## 1mdgea2021002 - 2. Preliminary Statement of the Non-Consolidated Operations of the General Government

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### Introduction and Mission Objective
- Remote Government Finance Statistics (GFS) mission from IMF Statistics Department (STA) conducted in Madagascar from October 26 to November 13, 2020.
- Objective: continue supporting adoption of GFSM 2014 and PSDSG methodologies and improve GFS quality.

### Key Findings and Status
- Progress since 2016 under EDDI2: significant improvements in GFS.
- Current status and capabilities:
  - Reporting of GFS to the IMF Statistics Department is routine; the annual GFS questionnaire on budgetary central government operations is complete and reported to IMF’s Statistics Department.
  - Recording of Other Net Treasury Transactions (AONT) on a gross rather than net basis is largely done.
  - Availability of basic accounting sources is now on a solid footing, enabling short-term compilation of consolidated GFS for the entire Malagasy general government.
- Postponed targets following 2020 government change:
  - Adoption of a regulatory text governing compilation and dissemination of GFS.
  - Adoption of GFSM 2014 analytical framework and classifications for official national GFS and the table of General Treasury Operations (OGT).
- Capacity notes:
  - Authorities demonstrate strong technical skills in statistical methodology.
  - Some difficulties remain interpreting and processing accounting procedures (provisions, equity, depreciation) requiring cooperation with accounting departments.

### Mission Work and Technical Focus
- Main technical focuses:
  - Improve bridge tables between accounting nomenclatures (EPAs, CTDs, CNaPS) and GFSM 2014 statistical nomenclature.
  - Prepare GFS for EPAs, CTDs, and CNaPS from accounting balances.
  - Consolidate sub-sector GFS to produce consolidated general government GFS.
  - Compile a financial balance sheet.
  - Review and update an action plan to develop and report consolidated statistics by mid-2021.
- Reiterated needs:
  - Establish a regulatory framework for compilation and dissemination of GFS.
  - Formalize organization of work and standardize regular data compilation procedures.

### Outlook and Immediate Priorities
- Feasibility: preparing a first set of consolidated GFS for all general government sub-sectors by mid-2021 is feasible.
- Two immediate priorities:
  - By mid-2021, prepare Statement of Operations and detailed tables of revenues, expenses and transactions in assets and liabilities for each general government sub-sector and the consolidated statement.
  - Consolidate achievements by assessing adequacy of work organization and procedures, including:
    - Formalize working procedures via regulatory framework for GFS to strengthen DE’s coordinating role.
    - Systematize the work to standardize regular data compilation.

### Priority Recommendations (selected)
- Q2 2021: Review and complete mission work to produce a first set of consolidated GFS for the entire Malagasy general government. — Responsible: DE, CNaPS
- Q2 2021: Pass a law defining the institutional and administrative framework for the compilation and dissemination of GFS. — Responsible: MEF, DE, and other partners in macroeconomic statistics
- Q2 2021: Systematize GFS compilation procedures based on experience already gained. — Responsible: DE and partners in GFS

### Draft Action Plan for 2021 — Selected Actions and Targets
- Outcome: Regulatory framework
  - High priority 1. Relaunch adoption of a decree on compilation and dissemination of GFS.
    - Verifiable indicator: The decree has been adopted.
    - Target Completion Date: March 31, 2021
  - High priority 2. Have the DE and MEP-INSTAT sign a memorandum of understanding.
    - Verifiable indicator: The memorandum of understanding has been signed.
    - Target Completion Date: Monday, December 31, 2018
  - High priority 3. Establish and sign protocols between the DE and source data providers.
    - Verifiable indicator: Memoranda of understanding have been signed.
    - Target Completion Date: March 31, 2021
- Outcome: Compare the nomenclatures of core sources and the GFSM
  - High 4. Review and complete the bridge tables prepared by the mission between various government charts of accounts and the GFSM 2014 nomenclature.
    - Verifiable indicator: Bridge tables have been checked and completed.
    - Target Completion Date: March 31, 2021
  - High 5. Ensure consistency between the various bridge tables.
    - Verifiable indicator: A single consolidated bridge table exists, or mechanisms to ensure consistency are in place.
    - Target Completion Date: March 31, 2021
- Outcome: Consolidation and completion of the GFS questionnaire
  - High 6. Consolidation: Identify and quantify flows between different levels of government.
    - Verifiable indicator: Intra- and inter-governmental flows identified and recorded in a whom-to-whom table (see Annex 1 of the GFS questionnaire).
    - Target Completion Date: March 31, 2021 for the central government; June 30, 2021 for all sub-sectors
  - High 7. Assemble and fill in the tables of revenues, expenses and transactions on assets and liabilities of the GFS questionnaire and submit to IMF.
    - Verifiable indicator: The GFS questionnaire for consolidated general government is completed and submitted to IMF Statistics Department.
    - Target Completion Date: June 30, 2021
  - Medium 8. Preparation of a financial balance sheet for budgetary central government and completion of Table 6 of the GFS questionnaire.
    - Verifiable indicator: A balance sheet is prepared and reported to IMF Statistics Department.
    - Target Completion Date: September 30, 2021
  - Medium 9. Consistency between debt statistics and debt liabilities in the financial balance sheet.
    - Verifiable indicator: Debt liabilities are consistent with debt statistics.
    - Target Completion Date: October 30, 2021
  - High 10. Reporting of debt statistics in the IMF GFS questionnaire (Tables 6 and 7).
    - Verifiable indicator: Central government debt statistics are reported to the IMF.
    - Target Completion Date: June 30, 2021
  - Medium 11. Preparation of the cash flow statement for budgetary central government in Statement II of the GFS Questionnaire.
    - Verifiable indicator: The government's cash flow statement is prepared and reported to the IMF.
    - Target Completion Date: September 30, 2021
- Outcome: Identification and expansion of institutional coverage
  - High 12. Develop relevance indicators for field coverage (e.g., weight of the 44 EPAs already covered).
    - Verifiable indicator: The weight of entities covered relative to all has been assessed.
    - Target Completion Date: March 31, 2021
  - Medium 13. Expand institutional coverage to other EPAs and non-market EPICs according to relevance.
    - Verifiable indicator: Process of sorting between market and non-market EPICs has begun; GFS for non-market EPICs are prepared.
    - Target Completion Date: Ongoing
- Outcome: Organization of work and other aspects
  - High 14. Assessment of the data preparation process and organization of work.
    - Verifiable indicator: Current working methods assessed with a view to improving them.
    - Target Completion Date: June 30, 2021
  - High 15. Establish mechanisms and schedules for spontaneous reporting of baseline data within the context of protocols.
    - Verifiable indicator: Reporting mechanisms and schedules are in place.
    - Target Completion Date: March 31 (year not specified)
  - High 16. Develop baseline data submission and supplementary information questionnaires for baseline data providers.
    - Verifiable indicator: Specific questionnaires and forms are prepared and offered.
    - Target Completion Date: June 30, 2021
  - Medium 17. Adoption of GFSM 2014 for the OGT.
    - Verifiable indicator: The OGT adopts the statement of operations format and classifications from the GFSM 2014.
    - Target Completion Date: TBD
  - Medium 18. Draft a Concepts, Sources and Methods document.
    - Verifiable indicator: The document has been drafted and is updated over time.
    - Target Completion Date: Pending effective implementation of GFS and OGT according to GFSM 2014

Note: action plan time frame limited to 2021; beyond 2021 additional work needed to adopt more complex aspects of GFSM 2014 and PSDSG (e.g., application of accrual accounting).

### Technical Issues and Recommendations — Bridge Tables, Provisions, Equity, Depreciation
- Bridge table improvements:
  - Review bridge tables and address remarks accompanying classifications.
  - Verify accuracy of classifications and validity of assumptions; revise where necessary.
  - Give special consideration to records relating to provisions, equity and depreciation.
- Provisions (treatment and recommendation):
  - GFSM 2014: provisions should not be recorded in the statistics and should in principle be excluded.
  - Exclusion must preserve statistical identity without disrupting accounting balance; exclusion is complex and requires access to detailed underlying records.
  - Recommendation: DE must work closely with accounting departments to eliminate these records in a balanced way.
- Equity accounts (treatment and recommendation):
  - Entries to equity accounts are accounting in nature and do not reflect economic flows; they must be excluded from statistics.
  - Elimination of class 1 equity accounts (accounts 10 to 12) and offsetting entries required while preserving accounting balance; cooperation with accounting departments necessary.
  - Recommendation: Introduce mechanisms to standardize treatment of provision accounts and class 1 accounts (10 to 12).
- Depreciation and Consumption of Fixed Capital (CFC):
  - GFSM 2014: CFC is a transaction and should be recorded; CFC differs conceptually from accounting depreciation.
  - Replacement of depreciation with economic CFC is likely not feasible short-term.
  - DE alternatives:
    - Use accounting depreciation and counterpart in fixed assets accounts for GFS.
    - Or eliminate allowances and present non-financial assets on a gross basis.
  - Recommendation: Use depreciation as a substitute for the CFC until economic calculation of CFC is feasible.

