without guarantees issued by central government should be reported as well. Fiscal risks can also relate to operational losses caused by unfunded quasi-fiscal operations such as a central bank, large expenditure payment arrears, unfunded community service obligations of public corporations, and unfunded pension obligations. Significant fiscal risks are those that are potentially large enough to result in an urgent need to respond with resources allocated to other purposes, or that require governments to increase borrowing to fund actions to address the consequences of a risk-related event.

10.1:3 Public corporations are resident corporations controlled by government units or by other public corporations that are potential sources of financial gains or losses to the government units that own or control them. Public corporations are recognized by law as separate legal entities from their owners, and are set up for purposes of engaging in market production. In some cases, the corporation issues shares, and thus the financial gain or loss is clearly allocated to the shareholders. In other cases, no shares are issued, but it is clear that a specific government unit controls the corporation’s activities and is financially responsible for them (ref GFS Manual 2014 Ch 2, s2.31, s2.48).

10.1:4. Public corporations may be created to: generate profits for general government; protect key resources; provide competition where barriers to entry may be large; and provide basic services where costs are prohibitive. These public corporations are often large and/or numerous, and may have a

 

significant economic impact (ref GFS Manual 2014, Ch 2, s2.105).

10.1:5. Public corporations may be involved in quasifiscal operations (i.e., they carry out government operations at the behest of the government units that control them). As such, public corporations may exist to serve as instruments of public (or fiscal) policy for government. Most directly, a public corporation can engage in specific transactions to carry out a government operation, such as lending to particular parties at a lower-than-market interest rate or selling their product, such as electric power, to selected customers at reduced rates. More generally, however, a public corporation can carry out fiscal policy by employing more staff than required, purchasing extra inputs, paying above-market prices for inputs, or selling a large share of its output for prices that are less than what the market price would be if only private producers were involved (ref GFS Manual 2014, Ch 2, s2.104). Assessors should determine whether the public corporation engages in market or non-market activities and should refer to the GFS manual 2014 for further guidance and explanation.

10.1:6. It is possible that certain institutional units that are legally constituted as corporations may not be classified as corporations for statistical purposes if they do not charge economically significant prices. Government-owned enterprises, such as the central bank, post office, or railroad, which are often referred to as public corporations, state-owned enterprises, or parastatals in a legal sense, may be part of the general government or public sector depending on

 

Table 10.1: Financial reports of public corporations

Public corporation Year covered by the financial report Financial statement audited? (Y or N) Date of reception of the report Total expenditure As a % of total expenditure of public corporations Are contingent liabilities of the public corporation included in the financial report? (Y/N)
 
 
 

 

Pillar Three: Management of Assets and Liabilities