As the Governmental Accounting Standards Board began grappling with concepts in reporting governmental service efforts and accomplishments, or SEA, it knew traditional financial statements didn’t provide a complete picture of government performance.After all, not everything that a government does can be measured in dollars and cents, so should GASB write standards for things that are not measured monetarily?

When the board issued its first thoughts on SEA in Concepts Statement 2 in 1994, the scope of the statement reached a bit beyond financial reporting. The statement did not set SEA reporting requirements, as an actual standard would, but it formed the philosophical framework that would eventually guide the board as it broached the issue in future projects.

Since then, constituents have expressed concern that CS 2 might be reaching beyond the bounds of accounting because its objective was “to provide more complete information about a governmental entity’s performance.”

GASB has rethought the question of scope and issued an exposure draft of an amended concepts statement. Two new sentences rein in the scope considerably.

“It is beyond the scope of the GASB to establish the goals and objectives of state and local government services, to develop specific non-financial measures or indicators of service performance, or to set standards for service performance,” the proposed statement states. “Selection of [those objectives, measures or standards] should be made by those charged with that responsibility.”

GASB director of research and technical activities David Bean said that the proposed amendment results from extensive research, rethinking and constituent response.

“It’s been 14 years since the concepts statement was issued, and we’ve conducted extensive research during that period,” Bean said. “What we’re trying to accomplish is to bring the concepts statement up to date with our current thinking with regard to SEA reporting from a conceptual standpoint. There’s been a lot of concern expressed that GASB was reaching beyond reporting and getting into the management of governments. We’re trying to make it very clear that it was beyond the scope of GASB to establish the goals and objectives for state and local governments [or] to develop non-financial performance measures or indicators of service performance.”

The ED also does away with Paragraphs 69-79 of the current concepts statement, the section titled “Developing Reporting Standards for SEA Information.”

“Unfortunately, I think the original concepts statement sent mixed signals to our constituency,” Bean said. “We believe that the best way to clarify things was to eliminate or modify certain provisions. From what we’ve learned through our research efforts, we didn’t think it was appropriate with a concepts statement to discuss potential approaches that would be used in establishing SEA reporting standards, particularly when one of the alternatives mentions establishing a minimum core set of SEA measures. We now are making it perfectly clear that establishing a core set of SEA measures or any specific measures of non-financial performance would be outside the GASB’s scope.”


Stephanie Weaver, interim finance director for Saco, Maine, thinks the amendment improves the statement.

“The proposed changes soundly refine the role of SEA reporting and GASB’s role in promoting and supporting SEA reporting as an integral part of reporting governmental performance,” Weaver said. “The proposed changes seem to reinforce the benefits of effective SEA reporting without unduly determining how such reports are crafted and what determinants of performance are actually used.”

Relmond P. Van Daniker, chief executive officer of the Association of Government Accountants, believes that GASB should be establishing voluntary guidelines on governmental performance, but not setting standards.

“What we have found is that users [of financial reports] want information about how governments have utilized their money, a report on where revenues originated and where the money was spent,” Van Daniker said. “This is the basis of accountability and transparency. I am fully supportive of GASB moving to provide assistance in recommended practices — but not developing standards — in the area of service efforts and accomplishments.”

The recently formed Performance Management Commission, whose membership includes several state and local government associations, would like to see GASB abstain from any involvement in SEA.

“GASB ought not be either setting standards or voluntary guidelines or recommendations on performance measurement or management,” said Jeffrey Esser, executive director and CEO of the Government Finance Officers Association, speaking for the PMC. “We don’t think they have expertise in this area. Our view is that performance management is fundamentally a government budgeting matter and ought to be a part of the strategic planning and budgeting process, not the accounting and financial reporting function of state and local governments.”

GASB has requested comments by July 3, 2008. A public hearing has been scheduled for July 29 in Atlanta.

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