Part C - The classification of sources and uses of cash

The statement of sources and uses of cash records transactions in the form of cash inflows from revenues, cash outflows from expenses, cash flows from the net acquisition of non-financial assets, cash flows from transactions in financial assets for policy purposes, cash flows from investments in financial assets for liquidity management purposes, and cash flows from financing activities during the reporting period. The concept of cash flows from other financing transactions includes cash flows from transactions in non-financial assets (ETF 22) consisting of expenditure on non financial assets (net) (ETF 221); cash flows from transactions in financial assets for policy purposes (ETF 23) consisting of advances paid (net) (ETF 231), and equity acquisitions, disposals and sale of equity (net) (ETF 232); cash flows from investments in financial assets for liquidity management purposes (ETF 24) consisting of increase in investments (ETF 241); and cash flows from financing activities (ETF 25) consisting of advances received (net) (ETF 251), borrowing (net) (ETF 252), deposits received (ETF 253), and other financing (net) (ETF 259).

The broad framework of the statement of sources and uses of cash is shown in Table 12.2 below:

The statement of sources and uses of cash only reflects transactions that are in cash, meaning that transactions are only recorded when cash is received or paid. Paragraph 4.35 of the IMF GFSM 2014 looks at the additional useful information that may be derived from the differences between amounts reported in the statement of operations and the statement of sources and uses of cash in GFS. There are some broad types of transactions that are recorded in the statement of operations but not in the statement of sources and uses of cash:

• Expense transactions that will be settled in cash in the future - with accrual recording, a purchase of goods and services is recognised when the ownership of goods changes hands or services are provided. The associated cash payment may not take place until a subsequent reporting period, in which case it would not be included in the statement of sources and uses of cash in the same period as it appears in the statement of operations. The fiscal implication of such differences in amounts reported may indicate a larger need for liquidity in the future to provide for the payments of accrued expense.
• Revenue transactions that were settled in cash but will be earned in the future - revenue can be received in cash before it is earned by the delivery of goods or provision of services to the purchaser. In addition, taxes and other compulsory revenue may be earned, but may be unpaid and will be settled in the future. The fiscal implication of such differences may indicate a larger demand for service delivery in the future, or a need to assess the efficiency of tax collection efforts.
• Transactions in assets and liabilities that will be settled in cash in future periods - such as the interest accruing from the amortisation of the discount on a zero-coupon or other discounted bond. There may be fiscal implications for liquidity management.
• Transactions that are not in cash by their nature - such as depreciation, imputed transactions, barter, other transactions in kind and debt forgiveness are non-cash transactions. These types of transactions would therefore not be recorded in the statement of sources and uses of cash.

The detailed framework of the statement of sources and uses of cash (ETF 2) is shown in Table 12.3 below. This shows a hierarchical framework of cash flows from operating activities and from investment activities in cash. Also shown are the classification codes required to populate the statement of sources and uses of cash for output purposes. These are the ETF code for each item appearing in the statement of sources and uses of cash and the appropriate source destination code (SDC) applicable to each category.

Cash flows from operating activities (ETF 21) is a net measure representing cash receipts arising from operating activities less cash payments arising from operating activities. Operating activities are the types of activities recorded in the statement of operations to derive the net operating balance (see Chapter 5 of this manual). In GFS, cash flows from operating activities are further classified as:

• Cash receipts from operating activities (ETF 211);
• Cash payments for employee expenses (ETF 212); and 
• Cash payments for non-employee expenses (ETF 213).

Cash receipts from operating activities (ETF 211) records the value of the total amount of cash received from operating activities. In GFS, cash receipts from operating activities are further classified into:

• Taxes received (ETF 2111, SDC); 
• Cash received from sales of goods and services (ETF 2112, SDC);
• Grants and subsidies received (ETF 2113, SDC); 
• Income transferred from public corporations (ETF 2114, SDC); 
• Interest received (ETF 2115, SDC); and 
• Cash receipts from operating activities not elsewhere classified (ETF 2119, SDC).

Taxes received (ETF 2111, SDC) records the value of cash received from compulsory levies imposed by government on other entities during the reporting period. Further information on the types of taxes that may be received can be found in paragraphs 6.27 to 6.119 of this manual.

Cash received from sales of goods and services (ETF 2112, SDC) records the value of cash received from the direct provision of goods and services by general government and public corporations, excluding GST. Included are cash receipts from fees and charges for services rendered by general government and public corporations; the sale of goods and services by market establishments; administrative fees charged for services; revenues of general government units for work done when acting as an agent for other government and private units; and incidental sales by non-market establishments. Further information on sales of goods and services can be found in paragraphs 6.120 to 6.124 of this manual.

