low-income groups.
For example, Australia and France treat tax expenditures like ordinary expenditures when accounting against budget ceilings; that is, ministries or departments that propose a new tax expenditure scheme in their budget submissions will need to compensate it with a reduction in an existing tax expenditure scheme or an expenditure program.
Many tax expenditure provisions have fixed expiration dates; however, such provisions are often extended. It is a good practice to conduct an evaluation/review before deciding on whether to extend an expiring tax expenditure provision or replace it with a direct expenditure program. It is similarly good practice to evaluate an existing spending program that is about to expire before extending it.
Ideally, the audited annual financial statements should be published in a timely manner. In countries where there is no functioning audit process or the external audit function is not well developed, this principle will assess the timeliness of the anuual financial statements prepared and published by the ministry of finance/treasury.
These procedures are usually referred as “year-end” or “closing” procedures.
The COA provides a coding structure for the classification and recording of relevant financial information (both flows and stocks) within the financial management and reporting system. The budget classifications define the structure of the COA codes/subcodes that are related to government budgetary revenue, expenditure, and financing operations. Where the budget classifications are not integrated with the COA, or only partially integrated, there is risk of loss of important information undermining the effectiveness of budget control and reporting. A bridge table is used by some countries to link accounting data with budgetary operations when budget classifications are not integrated with the COA. For further information on COA, see Cooper and Patanayak (2011).
The functions are classified using a three-level scheme. There are 10 first-level categories, referred to as divisions (e.g., health is Division 07). Within each division, there are several groups (e.g., hospital services are Group 073). Within each group, there are one or more classes (nursing and convalescent home services are Class 0734). https://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=4.
For example, if there has been a change in the structure of the ministries, a mapping table (between the old and new administrative classifications) should be published to illustrate the administrative changes that have occurred.
Appendix 8 of the GFSM 2014 provides a comprehensive overview of all the classification codes used for revenues, expenses, assets, and liabilities.
United Nations’ Classification of Functions of Government.
Outputs represent the products and services produced directly by a program or activity. Outcomes represent the economic or social changes brought about by a policy measure, program, or activity.
Reconciliation is a process of comparing two or more sets of related records/data from different sources to ensure consistency. When differences arise (usually in balances), they should be explained and justified, and adjustments and corrections should be made in accounting records as required. Timely and frequent reconciliation of data is fundamental for data reliability.
In many countries where information on all the financial instruments is not available, the net financing is usually calculated as the sum of net issuance of debt (issuance less amortization) and changes in the cash or other liquid asset balances. Liquid assets comprise, in most cases, deposits of foreign currency and cash, in addition to securities held for debt management purposes.
Bank reconciliation compares the banks’ records (from bank statements) with the government general ledger (cash accounts). It also helps ensure that public sector entities’ records (general ledger, cash accounts, etc.) and the bank’s records are complete and correct.
To verify this reconciliation, information from the security-by-security database built by the Bank of International Setlements (BIS) can be used. Another reference is the sectoral accounts produced under a country’s national accounts framework.
Public debt management office usually holds data related to the asset holdings of the creditor.
For more information on the latest statistical manuals and guides, see http://www.imf.org/external/data.htm#guide.
In addition, some forms of metadata linked to the data tables or time series disclose periods in which major revisions occurred and the reasons for these changes. Countries adhering to advanced practices will also explain the magnitude of each change and the impact that it had on the revised data. While best practice would require that the data are revised in such a way that time series remain comparable, lack of source data often prevents it. Where methodological changes occurred and it is not possible to make data comparable before and after the revision, a break symbol in the data usually alerts users about the lack of comparability in the data.
Such as the preparation of data to include in the IMF’s Government Finance Statistics Yearbook.
For more information, including on the recommendations of the different dissemination standards, see http://dsbb.imf.org/.
Five dimensions—assurances of integrity, methodological soundness, accuracy and reliability, serviceability, and accessibility—of data quality and a set of prerequisites for data quality are at the center of the DQAF. The DQAF, which is used for comprehensive assessments of countries’ data quality, covers institutional environments, statistical processes, and characteristics of the statistical products.
Approved at the XIXth Congress of INTOSAI, Mexico 2007.
International Standards for Supreme Audit Institutions (ISSAI). See http://www.issai.org/.
For the purpose of this principle, major audit qualifications include any of the following: (i) disclaimer audit opinion; (ii) adverse audit opinion; and (iii) any other audit qualification, the financial impact of which has been estimated by the auditor to be of the order of 1 percent of GDP or higher.
