Information on Canadian Government Finance Statistics Provisional Estimates
November 19, 2014
OTTAWA – Statistics Canada’s makes regular updates to the Canadian System of Macroeconomic Accounts in order to incorporate the most current information on the economy from censuses and annual surveys, and to improve estimation methods. These type of revisions are typically limited to a number of reference years.
Periodically, the Canadian macroeconomic accounts or components of the macroeconomic accounts undergo major revisions, which are much broader in scope. These are reserved for incorporating conceptual, classification, presentational, major statistical changes or due to the introduction of a new international accounting standard.
Since 2009 Statistics Canada has been working towards implementing the Government Finance Statistics standard, an international standard for reporting government revenues, expenditures, financial transactions, revaluations, assets, liabilities and net worth.
In short, Government finance statistics are:
- an economic representation of a government’s financial activity;
- the International Monetary Fund’s preferred basis for reporting government financial statistics;
- conceptually consistent with the balance of payment, international investment position and national account set of statistics.
Statistics Canada is now ready to release a set of provisional estimates of Government Finance Statistics for the period 2008-2009 to 2012-2013.
Government Finance Statistics allow users to analyze the financial soundness of the government and government business enterprises in the same way that financial soundness and stability is measured in the corporate or household sector. Government Finance Statistics also enable users to determine whether government decisions are sustainable over the long term, and assess government liquidity constraints as well as financing needs.
What are Government Finance Statistics?
The Canadian Government Finance Statistics will:
- Improve international comparability. Most countries around the world publish a set of government statistics according to the IMF’s government finance statistics manual. The Canadian Government Finance Statistics will be compatible allowing for inter-country comparisons with respect to indicators such as government sources of revenue, expenditures and level of debt.
- Allow policy makers to study the financial position, liquidity and operations of the different levels of governments in a consistent and systematic manner;
- Incorporate the latest advances in methodology in the area of economic measurement, and;
- Integrate updated source data and statistical techniques to add detail to economic estimates to more fully reflect the role of government in the Canadian economy.
Why Provisional?
Given the degree of changes associated with the development of this new product, Statistics Canada has decided to release the data with the provisional qualifier.
The provisional qualifier signals to users that the data are fit for use but subject to revision. Over the next year these data will be integrated into the rest of the Canadian System of Macroeconomic Accounts (such as the National Accounts, Balance of Payments, International Investment Position, Input-Output Tables). The data will be revised due to this integration process as the estimates, concepts and methods are compared and adjusted to align with counterparty information and integrated into the wider national accounts framework.
In addition there are a number of tasks that need to be completed over the next year to improve the usability of the data. These include:
- Balancing grants across levels of government: The GFS data estimate grants paid by one government to another government. Since the data are built from individual government accounting records the recording of what one level of government pays to another is not always consistent with what the receiving level of government records. For example, the Federal government may record a grant to a province valued at $100m. The provincial government may only record receipt of $95m (due to timing or approaches to classification). It is the role of the GFS compiler to determine how to balance these flows. This balancing has not been incorporated into the GFS data at this time.
- Inclusion of capital expenditures and capital stock: The current version of GFS data will not include estimates of capital spending and capital stock by government. The GFS manual recommends that government capital stock estimates be valued on a replacement cost basis. This means that the value of the government’s non-financial assets need to be valued at current prices. Government accounting records are inconsistent in their valuation of non-financial assets. As such, a methodology referred to as a perpetual inventory method, needs to be adopted to properly value the government’s non-financial assets. These estimates are not yet ready for dissemination. They will be ready sometime within the next year. The implication is that the provisional CGFS estimates will not include estimates of capital investment and capital stock and therefore it will not be possible to derive government net operating balance, net lending/borrowing or net worth.