### Compilation, Consistency Checks, and Systematization
- Data compilation workflow:
  - Prepare data compilation file to receive source data (copying/pasting balances by sub-sector); statistical tables fill automatically.
  - Bridge files are separate from data establishment files; manage links between files.
  - Consistency of GFS verified by statistical identity at bottom of statement of operations and accompanying consistency tables.
- Recommended consistency checks:
  - Verify statistical identity between net lending/net borrowing and financing.
  - Verify consistency between aggregates (revenue, expenses, non-financial assets) and source account classes (classes 7, 6, 2/3).
  - Introduce additional checks for change in financial assets and change in liabilities (classes 4 and 5).

### Consolidation — Steps, Types, and Practical Scope
- Consolidation steps:
  - Aggregate statistics of different sub-sectors.
  - Eliminate intra- and inter-subsector transactions (mainly transfers).
- Two consolidation types:
  - Intra-sector consolidation: eliminate transactions within same sub-sector (e.g., budgetary account and extra-budgetary account within central government).
  - Inter-sector consolidation: eliminate transactions between central government, CNaPS and CTDs.
- Questionnaire limitations:
  - Consolidation column of annual GFS questionnaire does not distinguish between intra-sectoral transactions among OGTs/EPAs and inter-sectoral transactions.
  - No consolidation column for internal consolidation of OGTs, EPAs and CTDs.
- Data collection status and recommendations:
  - DE has started collecting intergovernmental transfer data; discrepancies between payers and recipients are large and work is in infancy.
  - Priority actions:
    - Identify intra-sectoral transactions for budgetary and extra-budgetary accounts and within CTDs.
    - Eliminate internal transactions to obtain consolidated sub-sector GFS.
    - Identify inter-sectoral transactions between the three general government sub-sectors and eliminate them to obtain consolidated Malagasy general government statement of operations.
- Practical scope: in practice, eliminations focus on large flows:
  - Current and capital grants (subsidies/transfers) from budgetary central government to EPAs and CTDs.
  - Interest on debt securities held by other general governments (mainly CNaPS).
  - Taxes paid to State and CTDs by other general governments.
  - Credits granted by the State (including retrocession of external credits).

### Financial Balance Sheet Compilation
- First step: classify assets and liabilities listed in balance sheet.
- Two data situations:
  - Balance sheet from trial balance: opening/closing balances usable to prepare stock positions; replace flow codes with stock position codes (e.g., replace 3212 with 6212).
  - Balance sheet absent: reorganize balance sheet items when groupings comply with GFSM 2014; some items require detailed information.
- Valuation and coverage issues:
  - GFSM 2014 recommends market valuation, differing from accounting historical costs.
  - Operational coverage of statement of operations may differ from balance sheet; OGTs may require non-accounting information to complete scope.
- Recommendation:
  - Regroup outstanding amounts in trial balances of Treasury, EPAs, CTDs and CNaPS to draw up respective financial balance sheets and consolidated financial balance sheet; apply flow consolidation principles to stock positions.
  - Add a column to bridge table for asset and liability stock position codes and integrate SUMIF into Table 6 of GFS questionnaire.

### Other Economic Flows and Institutional Scope
- Other economic flows:
  - Statement of other economic flows should cover entire GFSM 2014 analytical framework but is not a priority.
  - Most flows can be extracted from balance sheet (holding gains/losses, revaluations).
  - Other changes in volume may require supplementary information.
- Broadening institutional scope:
  - Current GFS scope limited to budgetary central government, EPAs, non-market EPICs (where covered), CNaPS (sole social security entity), and CTDs.
  - Mission objective: compile statistics covering at least 44 EPAs, CNaPS and CTDs and their consolidation.
  - Resource implications: extension to extra-budgetary central government likely resource-intensive.
  - Recommendation: develop simple relevance indicators (e.g., weight based on number of employees or personnel costs) for EPAs and EPICs to prioritize extension.

### Systematization of Procedures and Next Mission
- Outlook:
  - Compilation of consolidated GFS for 2019 for all Madagascar general governments is possible in near future but requires significant sustained resources.
  - Learn from first experience to systematize and standardize development process (DE organization, staff skill sharing, relations with source data providers, accounting and IT services).
- Follow-up mission scope:
  - DE expressed interest in a future mission to cover previously mentioned topics.
  - Monitoring priorities to enable consolidation:
    - Exclusion of provision and equity account records (accounts 10 to 12) while preserving accounting balance of the rest of trial balance.
    - Identification of transfers between different units of government for consolidation.
  - Completion of these objectives should enable DE to carry out consolidation or gather sufficient information for consolidation during next mission.

### Officials Met
- (Mr) RANJALAHY Ihajambolatiana — Director General of the Treasury, DGT
- (Mrs.) RANDRIANIRINA Hanitra Olivia — Director of Research, DE
- (Mrs.) RANDRIAMAROLAFY Odile — Head of department at the DE, Treasury Inspector
- (Mr) RAKOTOBE Tahina Herilalaina — Research Officer, Treasury Inspector
- (Mrs.) RAVELOJAONA Mireille Harivola — Research Officer
- (Mr) ANDRIANANTENAINARINORO Oely Hasina — Research Officer, Treasury Inspector
- (Mr) ANDRIANASOLO Hoby Miarantsoa — Research Officer
- (Mr) HERINIAINA Lahady Eugene — Research Officer
- Lahady Eugen HERINIAINA — Research Officer
- (Mr) Lovanandrianina RAKOTOMAMONJY — Head of Accounting, CNaPS
- (Mr.) Hiaja RAKOTOARISON — Finance Director, CNaPS
- (Mr.) Manan'lala ANDRIANTSALAMA — IT Director, CNaPS

### Key Preliminary Fiscal Figures (Table 2.a In Ariary, 2019) — selected lines
- TRANSACTIONS AFFECTING NET WORTH:
  - 1 Revenue: 7,490,632,291,557 26,550,956,734 117,663,625,838 334,812,915,654
  - 11 Tax revenues: 5,374,959,911,557 0 58,576,390,728 0
  - 111 Income, profit and capital gains taxes: 1,428,749,683,004 0 36,564,965,098 0
  - 12 Social security contributions: 305,544,900,000 0 0 286,867,403,545
  - 13 Donations: 1,586,813,000,000 22,591,552,458 32,104,605,122 0
  - 14 Other revenue: 223,314,480,000 3,959,404,276 26,982,629,987 47,945,512,109
- 2 Expenses: 5,171,333,712,522 19,671,835,972 64,034,552,145 268,632,786,372
  - 21 Employee remuneration: 2,494,610,826,893 10,691,518,084 50,366,683,653 27,209,591,621
  - 22 Use of goods and services: 345,510,151,750 8,668,449,837 14,339,979,162 19,728,670,201
  - 23 Consumption of fixed capital: 0 30,581,473 0 18,032,746,343
  - 24 Interest: 355,997,157,518 129,600 0 0
  - 25 Grants: 784,483,200,000 9,500,000 53,000,000 0
  - 27 Social benefits: 707,099,635,650 0 3,262,541 200,687,584,642
- GOB Gross operating balance (1-2+23+NOBz): 2,319,298,579,035 6,909,702,235 53,629,073,693 84,212,875,625
- NOB Net operating balance (1-2+NOBz) c/: 2,319,298,579,035 6,879,120,762 53,629,073,693 66,180,129,281
- TRANSACTIONS IN NON-FINANCIAL ASSETS:
  - 31 Net acquisition of non-financial assets: 2,854,586,000,000 2,621,020,579 20,521,401,195 253,959,934,830
- NLB Financing capacity / need (1-2+NOBz-31): -535,287,420,965 4,258,100,183 33,107,672,498 -187,779,805,549
- TRANSACTIONS IN FINANCIAL ASSETS AND LIABILITIES (FINANCING):
  - 32 Net acquisition of financial assets: 112,199,000,000 8,267,832,560 58,170,973,092 697,366,553,798
    - 321 Domestic: 95,815,000,000 8,267,832,560 58,170,973,092 621,095,113,368
    - 322 Foreign: 16,384,000,000 0 0 76,271,440,430
  - 33 Net accumulation of liabilities: 676,210,422,569 4,114,424,906 859,875,274 30,483,140,896
    - 331 Domestic: 21,108,422,569 4,114,424,906 859,875,274 30,483,140,896
    - 332 Foreign: 655,102,000,000 0 0 0
- NLBz Overall statistical discrepancy: NLB vs. Financing (32-33-NLB): -28,724,001,604 -104,692,529 24,203,425,321 854,663,218,451