It is important for efficient resource management that all resource allocation decisions be taken together, as part of a single budget process. A fragmented budget not only prevents a comprehensive picture of fiscal operations but could also lead to suboptimal allocation and utilization of scarce public resources.
The central government comprises budgetary central government entities (e.g., ministries, departments, or agencies) and extrabudgetary funds (EBFs) performing central government functions (e.g., social security funds or road funds). For definitions, see Chapter 2.
“Gross basis” means that fiscal data are presented without any deductions or offsets. For example, a government agency responsible for delivering a public service (e.g., the issuance of passports) incurs costs related to salaries and purchases of goods and services but may also receive fees from citizens for providing this service (e.g., a standard charge for each passport). When the agency prepares its budget forecasts and/or financial reports, these fees should be disclosed separately from the costs of the human resources and purchases of goods and services incurred by the agency in providing the service.
For example, hospital fees and charges that are used by the health administration without first being transferred to the general fund of government. User charges are increasingly being used in OECD countries as part of the control and incentive mechanisms for managers of agencies.
These funds typically cover healthcare benefits, retirement pensions, and other social welfare benefits (e.g., for disabilities and unemployment).
For example, in some countries (notably, in some EU member countries), management of these funds involves also employers and trade unions.
This is the common practice in EU countries following Eurostat rules and in most OECD countries.
GDP(E) refers to the approach of measuring GDP based on final use (expenditure) minus imports, while GDP(P) refers to the approach of measuring GDP based on the sum of gross value added of all resident producer units plus net taxes on products. A third measure of GDP, called GDP(I), aggregates wages and salaries, company profits, and other sources of primary income.
The composition of growth—that is, whether domestic demand or export driven—is an important factor in forecasting revenue growth.
Stability Programs are prepared annually by euro area member countries, laying out their fiscal plans for the next three years to assess whether they are on track to meet their medium-term budgetary objectives. These programs typically set out yearly targets to achieve the medium-term budgetary objectives, underlying economic assumptions, policy measures, budget outturns and outlook, and explanations of why targets are not being met, if applicable.
In France, for example, ceilings on spending are imposed using the same classification of sectors and programs as in the annual state budget. Ceilings for the first two years are binding and are indicative for the third. Detailed allocations of spending within approved ceilings are decided annually.
The IMF’s work on public investment has expanded in recent years with the publication of a policy paper on making public investment more efficient (IMF, 2015b) and the development of a new diagnostic tool (PIMA) that assesses the performance of a country’s public investment management institutions; see http://www.imf.org/external/np/pp/eng/2015/061115.pdf.
In some countries, the planning ministry (or agency) has responsibility for preparing the government’s capital investment budget, thus creating the well-known system of “dual budgeting.” In other countries, the planning agency may prepare an indicative public investment plan (PIP) that provides an input to the preparation of the annual budget.
An example from the United Kingdom, widely replicated in other countries, is HM Treasury (2013).
See, for example, OECD (2010a).
These laws have various titles such as a public finance law, a budget framework law, a budget system law, and so on. They should be independent from the annual budget law, which sets the budgetary appropriations for the coming fiscal year. A budget systems law may be supplemented by other laws that deal with specific aspects of public finance or the budget process, for example, laws on fiscal responsibility, treasury management, debt management, public procurement, PPPs, and the financial oversight of public corporations. Issues relating to taxes and other revenues will typically be covered by separate legislation.
Fiscal policy objectives should not be confused with fiscal forecasts, which set out probable fiscal outcomes, although the later may be guided by fiscal objectives.
Fiscal sustainability refers to the ability of a government to sustain its current spending, taxation, and other policies without threatening government solvency, or defaulting on some of its liabilities or committed expenditures.
Fiscal rules may also include procedural rules. However, this principle of the Code focuses on setting fiscal policy objectives that are measurable and time bound.
For example, an objective that refers to a structural balance without defining how cyclical adjustment is calculated cannot be measured objectively.
For example, an expenditure rule that limits public spending to a certain percentage of GDP would not be considered precise if there is no comprehensive reporting of public spending, either in the budget or in other fiscal reports, to measure compliance with the stated objective/target.
A comprehensive yet succinct analysis of this challenge can be found in Castro (2011).
Most low-income countries, and many emerging market economies, may move beyond this basic level of practice only in the medium to longer term, as their budget systems are sufficiently decentralized to the line ministry or agency level.
See, for example, Global Initiative for Fiscal Transparency (GIFT) public participation case studies (http://guide.fiscaltransparency.net/).
For a good summary, see Marchessault (2014) and Olken (2007). The World Bank’s 2016 World Development Report on e-government devotes a chapter to using communications technology to engage citizens on public policy issues and describes the challenges in doing so. See also de Renzio and Wehner, 2015, at http://www.fiscaltransparency.net/resourcesfles/fles/20150704112.pdf.