- Consolidation: Consolidation is a method of presenting statistics for a set of institutional units (or entities) as if they constituted a single unit. For example, consider the following sectors within the Canadian public sector universe: Federal general government, provincial and territorial general government and local general government. Assume that we would like to analyze the overall impact of the federal, provincial/territorial and local governments on the Canadian economy. One way to do this would be to view these sectors as a single general government sector. In order to do this we could consolidate these units together and treat them as if they are a single unit. Consolidation is not simply summing together the data into a single aggregate. Consolidation involves first eliminating the transactions and debtor-creditor relationships that occur among the units being consolidated and then aggregating the remaining transactions. In other words, transactions or stock position of one unit are paired with the same transaction or stock position recorded for the second unit and then both the transaction or stock position are eliminated. The provisional GFS data will not be presented on an inter-sectoral basis. This has a number of implications. First, it makes it difficult to compare data from one province to another. For example, suppose you wanted to analyze total expenditures on health in the province of Ontario. You could not add together the health expenditures of the provincial general government, health sector and local government because you would invariably double count the expenditures. Some of the expenditures of the provincial general government on health represent grants to the health sector. The health sector then spends those same funds on hospital care, emergency care etc. Adding the two figures together results in a double counting of the information. Until the data are consolidated the only analysis that can be done using the CGFS data is a time series comparison of the data for a particular level of government.
- Aboriginal General Governments: While Statistics Canada has been producing data for the aboriginal general government sector since 2012 as part of the release of the Canadian System of National Accounts these data have not yet been incorporated into the CGFS release. These data will be incorporated over the next year as the CGFS data are integrated into the rest of the Canadian Macroeconomic Accounts.
Given these limitations one could ask why the data are being released at this point in time. Statistics Canada felt it was better to release the data now rather than wait another year since there is currently a lack of data in the area of government finance statistics, especially at the provincial and local level. While some of the detailed series may change over the next year and there are some data gaps, the general story and trends found in the data will remain the same.
‘Sequence of accounts’ approach
The strength of the Government Finance Statistics framework lies in the fact that it is a set of interrelated statements that integrate flows (revenues and expenditures) and stock positions (debt) for different levels of governments and government business enterprises.
The CGFS data is presented as a “sequence of accounts.” That is, it consists of two inter-related accounts; a statement of operations and a balance sheet.
This framework allows data users to monitor the impact current government policy and spending has on its stock of assets and liabilities, examine the liquidity of governments and the sustainability of government fiscal policy.
The Canadian Government Finance Statistics are also closely linked to other macroeconomic frameworks such as the System of National Accounts, Balance of Payments and International Investment Position. This ensures the data are comparable to other macroeconomic indicators such as gross domestic product, the balance of payments, household debt and net worth positions.
Increased Detail
With the initial release of the CGFS nine new matrixes will be published from which over 100 new data tables can be constructed.
Users will be able to look at government revenues (by type of revenue) and expenditures (by type of expenditure), transactions in assets, liabilities, as well as the stock of assets and stock of liabilities by level of government (federal, provincial, local).
Information is also available for various sub-sectors of governments such as the health sector and education sector.
A classification of the functions of government (COFOG) table is also available for each level of government. The COFOG tables provide an alternative view of government expenditures – focusing on the intended purpose of the expenditure. They paint a picture of the social and economic role governments play in society and the economy.
Finally a selected set of analytical tables are provided to data users. This includes tables which present government financial stability indicators and debt positions – at book and market value.
Who can use Government Finance Statistics?
Government Finance Statistics can be used by:
- Taxation analysts interested in studying tax rates and sources of revenue
- International bodies such as the OECD, IMF, UN to analyze the activities of the Canadian government relative to other countries.
- International credit agencies who need to advise on the credit worthiness of Canadian governments.
- The financial sector who need to track the governments’ demand and supply of funds in/to the economy.
- Tax payers interested in understanding how their tax dollars are spent and assessing the stewardship of the government.
Complex project
The compilation of the Canadian Government Finance Statistics is a complex project including structural, presentational, conceptual and statistical changes.
Regular users of Statistics Canada’s data are urged to familiarize themselves with these changes.
Users are invited to consult the following links on our website for a more in-depth explanation of the changes.
For more information, contact Media Relations (613-951-4636); statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca.
Ce document est aussi disponible en français.