### Key Preliminary Fiscal Ratios (Table 2.b Percentage of GDP, 2019) — selected lines
- TRANSACTIONS AFFECTING NET WORTH:
  - 1 Revenue: 14.7 0.1 0.2 0.7
  - 11 Tax revenues: 10.5 0.0 0.1 0.0
  - 111 Income, profit and capital gains taxes: 2.8 0.0 0.1 0.0
  - 12 Social security contributions: 0.6 0.0 0.0 0.6
  - 13 Donations: 3.1 0.0 0.1 0.0
  - 14 Other revenue: 0.4 0.0 0.1 0.1
- 2 Expenses: 10.1 0.0 0.1 0.5
  - 21 Employee remuneration: 4.9 0.0 0.1 0.1
  - 22 Use of goods and services: 0.7 0.0 0.0 0.0
  - 23 Consumption of fixed capital: 0.0 0.0 0.0 0.0
  - 24 Interest: 0.7 0.0 0.0 0.0
  - 25 Grants: 1.5 0.0 0.0 0.0
  - 27 Social benefits: 1.4 0.0 0.0 0.4
- GOB Gross operating balance (1-2+23+NOBz): 4.5 0.0 0.1 0.2
- NLB Financing capacity / need (1-2+NOBz-31): -1.0 0.0 0.1 -0.4
- TRANSACTIONS IN FINANCIAL ASSETS AND LIABILITIES (FINANCING):
  - 32 Net acquisition of financial assets: 0.2 0.0 0.1 1.4
    - 321 Domestic: 0.2 0.0 0.1 1.2
    - 322 Foreign: 0.0 0.0 0.0 0.1
  - 33 Net accumulation of liabilities: 1.3 0.0 0.0 0.1
    - 332 Foreign: 1.3 0.0 0.0 0.0
- NLBz Overall statistical discrepancy: NLB vs. Financing (32-33-NLB): -0.1 0.0 0.0 1.7

### Appendix I & II — Bridge Table Notes and CNAPS GFS Preparation (highlights)
- Bridge table recommendations and documentation:
  - Prefer basis on chart of accounts; mission used 2019 trial balance due to length of PCOP-CTD.
  - Include "Remarks" column in bridge table to explain classification choices and questions.
  - Long-term recommendation: establish a generic bridge table based on PCOP-CTD.
- Classification notes:
  - Class 7 revenue: focus on 14 revenue types representing more than 1% of Class 7 and covering 99% of total overall for 2019 (listed with account codes and percentages in source).
  - Class 6 expense classification generally straightforward from headings.
  - Class 2 fixed assets headings clearly indicate nature; no detailed mission classification for aggregation reasons.
  - Class 4 and 5 financial accounts: require explanations of control accounts and relation to other accounts.
  - Class 1 fund accounts: capital grants and disposals classified; accounts 10 to 12 excluded and require elimination for statistical identity.
- Imprest accounts:
  - Imprest accounts in use: 4092, 409218, 4711, 5410, 5411, 5418.
  - Classification decisions: 4092/409218 → other accounts receivable; 4711 → other accounts receivable; 5410/5411/5418 → currency and deposit assets.
  - Recommendation: provide description of operation and relation to CTDs.
- CNAPS compilation:
  - Two files used: CORRESPONDENCE CNAPS.xlsx and MDG GFS PC CNaPS xlsx.
  - Excluded accounts: equity accounts 10, 11 and 12; accounts relating to provisions, write-offs and impairment losses (15, 29, 39, 481, 49, 59, 68, 78).
  - Consistency procedure: ensure difference on line 46 equals balance of excluded accounts; include excluded accounts in two-stage adjustments to reach zero overall variance.

*Source: 1mdgea2021002 - 2. Preliminary Statement of the Non-Consolidated Operations of the General Government*

### 2.   Preliminary Statement of the Non-Consolidated Operations of the General Government

### 1mdgea2021002 - 2.   Preliminary Statement of the Non-Consolidated Operations of the General Government

### Introduction
- A remote Government Finance Statistics (GFS) mission from the IMF Statistics Department (STA) took place in Madagascar from October 26 to November 13, 2020, at the request of the Ministry of Economy and Finance (MEF) and in consultation with the Africa Department (AFR).
- Objective: continue supporting adoption of GFSM 2014 and PSDSG methodologies and improve GFS quality.

### Key Findings
- Since 2016 under the EDDI2 project, the Malagasy authorities have made significant progress in GFS.
- Improvements and status:
  - Reporting of GFS to the IMF Statistics Department is routine; the annual GFS questionnaire on budgetary central government operations is complete and has been reported to the IMF’s Statistics Department.
  - Recording of Other Net Treasury Transactions (AONT) on a gross rather than net basis is largely done.
  - Availability of basic accounting sources is now on a solid footing, enabling short-term compilation of consolidated GFS for the entire Malagasy general government.
- Two key targets postponed following a change of government in 2020:
  - Improving the regulatory framework by adopting a text governing compilation and dissemination of GFS.
  - Adoption of GFSM 2014 analytical framework and classifications for official national GFS and the table of General Treasury Operations (OGT).
- Authorities demonstrate strong technical skills in statistical methodology; some difficulties remain in interpreting and processing certain accounting procedures requiring cooperation with accounting departments.

### Mission Work
- Main focuses:
  - Improve bridge tables between accounting nomenclatures of Administrative Public Entities (EPA), Decentralized Subnational Governments (CTD) and National Social Security Fund (CNaPS) and GFSM 2014 statistical nomenclature.
  - Prepare GFS for EPAs, CTDs, and CNaPS from accounting balances.
  - Consolidate these GFS to produce consolidated GFS for all general government sub-sectors.
  - Compile a financial balance sheet.
  - Review and update action plan aiming to develop and report consolidated statistics by mid-2021.
- The mission reiterated need to establish a regulatory framework for compilation and dissemination of GFS and to formalize organization of work.

### Outlook and Priorities
- Implementation of GFSM 2014 methodologies is progressing well; preparing a first set of consolidated GFS for all general government sub-sectors by mid-2021 is feasible.
- Two immediate priorities identified:
  - By mid-2021, prepare Statement of Operations and detailed tables of revenues, expenses and transactions in assets and liabilities for each general government sub-sector and the consolidated statement.
  - Consolidate achievements by assessing adequacy of work organization and procedures, including:
    - Formalize working procedures via regulatory framework for GFS (to strengthen DE’s coordinating role).
    - Systematize work done to standardize regular data compilation.

### Priority Recommendations (Table 1)
- Q2 2021: Review and complete the mission's work to produce a first set of consolidated GFS for the entire Malagasy general government. — Responsible: DE, CNaPS
- Q2 2021: Pass a law defining the institutional and administrative framework for the compilation and dissemination of GFS. — Responsible: MEF, DE, and other partners in macroeconomic statistics
- Q2 2021: Systematize GFS compilation procedures based on experience already gained. — Responsible: DE and partners in GFS

