1. Copyright 2010, The World Bank Group. All Rights Reserved. 1 GOVERNMENT FINANCE STATISTICS ANALYTIC FRAMEWORK Part 2 This lecture describes the various organizational structures used by government units to provide social benefits and how those structures affect the compilation of statistics for the general government sector or the public sector.

2. Copyright 2010, The World Bank Group. All Rights Reserved. 2 GOVERNMENT FINANCE STATISTICS Governments establish social protection schemes, which provide systematic interventions intended to relieve households and individuals of the burden of a defined set of social risks. Social risks are events or circumstances that may adversely affect the welfare of households either by imposing additional demands on their resources or by reducing their incomes. The social protection schemes provide relief in the form of social benefits, which may be payable in cash or in kind. SOCIAL PROTECTION SCHEMES

3. Copyright 2010, The World Bank Group. All Rights Reserved. 3 GOVERNMENT FINANCE STATISTICS The scope of social benefits is wide and the social risks covered are liable to vary from scheme to scheme and from government to government. Here are some examples of social benefits: - Medical, dental, and other treatments and hospital, convalescent, and long-term care as a result of sickness, injuries, maternity needs, chronic invalidity, or old age 1, - Support of spouses, children, elderly relatives, invalids, and other dependents 2, - Compensation for a reduction in income as a result of not being able to work 3, - Compensation for a reduction in income because of the death of the main income earner 4, - Housing benefits in cash and housing services 5, - Allowances to cover education expenses or, occasionally, education services in kind. SOCIAL RISKS AND BENEFITS

4. Copyright 2010, The World Bank Group. All Rights Reserved. 4 GOVERNMENT FINANCE STATISTICS A social benefit is always a transfer payment and is always provided in a collective arrangement. The collective requirement means that social protection schemes exclude individual insurance policies taken out on the private initiative of individuals or households solely in their own interest. In order for an individual policy to be treated as part of a social protection scheme, the following conditions must be satisfied: - Participation in the scheme is obligatory, - The scheme is a collective one operated for the benefit of a designated group of people, and - An employer makes an actual or imputed contribution to the scheme on behalf of an employee. SOCIAL RISKS AND BENEFITS (cont’d)

5. Copyright 2010, The World Bank Group. All Rights Reserved. 5 GOVERNMENT FINANCE STATISTICS Social protection schemes can be classified in several ways, for example: - contributory versus noncontributory, - whether participation is compulsory or voluntary, - schemes providing coverage for a group of employees versus coverage for the general population. Contributory schemes require the payment of social contributions by the protected persons, or by other parties on their behalf, in order to secure entitlement to the benefits. These schemes are referred to as social insurance schemes, and the benefits paid by them are social insurance benefits. With noncontributory schemes, the eligibility to receive social benefits is not conditional on the payment of contributions by the protected persons or by other parties on their behalf. CLASSIFICATION OF SOCIAL PROTECTION SCHEMES

6. Copyright 2010, The World Bank Group. All Rights Reserved. 6 GOVERNMENT FINANCE STATISTICS Compulsory schemes may be established by law and/or regulation or by agreement between employer and employees. Self employed or unemployed persons may participate in social security or to other social insurance schemes through voluntary contributions. Social protection schemes can be organized as social assistance schemes, social security schemes, or employer social insurance schemes. All social assistance schemes are organized and operated by government units. The benefits are paid out of the unit’s general resources according to the specified criteria. CLASSIFICATION OF SOCIAL PROTECTION SCHEMES (cont’d)

7. Copyright 2010, The World Bank Group. All Rights Reserved. 7 GOVERNMENT FINANCE STATISTICS All social security schemes are organized and operated only by government units. Such units are referred to as social security funds. The primary receipts of social security schemes are social contributions. Social security benefits are one category of total social benefits. CLASSIFICATION OF SOCIAL PROTECTION SCHEMES (cont’d)

8. Copyright 2010, The World Bank Group. All Rights Reserved. 8 GOVERNMENT FINANCE STATISTICS Social insurance schemes may be are either funded or unfunded. A social insurance scheme is funded if there are identified reserves or accounts assigned for the payment of benefits. There are three types of funded employer schemes: - those operated by insurance enterprises, - those operated as autonomous pension funds, and - those operated as nonautonomous pension funds. Unfunded social insurance schemes are operated by the employer without assigning specific accounts or otherwise creating special reserves for the payment of benefits. FUNDING AND AUTONOMY

9. Copyright 2010, The World Bank Group. All Rights Reserved. 9 GOVERNMENT FINANCE STATISTICS Autonomous and non-autonomous pension funds may be organized as defined-benefit or defined-contribution schemes. DEFINED-BENEFITS AND DEFINED-CONTRIBUTIONS

10. Copyright 2010, The World Bank Group. All Rights Reserved. 10 GOVERNMENT FINANCE STATISTICS STRUCTURE OF SOCIAL PROTECTION SOCIAL PROTECTION Social Assistance Social Insurance Social Security Schemes Employer Schemes Autonomous Non-autonomous Retirement Schemes Other Schemes (e.g., health) Defined Benefit Defined Contribution