Grants and subsidies received (ETF 21d d0d13, SDC) records the value of voluntary transfers in the form of grants and subsidies received in cash during the reporting period. Further information on grants and subsidies can be found in paragraph 6.150 of this manual.

Income transferred from public corporations (ETF 2114, SDC) records the value of income in the form of dividends or tax equivalent payments from public corporations received in cash during the reporting period. Further information on income transferred from public corporations can be found in paragraphs 6.130 to 6.135 of this manual.

Interest received (ETF 2115, SDC) records the value of interest received in cash during the reporting period. Further information on interest received can be found in paragraphs 6.126 to 6.129 of this manual.

Cash receipts from operating activities not elsewhere classified (ETF 2119, SDC) records the value of other receipts not elsewhere classified received in cash during the reporting period. Further information on other types of receipts not elsewhere classified can be found in paragraphs 6.136 to 6.148 of this manual.

Cash payments for employee expenses (ETF 212) records the total amount of cash paid for the employee expenses during the reporting period. In GFS, cash payments for employee expenses are further classified into:

• Cash paid for employee superannuation - defined contribution scheme (ETF 2121, SDC); 
• Cash paid for employee superannuation - defined benefit scheme (ETF 2122, SDC); 
• Salary sacrifice expenses - superannuation (ETF 2123, SDC); 
• Salary sacrifice expenses - items other than superannuation (ETF 2124, SDC); and 
• Cash payments for employee expenses not elsewhere classified (ETF 2129, SDC).

Cash paid for employee superannuation - defined contribution scheme (ETF 2121, SDC) records the value of cash paid for employee defined contribution superannuation schemes during the reporting period. Further information on defined contribution superannuation schemes can be found in paragraph 7.11 and Chapter 13 Part I of this manual.

Cash paid for employee superannuation - defined benefit scheme (ETF 2122, SDC) records the value of cash paid for employee defined benefit superannuation schemes during the reporting period. Further information on defined benefit superannuation schemes can be found in paragraphs 7.12 to 7.14, and Chapter 13 Part I of this manual.

Salary sacrifice expenses - superannuation (ETF 2123, SDC) records the value of cash paid for expenses relating to salary sacrificed superannuation during the reporting period. Further information on salary sacrifice expenses can be found in Appendix 1 Part B of this manual.

Salary sacrifice expenses - items other than superannuation (ETF 2124, SDC) records the value of cash paid for expenses relating to salary sacrificed items other than superannuation during the reporting period. Further information on salary sacrifice expenses can be found in Appendix 1 Part B of this manual.

Cash payments for employee expenses not elsewhere classified (ETF 2129, SDC) records the value of cash paid for employee expenses not elsewhere classified during the reporting period. This category includes cash payments for wages and salaries, fringe benefits tax (FBT) expenses, and workers' compensation expenses.

Cash payments for non-employee expenses (ETF 213) records the value of the total amount of cash paid for non-employee expenses during the reporting period. In GFS, cash payments for non-employee expenses are further classified as: 

• Cash paid for the purchase of other goods and services (ETF 2131, SDC); 
• Subsidies paid (ETF 2132, SDC); 
• Grants paid (ETF 2133, SDC);
• Other transfer payments (ETF 2134, SDC);
• Interest paid (ETF 2135, SDC); 
• Distributions paid (ETF 2136, SDC); and 
• Cash payments for non-employee expenses not elsewhere classified (ETF 2139, SDC).

Cash paid for the purchase of other goods and services (ETF 2131, SDC) records the value of cash paid for the purchase of other goods and services during the reporting period. Further information on government payments for goods and services can be found in paragraphs 7.30 to 7.34 of this manual.

Subsidies paid (ETF 2132, SDC) records the value of cash transfers paid in the form of subsidies during the reporting period. Further information on subsidies can be found in paragraphs 7.44 to 7.46 of this manual.

Grants paid (ETF 2133, SDC) records the value of cash transfers paid in the form of current and capital grants during the reporting period. Further information on grants paid can be found in paragraphs 7.42 to 7.43 of this manual.

Other transfer payments (ETF 2134, SDC) records the value of cash paid for other transfer payments during the reporting period. Further information on other transfer payments can be found in paragraphs 7.47 to 7.55 of this manual.