### Draft Action Plan for 2021 — Selected Actions and Targets
- Outcome: Regulatory framework
  - High priority 1. Relaunch adoption of a decree on compilation and dissemination of GFS.
    - Verifiable indicator: The decree has been adopted.
    - Target Completion Date: March 31, 2021
  - High priority 2. Have the DE and MEP-INSTAT sign a memorandum of understanding.
    - Verifiable indicator: The memorandum of understanding has been signed.
    - Target Completion Date: Monday, December 31, 2018
  - High priority 3. Establish and sign protocols between the DE and source data providers.
    - Verifiable indicator: Memoranda of understanding have been signed.
    - Target Completion Date: March 31, 2021
- Outcome: Compare the nomenclatures of core sources and the GFSM
  - High 4. Review and complete the bridge tables prepared by the mission between various government charts of accounts and the GFSM 2014 nomenclature.
    - Verifiable indicator: Bridge tables have been checked and completed.
    - Target Completion Date: March 31, 2021
  - High 5. Ensure consistency between the various bridge tables.
    - Verifiable indicator: A single consolidated bridge table exists, or mechanisms to ensure consistency are in place.
    - Target Completion Date: March 31, 2021
- Outcome: Consolidation and completion of the GFS questionnaire
  - High 6. Consolidation: Identify and quantify flows between different levels of government.
    - Verifiable indicator: Intra- and inter-governmental flows identified and recorded in a whom-to-whom table (see Annex 1 of the GFS questionnaire).
    - Target Completion Date: March 31, 2021 for the central government; June 30, 2021 for all sub-sectors
  - High 7. Assemble and fill in the tables of revenues, expenses and transactions on assets and liabilities of the GFS questionnaire and submit to IMF.
    - Verifiable indicator: The GFS questionnaire for consolidated general government is completed and submitted to IMF Statistics Department.
    - Target Completion Date: June 30, 2021
  - Medium 8. Preparation of a financial balance sheet for budgetary central government and completion of Table 6 of the GFS questionnaire.
    - Verifiable indicator: A balance sheet is prepared and reported to IMF Statistics Department.
    - Target Completion Date: September 30, 2021
  - Medium 9. Consistency between debt statistics and debt liabilities in the financial balance sheet.
    - Verifiable indicator: Debt liabilities are consistent with debt statistics.
    - Target Completion Date: October 30, 2021
  - High 10. Reporting of debt statistics in the IMF GFS questionnaire (Tables 6 and 7).
    - Verifiable indicator: Central government debt statistics are reported to the IMF.
    - Target Completion Date: June 30, 2021
  - Medium 11. Preparation of the cash flow statement for budgetary central government in Statement II of the GFS Questionnaire.
    - Verifiable indicator: The government's cash flow statement is prepared and reported to the IMF.
    - Target Completion Date: September 30, 2021
- Outcome: Identification and expansion of institutional coverage
  - High 12. Develop relevance indicators for field coverage (e.g., weight of the 44 EPAs already covered).
    - Verifiable indicator: The weight of entities covered relative to all has been assessed.
    - Target Completion Date: March 31, 2021
  - Medium 13. Expand institutional coverage to other EPAs and non-market EPICs according to relevance.
    - Verifiable indicator: Process of sorting between market and non-market EPICs has begun; GFS for non-market EPICs are prepared.
    - Target Completion Date: Ongoing
- Outcome: Organization of work and other aspects
  - High 14. Assessment of the data preparation process and organization of work.
    - Verifiable indicator: Current working methods assessed with a view to improving them.
    - Target Completion Date: June 30, 2021
  - High 15. Establish mechanisms and schedules for spontaneous reporting of baseline data within the context of protocols.
    - Verifiable indicator: Reporting mechanisms and schedules are in place.
    - Target Completion Date: March 31 (year not specified)
  - High 16. Develop baseline data submission and supplementary information questionnaires for baseline data providers.
    - Verifiable indicator: Specific questionnaires and forms are prepared and offered.
    - Target Completion Date: June 30, 2021
  - Medium 17. Adoption of GFSM 2014 for the OGT.
    - Verifiable indicator: The OGT adopts the statement of operations format and classifications from the GFSM 2014.
    - Target Completion Date: TBD
  - Medium 18. Draft a Concepts, Sources and Methods document.
    - Verifiable indicator: The document has been drafted and is updated over time.
    - Target Completion Date: Pending effective implementation of GFS and OGT according to GFSM 2014

Note: The action plan time frame is limited to 2021. Beyond 2021, further work is needed to adopt more complex aspects of GFSM 2014 and PSDSG, such as application of accrual accounting.

### Recommended Follow-up
- Finalize adoption and promulgation of a text governing compilation and dissemination of GFS as provided for in Article 54 of the Malagasy Statistics Law.
- Continue follow-up work on bridge tables, consolidation, and preparation of GFS for EPAs, CNaPS and CTDs using accounting balances as primary sources.
- For each sub-sector, use:
  - A mapping file to classify and configure trial balance accounts according to GFSM 2014 criteria.
  - A data compilation file to process source data for fiscal years (2019 cited as example), electronically linked to the bridge table.

*Source: 1mdgea2021002 - 2. Preliminary Statement of the Non-Consolidated Operations of the General Government*

### 17.      Appendix IV provides a list of the working files provided to the DE, which is familiar with

### 17.      Appendix IV provides a list of the working files provided to the DE, which is familiar with 

### II. Improvement of bridge tables between accounting nomenclature and the GFSM 2014 statistical nomenclature
- Appendices I and II discuss main issues encountered in the development of the bridge table for CTDs and CNaPS.
- Essential actions for the authorities and the DE:
  - Review the bridge tables and take into account the remarks accompanying the classifications.
  - Verify the accuracy of classifications and the validity of assumptions made for classification of certain accounts; revise where necessary.
  - Give special consideration to records relating to provisions, equity and depreciation.

- Two groups of accounts not processed:
  - Provisions:
    - According to GFSM 2014, provisions should not be recorded in the statistics and should in principle be excluded from the accounting treatment of the balance.
    - Exclusion must preserve statistical identity without disrupting accounting balance of other accounts.
    - Exclusion is complex, requires familiarity with accounting practices relating to recording of provisions and their reversals, and possibly access to detailed underlying records.
    - DE must work closely with relevant accounting departments to eliminate these records in a balanced way.
  - Equity accounts:
    - Entries made to equity accounts are purely accounting in nature and do not reflect economic flows (mainly routine transactions); they must be excluded from statistics.
    - Their exclusion has similar potential for accounting and statistical imbalance as provisions; elimination of book equity entries and counterparts should be done in close cooperation with accounting departments.

- Desirable mechanism:
  - Introduce mechanisms to facilitate treatment of provision accounts and accounts 10 to 15 by requesting additional information from producers of accounting data on balanced set of records relating to provisions and equity accounts and their equivalents.

- Recommendations:
  - Verify the accuracy of the classifications made by the mission and verify the validity of the assumptions made for the classification of certain accounts; if necessary, make revisions.
  - Proceed with elimination of accounting records concerning provisions, reversals, and their counterparts in the balance sheet accounts while preserving the accounting balance for the remaining trial balance; this will probably require close collaboration with relevant accounting departments.
  - Eliminate the accounting records of the class 1 equity accounts (accounts 10 to 12) and the offsetting entries in the other parts of the balance sheet in order to preserve the accounting balance; cooperation of relevant accounting departments will be required.
  - Introduce mechanisms to standardize the treatment of provision accounts and class 1 accounts (10 to 12).

- Footnote context:
  - For EPAs, the correspondence table is based on the PCOP-EPA. The treatment of their consolidated balance does not raise any issues not already addressed in the CNaPS and CTD correspondence tables.

### Depreciation and Consumption of Fixed Capital (CFC)
- GFSM 2014 treatment:
  - Consumption of fixed capital (CFC) is a transaction and should be recorded in statistics; equivalent to depreciation of intangible and tangible fixed assets in business accounting.
  - Significant differences exist between the concepts, particularly in their calculation; depreciation allowances should in principle be replaced by a proper estimate of CFC.
  - Replacement is probably neither a priority at this time nor feasible without mobilization of significant resources.
  - Estimation of CFC requires prior valuation at market value (or equivalent) of the non-financial assets concerned.

- DE alternatives:
  - Use accounting records for depreciation and amortization and their counterpart in the fixed assets accounts for GFS.
  - Or eliminate these records and present statistics for non-financial assets on a gross basis.
  - Elimination of allowances would present similar difficulties to exclusion of provisions; mission recommends using accounting depreciation as substitute.

- Recommendation:
  - Use depreciation as a substitute for the CFC until the economic calculation of the CFC is feasible.

### III. Compilation of statistics
- Data compilation workflow:
  - Prepare data compilation file to receive source data (copying and pasting balances for each sub-sector); statistical tables fill automatically.
  - DE is familiar with the data processing as it is similar to the OGT table data process.
  - Bridge files are separate from data establishment files; management of links between files required but should not present particular difficulties.
  - Consistency of GFS is verified by statistical identity at bottom of statement of operations and various consistency tables that accompany detailed tables.

### IV. Consolidation
- Consolidation steps:
  - Once GFS of general government sub-sectors established, consolidate by (1) aggregating statistics of different sub-sectors and (2) eliminating transactions (mainly transfers) within and between sub-sectors.

- Two types of consolidation:
  - Intra-sector consolidation:
    - Eliminate transactions within same sub-sector, including within accounts of same sub-sector.
    - Central government sub-sector in GFS questionnaire and Yearbook includes sub-sector accounts: (1) budgetary account (General Budget, Annexed Budgets and the AONTs) and (2) account of extra-budgetary units (EPAs and in principle non-market EPICs).
    - Consolidation of budgetary and extra-budgetary account results in consolidated central government statistics.
    - Intra-sectoral consolidation may involve transactions between various CTDs; does not cover social security sub-sector (Madagascar comprises only one entity).
  - Inter-sectoral consolidation:
    - Eliminate transactions between different general government sub-sectors: central government, CNaPS and CTDs.

