SEA Performance Reporting
GASB’s Focus on Accountability for Results Stirs Controversy

By Dean Michael Mead

E-mail Story
Print Story
JANUARY 2008 - On the rare occasion that standards setting for governmental accounting and financial reporting gets broad media attention, it is generally for two reasons. The first is when the subject matter is of interest beyond the realms of CPA firms and governmental finance offices. Governmental Accounting Standards Board (GASB) Statement 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, which revamped the blueprint for state and local government financial reports, is a prime example. The second occurs in the presence of vocal opposition or controversy. GASB 34 qualifies on those grounds as well, based on the resistance to its requirement that reporting entities record and depreciate the cost of infrastructure assets such as roads and bridges.

Another project on GASB’s technical agenda has been met with opposition in some quarters and has consequently garnered some attention from the media. Although GASB has been studying performance reporting and promoting experimentation with the practice for nearly all of its 23-year existence, not until recently did GASB include a project on performance reporting on its technical agenda. Interestingly, opposition to this project arose long before it had even been added to the agenda, let alone resulted in any specific proposals.

Projects on the current technical agenda are those that GASB board members are actively deliberating, as opposed to projects in a preliminary research and information-gathering phase. At its April 2007 meeting, GASB voted unanimously to add a project on service efforts and accomplishments (SEA) reporting. The purpose of this project is to consider how to establish suggested guidelines for governments that voluntarily choose to report on their performance.

Unlike most projects on GASB’s current technical agenda, however, the SEA reporting project will not result in any new requirements. Whatever the outcome of the project, governments will not be required to report on their performance. Likewise, although most GASB projects lead to an exposure draft for public review, GASB will not decide whether, or in what format, to develop a proposal for suggested guidelines until later. Instead, GASB plans to issue a preliminary document that explores the form that such guidelines might take. After providing the public with sufficient opportunity to review and comment on the document, and thoroughly analyzing and considering that feedback, GASB will then decide how to proceed.

Importance of Performance Reporting for Governments

The central question of someone examining a company’s financial statements is: “Did it make a profit?” The performance results of governments are less easily pinpointed. Most governmental entities do not have a profit motive, although they try to ensure that sufficient resources are raised to cover their costs. Making ends meet is important because it helps to ensure a government’s long-term financial viability. But knowing only whether a government raised more or less money than it spent is not sufficient to evaluate its “success.” Understanding how well a government performed requires information about what the government did with the resources it raised. How much service did it provide? Were the services provided efficiently and effectively? What did the government accomplish?

For nearly 40 years, the accounting profession and academia have recognized that SEA performance information is a key component of accounting and financial reporting by governments. In 1971, the American Accounting Association’s Committee on Concepts of Accounting Applicable to the Public Sector divided accountability into four parts: a) financial resources; b) faithful compliance or adherence to legal requirements and administrative policies; c) efficiency and economy in operations; and d) the results of government programs and activities, as reflected in accomplishments, benefits, and effectiveness.

The following year, the AICPA established a study group, often referred to as the Trueblood Committee, to identify the objectives of financial reporting. The group’s report—which eventually became the starting point for the Concepts Statements developed by FASB and GASB—stated that indicators of earning power have limited value for assessing the performance of governmental and not-for-profit organizations. The report explained that indicators providing information about the achievement of the organization’s principal goals would be more useful. The committee recommended:

An objective of financial statements for governmental and not-for-profit organizations is to provide information useful for evaluating the effectiveness of the management of resources in achieving the organization’s goals. Performance measures should be quantified in terms of identified goals.

In 1980, FASB issued Concepts Statement 4, Objectives of Financial Reporting by Nonbusiness Organizations. Concepts Statement 4 noted that “nonbusiness organizations generally have no single indicator of performance comparable to a business enterprise’s profit. Thus, other indicators of performance usually are needed.” It further stated that “financial reporting should provide information about the performance of an organization during a period,” and that “information about the service efforts and accomplishments of an organization” are a major part of “the information most useful in assessing its performance.”

GASB’s immediate predecessor, the National Council on Governmental Accounting (NCGA), stated in its Concepts Statement 1 that one of the six basic objectives of accounting and financial reporting by governments is “[t]o provide information useful for evaluating managerial and organizational performance.” In the NCGA’s view, governments should provide information that can be used to evaluate “the efficiency and economy of operations” and “the results of programs, activities, and functions and their effectiveness in achieving their goals and objectives.”

Clearly, the notion that accounting and financial reporting includes more than just numbers and financial information predates the creation of both FASB and GASB. The importance of SEA reporting was already ingrained in the professional literature when FASB and GASB began to develop their conceptual frameworks. In other words, the position that financial reporting includes SEA performance information is not a creation of FASB or GASB, but rather an established concept they were expected to further develop and bring to fruition as part of their mission.

