II.  Public Availability of Information

57. Making fiscal information available to the public is a defining characteristic of fiscal transparency.⁴⁹ Principles and practices in this regard concern the provision of comprehensive information on fiscal activity and to obligations regarding publication.

Provision of Comprehensive Information on Fiscal Activity

2.1 The public should be provided with full information on the past, current, and projected fiscal activity of government.

58. The Code includes good practices relating to: (1) the coverage of the annual budget; and the provision of information on (2) outturns and forecasts, (3) contingent liabilities, tax expenditures, and quasi-fiscal activities, (4) debt and financial assets, and (5) the consolidated position of the general government. Underlying budget accounting and reporting principles and procedures are dealt with in detail in Section III.

Coverage of the annual budget

2.1.1 The budget documentation, final accounts, and other fiscal reports for the public should cover all budgetary and extrabudgetary activities of the central government, and the consolidated fiscal position of the central government should be published.

59. This is a basic requirement of fiscal transparency. The central government budget is usually the focus of fiscal policy, and comprehensive coverage of all fiscal activity undertaken by the central government is essential from a transparency standpoint. This requires that all extrabudgetary activities should be covered, and it is therefore also a basic requirement of fiscal transparency that detailed statements should be provided for all extrabudgetary funds. Similarly, information on the activities of autonomous central government agencies should also be part of the budget documentation. Such agencies are often established as separate legal entities to provide health, education, and other services, or to conduct specialized regulatory or quasi-judicial functions. Any grants or transfers such agencies receive from central government should be identified in the central government budget, and information on their gross expenditure and revenue, including revenue from earmarked taxes, user-charges and other sources, should be reported.

60. The various fiscal reports that are issued in connection with the budget are described in Box 7. To clarify the analytical basis of each type of report, its relationship to GFS classification and reporting is described. Classification issues are discussed in more detail in Section III. The relationship between financial, fiscal, and GFS reporting is covered in Box 17.

Outturns and forecasts

2.1.2 Information comparable to that in the annual budget should be provided for the outturns of the two preceding fiscal years, together with forecasts of the main budget aggregates for the two years following the budget.

61. For a more complete picture of the current fiscal position, information on past fiscal performance should be presented in the annual budget or elsewhere in the budget documentation. Original and revised budget estimates for the two years preceding the budget should be included with the annual budget, together with the actual outturn (or expected outturn, if the final outturn for the current year is not available).⁵⁰ The information should include both main budgetary aggregates, and more detailed information on subaggregates (item of expenditure, function, and where available, program or output). The status of the outturn information should be disclosed (for example, provisional and unaudited, final and audited). This allows an assessment to be made of recent performance compared to budget, and may draw attention to significant forecasting, policy, or macroeconomic risks and, more generally, to the realism of the budget. Any changes to the classification or presentation of items from year to year should be disclosed, together with the reasons for the changes. Forecasts of key budget aggregates for the two years following the budget should also be provided. Providing aggregate fiscal projections for 5-10 years ahead in the budget documentation is best practice.⁵¹

Box 7. Budget and Fiscal Reports
Report/Document	Comment	Relationship to GFS
The annual budget	Appropriation accounts containing details of the expenditure authorized or to be authorized by the legislature through a budget (appropriation) law. Includes estimates of revenue and borrowing. Transactions are generally classified by administrative unit and item of expenditure.	GFS classification facilitates compilation of national accounts and fiscal reports, but is not universally applied.
Budget supporting documents	Include various statements (e.g., on extrabudgetary funds, autonomous agencies, quasi-fiscal activities, fiscal risks) and background papers (e.g., on the fiscal and economic outlook). The annual budget and supporting documents make up the budget documentation.	GFS presentation of the overall balance is preferred, and should be reconciled with the presentation in the annual budget.
Within-year budget reports	Monthly or quarterly reports on budget outturns from government accounts. May be compared to the projected outturn for the period. Also includes regular reports on debt.	An administrative presentation (identical to that in the annual budget) is common, but a GFS summary is preferred for monitoring fiscal developments.
Final accounts	Final audited accounts are presented to the legislature at year-end to provide assurance of regularity and consistency with appropriations.	As for the annual budget. A GFS summary is rarely provided.
Financial reports	General purpose reports on the financial position and performance of the government are increasingly being provided. Such reports are more common under accrual accounting, but IFAC-PSC has recently developed reporting standards applicable to cash accounting (see IFAC (2000b)). Where the government budgets on an accrual basis, as in Australia and New Zealand, these financial reports also fulfill the function of reporting on compliance with budget appropriations. In other countries (e.g., the United States and France) accrual reporting is separate from budgeting, which is mainly on a cash basis.	A GFS summary is rarely provided. In some countries (e.g., Australia), financial reports meet a number of analytical needs including GFS reporting.
GFS reports	Reports that provide analytical information on government finances in GFS format. Such reports can be generated from data compiled for one of the above reports, but as accrual accounting is adopted by GFS and applied more widely in government, classification in all fiscal reports is likely to converge.

