Annual Capital Expenditures Part A

Supporting Statement

U.S. Census Bureau/Company Statistics Division

Annual Capital Expenditures Survey (ACES)

Forms ACE-1(S), ACE-1(M), ACE-1(L), and ACE-2

A. Justification

1. Necessity of the Information Collection

A major concern of economic policymakers is the adequacy of investment in plant and equipment. Data on the amount of business expenditures for new plant and equipment and measures of the stock of existing facilities are critical to evaluating productivity growth, the ability of U.S. businesses to compete with foreign businesses, changes in industrial capacity, and overall economic performance. The ACES is the sole source of detailed comprehensive statistics on investment in buildings and other structures, machinery, and equipment by private nonfarm businesses in the United States.

Data users tell us that they need comprehensive and consistent data on investment by all private nonfarm businesses, by industry, by kind of investment, i.e., whether in new or used structures or equipment. The objectives of the ACES are:

(a) to provide estimates of capital expenditures for all private nonfarm sectors of the economy by 3-digit and selected 4-digit North American Industry Classification System (NAICS) levels;

(b) to base the survey on a probability sample that yields measures of the statistical reliability of the survey estimates;

(c) to develop a base survey to benchmark more frequent surveys on capital expenditures that do not have complete industry coverage;

(d) to produce annual enterprise-level data with the level of detail, coverage, and quality, which previously was only available as part of the quinquennial economic census;

(e) to provide detail on capital expenditures for estimating the national income and product accounts, estimating the productivity of U.S. industries, evaluating fiscal and monetary policy, and conducting research using capital expenditures data; and

(f) to provide industry analysts with capital expenditures data for market analysis, economic forecasting, product development, and business planning.

The Census Bureau conducts this survey under the authority of Title 13 of the United States Code, Sections 131 and 182. Sections 224 and 225 make the survey mandatory."

This request is for continuation of a currently approved collection and will cover the 2013 through 2015 ACES (conducted in fiscal years 2014 through 2016). Changes from the previous ACES authorization are the elimination of detailed capital expenditures by type of structure and equipment. These data, collected every five years, were last collected in the 2012 ACES and will not be collected again until the 2017 ACES.

We will collect and publish data based on the 2012 NAICS. Industries in the survey will comprise 3-digit and 4-digit 2012 NAICS codes.

For the 2012 and prior ACES data collection; the Census Bureau used mail out/mail back survey forms to collect data. Companies were able to respond via Centurion (The Census Bureau’s online reporting system), by mail, or by using our toll-free number to reply via secure facsimile machine. We asked companies to respond to the survey within 30 days of the initial mailing. If companies did not respond by the designated time, they received letters and/or telephone calls encouraging participation.

Employer companies were mailed one of three forms based on their diversity of operations and number of industries with payroll. Companies that operated in only one industry received an ACE-1(S) form. Companies that operated in more than one, but less than nine industries received an ACE-1(M) form. Companies that operated in nine or more industries received an ACE-1(L). All nonemployer companies received an ACE-2 form.

For the 2013 ACES data collection, the Census Bureau will collect the 2013 ACES data from employer companies primarily through electronic reporting. Employer companies will receive a mailed notification letter containing their User ID and password, and directed to respond via Centurion through the Census Bureau’s Business Help Site. The online reporting instrument is an electronic version of the paper data collection instrument, and based on their diversity of operations and number of industries with payroll. Companies operating in only one industry will access an ACE-1(S) form or electronic instrument. Companies operating in more than one, but less than nine industries will access an ACE-1(M) form or electronic instrument. Companies that operate in nine or more industries will access an ACE-1(L) form or electronic instrument. Companies will be able to print the form through online services or request a paper form by mail.

The Census Bureau will continue to use mail out/mail back survey forms to collect data from nonemployer companies. All nonemployer companies will receive an ACE-2 form. Nonemployer companies will have the option to respond by mail or online through the Census Bureau’s Business Help Site using the User ID and password provided to them on their form.

The Census Bureau will continue to ask both companies with employees and nonemployer companies to respond to the survey within 30 days. Reminder letters and/or telephone calls encouraging participation will continue to all companies that have not responded by the designated time.

For the 2014 and 2015 ACES data collection, the Census Bureau will determine whether to use the same data collection strategy based upon the electronic response rate of the employer companies for the 2013 ACES.