- Questionnaire limitations:
  - Consolidation column of annual GFS questionnaire used to eliminate transactions between governments does not distinguish between intra-sectoral transactions between OGTs and EPAs and inter-sectoral transactions; elimination of both should appear in "consolidation" column.
  - No consolidation column for internal consolidation of OGTs, EPAs and CTDs; elimination of their internal transactions will not be apparent in annual GFS questionnaire.

- Data collection status:
  - DE has started collecting data on transfers between different units of general government; work is in its infancy and should be given priority as basis for consolidated GFS output.
  - DE must continue while resolving differences between declarations of amounts received (or to be received) and amounts paid (or to be paid).
  - Preliminary data on intergovernmental transfers collected by DE suffer from large discrepancies between payments and receipts.
  - Appendix 3 elaborates further.

- Recommendations:
  - Identify intra-sectoral transactions, i.e. internal transactions for budgetary accounts, extra-budgetary accounts, as well as transactions between these accounts.
  - Eliminate transactions internal to the budgetary accounts to obtain the consolidated GFS for the transactions in those accounts.
  - Eliminate the internal transactions of the extra-budgetary account to obtain the consolidated GFS for the transactions of this account.
  - Eliminate transactions between the budgetary and extra-budgetary accounts to obtain consolidated GFS for the central government.
  - Identify and eliminate internal transactions within the CTDs to obtain consolidated GFS of the local government sub-sector.
  - Identify inter-sectoral transactions between the three general government sub-sectors.
  - Aggregate the GFS of the three general government sub-sectors.
  - Eliminate intersectoral transactions between the aggregate statistics of the three general government sub-sectors to obtain the consolidated statement of operations of the Malagasy general government.

### V. Compilation of a financial balance sheet
- First step:
  - Classify different types of assets and liabilities listed in balance sheet (or balance sheet items); valuation and operational coverage to be addressed later.

- Two data situations:
  - Balance sheet compiled from trial balance:
    - Trial balance includes opening and closing balances usable to prepare two stock positions (end of current year and end of previous year).
    - Classification of stock positions must match classification of transactions; no new bridge table required—replace flow codes with stock position codes (e.g. replace 3212 with 6212).
  - Balance sheet compiled when balance sheet not available (e.g., EPICs):
    - Reorganization of balance sheet items relatively simple when groupings comply or are close to GFSM 2014 criteria.
    - Other items require detailed information or consultation with accounting departments to classify grouped accounts.

- Valuation and operational coverage issues:
  - Market valuation recommended in GFSM 2014 differs from accounting standard based on historical costs; concerns government holdings in public and parastatal companies and debt securities.
  - Operational coverage of statement of operations may differ from that of financial balance sheet (e.g., OGTs supplemented with non-accounting information to complete scope of transactions, including some debt and grant transactions not recorded in trial balance); additions to be handled case-by-case with relevant services.

- Recommendation:
  - Carry out necessary regrouping of outstanding amounts in trial balances of the Treasury, EPAs, CTDs and CNaPS to draw up their respective financial balance sheets and then the consolidated financial balance sheet of the Malagasy general government. Principles of flow consolidation apply to stock positions.

- Implementation notes:
  - Add a column to bridge table dedicated to asset and liability stock position codes; SUMIF function to calculate financial assets account items must be integrated into Table 6 of GFS questionnaire of classification assistant.
  - Consult bridge table between balance sheet and chart of accounts presented in guides accompanying various charts of accounts consulted by mission; DE will need updated versions where revised.
  - Alternative sources of data for balance sheet discussed at meeting with main departments managing elements of the State's portfolio.

### VI. Other economic flows
- Statement of other economic flows must be filled to cover entire GFSM 2014 analytical framework; not a priority and can await resolution of other issues and future missions.
- Most flows can be extracted from balance sheet where holding gains or losses are recorded as foreign exchange gains or losses, gains or losses on disposals of assets and revaluations.
- For other changes in volume, additional information may be required (Supplementary Information Statements or extra-accounting information) if accounting records do not permit isolation of such events.

### VII. Broadening the institutional scope
- Current scope of Malagasy GFS limited to budgetary central government transactions:
  - Operations carried out by general budget, annexed budgets and Treasury's special accounts for budgetary central government; EPAs and non-market EPICs for extra-budgetary central government; CNaPS alone constitutes Malagasy social security sub-sector; CTDs for local government.
- Mission objective:
  - Lead in relatively near future to compilation of statistics covering at least 44 EPAs, CNaPS and CTDs (exact scope to be specified), including their consolidation.
- Resource implications:
  - Extension to extra-budgetary central government likely resource-intensive.
  - Develop an indicator of importance of operations of covered EPAs relative to budgetary central government total operations (simple indicator based on number of employees or personnel costs).
- EPICs:
  - For including non-market EPICs in GFS, begin sorting non-market from market EPICs and complete institutional table by adding identified non-market EPICs; remaining EPICs classified as public companies.

- Recommendations:
  - Construct a simple indicator of the weight of the EPAs in Malagasy government finances based on staff numbers or expenditure to assess significance of the 44 EPAs covered by this mission and remaining EPAs.
  - Construct a similar indicator for EPICs to assess priority of further extension of statistical scope of Malagasy general government.

- Footnote clarifications:
  - Two social insurance schemes for civil servants are attached to the Treasury as special accounts and are not part of social security sub-sector; their transactions must be integrated with GFS for the OGTs.

### VIII. Systematization of Procedures
- Outlook:
  - Implementation of monitoring activities should make possible compilation of consolidated GFS for 2019 for all of Madagascar's general governments in relatively near future.
  - This result will require significant resource mobilization over several years involving different actors in different fields and must be reproduced for each subsequent fiscal year (and then at more frequent intervals, albeit on smaller scale).
- Need for evaluation:
  - Desirable to learn from first experience to systematize and standardize GFS development process.
  - Reflection should cover organization of DE's work, sharing of staff skills, relations with other services such as providers of source data and technical services (accounting and IT).
  - Reflection can occur after adoption of Statistics Act text framing compilation and dissemination of GFS but need not wait for adoption; can be done in context of preparation of GFS for 2020.

C.   Next Mission

*Source: 1mdgea2021002 - 17.      Appendix IV provides a list of the working files provided to the DE, which is familiar with how they function.*

### 35.      The DE has expressed an interest in a future mission, which could cover the topics

### 35.      The DE has expressed an interest in a future mission, which could cover the topics

### Follow-up mission scope and objective
- The DE has expressed interest in a future mission to cover topics mentioned in the previous section.
- The follow-up carried out by the DE should be substantial enough to facilitate significant progress during the next mission.
- Monitoring should focus on areas not directly within the mission's remit, including accounting aspects or areas where access to information is not immediate.

### Specific monitoring priorities (to enable consolidation)
- The exclusion of records relating to provisions and equity accounts (accounts 10 to 12) and their counterparts, while taking care to preserve the accounting balance of the rest of the trial balance in order to satisfy statistical identity.
- Identification of transfers between different units of government in order to eliminate them in consolidation.
- Completion of these two objectives should enable the ED either to carry out the consolidation of the Malagasy general government itself or, if this objective cannot be achieved, to gather sufficient information to carry out this consolidation during the next mission.

### Officials met during the mission
- (Mr) RANJALAHY Ihajambolatiana — Director General of the Treasury, DGT
- (Mrs.) RANDRIANIRINA Hanitra Olivia — Director of Research, DE
- (Mrs.) RANDRIAMAROLAFY Odile — Head of department at the DE, Treasury Inspector
- (Mr) RAKOTOBE Tahina Herilalaina — Research Officer, Treasury Inspector
- (Mrs.) RAVELOJAONA Mireille Harivola — Research Officer
- (Mr) ANDRIANANTENAINARINORO Oely Hasina — Research Officer, Treasury Inspector
- (Mr) ANDRIANASOLO Hoby Miarantsoa — Research Officer
- (Mr) HERINIAINA Lahady Eugene — Research Officer
- Lahady Eugen HERINIAINA — Research Officer
- (Mr) Lovanandrianina RAKOTOMAMONJY — Head of Accounting, CNaPS
- (Mr.) Hiaja RAKOTOARISON — Finance Director, CNaPS
- (Mr.) Manan'lala ANDRIANTSALAMA — IT Director, CNaPS