See also the IBP guide on citizens budget (2013): https://www.internationalbudget.org/.
Fiscal illusion refers to a false perception of wealth created by debt-led spending.
A structural position is determined by separating and stripping out cyclical influences on a government’s fiscal position.
For example, in the European Union, the 2012 Fiscal Compact, agreed by all members of the euro area requires that each country put in place an independent body to act as a monitoring institution to support the credibility and transparency of the required fiscal consolidation. Most countries have now introduced such a fiscal council whose roles are to assess the credibility of the fiscal forecasts and to assess whether the fiscal plans meet the European fiscal rules.
A virement is a reallocation of resources by the executive from one expenditure line to another, usually within a program or a category of expenditure, which is neutral in terms of the overall expenditure envelope.
Rules related to virements should clearly define (i) who is authorized to propose and approve a virement; (ii) limits—in nominal or percentage terms—on the amount of resources that spending entities are legally authorized to move within or across approved appropriations without recourse to a supplementary budget; (iii) any other restrictions or prohibitions (e.g., on virements involving certain categories of expenditure); and (iv) how such changes should be reported to the legislature. See Saxena and Yläoutinen (2016).
The frequency of forecast revisions is typically undertaken annually as part of the annual budget preparation process, but a revision to the forecast could be triggered by macroeconomic developments (e.g., an exogenous shock) or by decisions to amend fiscal policy objectives.
Forecast reconciliation refers to a systematic comparison and explanation of changes in successive vintages of forecasts for the same period.
Macroeconomic shocks are based on episodes where nominal GDP growth falls by one standard deviation relative to its average, with fiscal costs estimated as the loss in revenue resulting from lost output (compared to the case in which nominal GDP had continued to grow at the five-year average rate preceding the crisis). Other fiscal shocks are derived from the contingent liability data set combined by Bova and others (2016).
Examples from developing countries include Armenia, Georgia, Indonesia, the Kyrgyz Republic, Mozambique, South Africa, and Tajikistan.
Whether fiscal risks are disclosed in a quantitative or qualitative manner depends on whether the fiscal cost of an event and the probability of its occurrence can be reasonably estimated. Quantification is usually easier for macroeconomic risks and explicit guarantees (which include contractual terms and amounts) than for implicit guarantees (expected or possible obligations for the government, based on public expectations or pressures, e.g., bailouts of banks or public corporations).
Of course, revenue volatility can be affected by factors other than macroeconomic shocks, including large policy changes or significant deviations in taxpayer compliance and tax collection practices.
For low-income countries that are dependent on overseas development assistance, volatile aid flows, and the need to cushion the poor from external shocks present special challenges. In some highly aid-dependent countries, aid is more volatile than fiscal revenues, and shortfalls in aid and domestic revenues tend to coincide. Data on the aid commitments of donors may be difficult to collect and may be unreliable.
Fiscal contingency planning provides markets with a broad indication of what sort of fiscal adjustments will be made in response to possible adverse developments—for example, spending cuts, tax increases, a bigger deficit, or some combination of these—may reduce the risk of abrupt market reactions to such developments. This is particularly important where the deficit and debt are already high, or where the structure of public finances or of the national economy creates additional vulnerability.
See, for example, IMF (2008).
International accounting standards also allow for general disclosure where full disclosure can jeopardize the position of a party to the case. IPSAS 19 (paragraph 109) states: “In extremely rare cases, disclosure of some or all of the information required by paragraphs 97–107 can be expected to prejudice seriously the position of the entity in a dispute with other parties on the subject matter of the provision, contingent liability or contingent asset. In such cases, an entity need not disclose the information, but shall disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed.”
Governments that prepare budgets or accounts on an accrual basis record the expected cost of guarantees that meet certain criteria, such as having a call probability of greater than 50 percent. This means that the expected cost of such risks is already incorporated in budgets and accounts. Under cash accounting, information on such risk exposures should be published as supplementary disclosures in financial statements and/or as additional information in annual budget documents. A change in the basis of accounting is neither necessary nor sufficient for adequate disclosure of fiscal risks. See Petrie (2002).