All ACE-1 forms request sales and receipts information to calculate industry investment to sales ratios and to assist in verifying that consolidated company data are being reported. Asset and depreciation information, also collected, assists in measuring changes in the Nation’s capital stock estimates.

Capital expenditures data are also collected annually from a sample of non-employer businesses using Form ACE-2. This collection is intended to better represent the total capital expenditures activity of all firms.

The survey Forms ACE-1(S), ACE-1(M), ACE-1(L), ACE-2 and accompanying instructions were developed through consultation described in Section 8, Consultation Outside the Agency.

2. Needs and Uses

The ACES is an integral part of the Federal Government’s effort to improve the quality and usefulness of National economic statistics. Federal agencies, including the Census Bureau, use these data to improve and supplement ongoing statistical programs.

The Census Bureau uses these data to improve the quality of monthly economic indicators of investment. The Census Bureau’s Value of New Construction Put in Place Survey currently uses the ACES data to benchmark its industrial buildings data. The Bureau of Economic Analysis (BEA) uses these data in refining and evaluating annual estimates of investment in structures and equipment in the national income and product accounts, compiling annual input-output tables, and computing gross domestic product by industry. The Federal Reserve Board (FRB) uses these data to improve estimates of investment indicators for monetary policy. The Bureau of Labor Statistics (BLS) uses these data to improve estimates of capital stocks for productivity analysis.

In addition, industry analysts use these data for market analysis, economic forecasting, product development, and business planning.

Information quality is an integral part of the pre-dissemination review of information disseminated by the Census Bureau (fully described in the Census Bureau’s Information Quality Guidelines). Information quality is also integral to the information collections conducted by the Census Bureau and is incorporated into the clearance process required by the Paperwork Reduction Act (PRA).

3. Use of Information Technology

Beginning with the 2006 ACES, electronic reporting was offered to all respondents using an encrypted Internet Data Collection System (Centurion) as a substitute for the paper form mailed to all companies. Based on the 2012 results, we estimate that overall 52 percent or more of the responses (66 percent of employer businesses and 16 percent of non-employer businesses) on the 2013 and later ACES will be collected electronically.

4. Efforts to Identify Duplication

The ACES is the only survey that provides annual capital investment data on a consistent basis for all private nonfarm businesses in the United States, by the investing industries, and by new and used structures and equipment. During 1995 and 1996, the Census Bureau assembled a team of survey managers to review several programs that collect investment data and proposed to eliminate all but essential duplication of capital expenditures data on its surveys. This effort revealed that although the collection of selected components of investment data occurred on various Census Bureau surveys, none of these surveys aimed at creating combined comprehensive investment statistics. Most of the programs reviewed serve multiple purposes of which investment data are only a part. In addition, the surveys are conducted at different frequencies; the reporting units vary from enterprise to establishment; and the amount of detail is limited.

In the Annual Survey of Manufactures (ASM), for example, aggregated annual capital expenditures data were available on an establishment basis for manufacturing industries. However, the survey excluded all but essential control totals at the 6-digit NAICS level.

There are no capital expenditures questions on the annual surveys covering the wholesale, retail, and services sectors, which are generally at the Employer Identification Number (EIN) level. To add such questions to all these surveys would be extremely burdensome to respondents. Also, large companies often make decisions about investment not at the establishment or EIN level, but at the corporate level.

The Census of Manufactures and Mineral Industries programs, which are part of the 5-year economic census, also do not collect detailed data on capital expenditures. Only essential control totals for the 6-digit NAICS level are retained.

No capital expenditures questions are included in the economic census programs covering the wholesale, retail, and services sectors, with the exception of the information sector. Selected industries in the information sector collect data on capital expenditures for new construction, including renovation because these data are considered essential to that program.

The Business Expenditures Survey, which is also part of the 5-year economic census, eliminated all data requests for capital expenditures.

To identify other available sources of data, we have also reviewed requirements for reporting to the Securities and Exchange Commission and regulatory requirements for utilities companies. While these sources require data on capital expenditures, they do not provide comprehensive and consistent data, nor are the data presented in the detail provided by the ACES.