Contingent liabilities, tax expenditures, and quasi-fiscal activities

2.1.3 Statements describing the nature and fiscal significance of central government contingent liabilities and tax expenditures, and of quasi-fiscal activities, should be part of the budget documentation.

Contingent liabilities

62. Contingent liabilities are costs which the government will have to pay if a particular event occurs. They are therefore not yet recognized as liabilities.⁵² A common example of a contingent liability is a government-guaranteed loan. At the time a guarantee is entered into there is no liability for the government, since this is contingent on the borrower failing to repay the loan as contracted. However, in the event of default, the lender can invoke the guarantee and the government will be obliged to repay the amount of the loan still outstanding. At that point, the contingent liability will become an actual liability of government, and a payment must be made. Box 8 gives other examples of contingent liabilities, and describes the links between contingent liabilities and certain other potential obligations of government.

Box 8. Contingent Liabilities, Policy Obligations, and Implicit Liabilities

In addition to government guarantees, other examples of contingent liabilities are indemnities, uncalled capital, and legal action against the government Indemnities are commitments where the government assumes certain specified risks. For example, when a state enterprise is privatized, the government sometimes provide an indemnity to the purchaser against particular risks—such as protection against future legal action relating to preexisting conditions. The government can also issue indemnities in the context of privately financed infrastructure projects. Uncalled capital is an obligation on government to provide additional capital on demand to an entity of which it is a shareholder. An example is uncalled capital in official international financial institutions. And the government may at any time be subjected to legal action if it is judged to have acted outside its authorized powers. Contingent liabilities need to be distinguished from other obligations or responsibilities of government, such as obligations to pay pensions in the future. For civil service pensions, these will generally be recognized as liabilities under accrual accounting. But they are current obligations arising from past events and not contingent liabilities. Future obligations to pay public pensions have not been recognized as a liability to date in any country that has adopted accrual reporting. Only amounts currently due and payable are recognized as a liability.53 Contingent liabilities also need to be distinguished from situations where the government has a potential future obligation, but where there is no policy or contractual requirement that a payment be made should a future contingency occur. Such implicit contingent liabilities reflect the fact that there may be strong pressure on a government to step in and provide assistance should some event occur, even in the absence of any explicit prior policy or commitment to do so. The notable example in recent years has been financial sector restructuring, where governments have made payments far in excess of any explicit prior commitment to protect depositors or institutions. Because of moral hazard, it will generally be inappropriate that such potential obligations be quantified and reported as explicit contingent liabilities. However, such potential obligations should be considered openly in policy discussion.54

63. Contingent liabilities complicate fiscal management because of the inherent uncertainty about their fiscal impact. The fact that they have traditionally not been subject to the discipline of the budget process is also a problem. In many countries, guarantees have proliferated, resulting in a large "hidden deficit" which is not reported.⁵⁵ Guarantees can also create moral hazard, by weakening incentives for prudent behavior by the beneficiaries of guarantees, which increases the likelihood that the guarantee will be called.