To help recognize and clarify key fundamental differences between the government environment and the for-profit business environment, GASB prepared a whitepaper, “Why Governmental Accounting and Financial Reporting Is—And Should Be—Different,” which can be downloaded from

GASB’s Past Work on SEA Reporting

The agreement that created GASB required it to adopt the existing NCGA pronouncements, including its Concepts Statements. GASB has since incorporated SEA reporting into its own conceptual framework and has worked for more than two decades to encourage governments to experiment with performance reporting and to monitor their progress. GASB’s research work has included the following:

  • Publication of research reports discussing the basics of performance measurement and reporting for a dozen government service areas;
  • Two national surveys of governments regarding their use and reporting of performance measures;
  • Creating a website devoted to government performance measurement ( to serve as a national clearinghouse for information about SEA reporting;
  • Case studies of leading performance measurement and reporting programs based on extensive visits to 26 state and local governments;
  • Conducting 19 citizen discussion groups around the country to learn about public views of the need for performance information; and
  • Development and publication of a staff document on suggested criteria for effectively communicating performance information to the public.

GASB’s efforts are widely recognized as having played a significant role in advancing the state of the art of performance measurement and reporting by state and local governments. Yet, some of GASB’s early work is problematic in that it appears to have presumed that standards for required reporting of SEA information would soon be forthcoming. In retrospect, GASB Concepts Statement 2, Service Efforts and Accomplishments Reporting, and GASB’s series of research reports, Service Efforts and Accomplishments Reporting: Its Time Has Come, seem to have gotten the cart before the horse.

New SEA Reporting Project

The project that GASB recently added to its technical agenda has two parts. One part will update portions of Concepts Statement 2 based on what has been learned from GASB’s research and other developments during the 13 years since it was published. For example, one approach considered in Concepts Statement 2 was the development of specific measures that all governments would be required to report. GASB’s subsequent research, however, suggests that it would be preferable for governments to select appropriate measures based on the goals and objectives the government has established. GASB anticipates issuing a draft of the revisions of Concepts Statement 2 for public comment early in 2008.

The other part of the project will explore how principles-based guidelines could be established. GASB’s project plan envisions the guidelines as suggested practices, based on essential principles of performance measurement and reporting, for governments that voluntarily report to the public on their performance.

When a project is added to GASB’s agenda, it typically includes a step-by-step plan that leads from board deliberations, through public exposure of a draft, and ultimately to the final publication of a pronouncement. In this case, GASB plans to issue a preliminary document to obtain public comment on the proposal of suggested guidelines. GASB has decided to wait until it has reviewed the input it will receive in response to the preliminary document before deciding any next steps.

Controversy Regarding the SEA Reporting Project

As noted earlier, there are those who object to GASB’s work on performance reporting. Although they support government performance measurement, they believe that GASB should not be involved. Specifically, they have stated that choosing what performance to measure should not be decided by GASB, but rather by elected officials, based on their government’s mission and goals.

GASB agrees completely with this point and has taken steps to address these concerns. In January 2007, GASB convened a roundtable discussion in Washington, D.C., to give critics an opportunity to speak directly to the board members and to open a dialogue between them and the constituents that support GASB’s SEA reporting project. In response to what GASB heard at that roundtable, at meetings of the Governmental Accounting Standards Advisory Council, and at other meetings with constituent groups, GASB decided to amend Concepts Statement 2 to highlight that its role is limited to SEA performance reporting.
GASB also decided to revise its project plan so as to make the
following clear:

  • The project will not require governments to report on their performance.
  • The project will not establish goals and objectives for governments.
  • The project will not create specific performance measures that governments would have to report.
  • The project will not set benchmarks or required levels of performance that governments would be expected to meet.

Again, GASB intends to explore suggested guidelines for voluntary SEA performance reporting by governments.

Those opposed to the GASB project have also stated that even if GASB’s reporting guidelines are optional, they will open the door to the setting of standards that require performance reporting of measures that are specifically required by GASB. GASB expects that revising Concepts Statement 2—which guides board deliberations and decision making—will make it clear that GASB does not intend to follow that path.

Public Participation in the SEA Reporting Project

GASB plans a variety of opportunities for CPAs and other interested individuals and organizations to get involved. GASB wants its constituents to provide as much feedback as they wish. GASB has already created an advisory committee comprising experts on performance reporting from inside of government, the accounting profession, academia, and the general public. The advisory committee met in September 2007 to provide input directly to GASB members and staff. Other constituents will have the opportunity to speak directly to GASB during hearings and roundtable discussions scheduled for 2008.

GASB also expects to do the following:

  • Work with the Joint Performance Management Initiative, which has been proposed by those objecting to the GASB project, and solicit that group’s input as the GASB project proceeds;
  • Use its Performance Reporting for Government website to make available up-to-date information about the project, perhaps by an electronic news service;
  • Publish articles in GASB’s newsletters The GASB Report and The User’s Perspective, as well as in constituent publications;
  • Make presentations about the SEA reporting project at constituent conferences and meetings; and
  • Provide an Internet-based mechanism for constituents to express their views on any SEA Reporting project’s proposed documents when they have been issued.

It is vitally important to GASB that its constituents be able to easily follow the progress of this project and to have ample opportunity to speak their minds. GASB wants everyone to be fully informed about what it is doing, so that ultimately the users of the financial reports of governments that report SEA performance information will be able to make better-informed political, social, and economic decisions.

Dean Michael Mead is the research manager at the Governmental Accounting Standards Board (GASB). The opinions expressed in this article are those of the author. Official positions of GASB are established only after extensive deliberation and due process.




















The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

©2009 The New York State Society of CPAs. Legal Notices