5. Minimizing Burden

To minimize reporting burden on small businesses, we limit the sample size to the smallest size necessary to provide statistically reliable estimates. We also select a new sample each year to reduce the likelihood of a business being asked to respond to the survey more than once in a 5-year period. Our sampling methodology minimizes the probability of selection for any individual small or mid-sized business. (See Sections B.1 and B.2.a. for additional detail)

6. Consequences of Less Frequent Collection

ACES data are collected annually. Collecting the data less frequently would seriously impair their usefulness as a trend estimator of investment and as a benchmark for the national income and product accounts and estimates of capital stocks. Data on investment by types of structures and types of equipment are collected once in a 5-year period, with the next collection planned for the 2017 survey.

7. Special Circumstances

There are no special circumstances.

8. Consultations Outside the Agency

During development of the ACES, the Census Bureau conducted extensive pre-testing, a response analysis survey, and a comprehensive program evaluation. In addition, we maintain ongoing consultations with data users and respondents. Based on these consultations, we modified the survey’s information collection instruments and dropped our plan for the annual collection of detailed data on types of structures and equipment.

We have periodic discussions about the content and nature of the ACES with data users at the BEA, the FRB, the BLS, and the Department of the Treasury. Based on these discussions, in particular with the BEA, we issued the “Technical Note on New Capital Expenditures Survey” to accompany the 1993 survey publication. In addition, we clarified the information collection instruments to minimize any ambiguity in our data collection. Since the issuance of the technical note, we continually review data discrepancies between the BEA’s estimate of nonresidential fixed investment and the Census Bureau’s estimate of new structures and equipment from the ACES. When appropriate, we modify the ACES collection instruments to minimize these discrepancies.

The Census Bureau consults periodically with the following Federal Government data users:

Bureau of Economic Analysis

Dennis Fixler (202) 606-9607

Chief Statistician

Brent Moulton (202) 606-9606

Associate Director for National Economic Accounts

Carol Moylan (202) 606-9612

Associate Director for Industry Accounts

David Wasshausen (202) 606-9752

Chief, Industry Sector Division

Nicole Mayerhauser (202) 606-9742

Chief, National Income and Wealth Division

Robert Kornfeld (202) 606-9285

Deputy Chief, National Income and Wealth Division

Michael Armah (202) 606-9721

Chief, Capital Stock Branch

National Income and Wealth Division

Michael Glenn (202) 606-9718

Economist, Capital Stock Branch

National Income and Wealth Division

Matt Russell (202) 606-9575

Chief, Goods Branch

Industry Benchmark Division

Federal Reserve Board

Norman Morin (202) 452-2476

Chief, Industrial Output Section

Division of Research and Statistics

Justin Pierce (202)-452-2980

Economist, Industrial Output Section

Division of Research and Statistics

Bureau of Labor Statistics

Michael Harper (202) 691-5600

Associate Commissioner for Productivity and Technology

Department of the Treasury

Mike McDonald (202) 622-1785

Financial Economist

Office of Tax Analysis

Centers for Medicare and Medicaid Services

Jean Stiller (410) 786-0708

Economist

Information received from any outside individuals or entities was received on an informal basis and not designed to provide a group consensus.

The 2013 ACES pre-submission notice was published in the Federal Register on August 19, 2013 (Volume 78, Number 160) Page 50373-50374, inviting public comments on our plans to submit this request. The pre-submission notice closed October 19, 2013. We received comments from the BEA (see attachment D) supporting the continued collection of the ACES because the data are crucial to key components of BEA’s economic statistics.

9. Paying Respondents

We do not pay respondents or provide them gifts.

10. Assurance of Confidentiality

The report forms for this information collection will provide respondents with the following assurance of confidentiality:

YOUR RESPONSE IS REQUIRED BY LAW. Title 13, United States Code requires businesses and other organizations that receive this questionnaire to answer the questions and return the report to the U.S. Census Bureau. By the same law, YOUR REPORT IS CONFIDENTIAL. It may be seen only by persons sworn to uphold the confidentiality of Census Bureau information and may be used only for statistical purposes. Further, copies retained in respondents’ files are immune from legal process.

We will include similar guarantees in the cover letters that accompany the report forms. The statutory basis for these assurances of confidentiality is Title 13, USC, Section 9. All activities relating to the collection and dissemination of these data satisfy requirements of this law.

11. Justification for Sensitive Questions

There are no sensitive questions.