64. Contingent liabilities will only be recognized under cash accounting if and when the contingent event actually occurs and a payment is made. Thus while a loan by government will be recorded as expenditure at the time the loan is made, a government-guaranteed loan will be recorded only when the government is required to honor the guarantee by making a cash payment to the lender. This can result in governments using guarantees rather than more transparent direct expenditure. Even under accrual accounting, many contingent liabilities would not be recognized as liabilities, unless they can be quantified and are judged likely to require a future payment by the government.⁵⁶ They would instead be disclosed in supplementary statements.⁵⁷

65. Given the difficulties involved in quantification, including in budget documentation a statement that indicates the public policy purpose of each provision giving rise to a central government contingent liability, its duration, and the intended beneficiaries is a basic requirement of fiscal transparency.⁵⁸ But where possible, major contingencies should be quantified. Disclosure of contingent liabilities in the annual budget, the mid-year report to the legislature, and the final accounts is included in the OECD best practice guidelines. These should be classified by major category, and information on the past calls on the government to meet contingent liabilities should be disclosed.⁵⁹

66. A number of judgments need to be made as to what items should be included when reporting contingent liabilities. Further guidance on these matters is being developed by IFAC-PSC. Specific issues include the following.

• To qualify as a contingent liability, the likelihood that a future expenditure will result should be more than remote. It would, however, be desirable to report contingent liabilities where the likelihood of actual expenditure is remote but the amount potentially at risk is very large. Guarantees below some minimum country-specific threshold need not be separately disclosed, but should be included in an "other quantifiable contingent liabilities" total.

• Some contingent liabilities are inherently unquantifiable. An indemnity against prosecution for public officials is an example. In this situation, it is sufficient to provide details on the nature and scope of the indemnity.

• Quantification of some contingent liabilities may be undesirable on public policy grounds, because it may result in unnecessary additional cost or risk to the government . For example, reporting the potential cost of a contingency that is the subject of negotiation with another government could prejudice the government's negotiating position. In such a situation, it would again be sufficient to disclose the nature and scope of the provision. Reporting the potential cost of legal action against the government should, however, include disclosure of the amount claimed, together with a proviso that this does not represent either an admission that the claim is valid or an estimate of the possible amount of any award against the government.

• Where the government has set aside reserves against a specific contingency, this should be noted in the statement of contingent liabilities. For example, a deposit insurance fund may have substantial dedicated assets available to be drawn down should a covered financial institution fail. Details of these assets should be reported, together with the extent of the government's remaining loss exposure.⁶⁰

Tax expenditures

67. Tax expenditures include exemptions from the tax base, allowances deducted from gross income, tax credits deducted from tax liability, tax rate reductions, and tax deferrals (such as accelerated depreciation). Tax expenditures are often identical in their effects to explicit expenditure programs. For example, assistance to individuals, families, or firms can be delivered either through expenditure programs or through concessional tax treatment. Once introduced, however, tax expenditures do not require formal annual approval by the legislature (though some may be subject to sunset clauses), and are therefore not subject to the same degree of scrutiny as actual expenditure. A proliferation of tax expenditures can therefore result in a serious loss of transparency.

68. The inclusion of a statement of the main central government tax expenditures as part of the budget documentation is a basic requirement of fiscal transparency. Such statements should indicate the public policy purpose of each provision, its duration, and the intended beneficiaries. Where possible, major tax expenditures should be quantified.⁶¹

69. Providing the estimated costs of all tax expenditures in the budget documentation is included in the OECD best practice guidelines, which also call to the extent possible for the discussion of tax expenditures and general expenditure to be combined. Although there can be serious difficulties in cost estimation, reporting the approximate cost of tax expenditures and describing the basis of the estimates can significantly enhance transparency.⁶² A number of OECD countries regularly publish estimates of tax expenditures. Box 9 provides information on selected country practices.