Interest paid (ETF 2135, SDC) records the value of cash paid for interest. Included are interest paid in cash on advances, loans, overdrafts, bonds and bills, and deposits during the reporting period. Further information on interest paid can be found in paragraphs 7.56 to 7.62 of this manual.

Distributions paid (ETF 2136, SDC) records the cash value of distributions paid in the form of cash transfers by public enterprises to their parent entities and other shareholders in the form of dividends, transfer of profits or other similar distributions during the reporting period. Further information on types of distributions paid can be found in paragraphs 7.63 to 7.77 of this manual.

Cash payments non-employee expenses not elsewhere classified (ETF 2139, SDC) records the value of cash paid for other non-employee expenses not elsewhere classified.

Cash flows from transactions in non-financial assets (ETF 22, SDC and ETF 221, SDC) records the value of the total cash flows from transactions in non-financial assets by government during the reporting period. This category is further classified into expenditure on non-financial assets (net) (ETF 221). This category is similar to transactions in non-financial assets (ETF 4), but only cash-based transactions are recorded here.

Expenditure on non-financial assets (net) (ETF 221) records the total value of expenditure on nonfinancial assets in cash during the reporting period, on a net basis. This refers to net expenditure on new and second-hand non-financial assets, and sales of non-financial assets. Non-financial assets are durable goods intended to be employed in the production process for longer than a year. In GFS, expenditure on non-financial assets (net) (ETF 221) is further classified into:

• Purchases of new non-financial assets (ETF 2211, SDC);
• Purchases of second-hand non-financial assets (ETF 2212, SDC); and 
• Sales of non-financial assets (ETF 2213, SDC).

Purchases of new non-financial assets (ETF 2211, SDC) records the value of cash purchases of new nonfinancial assets. Non-financial assets are economic assets other than financial assets, and the main categories are produced assets (such as fixed produced assets, inventories, and valuables) and nonproduced assets (such as natural resources, contract, leases and licenses, and goodwill and marketing assets). Included is the purchase of mineral deposits, timber tracts and similar tangible assets. Also included in this category is the purchase of intangible assets such as patents and copyrights. This category also includes cash paid for non-financial assets constructed on own account, valued at cost of materials, and capitalised salaries and wages, and reimbursements received by public authorities for amounts spent on capital works while acting as an agent for other government and private bodies. Assets acquired under finance lease arrangements are excluded from this category. Further information on non-financial assets can be found in paragraphs 8.54 to 8.145 and Chapter 9 of this manual.

Purchases of second-hand non-financial assets (ETF 2212, SDC) records the value of cash purchases of second-hand non-financial assets during the reporting period. Excluded are second-hand assets imported into the country for the first time which are regarded as new for classification purposes. Also excluded are assets acquired under finance lease arrangements. Further information on non-financial assets can be found in paragraphs 8.54 to 8.145 and Chapter 9 of this manual.

Sales of non-financial assets (ETF 2213, SDC) records the value of cash sales of non-financial assets during the reporting period. This refers to sales of non-financial assets, and relates mainly to the disposal of previously rented dwellings, non-residential buildings, and used plant and equipment. It also refers to the sale of land (including the sale of residential leases in the ACT). The sale of land and buildings as a package is treated as sales of non-financial assets unless a separate value can be determined for the land component. It also refers to the outright sales of intangible assets. Further information on non-financial assets can be found in paragraphs 8.54 to 8.145 and Chapter 9 of this manual.

Cash flows from transactions in financial assets for policy purposes (ETF 23) refers to cash receipts from the repayment and liquidation of investments in financial assets for policy purposes, less cash payments for acquiring financial assets for policy purposes. Acquisitions of financial assets for policy purposes are distinguished from investments by the underlying government motivation for acquiring the assets. Where assets are acquired for the purpose of implementing or promoting government policy (e.g. loans to assist industry development), the acquisition of the assets is treated as being for policy purposes. Acquisition of financial assets for policy purposes includes government policies encouraging the development of certain industries or assisting citizens affected by natural disaster. In GFS, cash flows from transactions in financial assets for policy purposes are further classified into:

• Advances paid (net) (ETF 231); and 
• Equity acquisitions, disposals and sale of equity (net) (ETF 232).

Advances paid (net) (ETF 231, SDC) records the net value of advances paid by public sector units for policy purposes. Advances are the creation of financial assets (i.e. an increase in the indebtedness to public sector units) with the aim of funding particular enterprise, household or government activities. The repayments of such advances are netted off advances to give net advances. Advances are distinguished from other financial assets (e.g. investments) in that advances are motivated by public policy purposes while investments are motivated by liquidity management purposes and the need to earn a return. In GFS, advances paid (net) are further classified into:

• Advances paid - concessional loans (ETF 2311, SDC); 
• Advances paid other than concessional loans (ETF 2312, SDC);and 
• Repayments of advances (ETF 2313, SDC).

