Government Finance Statistics Manual 2014

36 Government Finance Statistics Manual 2014

government outlays abroad for fi scal purposes. Even

if there are no actual economic fl ows recorded be-

tween the government and the SPE related to these

fi scal activities, fl ows and stock positions should be

imputed in the accounts of both the government and

the rest of the world to refl ect the fi scal activities of the

government undertaken by the SPE.

Joint Ventures

2.140 Many public sector units enter into arrange-

ments with private entities (e.g., a public-private part-

nership) or other public sector units to undertake a

variety of activities jointly. Th e joint venture could be

a market or nonmarket producer. Joint operations can

be structured broadly as one of three types: jointly

controlled units, referred to here as joint ventures;

jointly controlled operations; and jointly controlled

assets.

2.141 A joint venture involves the establishment

of a corporation, partnership, or other institutional

unit in which, legally, each party has joint control

over the activities of the joint venture unit. Th e joint

venture unit operates in the same way as other units

except that a legal arrangement between the parties

establishes joint control over the unit. As an institu-

tional unit, the joint venture may enter into contracts

in its own name and raise fi nance for its own pur-

poses. Such a joint venture maintains its own account-

ing records.

2.142 Th e participants to a joint venture may be

public sector and/or private sector units. To properly

decide the sector classifi cation of the joint venture

in macroeconomic statistics, it must be determined

which unit has economic control of the joint venture.

Given the nature of a joint venture (created legally with

joint control), the principal question to be considered

here is whether the eff ective economic control of the

joint venture establishes a public or a private unit:

• If a joint venture operates as a nonmarket pro-
  ducer, then government is in eff ective control
  and it is classifi ed as part of the general govern-
  ment sector.


• If the joint venture is a market producer, it is
  treated as a public or private corporation accord-
  ing to whether it is controlled by a government
  unit. Normally, the percentage of ownership will
  be suffi cient to determine control. If the public

and private units own an equal percentage of

the joint venture, the other indicators of control

must be considered (see Box 2.2).

2.143 Joint operating arrangements can be in the

form of jointly controlled operations or jointly con-

trolled assets. When public sector units enter into joint

operating arrangements without establishing separate

institutional units, there are no units requiring clas-

sifi cation; however, the recording should refl ect the

proper economic ownership of assets. Also, any shar-

ing arrangements of revenue and expense should be

recorded in accordance with their economic nature

as determined by the provisions of the governing con-

tract. For example, two units may agree to be responsi-

ble for diff erent stages of a joint production process or

one unit may own an asset or a complex of related as-

sets, but both units agree to share revenue and expense.

Sinking Funds

2.144 A sinking fund is a separate account, which

may, or may not be an institutional unit. A sinking

fund is made up of segregated contributions provided

by the unit(s) that makes use of the fund (the “par-

ent” unit) for the gradual redemption of the parent

unit’s debt. A sinking fund may also be established

to provide for major repairs or replacements. Aside

from eventually extinguishing all government debt in

a prudent and orderly manner, sinking funds may be

meant to inspire confi dence, supporting the market

for government securities.

2.145 Public sector sinking funds are classifi ed to

sectors according to whether they are separate insti-

tutional units^41 and, if so, whether they provide their

services at economically signifi cant prices.

• Sinking funds that are separate institutional units
  and provide services as market producers are
  classifi ed as public fi nancial corporations.


• Sinking funds that are separate institutional units
  and provide services as nonmarket producers are
  classifi ed as general government units. In partic-
  ular, such sinking funds will be classifi ed as ex-
  trabudgetary units of the unit that controls them
  (e.g., central government).


• Sinking funds that are not separate institutional
  units are classifi ed with the unit that controls
  them (i.e., the “parent” unit).

(^41) An institutional unit is defi ned in paragraph 2.22.