Box 9. Tax Expenditure Reporting

Germany and the United States were the first countries to report tax expenditure information, in the late 1960s. Tax expenditure reports are now a legal requirement in at least nine OECD countries (Australia, Austria, Belgium, France, Germany, Greece, Portugal, Spain, and the United States). Most of the countries reporting information do so annually; in Australia, Belgium, Finland, France, Greece, Portugal, Spain and Sweden the tax expenditure report is linked explicitly to the budget process. In Greece the central government budget must be accompanied by an attached budget of tax expenditures. An OECD survey in 1999 indicated that three-quarters of OECD countries regularly report tax expenditures. About half of these do so in the budget documentations. Brazil also reports some tax expenditure information in its annual budget. This information is required by the constitution, and by the Fiscal Responsibility Law. In Korea, the government began to report direct tax expenditures to the National Assembly from 1999. In Germany, tax expenditures are reported as part of a "subsidy report," which includes all forms of federal support through both direct expenditure and tax expenditures. (Most states provide similar subsidy reports to state legislatures.) The foregone revenue is reported for two prior years, the current year, and the following year. The federal subsidy report lists for each tax expenditure item the revenue foregone to the federal budget and to all the territorial authorities. The report covers a wide range of direct and indirect taxes, and classifies them by industrial sector and within sector by type of tax. In addition to regular biennial reports, more detailed reports are prepared on individual sectors, and supplementary calculations are made if changes to the law are planned. To prevent certain types of tax expenditure from becoming permanent parts of the tax system, they may be designed to phase out over time (e.g., the tax incentives for investment in eastern Germany). The subsidy reports are submitted to the federal legislature, where they are considered by various committees. The reports are subjected to scrutiny by the Federal Court of Audit. Independent economic research institutes conduct their own analyses of the economic effects and efficiency of subsidies, and make their own calculations of the magnitude of tax expenditures (and subsidies more generally).

Quasi-fiscal activities

70. Quasi-fiscal activities may be conducted by the central bank, public financial institutions, and nonfinancial public enterprises. Box 10 presents a listing of different types of quasi-fiscal activities. In contrast to explicit fiscal activities, quasi-fiscal activities are often introduced by simple administrative decision, are not recorded in budgets or budget reporting, and typically escape legislative and public scrutiny. They are introduced by governments to achieve a variety of objectives, such as promoting certain activities, redistributing income or collecting revenue. Because they lack transparency, quasi-fiscal activities can be self-perpetuating. They can also have implications which lead to further nontransparency. For example, requirements on nonfinancial public enterprises to purchase inputs from government-owned monopoly suppliers may result in pressure from the nonfinancial public enterprise to be exempted from other regulations or taxes in order to compensate them for the loss of profitability arising from the quasi-fiscal activity.

Box 10. Types of Quasi-Fiscal Activity

Operations related to the financial system Subsidized lending Administered lending rates Preferential rediscounting practices Poorly secured and subpar loans Loan guarantees Underremunerated reserve requirements Credit ceilings Rescue operations Operations related to the exchange system Multiple exchange rates Import deposits Deposits on foreign asset purchases Exchange rate guarantees Subsidized exchange risk insurance Operations related to the commercial enterprise sector Charging less than commercial prices Provision of noncommercial services (e.g., social services) Pricing for budget revenue purposes Paying above commercial prices to suppliers

71. There are a number of reasons why it is important to identify, where possible to quantify, and to report information on quasi-fiscal activities. First, where quasi-fiscal activities are sizable, the budget balance ceases to be a reliable indicator of the government's financial position, complicating the design of fiscal policy. Second, official government revenue and expenditure statistics do not accurately reflect the actual size of government. Third, quasi-fiscal activities can generate implicit contingent liabilities. This would happen, for example, if the government directs a public financial institution to guarantee a loan which could impair its profitability and ultimately require a capital injection from the government. Finally, because quasi-fiscal activities often have redistributive effects, it is important that they be subjected to public scrutiny.

72. Reporting quasi-fiscal activities is, however, complex, and raises a number of issues. For example, with respect to central bank quasi-fiscal activities, only where the financial effects are fully reflected in the profit and loss account in the financial year in which they occur will the impact of such quasi-fiscal activities be captured in the budget, through central bank profits transferred to the government.⁶³ This has a number of consequences from a transparency standpoint.

• Even if all quasi-fiscal activities impact immediately on the profit and loss account of the central bank, and profits are transferred in full to the central government, these fiscal activities are effectively being reported on a net basis, and little information is available on the underlying gross flows.⁶⁴

• If some portion of central bank profits is retained as central bank reserves, the cost of quasi-fiscal activities is met in part by the central government budget and in part by a smaller increase in central bank reserves than would have occurred in the absence of the quasi-fiscal activities.⁶⁵

• In some cases, the central bank engages in such extensive quasi-fiscal activities that it makes a loss, but central bank losses are not reported as expenditure of the central government.⁶⁶

• The effects of some quasi-fiscal activities are not reflected immediately in the central bank profit and loss account. For example, subsidized lending may result in an overvaluation of the central bank assets rather than a reduction in its operating surplus.⁶⁷ Also, contingent liabilities of the central bank—such as exchange rate guarantees—are not recorded as expenditure unless the contingency arises and the liability must be met.

