# Presentation: 923523

## NIPA – Flow of Funds Accounts Integration

- BEA Government Statistics Users Conference
- September 14, 2006
- Susan Hume McIntosh
- Flow of Funds Section
- Federal Reserve Board

- Draft SNA-USA

**Notes:**
	I would like to thank Charlotte for her comments on integrated accounts for the government sectors.  
	Almost four years ago the Federal Reserve Board and Bureau of Economic Analysis met for the first time to begin work on creating a set of integrated macroeconomic accounts.  The initial goal was to see if this was feasible and to present the results at the NBER/Conference on Research in Income and Wealth, Architecture for the National Accounts in April 2004 in Washington, D.C.  The project was coordinated by Al Teplin.

## Project Goals

- Produce integrated accounts based on NIPA, ITA, and FFA.
- Identify inconsistencies among existing accounts.
- Eliminate inconsistencies where possible.
- Develop a program to:
- Deal with remaining inconsistencies.
- Correct other deficiencies.
- Enhance presentation.

- Draft SNA-USA

**Notes:**
	To  produce the integrated accounts we set out to identify and eliminate inconsistencies among the existing accounts which included the NationaI Income and Product Accounts, International Transaction Accounts, and Flow of Funds Accounts.  We quickly realized that most of the problems required more staff time than was available.  Therefore, we settled for establishing an ongoing program to work together on the issues and enhance the presentation of the accounts.
	A year ago we met again and decided that we would publish integrated accounts on BEA’s website at the end of September 2006.  And here we are two weeks before that date and ready to go.  Annual data for 1960-2005 will be published.  I have handed out copies of two of the tables, the federal and state and local governments sectors (S.7-S.8) so you can see the format.  Data are preliminary.

## 
Follows SNA93 structure with a complete sequence of accounts:
Current (production and income).
Capital accumulation.
Financial accumulation.
Other changes in volume. 
Revaluation.
Balance sheet.

- Follows SNA93 structure with a complete sequence of accounts:
- Current (production and income).
- Capital accumulation.
- Financial accumulation.
- Other changes in volume.
- Revaluation.
- Balance sheet.

- Draft SNA-USA

**Notes:**
	For those of you who are not familiar with integrated accounts, I will spend a minute explaining what they are.  Integrated accounts follow the SNA93 structure, and we have made considerable headway with the integration by being able to provide a full sequence of accounts for seven major sectors.
	The next slide provides a diagram of the sequence of accounts for integrated accounts.

## Progression of Accounts

_**Progression of Accounts**_

- Draft SNA-USA

**Notes:**
	We began with a balance sheet position, number 1, which was the level of assets and liabilities, say at the end of 2004.  The accounts then record production and income and saving flows for each sector; these are the current accounts numbered 2 and 3.
	Saving derived in the income account is used for the purchase of capital in the capital account (number 4), with the remainder available for lending to other sectors.  If capital accumulation is greater than saving, the sector borrows.
	The net lending/net borrowing position is expressed in the capital account, number 5.  An alternate version can be calculated from the financial accounts.
	Two accounts record changes in the nominal value of assets and in some cases liabilities. Number 6 lists changes in volume due to factors other than those in the capital or financial account or to holding gains and losses which are recorded in number 7.
	Altogether, the flow accounts determine the factors that lead to a change in sector net worth over a specific period, which, in turn, provides the starting balance sheet position for the next period.
	Of course, this is a sequence of accounts, the actual economic activities occur simultaneously and continuously within the period.

## 
No full balance sheet in the FFA.
Nonfinancial assets: only structures and equipment and software.
No outstanding value of land and nonproduced nonfinancial assets. 
Other volume changes balancing item.
Focus on annual balance sheets

- No full balance sheet in the FFA.
- Nonfinancial assets: only structures and equipment and software.
- No outstanding value of land and nonproduced nonfinancial assets.
- Other volume changes balancing item.
- Focus on annual balance sheets