### Key preliminary fiscal figures (Table 2.a In Ariary, 2019)
- TRANSACTIONS AFFECTING NET WORTH:
  - 1 Revenue: 7,490,632,291,557 26,550,956,734 117,663,625,838 334,812,915,654
  - 11 Tax revenues: 5,374,959,911,557 0 58,576,390,728 0
  - 111 Income, profit and capital gains taxes: 1,428,749,683,004 0 36,564,965,098 0
  - 112 Payroll and labour taxes: 0 0 0 0
  - 113 Property taxes: 0 0 0 10,252,230,391 0
  - 114 Taxes on goods and services: 3,030,618,626,460 0 11,653,785,730 0
  - 115 Taxes on foreign trade and international transactions: 890,852,151,146 0 0 0
  - 116 Other tax revenues: 24,739,450,947 0 105,409,510 0
  - 12 Social security contributions: 305,544,900,000 0 0 286,867,403,545
  - 13 Donations: 1,586,813,000,000 22,591,552,458 32,104,605,122 0
  - 14 Other revenue: 223,314,480,000 3,959,404,276 26,982,629,987 47,945,512,109
- 2 Expenses: 5,171,333,712,522 19,671,835,972 64,034,552,145 268,632,786,372
  - 21 Employee remuneration: 2,494,610,826,893 10,691,518,084 50,366,683,653 27,209,591,621
  - 22 Use of goods and services: 345,510,151,750 8,668,449,837 14,339,979,162 19,728,670,201
  - 23 Consumption of fixed capital: 0 30,581,473 0 18,032,746,343
  - 24 Interest: 355,997,157,518 129,600 0 0
  - 25 Grants: 784,483,200,000 9,500,000 53,000,000 0
  - 26 Donations: 426,521,700,000 0 1,050,505,767 0
  - 27 Social benefits: 707,099,635,650 0 3,262,541 200,687,584,642
  - 28 Other expenses: 57,111,040,710 271,656,978 -1,778,878,978 2,974,193,565
- GOB Gross operating balance (1-2+23+NOBz): 2,319,298,579,035 6,909,702,235 53,629,073,693 84,212,875,625
- NOB Net operating balance (1-2+NOBz) c/: 2,319,298,579,035 6,879,120,762 53,629,073,693 66,180,129,281
- TRANSACTIONS IN NON-FINANCIAL ASSETS:
  - 31 Net acquisition of non-financial assets: 2,854,586,000,000 2,621,020,579 20,521,401,195 253,959,934,830
- NLB Financing capacity / need (1-2+NOBz-31): -535,287,420,965 4,258,100,183 33,107,672,498 -187,779,805,549
- TRANSACTIONS IN FINANCIAL ASSETS AND LIABILITIES (FINANCING):
  - 32 Net acquisition of financial assets: 112,199,000,000 8,267,832,560 58,170,973,092 697,366,553,798
    - 321 Domestic: 95,815,000,000 8,267,832,560 58,170,973,092 621,095,113,368
    - 322 Foreign: 16,384,000,000 0 0 76,271,440,430
  - 33 Net accumulation of liabilities: 676,210,422,569 4,114,424,906 859,875,274 30,483,140,896
    - 331 Domestic: 21,108,422,569 4,114,424,906 859,875,274 30,483,140,896
    - 332 Foreign: 655,102,000,000 0 0 0
- NLBz Overall statistical discrepancy: NLB vs. Financing (32-33-NLB): -28,724,001,604 -104,692,529 24,203,425,321 854,663,218,451

### Key preliminary fiscal ratios (Table 2.b Percentage of GDP, 2019)
- TRANSACTIONS AFFECTING NET WORTH:
  - 1 Revenue: 14.7 0.1 0.2 0.7
  - 11 Tax revenues: 10.5 0.0 0.1 0.0
  - 111 Income, profit and capital gains taxes: 2.8 0.0 0.1 0.0
  - 112 Payroll and labour taxes: 0.0 0.0 0.0 0.0
  - 113 Property taxes: 0.0 0.0 0.0 0.0
  - 114 Taxes on goods and services: 5.9 0.0 0.0 0.0
  - 115 Taxes on foreign trade and international transactions: 1.7 0.0 0.0 0.0
  - 116 Other tax revenues: 0.0 0.0 0.0 0.0
  - 12 Social security contributions: 0.6 0.0 0.0 0.6
  - 13 Donations: 3.1 0.0 0.1 0.0
  - 14 Other revenue: 0.4 0.0 0.1 0.1
- 2 Expenses: 10.1 0.0 0.1 0.5
  - 21 Employee remuneration: 4.9 0.0 0.1 0.1
  - 22 Use of goods and services: 0.7 0.0 0.0 0.0
  - 23 Consumption of fixed capital: 0.0 0.0 0.0 0.0
  - 24 Interest: 0.7 0.0 0.0 0.0
  - 25 Grants: 1.5 0.0 0.0 0.0
  - 26 Donations: 0.8 0.0 0.0 0.0
  - 27 Social benefits: 1.4 0.0 0.0 0.4
  - 28 Other expenses: 0.1 0.0 0.0 0.0
- GOB Gross operating balance (1-2+23+NOBz): 4.5 0.0 0.1 0.2
- NOB Net operating balance (1-2+NOBz) c/: 4.5 0.0 0.1 0.1
- TRANSACTIONS IN NON-FINANCIAL ASSETS:
  - 31 Net acquisition of non-financial assets: 5.6 0.0 0.0 0.5
- NLB Financing capacity / need (1-2+NOBz-31): -1.0 0.0 0.1 -0.4
- TRANSACTIONS IN FINANCIAL ASSETS AND LIABILITIES (FINANCING):
  - 32 Net acquisition of financial assets: 0.2 0.0 0.1 1.4
    - 321 Domestic: 0.2 0.0 0.1 1.2
    - 322 Foreign: 0.0 0.0 0.0 0.1
  - 33 Net accumulation of liabilities: 1.3 0.0 0.0 0.1
    - 331 Domestic: 0.0 0.0 0.0 0.1
    - 332 Foreign: 1.3 0.0 0.0 0.0
- NLBz Overall statistical discrepancy: NLB vs. Financing (32-33-NLB): -0.1 0.0 0.0 1.7

*Republic of Madagascar: mission text and tables excerpt.*

### Appendix I.  Notes on the Bridge Table and on the Development of

### Appendix I.  Notes on the Bridge Table and on the Development of the CTD GFS

### A. Bridge Table — Introductory remarks and basic documents
- Purpose: describe key aspects of the bridge table between the 2019 CTD consolidated trial balance accounts and the GFSM 2014 classifications and the application to develop the GFS (statement of operations and detailed tables of revenues, expenses, and transactions in assets and liabilities).
- Bridge table location: CORRESPONDENCE sheet of the MDG BAL CT GFS CORRESPONDENCE 2020 10 20.xlsx file.
- Documents used to prepare the bridge table:
  - The consolidated trial balance of the CTDs for 2019 in CTD regions communes.xlsx.
  - The CTD chart of accounts (without comments or instructions) in PCOP-CTD.xlsx.
  - The Chart of Accounts for Government Operations consistent with International Accounting Standards (IAS/IFRS) (PCOP 2006).
  - The PCOP-State Guide, the PCOP.EPA and its guide.
  - Guide to the General Chart of Accounts (PCG).
  - The General Tax Code.

### A. Bridge Table — Organization of the trial balance and methodological issues
- Preferred basis: bridge should be based on the chart of accounts rather than the trial balance; chart follows structure/hierarchy distinguishing "items", "headings" and "accounts".
- Practical approach: due to PCOP-CTD length, bridge table was based on the 2019 trial balance (shorter).
- Issues observed in the 2019 trial balance:
  - Balance shows only headings (3 digits), accounts (4 digits) and "sub-accounts" (>4 digits); absence of 2-digit items complicates interpretation.
  - Ordering of accounts does not respect chart of accounts hierarchy.
  - 2019 trial balance does not follow the convention that 5-digit and above are sub-accounts of 4-digit accounts — 4-digit accounts are independent of 5-digit accounts in the trial balance.
  - These aspects raise questions about compliance with accounting practices and reliability of the trial balance as a statistical data source.
- Actions taken:
  - Reorganized PCOP-CTD trial balance to reproduce accounting numbering hierarchy.
  - Included a "Remarks" column in the bridge table to explain less obvious classification choices and to document questions.

### A. Bridge Table — Other general remarks
- The exact nature of the trial balance should be specified; the consulted version appears provisional. Producing final statistics from the final trial balance is desirable.
- Bridge table classifications are limited to accounts actually used in 2019; table may not apply to other years without adding missing accounts.
- Long-term recommendation: establish a generic bridge table based on the PCOP-CTD itself.