Some of these considerations apply also to the transparency of quasi-fiscal activities conducted by public financial institutions and nonfinancial public enterprises. In the case of the central bank, there may also be significant fiscal effects from its monetary policy operations. For example, sterilization of foreign currency inflows may have a significant negative impact on central bank profitability, and hence on the profit transfer to the budget. While sterilization is undertaken for monetary purposes (and hence is not a quasi-fiscal activity), it is important that its financial implications are reported in the central bank's annual report.

73. Given the nature and potential fiscal significance of quasi-fiscal activities, they should ideally be taken into consideration in assessing the fiscal position. However, the identification and quantification of quasi-fiscal activities is difficult and contentious. This is especially the case for public enterprises, where taxes and subsidies are often not transparent. Some pragmatism is called for in deciding on the range of quasi-fiscal activities to be reported, and financial magnitude is certainly a criterion that should be applied in making such a decision.

74. After taking the preceding factors into account, it is a basic requirement of fiscal transparency that a statement on quasi-fiscal activities should be included in the budget documentation which indicates the public policy purpose of each quasi-fiscal activity, its duration, and the intended beneficiaries. Meeting this requirement necessitates the following.

• Independently audited financial statements of the central bank, public financial institutions, and nonfinancial public enterprises should be publicly available shortly after the end of each financial year.

• The annual report of the central bank should indicate any nonmonetary policy activities it conducts on behalf of the government; annual reports of individual public financial institutions and nonfinancial public enterprises should indicate the noncommercial services that the government requires them to provide; and public financial institutions should disclose any connected lending to other government-owned agencies, and provide information on nonperforming loans.

Statements on quasi-fiscal activities could be compiled by the central ministry responsible for the budget on the basis of information provided by the central bank and other public sector agencies undertaking quasi-fiscal activities.⁶⁸

75. Statements on quasi-fiscal activities should include sufficient information to enable at least some assessment of the potential fiscal significance of each quasi-fiscal activity,⁶⁹ and where possible, major quasi-fiscal activities should be quantified. However, while it is often possible to provide an indication of the order of magnitude of fiscal effects as illustrated in Box 11, precise quantification may be difficult.⁷⁰ Thus reporting of an exchange rate guarantee issued by the central bank could readily include the value of guarantees outstanding and the cost if they were called at the current exchange rate. But precise quantification requires an estimate of the probability that a guarantee will be called, and this is difficult to know. If an estimate is provided, its basis should also be indicated.

76. It is a matter of judgement whether the private sector, if called upon to undertake activities of a quasi-fiscal nature, should be covered by reports on quasi-fiscal activities. In general, and as indicated earlier, such activities are best examined from the perspective of transparency of regulations. However, guarantees or indemnities given by government in the context of private sector activity (e.g., in connection with private infrastructure projects) should be disclosed in the statement of contingent liabilities.⁷¹

77. The OECD best practice guidelines do not cover reporting on quasi-fiscal activities. However, best practice is to report quantified estimates of the fiscal significance of quasi-fiscal activities, and to provide information on the basis for quantification.

