Appendix D:  Government Finance Statistics 
Statements
The tables presented in this appendix are prepared in a manner consistent with the Government Finance Statistics (GFS) classification framework determined by the Australian Bureau of Statistics (ABS). The new GFS framework reflects the principles contained in the international standards set out in the United Nations’ A System of National Accounts, 1993 and the Manual on Government Finance Statistics, which is currently being reviewed by the International Monetary Fund. The first presentation by the ABS of public finance statistics on an accrual accounting basis is expected to be in the next issue of Government Financial Estimates, Australia (Cat. No. 5501.0) for 1999‑2000, which is planned for release in February 2000. 
While the GFS and AAS31 standards are generally consistent, there are some significant variations between them in the treatment of some items. In particular, revaluations of financial and non-financial assets and liabilities are classified differently under AAS31 and GFS standards. Such transactions include, for example, gains or losses from foreign exchange rate variations. 
Under AAS31 reporting, valuation changes will affect revenues or expenses. However, under GFS reporting revaluations are treated neither as revenues nor expenses, and are not taken into account in the calculation of the net operating balance. This treatment of revaluations in GFS is consistent with that required by international statistical standards.
The Government’s primary measure of fiscal policy under accrual accounting is the fiscal balance (GFS net lending). The fiscal balance is the GFS net operating balance (revenue less expenses) adjusted for net capital investment (the net acquisition of non‑financial assets). As a result, the fiscal balance measures the investment-saving balance (that is, the government’s direct contribution to the current account deficit).
Some key differences between the GFS and AAS31 standards are summarised in the table below. In addition, a reconciliation between the AAS31 operating result and the fiscal balance is presented in Part III.
Sectoral Classifications
The three sectors constituting the Commonwealth public sector under GFS and national accounting standards are:
•	the general government sector;
•	the Public Trading Enterprise (PTE) sector; and
•	the Public Financial Enterprise (PFE) sector. 
Agencies belonging to the Commonwealth general government sector are the key focus of the budget financial statements. In the MYEFO, as in the Budget, financial data are also presented on a GFS consistent basis for the Commonwealth PTE and consolidated non‑financial public sectors.
The primary function of the general government sector is to provide public services for the collective consumption of the community that are mainly:
•	non‑market in nature;
•	involve the transfer or redistribution of income; and 
•	are financed chiefly through taxes and other compulsory levies. 
Examples of agencies that belong to the Commonwealth general government sector are Commonwealth departments and Commonwealth authorities such as the Australian Broadcasting Corporation (ABC) and the Commonwealth Scientific and Industrial Research Organisation (CSIRO).
PTEs are government controlled enterprises that provide goods and services that are mainly market, non‑regulatory and non‑financial in nature and are financed predominantly through sales to consumers. Examples of PTEs are Telstra and Australia Post.
PFEs are government controlled enterprises that perform central banking functions, accept demand, time or savings deposits, or have the authority to incur liabilities and acquire financial assets in the market on their own account. Examples are the Reserve Bank of Australia and Medibank Private Ltd.
When preparing the Commonwealth general government consolidated financial statements material transactions between general government agencies are eliminated, for example payments of fringe benefits tax.
Transactions between the general government and PTE sectors are included in their respective financial statements, however they are eliminated from the consolidated non‑financial public sector tables (as they are transactions internal to that consolidated sector). 
Transactions between the Commonwealth non‑financial and PFE sectors are included in all tables. These transactions might include income transfers, net advances paid to PFEs and taxes paid by PFEs to the general government sector.
The classification of agencies in this document is consistent with that used by the ABS. Where an agency’s operations change materially (for example, as a result of corporatisation), its sectoral classification is reviewed and if necessary reclassified. 
The GFS tables in this appendix have been produced by the Department of Finance and Administration in consultation with the ABS.