### A. Bridge Table — Classification of revenues (Class 7)
- Recommendation: focus on the most important revenues because titles do not always indicate nature.
- For 2019, the 14 revenue types each representing more than 1% of total Class 7 revenue and covering 99% of the total overall are:
  - 7020   General income tax - IR (4.14%)
  - 7021   Tax on non-salaried income (15.20%)
  - 7023   IS (9.09%)
  - 7080   Other income taxes (6.60%)
  - 7151   Property tax on built properties - IFPB (9.38%)
  - 7511   Operating grants - PPE (3.58%)
  - 7518   Operating grants - Other (8.53%)
  - 77144  Levies and rebates on products (agricultural, forestry, livestock, mining, fishing) (6.09%)
  - 7717   Rebate income (8.50%)
  - 7718   Other local fees (5.26%)
  - 772111   Market fee (2.95%)
  - 772113   Construction permits (3.74%)
  - 772118   Other (1.38%)
  - 7732   Miscellaneous rentals (1.42%)
- Conclusion: classification of revenue in Class 7 does not pose a major problem overall; ambiguous items are generally negligible for 2019 but relative importance should be checked regularly.

### A. Bridge Table — Classification of expenses (Class 6)
- General observation: classification of expense accounts is generally not a problem because headings typically reflect economic nature; classification can generally be inferred.

### A. Bridge Table — Classification of fixed assets (Class 2)
- Headings in Class 2 clearly indicate nature of assets; no difficulties in classification.
- Mission did not classify at detailed level because equivalent breakdowns are not available for the budgetary central government, preventing aggregation.
- DE can carry out detailed classification for CTDs in due course.

### A. Bridge Table — Classification of financial accounts (Class 5)
- Only four financial accounts appear in the 2019 trial balance:
  - The CTD account in the Treasury (classified as an asset under currency and deposits).
  - Three sub-accounts of 541 relating to imprest accounts.
- Classification of CTDs' control accounts would be facilitated by explanations of their operation and articulation with other trial balance accounts, particularly class 4 accounts, following example explanations in the PCOP-State guide (pages 186 to 188).

### A. Bridge Table — Classification of fund accounts (Class 1)
- Only Class 1 capital grants and asset disposals accounts have been classified.
- Nature of disposal accounts needs clarification: normally capital gains/losses on disposals appear in class 1, disposals themselves are recorded in class 7 in accounts not in the three PCOPs.
- Other Class 1 accounts largely record accounting/order entries associated with inventory operations at closing of accounts and do not reflect transactions.
- Non-inclusion of accounts 10 to 12 in statistics results in a difference between net lending/net borrowing and financing; this must equal the balance of movements in these accounts. Any other discrepancy indicates statistical treatment error.
- To bring statistical difference to zero, offsetting entries for accounts 10 to 12 must be eliminated, requiring additional information from accounting departments and the final trial balance.

### A. Bridge Table — Classification of Class 4 accounts (detailed)
- Detailed classification preferred for initial exercise to learn peculiarities of accounting sources.
- Key treatments and observations:
  - Accounts 40: mainly creditor supplier-type accounts; account 409 are debit accounts (4092 concern imprest accounts). After deducting 409 debits, accounts 40 classified as other accounts payable. 4099 Accounts Receivable classified as other receivables.
  - Accounts 41: debtor-type accounts receivable classified as other accounts receivable. Account 419 is absent in 2019 trial balance.
  - Accounts 42: credit accounts recording staff costs to be paid; classified as other domestic payables except 4282 (Personnel Revenue Receivable) which will need reclassification as other receivables (does not appear in 2019 trial balance).
  - Accounts 43: payables related to transactions with CNaPS and other agencies classified as other accounts payable; 4317 (accrued income) absent in 2019 trial balance.
  - Accounts 44: record grants and reimbursable aid receivable and repayments; grants receivable classified as other receivables; repayments (account 4430) also classified as other receivables though their exact nature (retrocession vs reimbursement) is unclear.
  - Accounts 45: correspondents and related separate accounts (cash transactions for annexed budgets, CTDs, EPNs, entities with financial accounts at the Treasury). Balance deposit account 453118 classified as currency and deposits on liabilities side. Accounts 4518 and 45213 included with other accounts payable. The notion of correspondents/related accounts and exact nature of 45 accounts needs clarification for CTDs, especially deposits involved in 453118.
  - Accounts 46: 462 (deposits), 465 (accountants' debts), 467 (other accounts receivable and payable).
    - Consignments are accounts payable → GFSM 2014: other accounts payable.
    - Accountants' debits reflect accounts receivable → include in other accounts receivable (requires verification).
    - Account 4677 classified as Other Payables.
    - Account 4691 (Write-offs of Receivables): records waivers of receivables by CTDs. If cancellations result from mutual agreement, classify in the categories of the original claims; otherwise treat as another change in volume. In absence of information, classified as other accounts receivable.
  - Accounts 47 (Suspense or Transitional Accounts):
    - 471 Provisional allocation of revenue:
      - 4711 Payments by stewards*
      - 4713 Revenue collected before the issuance of a title*
      - 4718 Other*
      - 47188 other revenue received before issuance of title* (in thousands of dollars)
      - Classified as revenue in category 14412 (Other current voluntary transfers excluding grants) in absence of a revenue category N.E.C.
    - 472 Provisional expenditure allocations:
      - 4728 Other*
      - Classified as expense in category 2821 (current transfers N.E.C.).
    - 478 Other suspense accounts:
      - 4786 Expenditure to be classified and adjusted* → classified as 2821 (Expenses, Current transfers N.E.C.).
      - 4787 Revenues to be classified and adjusted* → classified as 14412 (Revenue, Other current voluntary transfers excluding grants).
  - Accounts 48 (Prepaid Expenses or Income and Provisions):
    - 487 Deferred income*: records revenue recognized before generating event (per PCOP Application Guide - State, page 98). Should be classified as a receivable; credited against relevant class 7 account to reduce revenue accruing to the year; reduces accompanying accounts receivable.

### A. Bridge Table — Note on imprest accounts
- Imprest-related accounts in use:
  - 4092   Uncleared imprest accounts
  - 409218  Uncleared imprest accounts
  - 4711   Payment by stewards
  - 5410   Imprest Accounts
  - 5411   Imprest accounts Main budget
  - 5418   Other imprest accounts
- Lack of clear description of operation and relation to CTDs; PCOP-State guide coverage insufficient to resolve ambiguities for CTDs.
- Classification decisions made on the basis of account headings/positions:
  - 4092 and 409218 → other accounts receivable (included in 409 Ordinary creditors - Accounts receivable).
  - 4711 → other accounts receivable (belongs to heading 471 Provisional allocation of revenue).
  - 5410, 5411, 5418 → currency and deposit assets (membership in item 54, classified as cash or cash equivalent in PCG page 154 and PCOP-EPA page 213).
- Note: amounts relating to imprest account transactions are negligible compared to totals.
- Recommendation: provide a description of how these accounts work for CTDs.

### B. Compilation of GFS for CTDs — process and checks
- File used: MDG GFS PCOP CDT 2020 10 20.xls developed from the bridge table.
- Process:
  - DE officers familiar with linkage between bridge table and GFS compilation assistant.
  - 2019 trial balance copied into SOURCE sheet of the GFS file (codes, headings, transactions for the period).
  - Net transactions for the period calculated and classification performed automatically from the bridge table.
  - Table sheets (Table1_A, Table2_A, Table3_A) use SUMIF to fill detailed tables of revenues, expenses, and transactions on assets and liabilities; statement of operations filled from these tables.
- Consistency checks performed:
  - Accounting identity of the balance checked in SOURCE sheet in range T359:U369. The gap is zero.
  - Statistical identity between net lending/net borrowing and financing (change in financial assets minus change in liabilities) must equal balance of Class 1 accounts not processed. This identity is verified in line 46 of the statement of operations sheet. The difference between the balance of these accounts and the statistical difference (called the "Overall statistical difference") is shown on line 50. It is zero.
  - Consistency between totals of class 7, class 6 and class 2 is verified at the top of tables 1-3 by accounting for reclassifications; the "Difference" line at the top of tables 1, 2, and 3 must equal zero.
- Checks not performed:
  - No consistency check was performed for change in financial assets and change in liabilities (classes 4 and 5). Although necessary in principle, not considered essential given other satisfied checks; however, offsetting errors may remain. Recommendation: introduce such consistency checks in the future.

### C. Documents consulted
- General Chart of Accounts 2005 consistent with accounting standards iAS/IFRS, Annotated Guide to the General Chart of Accounts 2005, Ministry of Economy, Finance and Budget (PCG 2005).
- Decree no. 2005-210 of April 26, 2005 on the 2006 Public Operations Accounting Plan (PCOP).
- The application guide of the accounting plan for government operations: 2005, Ministry of Economy, Finance and Budget (PCOP-State guide).
- Guide to the application of the chart of accounts for government operations - administrative public entities 2005, Ministry of Economy, Finance and Budget (PCOP-EPA guide).
- PCOP CTD.xlsx (CTD Chart of Accounts).
- General Tax Code of the Republic of MADAGASCAR 2011.

