Government Finance Statistics Manual 2014

26 Government Finance Statistics Manual 2014

additional institutional units (see paragraph 2.39).

Th ere may also be institutional units whose authority

extends over two or more states, but are responsible to

the respective state governments. Such units should

also be included in the state government subsector.

2.94 State governments may control corporations

in the same way as central government. Th ey may

also have unincorporated units that engage in mar-

ket production. Such institutional units should be

treated as quasi-corporations in line with the princi-

ples in paragraph 2.33. Th ese corporations and quasi-

corporations should be classifi ed outside of the state

government subsector (and general government sec-

tor) as part of public corporations.

Local governments

2.95 Local government units are institutional

units whose fi scal, legislative, and executive author-

ity extends over the smallest geographical areas dis-

tinguished for administrative and political purposes.

Th e local government subsector consists of local

governments that are separate institutional units

plus those nonmarket NPIs that are controlled by

local governments. Th e scope of their authority is

generally much less than that of central government

or state governments, and they may, or may not, be

entitled to levy taxes on institutional units resident

in their areas. Th ey are oft en heavily dependent on

grants (transfers) from higher levels of government,

and they may also act, to some extent, as agents of

central or regional governments. Th ey should also

be able to appoint their own offi cers, independently

of external administrative control. Even when local

governments act as agents of central or state govern-

ments to some extent, they can be treated as a sepa-

rate level of government, provided they are also able

to raise and spend some funds on their own initiative

and own responsibility.

2.96 Local governments are in closest contact with

institutional units occupying their localities. Th ey typi-

cally provide a wide range of services to local residents,

some of which may be fi nanced out of grants (trans-

fers) from other levels of government. Statistics for the

local government subsector may cover a wide variety of

governmental units, such as counties, municipalities,

cities, towns, townships, boroughs, school districts,

and water or sanitation districts. Oft en, local govern-

ment units with diff erent functional responsibilities

have authority over the same geographic areas. For ex-

ample, separate government units representing a town,

a county, and a school district may have authority over

the same area. In addition, two or more contiguous

local governments may organize a government unit

with regional authority that is accountable to the local

governments. Such units should also be included in

the local government subsector.

2.97 Some of the most typical functions of local

governments provide services for which users’ fees

are small in relation to the main costs borne by the

local government. Local governments are typically in-

volved in:

• Educational establishments


• Hospitals and social welfare establishments, such
  as kindergartens, nurseries, and welfare homes


• Public sanitation and related entities, such as
  water purifi cation systems and plants, refuse col-
  lection and disposal agencies, cemeteries, and
  crematoria


• Culture, leisure, and sports facilities, such as the-
  aters, concerts, music halls, museums, art galler-
  ies, libraries, parks, and open spaces.
  2.98 Th e same rules governing the treatment of
  the production of goods and services by central and
  state government units are applied to local govern-
  ments. If a market producer can be identifi ed within
  a local government unit that satisfi es the criteria to be
  a corporations or a quasi-corporation (see paragraph
  2.34), it is classifi ed as a public corporation. When
  market establishments^29 do not satisfy the criteria to
  be a quasi-corporation, they are included within local
  government. Units supplying services on a nonmarket
  basis, such as education or health, remain an integral
  part of the local government unit that controls them.

2.99 Government units serving both a state gov-

ernment and one or more local governments should

be included with the level of government that pre-

dominates in its operations and fi nances. In some

countries, more than one level of government exists

between the central government and the smallest gov-

ernmental institutional units at a local level. In such

cases, these intermediate levels of government are

grouped together with the level of government, either

(^29) See paragraph 2.75 for a defi nition of market establishments.