- Draft SNA-USA

**Notes:**
	Turning to the integrated government tables, the focus of this meeting, several things should be pointed out.  First, the FFA does not have full balance sheet for the government sectors.  Second, for nonfinancial assets we only have outstandings for structures and equipment and software from BEA.  There are no outstanding values of land and nonproduced nonfinancial assets.  Since there is an item for the acquisition of nonproduced nonfinancial assets in the capital account, we have used the other changes in volume account as the balancing item for explaining the change in net worth.
	Charlotte mentioned her work on developing a set of aggregate values for the electormagnetic spectrum as a step toward improving the government balance sheet.  Developing outstanding values for nonproduced nonfinancial assets for the balance sheet is a high priority for improving the integrated accounts.  
	I would also recommend that Charlotte concentrate on annual data when looking at the discrepancies.  There is significant volatility in the financial accounts on a quarterly basis which is often smoothed through in the NIPAs.   

## 
Timing differences on receipts and expenditures.
Accrual versus cost accounting.
Trade receivables timing adjustment.
Treasury versus ITA data on gold, SDRs, and official foreign exchange.
Government enterprises.

- Timing differences on receipts and expenditures.
- Accrual versus cost accounting.
- Trade receivables timing adjustment.
- Treasury versus ITA data on gold, SDRs, and official foreign exchange.
- Government enterprises.

- Draft SNA-USA

**Notes:**
	Turning more specifically to the federal government sector,  during our meetings while preparing the initial paper, the staff at the Federal Reserve and BEA came up with a list of items to review in hopes of reducing the sector discrepancy.  Charlotte mentioned a few and I would like to expand a little on her list.  
	Attention needs to be given to timing differences in receipts and expenditures.  Differences in accounting methods that may be due to accrual versus cash accounting should be resolved.  Some work has already been done on this issue with Tim Dobbs.  FOF staff agreed to consider adjusting trade receivables for timing adjustments as done by BEA.  Also we need to reconcile Treasury data (MTS) with International transaction account data (ITA) on gold, SDRs, and official foreign exchange.  
	Another issue to address is that the placement of government enterprises, such as the postal service, are in the government sectors, consistent with the Flow of Funds Accounts and SNA93.  However, in the NIPA, these entities are in the business sector.

## 
Similar timing and accounting issues.
Work with Census Bureau on improving their data collection.
Use of annual reports of state and local governments.

- Similar timing and accounting issues.
- Work with Census Bureau on improving their data collection.
- Use of annual reports of state and local governments.

- Draft SNA-USA

**Notes:**
	Similar issues on timing of transactions and accounting methods were discussed regarding state and local governments. 
	 Also improving and sharing data sources have been important for both agencies.  BEA and the Fed are committed to working together and with the Census Bureau to improve our data collection and consistency.  
	In addition, the FOF staff has used data from annual reports of a sample of state and local governments for balance sheet estimates of financial assets.  These data might be of use to BEA in the compilation of their accounts. 

## Real time accounts can be calculated.
Fame database and software can be shared
Publish data on BEA’s website for 1960-2005 at end of September 2006.
Tables can be updated each quarter.
Article in Survey of Current Business by Ian Mead (BEA) and Susan Hume McIntosh (FRB) in November 2006.
Continue work on greater SNA consistency, sharing data sources, and narrowing discrepancies. 

- Real time accounts can be calculated.
- Fame database and software can be shared
- Publish data on BEA’s website for 1960-2005 at end of September 2006.
- Tables can be updated each quarter.
- Article in *Survey of Current Business* by Ian Mead (BEA) and Susan Hume McIntosh (FRB) in November 2006.
- Continue work on greater SNA consistency, sharing data sources, and narrowing discrepancies.

- Draft SNA-USA

**Notes:**
	So where are we and what’s next?  FOF staff has developed the software to calculate real time accounts and are able to share our Fame database and tabling software with BEA.  Jointly, in two weeks we will publish nine tables for seven sectors for a forty-five year time span,  and we have the ability to update these data each quarter.
	An article explaining the integrated accounts will appear in the Survey of Current Business in a couple of months.  
	We will continue to work with BEA on improving the data and methodology used to create the integrated tables.  	
	In summary, creating integrated accounts has been a very worthwhile exercise for both agencies, and we hope they will be well received.  I know there already has been much interest in the international community for this type of accounts.