*Source: Appendix I. Notes on the Bridge Table and on the Development of the CTD GFS (1mdgea2021002).*

### Appendix II. Comments on the Bridge Table and the Preparation

### Appendix II. Comments on the Bridge Table and the Preparation of the CNAPS GFS

### Bridge table and source files
- Two files relate to the compilation of statistics on CNaPS financial operations:
  - The bridge table between the CNaPS accounting nomenclature and the GFSM 2014 statistics (CORRESPONDENCE CNAPS.xlsx).
  - The procedure for compiling CNaPS statistics for the 2019 financial year from the trial balance on the basis of the above-mentioned bridge table (MDG GFS PC CNaPS xlsx).
- Classification approach for the 2019 trial balance:
  - Largely classified at the individual account or sub-account level, except for homogeneous groups where classification was done globally at the higher level (most often corresponding to the "position").
  - Higher-level classification saved time and allowed skipping integration into the bridge table for accounts newly appearing in 2019 when they were part of homogeneous groups. Accounts not included in the bridge table are indicated in the SOURCE sheet by the symbol #NA.

### Compilation of statistics and consistency checks
- Statistics compiled via the classification assistant (in the SOURCE sheet linked to the bridge table).
- Outputs presented in:
  - Revenue, Expense, Asset and Liability Transactions tables.
  - Statement of operations sheet (line references used for checks).
- Two sets of balance accounts excluded from statistical processing:
  - Equity accounts 10, 11 and 12 of class 1 (adjustment transactions, not economic flows).
  - Accounts relating to provisions, write-offs and impairment losses: 15, 29, 39, 481, 49, 59, 68, and 78.
- Statistical implication of exclusions:
  - Trial balance is balanced (total debits = total credits); exclusion of above accounts introduces a statistical imbalance (gap) which must in principle be strictly equal to the balance of the excluded accounts.
  - Any discrepancy indicates an error in statistical treatment.
  - This difference is calculated on line 46 of the statement of operations sheet.

### Consistency checks — procedures and targets
- Two types of consistency checks:
  - Verify the difference on line 46 exactly matches the balance of accounts excluded from statistical processing.
  - Verify consistency between totals of main aggregates (revenue, expenses, transactions on assets and liabilities) and the totals of the classes of accounts from which these aggregates mainly originate.
- Consistency in relation to the statistical discrepancy:
  - Until offsetting adjustments to excluded accounts are made, the difference between deficit and financing on line 46 should equal the balance in those accounts; inclusion of excluded amounts should yield zero difference (illustrated in the yellow highlighted area at the bottom of the statement of operations sheet).
- Integration of excluded accounts carried out in two stages:
  1. Calculate the balance of accounts excluded from class 1 to identify their contribution to the difference on line 46. The residual difference on line 54 must then be exactly equal to the balance of the other excluded accounts (the allowance accounts).
  2. Calculate the balance of individual value adjustment accounts to neutralize the remaining difference. The overall variance of line 76 is then zero.

### Consistency of aggregates with source data
- Verification of statistical identity does not preclude compensating classification errors between revenue, expenses and transactions in assets and liabilities; hence verify consistency between each aggregate and the total of the class of account from which it mainly originates.
- Specific top-of-table checks performed:
  - Between total revenue and total class 7.
  - Between total expenses and total class 6.
  - Between total non-financial assets and total classes 2 and 3.
- A consistency check between financing and totals of classes 1 (debts) and 4 and 5 was noted as desirable; it was not performed due to lack of time and because verification of all other consistency types implies consistency of this last check.

### Consolidation — identification of intra- and inter-sectoral flows (Appendix III)
- Purpose: identify transaction flows between general government entities as intra- or inter-sectoral and by economic nature to determine flows subject to elimination for consolidated general government statistics.
- Table 1: schematic of intra- and inter-sectoral flows among entities BG, BA, AONT, EPA, CNaPS, CTD.
  - Rows = origin (entities making payments); columns = destination (entities receiving payments).
  - Example transactions:
    - Line 1: BG makes payments to BAs, AONTs, EPAs, CNaPS and CTDs (columns B, C, D, E and F respectively).
    - Line D: EPAs receive transactions from BG, BAs, AONTs, CNaPS, and CTDs.
  - Colour coding explanation (as presented): red = intra-sectoral within budget account (OGTs); blue = intra-sectoral between OGTs and EPAs and between EPAs; green = intra-sectoral between CTDs; black = inter-sectoral transactions.
  - Elimination of intra-sectoral transactions shown in red and blue provides consolidated central government statistics.
- Enumerated flows (coordinates correspond to Table 1 positions):
  1. Transactions from BGs to BAs (1B)
  2. Transactions from BGs to AONTs (1C)
  3. Transactions from BAs to other BAs (2B)
  4. Transactions from BAs to BGs (2A)
  5. Transactions from BAs to AONTs (2C)
  6. Transactions from AONTs to other AONTs (3C)
  7. Transactions from AONTs to BAs (3B)
  8. Transactions from AONTs to BGs (3A)
  9. Transactions between EPAs (4D)
  10. Transactions from BGs to EPAs (1D)
  11. Transactions from BAs to EPAs (2D)
  12. Transactions from EPAs to BGs (4A)
  13. Transactions from EPAs to BAs (4B)
  14. Transactions from EPAs to AONTs (4C)
  15. Transactions from AONTs to EPAs (3D)
  16. Transactions from BGs to CNaPS (1E)
  17. Transaction from CNaPS to BGs (5A)
  18. Transactions from BAs to CNaPS (2E)
  19. Transaction from CNaPS to BAs (5B)
  20. Transactions from CNaPS to AONTs (5C)
  21. Transactions from AONTs to CNaPS (3E)
  22. Transactions from CNaPS to EPAs (5D)
  23. EPA Transactions to CNaPS (4E)
  24. Transactions from BGs to CTDs (1F)
  25. Transactions from CTDs to BGs (6A)
  26. Transactions from BAs to CTDs (2F)
  27. Transactions between various CTDs (6F)
  28. Transactions from CTDs to BAs (6B)
  29. Transactions from AONTs to CTDs (3F)
  30. Transactions from CTDs to AONTs (6C)
  31. Transactions from EPAs to CTDs (4F)
  32. Transactions from CTDs to EPAs (6D)
  33. Transactions from CNaPS to CTDs (5F)
  34. Transactions from CTD to CNaPS (6E)

### Intra- and inter-sectoral flows by economic nature (Table 2) — major categories
- Economic transaction types identified for consolidation include (GFSM 2014 codes shown in source):
  - Acquisitions of goods and services (22) — counterpart receipts from sales of goods and services (142).
  - Interest payable (243) — counterpart interest revenue (14113).
  - Grants to other levels of government (263) — counterpart grant revenue of recipient (133).
  - Rents (2814 in expenses and 1415 in revenues).
  - Transfers not elsewhere classified (282) — counterpart revenue may be tax revenues (11), fines and penalties (143), voluntary transfers receivable other than grants (144), miscellaneous bonuses/allowances (145).
  - Acquisition or disposal of non-financial assets between general government units (31).
  - Holdings of currency and deposits (3212 and 3312).
  - Holdings of securities issued by another government unit (3214 and 3314).
  - Appropriations granted by another government unit (3215 and 3315).
  - Accounts payable and receivable between governments (3218 and 3318).
- Table 2 maps expense categories (rows) against revenue/liability categories (columns) using GFSM 2014 codes (e.g., G&S 142; Interest 14113; Donations 133; Rent 1415; Taxes 11; Fines / penalties 143; Transf. Non-donated Vol. 144 & 145; Acq. of NFA 31; 3312; 3314; 3315; 3318).
- Note: Only main categories presented; further disaggregation (e.g., 1421, 1422, 1423) likely unnecessary given data granularity.

### Practical scope for consolidation (flows likely to be eliminated)
- Although the theoretical number of flows to consider is high (product of flows in Table 1 and categories in Table 2), in practice the number of eliminations is limited; primarily large amounts require elimination:
  - Current and capital grants (often called subsidies or transfers) paid by the budgetary central government to the EPAs and the CTDs.
  - Interest paid by the State on debt securities held by other general governments (mainly CNaPS) and possibly interest paid to the State on loans and advances granted by it.
  - Taxes paid to the State and the CTDs by other general governments.
  - Credits granted by the State, including retrocession of external credits.
- Purchases or sales of goods and services may be difficult to isolate; other flows are generally small and require case-by-case verification.

*Appendix II. Comments on the Bridge Table and the Preparation of the CNAPS GFS.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1mdgea2021002.pdf_