Public debt can be thought of as a subset of liabilities in terms of a balance sheet. Liabilities are obligations that provide economic benefits to the units holding the corresponding financial claims. The criterion to define a liability as debt is that future payments of interest and/or principal are due by the debtor to the creditor. Six different instruments comprise gross debt: (i) debt securities (e.g., treasury bills and bonds); (ii) loans; (iii) other accounts payable (e.g., trade credits and advances, and other items due to be paid); (iv) Special Drawing Rights (SDRs); (v) currency and deposits; and (vi) insurance, pension, and standardized guarantee schemes. Contingent liabilities are shown as memorandum items because, by definition, they are not actual liabilities and, therefore, not considered as debt. For more information, see Dippelsman, Dziobek, and Gutiérrez (2012).
Such as assets, liabilities, and net worth.
For example, at the federal level, Canada’s guarantee and loan framework requires a sponsoring public entity to demonstrate that any project being proposed could not be financed on reasonable terms and conditions without a government loan or guarantee.
This “contingency reserve” can take several forms. In many countries, it is an unallocated appropriation in the annual budget law, access to which is regulated based on certain criteria and requires the approval of the ministry of finance, and sometimes the legislature. In other countries, it is a fund with an appropriate amount of financing authorized under the legal framework and replenished at the beginning of each fiscal year, depending on the drawdown during the previous year.
Accounting standards require recognizing in the financial statements the unfunded actuarial liabilities of civil service pension schemes in which case the government is the employer. Other public pension schemes are treated as social benefits and disclosed as memorandum items.
For example, a government may have both foreign currency-denominated debt as well as holdings of foreign currency so that its exposure to the risk of an increase in the value of its public debt will be offset, at least to some extent, by an increase in the value of its currency holdings.
Such a public asset and liability management framework, however, presupposes well-defined macroeconomic and asset and liability management objectives, and a reliable assessment of future public revenues and on- (and off-) balance sheet liabilities, in addition to good coordination among the public entities involved.
See also Das and others (2012).
Rollover risk is the risk that a debt cannot be refinanced at the same, or more favorable, terms. It is commonly faced by countries when their debt is about to mature and needs to be rolled over into new debt. If interest rates or exchange rates change unexpectedly, countries may have to refinance their debt at a higher rate and incur greater debt servicing charges in the future.
For more information on the DSA framework, see IMF (2018).
For example, for financial asset portfolios, the analysis could assess the impact of changes in interest rates, exchange rates, and equity prices on the value of the portfolio. For civil servant pension liabilities, it could analyze the impact of changes in wage growth and other cost drivers. For PPPs, it could assess the impact of possible future changes in demand (e.g., the volume of road traffic) for those contracts that have demand-linked availability payments.
For example, a government may have a natural hedge for a foreign currency liability offset by a separate foreign currency asset, and paying to transfer the risk to another party would not be warranted.
For more on PPPs, see, for example, Hemming and others (2006); and Funke, Irwin, and Rial (2013). The PPP capital stock accounts on average for less than 1 percent of GDP in advanced economies but around 5 percent of GDP in emerging markets and low-income countries: see IMF (2015b).
Putting a PPP on the government’s balance sheet means that (i) the private partner’s investment spending counts as government spending; (ii) the project is recorded as an asset on the government’s balance sheet; and (iii) the government also records a liability initially equal to the value of the asset. Although this approach is usually associated with accrual accounting, it can also be used with cash accounting, though no asset would be recorded.
For example, for the 10 countries that experienced the largest unanticipated increase in general government gross debt between 2007 and 2010, the financial sector interventions, on average, amounted to 3.8 percent of GDP (See IMF, 2012a).
A bailout may in effect constitute nationalization if the government acquires control of the corporation it is bailing out, and this will change the classification of the corporation from the private to the public sector.
See http://www.imf.org/external/np/fsap/fssa.aspx that describes the FSAP and includes many associated Financial System Stability Assessment (FSSA) country reports. Following the global financial crisis, the IMF in September 2010 made it mandatory for 25 jurisdictions with systemically important financial sectors to undergo financial stability assessments under the FSAP every five years. This number was subsequently increased to 29 countries.
See Irwin (2015).
A stress test is an analysis designed to determine whether a financial institution has enough capital to withstand the impact of ad verse developments.
A detailed assessment of natural resource revenue management issues is provided in Pillar IV of the Code.
Countries are considered rich in hydrocarbons and/or mineral resources if more than 25 percent of their revenues or total export proceeds derive from this source. See IMF (2007), Appendix 1.
While they may cause greater loss of life in poor countries, richer countries tend to experience greater financial costs due to their exposure to high-value assets.
For example, this report could be produced by the ministry of finance or by the ministry responsible for subnational governments.
Based on 2011 data from Forbes Global 2000, which ranks top 2,000 public companies in the world. The criteria for ranking include four elements: sales, profit, assets, and market value.
For further discussion of QFAs, including methods of estimating their cost, see Allen and Alves, 2016.