12. Estimate of Hour Burden

The estimate of total respondent burden hours for the 2013 through the 2015 ACES (conducted in fiscal years 2014 through 2016) is 146,570 hours per year. This estimate was derived as follows:

Hours per Burden

Survey forms response hours

_______________________________________________________________

FY 2014 - 2016: 25,515 Form ACE-1(S) 2.0 ¹ 51,030

18,940 Form ACE-1(M) 3.0 ¹ 56,820

545 Form ACE-1(L) 16.0 ¹ 8,720

30,000 Form ACE-2 1.0 30,000

Fiscal year total: 146,570 hours

Average for 45,000 ACE-1 responses: 2.59 hours

Average for 30,000 ACE-2 responses: 1.0 hours

Average for all 75,000 responses: 1.96 hours

These burden hour estimates are based on estimates of the average time required

to complete the survey as reported in the response analysis survey conducted during the pre-testing of the ACES, on conversations and correspondence with respondents, and on estimates of time required to complete similar surveys conducted by the Census Bureau. We adjust our estimates to account for the modification of data items collected.

About 45,000 companies will receive Form ACE-1. About 545 of the companies that receive Form ACE-1(L) are highly diversified. We expect them to report expenditures for 9 or more industry categories. Approximately 18,940 companies receiving Form ACE-1(M) are engaged in fewer industries. We expect these companies to report expenditures for 1 to 8 industry categories. The remaining 25,515 companies will receive form ACE-1(S) and generally are active in one industry. About 30,000 non-employer companies will receive Form ACE-2. No industry level data are requested from these companies.

The total cost to all respondents is estimated to be $4.5 million annually based on the median hourly wage of $30.55 for accountants and auditors multiplied by the annual burden hours (146,570).

13. Estimate of Cost Burden

We do not expect respondents to incur any costs other than that of their time to respond. The information requested is of the type and scope normally carried in company records and no special hardware or accounting software or system is necessary to provide answers to this information collection. Therefore, respondents are not expected to incur any capital and start-up costs or system maintenance costs in responding. Further, purchasing of outside accounting or information collection services, if performed by the respondent, is part of usual and customary business practices and not specifically required for this information collection.

14. Cost to Federal Government

We estimate the total cost to the government of the survey to be $4.6 million per fiscal year 2014, 2015, and 2016, all borne by the Census Bureau. The Business Investment Branch of the Company Statistics Division has planned and allocated resources for the effective and efficient management of this information collection.

15. Reason for Change in Burden

We estimate needing approximately 80,830 less burden hours. Approximately 74,530 of this decrease is due to the elimination of detailed capital expenditures by type of structure and type of equipment. Approximately 6,300 of this decrease is due to a reduction in the number of employer companies serving multiple industries in the universe and sample, resulting in a decrease in the number of companies receiving the ACE-1(S), ACE-1(M) and ACE-1(L) survey forms.

16. Project Schedule

The survey to collect 2013 data will begin in March 2014. Data collection for 2013 will occur from March 2014 through October 2014. We will process data using Census Bureau computer equipment. Census Bureau analysts will review the survey returns and the tabulated data for reasonableness. We estimate that the review process will continue through November 2014. We will release data in early 2015.

17. Request to Not Display Expiration Date

We will display the assigned expiration date on all report forms used in the information collection.

18. Exceptions to the Certification

There are no exceptions to the certification.

19. NAICS Codes Affected

The survey covers all private nonfarm businesses within the following NAICS sectors:

Title NAICS Sectors

Forestry, Logging, Fishing, Hunting, Trapping, and

Agricultural Support Activities 113-115 Mining, Quarrying, and Oil and Gas Extraction 21

Utilities 22

Construction 23

Manufacturing 31-33

Wholesale Trade 42

Retail Trade 44-45

Transportation and Warehousing (except Postal Service) 48, 492,493

Information 51

Finance and Insurance 52

Real Estate and Rental and Leasing 53

Professional, Scientific, and Technical Services 54

Management of Companies and Enterprises 55

Administrative and Support and Waste Management

and Remediation Services 56

Educational Services 61

Health Care and Social Assistance 62

Arts, Entertainment, and Recreation 71

Accommodation and Food Services 72

Other Services (except Private Households and

Public Administration) 811-813

Companies receiving Form ACE-1 are asked to report information for industry categories at the 3-digit and selected 4-digit NAICS levels. The industry categories for each company are computer-imprinted on the form. We ask each company to review the industries and correct them if necessary using the list of industry categories that appear in the instruction manual or online reporting system.

1 The difference in hours per response is due to the expected number of industry categories reported by companies. Highly diversified companies will report a greater number of industries.