14 Government Finance Statistics Manual 2014
2.35 All corporations are part of the nonfi nancial
corporations sector or the fi nancial corporations sec-
tor, depending on the nature of their primary activ-
ity. Institutional units that qualify as corporations and
are controlled by government units or other public
corporations are classifi ed as public corporations (see
paragraph 2.104).Nonprofi t institutions (NPIs)
2.36 Nonprofi t institutions (NPIs) are legal or so-
cial entities created for the purpose of producing or
distributing goods and services, but they cannot be a
source of income, profi t, or other fi nancial gain for the
institutional units that establish, control, or fi nance
them. In practice, their productive activities gener-
ate either surpluses or defi cits, but the surpluses can-
not be appropriated by other institutional units. Th e
articles of association by which they are established
are drawn up in such a way that the institutional units
that control or manage them are not entitled to a share
in any profi ts or other income they generate.
2.37 NPIs may engage in market or nonmarket
production, and may be created by households, cor-porations, or governments (see paragraph 2.83).
- NPIs engaged in market production charge eco-
nomically signifi cant prices for their services
(see paragraph 2.66). Schools, colleges, universi-
ties, clinics, hospitals, etc. constituted as NPIs are
market producers when they charge fees that are
based on the majority of their production costs
and that are suffi ciently high to have a signifi cant
infl uence on the demand for their services. Th ere
are no shareholders with a claim on the profi ts or
equity of the NPI. Because of their status as NPIs,
they are also able to raise signifi cant additional
funds through donations from persons, corpo-
rations, or governments. Nevertheless, NPIs en-
gaged in market production and controlled by
government units must be treated as public cor-
porations so long as they produce goods and ser-
vices for the market at economically signifi cant
prices. - Some market NPIs restrict their activities to
serving a particular subset of other market pro-
ducers. Th ey consist of chambers of commerce,
agricultural, manufacturing or trade associations,
employers’ organizations, research or testing lab-
oratories, or other organizations or institutions
that engage in activities that are of common in-
terest or benefi t to the group of enterprises that
control and fi nance them. Th ese NPIs are usually
fi nanced by contributions or subscriptions from
the group of enterprises concerned. Such sub-
scriptions are treated not as transfers but as pay-
ments for services rendered, and these NPIs are,
therefore, classifi ed as market producers. Th ese
market NPIs are, like corporations and quasi-
corporations, members of either the nonfi nancial
corporations sector or the fi nancial corporations
sector.- NPIs that are engaged in nonmarket production
and are controlled by government are treated as
government units (see paragraph 2.38 and Box 2.1).
Th erefore, schools, colleges, universities, clinics,
hospitals, etc. constituted as NPIs are nonmarket
producers when they charge fees that are not eco-
nomically signifi cant. - Th e remaining NPIs, those that produce goods
and services but do not sell them at economically
signifi cant prices and are not controlled by gov-
ernment, are classifi ed as a special group of units
called NPIs serving households.
Government units
2.38 Government units are unique kinds of legal
entities established by political processes that have
legislative, judicial, or executive authority over other
institutional units within a given area. Th e principal
economic functions of government units are to:- Assume responsibility for the provision of goods
and services to the community or individual
households primarily on a nonmarket basis - Redistribute income and wealth by means of
transfers - Engage primarily in nonmarket production^13
- Finance their activities primarily out of taxation
or other compulsory transfers.^14
(^13) Th e concepts of market and nonmarket producers are described
in paragraph 2.65.
(^14) Th e requirement of fi nancing activities by compulsory transfers
is necessary to diff erentiate a government from a nonprofi t insti-
tution, which may carry out the same functions as a government
but obtains its funds from voluntary transfers, property income,
or sales. Th e receipt of compulsory transfers may be indirect. For
example, a local government may fi nance its activities with grants
receivable from the central government.