Box 11. Estimating the Fiscal Effects of Quasi-fiscal Activities

Estimating the fiscal effects of some quasi-fiscal activities is relatively straightforward. The necessary information may be contained in accounting records (e.g., the cost to a nonfinancial public enterprise of providing social services). Others, however, are more difficult to quantify. Worked examples are provided below to illustrate quantification of quasi-fiscal activities in two relatively straightforward cases. Example 1: A subsidized loan provided by a public financial institution A state-owned bank provides a loan of $10 million at a 5 percent rate of interest. Commercial rates of interest for comparable loans range from 15 percent to 20 percent, depending on specific elements bearing on credit risk. The annual subsidy should be estimated as between $1 million and 1.5 million. In the absence of any relevant factors indicating an alternative treatment, the cost of the quasi-fiscal activity should be reported as the midpoint of the range, or $1.25 million. Example 2: A multiple exchange rate The central bank operates a special appreciated exchange rate of 2.75 local currency units to the dollar for mineral exports, and of 2 to the dollar for imports of a staple foodstuff. The central exchange rate is 3 to the dollar, entailing a tax on mineral exports and a subsidy on imports of food. If total mineral exports are $3 billion, and total food imports are $300 million, the effects of the quasi-fiscal activity can be estimated and reported as follows: Quasi-fiscal tax on mineral exports: (3-2.75)$ x ($3,000,000,000) = 750,000,000 Quasi-fiscal subsidy to food imports: (3-2)$ x ($300,000,000) = 300,000,000 In this example, the central bank gains a net 450,000,000 local currency units.

Debt and financial assets

2.1.4 The central government should publish full information on the level and composition of its debt and financial assets.

78. This is a basic requirement of fiscal transparency. Sound information on liabilities and financial assets is essential to enable a government to assess its ability to finance its activities and service its debt, and to estimate the amount of future revenue required to meet all existing commitments. It also provides a basis for assessing fiscal sustainability. Best practice in providing information on debt and financial assets is the publication of a government balance sheet as part of the budget documentation. As indicated in Box 12, a number of complex issues need to be addressed in preparing a government balance sheet. However, where a government balance sheet is published, it should ideally cover financial liabilities and assets, and nonfinancial assets, of government. Where nonfinancial assets are not covered, a register of nonfinancial assets should be maintained, and a listing of nonfinancial assets should be provided in the budget documentation.

Box 12. Government Balance Sheets: Some Issues

With respect to reporting balance sheet information, best practice is to publish with the annual budget and final accounts either: a balance sheet showing all liabilities of government (not just public debt), and disclosing in addition a register of all physical assets of central government; or a full balance sheet showing all liabilities and all financial and physical assets of central government. Governments generally have significant liabilities other than public debt. One important example is the future obligation to pay civil service pensions under existing contractual or legal arrangements. These obligations are typically underfunded and, under accrual accounting, the unfunded liability is usually shown on the balance sheet as a liability. The key assumptions underlying the valuation of the liability are shown, together with the change in the liability compared to the previous year, and an explanation of the main reasons for the change. Other liabilities include accounts payable, accrued interest and accrued salaries and wages, transfer payments payable, environmental liabilities, and obligations under accident compensation schemes.72 Under accrual accounting, a range of additional disclosures are typically made in supplementary notes. These include information on contingent liabilities and on commitments. Commitments are existing contractual agreements under which government will be responsible for a future liability. Examples include multi-year leases for buildings, and agreements to purchase or construct capital assets in the future. Information on available undrawn lines of credit is also included. Under full accrual accounting, all physical assets are valued and recorded on the balance sheet. This presents significant and complex issues of valuation, and industrial countries have adopted different positions on whether the benefits of such an exercise outweigh the costs. Under modified accrual accounting, information on physical assets is limited to supplementary reporting (such as the date and cost of acquisition) from a register of assets. However, even a full government balance sheet, prepared in accordance with generally accepted accounting principles (GAAP), falls well short of providing all relevant information on government resources and obligations. This is because some important obligations of government, such as future social security and welfare payments, have not generally been recognized to date as a liability in any country that has adopted accrual accounting. Only amounts currently due and payable are recognized as a liability. Future obligations have not been judged to meet the definition and recognition criteria of a liability. Nor are future taxes, or the power to tax, recognized as an asset of government. In recognition of the substantial differences between public and private sector balance sheet reporting, governments that produce full balance sheets often also give extensive disclosures of "stewardship" assets and liabilities. The United States, for instance, includes disclosures on such assets as defense, natural assets, heritage assets, and social security obligations in addition to its balance sheet statement.73 Long range projections on government receipts and outlays are also provided in this context.