Table D1:  Selected Differences between AAS31 and GFS Reporting Standards

Issue	AAS31 treatment	GFS treatment	

Writedowns/provisions for bad and doubtful debts	Classified as operating expenses.	Classified as revaluations and not treated as operating expenses. Bad debts written off are treated as capital transfers (if mutually agreed between debtor and creditor) or as other changes in volume of assets (if unilaterally written off by the creditor).	
Abnormal and extraordinary items	In accounting terms, abnormal items are transactions that occur within the normal operations of an enterprise but are abnormal due to their size. Extraordinary items are transactions that occur outside the ordinary operations of government and are not of a recurring nature. These items are included in the operating statement but are disclosed separately.	Each abnormal item is considered on an individual basis to ascertain whether it is an economic transaction, and in which period the transaction applies. If it is treated as an economic transaction then it will have an effect on the GFS net operating balance.	
Benefits to households in goods and services (social transfers in kind) component of personal benefit payments	All personal benefit payments are classified as transfers in the operating statement.	This component of personal benefit payments is treated as part of ‘other expenses’ in the operating statement.	
Finance leases	Finance leases are treated as if the asset were purchased from borrowings. That is, the lease payment is split into an interest component (which is shown as an operating expense) and a principal component (a liability).	The GFS treatment of finance leases is consistent with the accounting standard treatment. However, the acquisition of the asset is taken into account in deriving the cash underlying balance.	
	The asset and the liability are both recorded in the balance sheet. However, this convention does not apply to the cash flow statement, which does not record the acquisition of the asset or the liability.		
Public debt net interest	Under accounting standards, premia and discounts on the repurchase of debt are included in public debt net interest at the time of repurchase, regardless of whether the stock is cancelled at that time. Issue premia and discounts are amortised over the life of the stock.	Repurchase premia and discounts are treated as economic revaluations at the time the debt is repurchased (provided it is valued at historical cost). 	

Table D2:  General Government Operating Statement

Table D3:  Public Trading Enterprise Sector Operating Statement

Table D4:  Total Non-financial Public Sector Operating Statement

Table D5:  General Government Sector Balance Sheet

(a)	Net debt equals the sum of deposits held, advances received and borrowing, minus the sum of cash and deposits, advances paid, and investments, loans and placements.

Table D6:  Public Trading Enterprise Sector Balance Sheet

(a)	Net debt equals the sum of deposits held, advances received and borrowing, minus the sum of cash and deposits advances paid, and investments, loans and placements.

Table D7: Total Non-financial Public Sector Balance Sheet

(a)	Net debt equals the sum of deposits held, advances received and borrowing, minus the sum of cash and deposits, advances paid, and investments, loans and placements.

Table D8:  General Government Sector Cash Flow Statement

Table D9:  Public Trading Enterprise Sector Cash Flow Statement

Table D10:  Total Non-financial Public Sector Cash Flow Statement

Loan Council Allocation
Table D11 presents a revised estimate of the Commonwealth’s 1999‑2000 Loan Council Allocation (LCA), updating the budget estimate provided in 1999‑2000 Budget Paper No. 3, Federal Financial Relations. LCA estimates are on a headline cash basis as they seek to measure a government’s call on financial markets.  
The fall in the Commonwealth’s estimated LCA surplus since budget mainly reflects a change in the timing of receipts from the sale of the second tranche of Telstra, with the final instalment of payments for Telstra 2 shares due in 2000‑01, rather than 1999‑2000 as anticipated at budget. Consequently, the Commonwealth expects to exceed the 2 per cent of revenue tolerance limit that applies on either side of its budget LCA estimate.
Table D11:  Commonwealth’s Loan Council Allocation for 1999–2000

(a)	For the Commonwealth, memorandum items comprise the change in the net present value of operating leases (with NPV greater than $5 million), university borrowings, overfunding of superannuation and an adjustment to exclude the net financing requirements of statutory marketing authorities and Telstra from the LCA.
(b)	The Commonwealth does not expect to enter into any infrastructure projects with private sector involvement in 1999–2000.