Advances - concessional loans (ETF 2311, SDC) records the value of advances paid in the form of concessional loans during the reporting period. Concessional loans are loans with contractual interest rates intentionally set below the market interest rate that would otherwise apply. Further information on advances in the form of concessional loans can be found in paragraphs 8.175 to 8.176 and Chapter 13 Part B of this manual.

Advances other than concessional loans (ETF 2312, SDC) records the value of payments of advances other than concessional loans during the reporting period. This category includes advances to purchasers of assets sold to private enterprises, advances from one level of government to another and advances between units at the same level of government (e.g. general government to PNFCs). Further information on advances other than concessional loans can be found in paragraphs 8.177 to 8.179 and Chapter 13 Part B of this manual.

Repayments of advances (ETF 2313, SDC) records the value of repayments in cash of advances paid for policy purposes. Repayments of advances refer to repayments of advances made by public authorities to private enterprises, persons and non-profit institutions, foreign governments and organisations, and other public authorities. This category excludes amounts on-passed by public enterprises to their parent governments from the liquidation of assets, capital restructuring, etc. Also excluded are proceeds received by government from sales to the private sector of some or all equity in public enterprises.

Equity acquisitions, disposals and sale of equity (net) (ETF 232) records the net value of the acquisition and disposal of shares and other equity in public enterprises (note that the net value of the acquisition and disposal of shares and other equity in private enterprises is recorded as increase in investments (ETF 2411, SDC). Disposal of financial assets acquired for policy purposes includes proceeds from sales of equity in public corporations, including privatisations and sale of subsidiaries by public corporations. In GFS, equity acquisitions, disposals and sale of equity (net) are further classified into:

• Equity acquisitions (ETF 2321, SDC); and 
• Equity disposals and sale of equity (ETF 2322, SDC).

Equity acquisitions (ETF 2321, SDC) records the value of equity acquisitions in cash. Equity acquisitions refer to acquisitions of shares and other equity in public and private enterprises. Further information on equity can be found in paragraphs 8.169 and 8.170 of this manual.

Equity disposals and sale of equity (ETF 2322, SDC) records the value of equity disposals and the sale of equity in cash. This consists of proceeds received from disposals of some or all equity in public and private enterprises. It includes proceeds received by general government from sales of public enterprises. It also includes proceeds received by public enterprises from sales of subsidiary public enterprises. Further information on equity can be found in paragraphs 8.169 and 8.170 of this manual.

Cash flows from investments in financial assets for liquidity management purposes (ETF 24) refers to cash receipts from liquidation or repayment of investments in financial assets for liquidity management purposes less cash payments for such investments. Investment for liquidity management purposes means making funds available to others with no policy intent and with the aim of earning a commercial rate of return. Where the assets are acquired for the purposes of managing the government’s cash reserves (e.g. investment in shares with the aim of maximising returns), then the acquisition is considered as arising for liquidity management purposes. In GFS, cash flows from investments in financial assets for liquidity management purposes (ETF 24) is further classified into increase in investments (ETF 241). Furthermore increase in investments (ETF 241) is classified into increase in investments (ETF 2411, SDC)

Increase in investments (ETF 2411, SDC) records the value of increases in investments in cash. Investments are financial assets for the purpose of earning a return and managing liquidity. This makes them distinct from advances which are motivated by specific policy objectives. Also includes investments in private corporations for the purpose of earning a return. Investments included in this category are generally long term assets.

Cash flows from financing activities (ETF 25) refers to cash receipts from borrowing by public sector units less cash repayments, or redemption of such borrowing in the past. Cash flows from other financing activities does not include the increase in liability or borrowing related to the acquisition of a finance lease or similar arrangement, because no cash flows have actually occurred. When cash flows associated with a finance lease or similar arrangement do occur they are reflected in the cash flow statement for that period. The reduction in liability from subsequent lease repayments is split into a principal and an interest component. Repayments of lease principal are included here. Interest repayments in cash are classified as cash flows from operating activities. In GFS, cash flows from other financing activities are further classified into:

• Advances received (net) (ETF 251); 
• Borrowing (net) (ETF 252); 
• Deposits received (ETF 253); and 
• Other financing (net) (ETF 259).