Reporting of debt

79. Reporting should cover the comprehensive debt of central government, including securities, loans, and deposits.⁷⁴ The level of debt at the reporting date and the previous reporting date (for comparison purposes) should be disclosed. Valuation methods and practices (e.g., revaluation of indexed debt),⁷⁵ together with any special characteristics of debt instruments or any liabilities not reported, should be noted as memorandum items. The classification and definition of debt should be in accordance with internationally recognized practices (e.g., the GFS or OECD, 1988). Information should also be provided on any sinking funds established for debt amortization.

80. Debt should be broken down by remaining maturity, and classified as short (less than 12 months), medium or long term.⁷⁶ Breakdowns of debt should also be provided, where relevant, by domestic and foreign components according to residence, by currency of issue (including indexing), by debt holder, and/or by debt instrument. Any debt arrears should be disclosed, with arrears on interest and principal identified separately. In addition, debt swaps should be disclosed. Best practice in debt reporting is represented by the SDDS, which in addition requires reporting of guaranteed debt and encourages that debt service projections are reported.

Reporting of financial assets

81. Reporting of financial assets should cover all such assets of central government at the reporting date as well as those at the previous reporting date. The report should include a clear statement of the accounting policies that have been followed with respect to asset valuation.

82. Financial assets are those available to the government to settle liabilities or commitments, or to finance future activities. Financial assets to be reported include cash and cash equivalents;⁷⁷ other monetary assets, such as gold and investments; and loans and advances. In addition to reporting financial assets according to these categories, additional breakdowns should be provided within each category. For example, investments might be broken down into direct marketable securities, equity investment in private companies, portfolio investment in private companies, and investment in international institutions. Loans and advances receivable might be broken down by sector (e.g., agricultural loans, student loans, and housing loans), and within sector by major loan programs.

83. Foreign exchange reserves held by the central bank should not be reported as part of the central government statement of financial assets for fiscal policy purposes. They are generally held to provide import cover and for possible exchange market intervention, although it is acknowledged that in some countries foreign exchange reserves have been run down as a matter of central government policy for other purposes, including debt repayment, even when held by an independent central bank. Foreign exchange reserves should, however, be reported as part of other transparency requirements (i.e., in the context of monetary or statistical standards), generally by the central bank.

84. Any special characteristics of financial assets, such as being secured against a debt or other specific liability, or any restrictions on the use of an asset or the income deriving from it, should be noted as memorandum items. Any financial assets excluded from reporting should also be noted.

85. The OECD best practice guidelines include disclosure of nonfinancial assets, but not the publication of a government balance sheet. The valuation of nonfinancial assets would be required under accrual accounting.

Consolidated position of the general government

2.1.5 Where subnational levels of government are significant, their combined fiscal position and the consolidated fiscal position of the general government should be published.

86. Although the Code is intended to cover the operations of the general government, it is recognized that there are often problems in providing budget data for subnational levels of government at the time the central government budget is presented. This would be the case where subnational levels of government are not required to coordinate their budget presentations with that of the central government. There may also be practical limitations to collecting budget data on a timely basis when the structure of subnational levels of government is quite complex. Under such circumstances, some countries may not be able to present timely information on the consolidated budget position of the general government.

87. While presentation of the consolidated budget position of the general government may not be feasible for many countries, there should be an attempt to provide at least ex post information on general government. This can be done through national accounts-based reports, provided these reflect actual budget outturns for the various parts of general government.⁷⁸A basic requirement of fiscal transparency is that¾where they have significant tax powers, expenditure responsibilities, and/or borrowing capacity, and/or they receive sizable transfers¾the combined fiscal position of subnational levels of government and the consolidated fiscal position of the general government should be published. Subnational levels of government should also report publicly on their extrabudgetary activities, debt, and financial assets, contingent liabilities, and tax expenditures, and on the quasi-fiscal activities of public financial institutions and nonfinancial public enterprises under their control.

88. Best practice is that there should be comprehensive reporting by all levels of government. Countries differ considerably in their approach to this issue, however. Two possible benchmarks could designate best practice. Either comprehensive fiscal data should be compiled by all levels of government using a uniform classification and a consolidated general government financial position should be presented with the annual central government budget; or subnational levels of government that are independent fiscal agencies should observe the same standard of fiscal transparency as the central government.⁷⁹