The title is a paraphase of "Water water everywhere but not a single drop to drink" from Coleridge's The Rime Of The Ancient Mariner. It's a despair of denial in a state of plentiful.
Singaporeans are pretty sure that the government collects a helluva lot of money each year and are perplexed at the continual attempt to extract more from the people, the latest being the increase in GST. This has led to overload of negative comments in social media. I can't help noticing the regularity of the same comments over and over again, many in ignorance of how the government accounts for the cash it collects. I have blogged on this but here I want to explain in a different manner with the help of the pictorial schematic. I think this can be a reference material for government accounting lol.
The chart shows 3 aspects - the cash inflows, record keeping and cash outflows..
CASH INFLOWS:
All cash flows into the government's account at MAS. The governmemt has 4 main streams of cashflow. :
(1) Revenue -- taxes, duties, fees, fines, rental, NIRC from SWF. part of earnings from MAS.
(2) Fiduciary money -- these are funds of statutory boards that they do not have immediate use yet and other agencies who hold funds not belonging to them, example cash bonds from courts. These are deposited with the government for pooled investing.
(3) Debt -- these are proceeds from various government securities (SSGS for CPF, SGS, Savings bonds etc) and income from government investment. (Not all cash are transferred to GIC or Temasek. Government does some investment themselves).
(4) Land sales -- proceeds of land sales by SLA.
RECORDING:
(5) Cash A/c - All receipts (1) (2) (3) (4) and all payments (12) are recorded in Cash A/c.
(6) Consolidated Fund - Only receipt (1) Revenue is recorded in the Consolidated Fund. This is the only income stream the government can spend. The government spends in 2 ways -
(a) Fiscal spending - what is budgeted for the running of each Ministry. When the Ministries spend, the payments (17) are recorded in the Consolidated Fund.
(b) Discretionary spending - for various special programmes. Money for the special programmes are 'appropriated' (taken out of, or set aside from) Consolidated Fund to the relevant discretionary funds. When money is spent on these programmes, the payments are recorded in the relevant discretionary fund.
(7) Discretionary Funds -- A specific fund is set up for each spending programme -- eg Pension Fund, GST Voucher Fund, Development Fund, Merdeka Generation Fund etc. Discretionary funds are legislated - a law is passed to authorise and specify the spending. Appropriations from Consolidated Fund and programme expenditures are recorded in the relevant discretionary fund.
(8) Fiscal surplus - the amount budgeted for all the ministries which were under-spent.
(9) Fiduciary Fund - all cash from depositors and withdrawals are recorded directly in the Fiduciary Fund.
(10 Securities Fund - This fund records (a) proceeds from issuance of government securities, (b) earnings from government investments,(c) payouts for redemption of government securities and (d) expenses in connection with the securities issued.
(11) Securities A/c - This a/c records (a) all cash transferred to GIC/Temasek for long term investment (b) investments made by Government itself, (c) disposals of securities. Balance in the account is represented by the capital injection into the SWF and cost of investments held by the government.
CASH OUTFLOWS:
(12) All payments are recorded in the Cash a/c. There are 4 types of payments - (13) to (18).
(13) Transfers to GIC/Temasek are recorded in Investment a/c.
(14) Purchase of investments by government are recorded in Investment a/c
(15) Redemption of govt securities and related expenses are recorded in Securities Fund.
(16) Withdrawal of fiduciary deposits and its related expenses are recorded in Fiduciary Fund.
(17) Expenditures of all ministries (fiscal) are recorded in Consolidated Fund
(18) All payments relating to various legislated programmes are recorded in the relevant discretionary fund.
FURTHER EXPLANATION:
1. Cash basis : The government account is only about what cash came in and how the government uses it. It does not cover all the financial affairs of the state.
2. Government investment : At all times the govt maintains enough liquidity for their immediate needs. These are kept in liquid cash at MAS and some invested in very short term securities which it manages itself.
3. Note that cash is all co-mingled. The control for how cash is spent is in the Funds accounts. (That's why government accounting is called Fund Accounting). This ensures that money that is not meant to be spent (fiscal surplus, land sales, proceeds from govt securities) are not spent.
4. Government Financial Statements : From this cash flow, 2 statements are prepared:
(a). Government income statement - this shows ALL receipts, including proceeds of land sales.
(b). Government Assets & Liabilities - This statement does not represent the country's aggregate assets & liabilities. It only shows :-
(i) Assets -- comprising of Cash a/c and Investment a/c. The cash balance is reflected in the govt a/c at MAS. The balance in the Investment a/c is reflected in (i) cost of investments held by the government and (ii) amount transferred to, or capitalised, in GIC & Temasek for long term investment.
(ii) Liabilities -- comprising all the funds accounts. Balances represent money set aside for specific purposes but not yet spent.
5. Country balance sheet : To determine the country's entire assets & liabilities we need to consolidate the balance sheets of all the ministries, all statutory boards, fifth schedule entities (CPFB, HDB, MAS, Temasek, GIC, etc), and all companies owned by these entities. This consolidated balance sheet will cover all assets owned by the government -- all buildings, state land, ports, MRT tracks and stations, F15s, satellites, etc.
6. Reserves : This cannot be determined from the cash statements. The country balance sheet (5) is needed. The net assets, or equity, from this country balance sheet is the country's reserve. Where are these reserves? Major part of these are invested in GIC and Temasek.