Advances received (net) (ETF 251) records the net value of cash advances received. Advances may be received by public sector units from other public sector units, for example from one level of government to another and between units at the same level of government (e.g. general government to public corporations). Advances can also be received from foreign governments and organisations, such as the International Bank for Reconstruction and Development and the International Development Association. In GFS, cash flows from advances received (net) are further classified into:

• Advances received - concessional loans (ETF 2511, SDC); 
• Advances received other than concessional loans (ETF 2512, SDC); and 
• Advances repaid (ETF 2513, SDC).

Advances - concessional loans (ETF 2511, SDC) records the value of advances received in the form of concessional loans. Concessional loans are loans with contractual interest rates intentionally set below the market interest rate that would otherwise apply. Further information on advances in the form of concessional loans can be found in paragraphs 8.175 to 8.176 and Chapter 13 Part B of this manual.

Advances other than concessional loans (ETF 2512, SDC) records the value of advances received from sources other than concessional loans. This includes advances to purchasers of assets sold to private enterprises, advances from one level of government to another and advances between units at the same level of government (e.g. general government to PNFCs). Further information on advances other than concessional loans can be found in paragraphs 8.177 to 8.179 and Chapter 13 Part B of this manual

Advances repaid (ETF 2513, SDC) records the value of repayments of advances made by public authorities to private enterprises, persons and non-profit institutions, foreign governments and organisations, and other public authorities. Excluded are amounts on-passed by public enterprises to their parent governments from the liquidation of assets, capital restructuring, etc. Further information on advances can be found in Chapter 8 of this manual.

Borrowing (net) (ETF 252 and ETF 2521, SDC) records the net borrowing by public authorities from public and private bodies and individuals within Australia and from abroad. Borrowing is the creation of liabilities through, for example, sale of bonds and bills in the capital market, raising loans through direct agreements with lenders or issuing shares and other equity (public corporations only). Included in this category is borrowing from other government units and receipt of deposits. Also included are borrowing from the International Bank for Reconstruction and Development, borrowing under credit arrangements with foreign governments and authorities, and the issue of stock and bonds abroad. Excluded from this category is the receipt of advances from other government units (these transactions are classified to advances other than concessional loans (ETF 2512, SDC)).

Deposits received (ETF 253) refers to cash flows from the receipt of deposits. Deposits include cash held in public accounts by treasuries on behalf of other government units (e.g. public non-financial corporations) that operate through a trust account held in the public accounts. Deposits lodged by public non-financial corporations and other public sector units with Central Borrowing Authorities (CBAs) are included, as are deposits lodged by private sector entities with public financial corporations. In GFS, cash flows from deposits received are classified into increase in deposits received (ETF 2531, SDC).

Increase in deposits received (ETF 2531, SDC) records the value of increases in deposits received. Increases in deposits refer to the net increase in cash held by a public sector unit as a result of a net change to its liabilities generated by taking deposits from a private body or other public sector unit. Included in the category is cash held in public accounts by treasuries on behalf of other government units, e.g. PNFCs which operate through a trust account held in the public accounts. It also includes deposits lodged by PNFCs and other public sector units with Central Borrowing Authorities (CBAs) and by private sector entities with PFCs. Further information on deposits can be found in paragraph 8.151 of this manual.

Other financing (net) (ETF 259) records cash flows received by government from any other type of financing activities. In GFS, cash flows from other financing are classified as other financing not elsewhere classified (net) (ETF 2599, SDC).

Other financing not elsewhere classified (net) (ETF 2599, SDC) records the cash value of other financing by public sector units that are not elsewhere classified.

Increase / (decrease) in cash held (ETF 26, ETF 261 and ETF 2611, SDC) is an aggregate balancing item in GFS, and is calculated as follows:

Increase / (decrease) in cash held (ETF 26, ETF 261 and ETF 2611, SDC) refers to increases and decreases in the stock of cash on hand and cash equivalents held during the accounting period. Cash on hand refers to notes and coins held, and funds held in the form of an account with financial institutions, other government authorities, etc., which are recoverable (or transferable) on demand or on relatively short notice. Cash equivalents refer to highly liquid investments which are readily convertible to cash on hand at the investor's option. Included in this category are increases in cash and bank balances, funds lodged with treasuries or Central Borrowing Authorities (CBAs), balances at call, and foreign cash and deposits. This classification item also includes funds invested by public authorities for a fixed period of time (short term). Further information on cash can be found in paragraphs 8.150 to 8.154 of this manual.