The User's Perspective

May 2008

SEA Reporting Project Under Full Swing

            Service efforts and accomplishments (SEA) reporting has been an integral part of the GASB’s agenda since it was established in 1984, and its roots can be traced much further back into the annals of governmental accounting and financial reporting history. The expected goal of SEA reporting is to assist the users of government financial information in evaluating the operational efficiency of the services governments provide and to offer the means to measure governments’ effectiveness in achieving their goals and objectives.

SEA performance information has been recognized for nearly 40 years as a key component of governmental financial reporting. It includes performance data regarding:

  • Inputs (like the number of teachers, or tons of asphalt used to repair roads)
  • Outputs (such as the number of students promoted, or the number of potholes filled)
  • Outcomes (for instance, percentage of a high school’s students entering college, or the physical condition rating of roads) and
  • Efficiency (cost per pupil educated, or cost per pothole filled).

            With an Exposure Draft out for comment in one area of the project, and a due process document forthcoming in the other, this is a good opportunity to provide an update from the user’s perspective.

The Importance of SEA Performance Information

            When examining a for-profit corporation, how efficiently and effectively that company provides their services is eventually going to be reflected in its bottom line. The key question being: “Did it make a profit?”

            That is not the case when evaluating state and local governments. Most governments do not have a profit motive, though they do 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-run financial viability. But a government could operate with a balanced budget and be inefficient in providing services, or it could operate with a deficit and be highly efficient in providing services. Some of the information needed to make such evaluations has not been provided through traditional financial reporting. This is where SEA performance information comes in.

            To meaningfully understand how well a government performed and, therefore, to establish improved accountability, taxpayers, the buyers of municipal bonds, and other resource providers need information about what a government did with those resources. How much service did it provide? Were the services provided efficiently and effectively? What did the government accomplish?

            Without SEA performance information, it is difficult—if not impossible—to gauge how well a government is achieving its intended results or how effective it is in relation to the resources it receives. Consequently, many governments are not able to fully demonstrate their stewardship over public resources or that they have been accountable to their constituents.

What Is the GASB Doing with Its Conceptual Framework?

            The SEA reporting project has two parts, which the GASB is deliberating concurrently. The objective of the first portion of the project is to amend Concepts Statement No. 2, Service Efforts and Accomplishments Reporting, to reflect developments that have taken place in the decade-and-a-half since its issuance and to clarify certain other issues. The proposed changes to Concepts Statement 2 are based both on the findings of extensive research by the GASB and others, and on the results of the GASB’s monitoring of state and local governments that report SEA performance information.

            In an Exposure Draft issued in April, the GASB proposed to modify four sections of Concepts Statement 2 (Purpose and Scope, Elements of SEA Reporting, Limitations of SEA Information, and Enhancing the Usefulness of SEA Information) and to eliminate one section (Developing Reporting Standards for SEA Information). It is the GASB’s belief that this proposal would enhance the common understanding of the elements, characteristics, limitations, and methods of communicating SEA performance information. (A link to the Exposure Draft and to more details about the proposed changes can be found at the end of this article.)

            It is important to note that the proposed changes would clarify that it is beyond the scope of the GASB to:

  • Establish the goals and objectives of state and local government services
  • Develop specific nonfinancial measures or indicators of service performance
  • Set targets for service performance.

            These activities are rightly the prerogatives of government officials.

What Is the GASB Doing Regarding Suggested Guidelines?

            The objective of the second portion of the project is to develop conceptually based suggested guidelines for voluntary reporting of SEA performance information. It is important to underscore that the GASB is not proposing that any government be required to follow these suggested guidelines or even to report SEA performance information at all.

            The GASB is expected to issue a Request for Response document during the third quarter of 2008 seeking constituent feedback on the issue of suggested guidelines. Unlike most GASB projects, which are planned to proceed from a draft proposal to a final pronouncement, the GASB has not yet decided how this portion of the SEA reporting project will proceed beyond the Request for Response. Not until the public feedback has been thoroughly analyzed will the GASB decide what, if anything, it will do regarding the further development of suggested reporting guidelines.

            The Board is discussing a tentative framework for suggested reporting guidelines that are intended to provide state and local governments with the essential information needed for the effective communication of SEA performance information.   The Board believes that a set of reporting guidelines, though voluntary, would enhance governmental SEA reports.

            The Board began by considering 16 suggested criteria presented in the GASB staff’s 2003 Special Report, Reporting Performance: Suggested Criteria for Effective Communication. The Board’s deliberations benefited from the results of studying dozens of governments that experimented with reporting following the criteria during 2004 through 2007. The GASB staff monitored the use of the suggested criteria and conducted interviews with preparers, attestors, senior management, elected officials, and citizens, and a random survey of government finance officials. This research found that the suggested criteria were perceived as valuable in preparing SEA reports.

            The GASB held a roundtable meeting on SEA reporting in early 2007 to gather input from the more than 40 participants representing a broad spectrum of constituent groups. Some participants expressed discomfort about the GASB dealing with nonfinancial performance information, but others expressed that it is as important for the GASB to be involved in performance reporting as it is for other types of financial reporting. Some participants cited the importance of not impinging upon political and policy decisions, which need to remain with elected officials. Those views are clearly reflected in the changes the GASB has proposed for Concepts Statement 2.

         The GASB’s discussions also have been informed by feedback from the Governmental Accounting Standards Advisory Council (GASAC), which reviewed a draft project prospectus in March 2007 and voiced a variety of views, both positive and negative. As a whole, the GASAC gave the project a high priority in relation to the other projects being considered for addition to the Board’s current agenda and recommended that any guidance provided for the reporting of SEA performance information be voluntary. The Board also met with a task force of experts on SEA performance reporting, which offered suggestions about how to improve the 16 criteria, including moving from a lengthy list of specific items to a manageable number of guidelines.

            The framework the GASB is currently discussing comprises essential components of an effective SEA report and qualitative characteristics of SEA performance information. The Board has tentatively agreed on four essential components:

  • It is essential for the reader to understand the report’s purpose and scope—why the information is being reported and what part of the government is being reported on.
  • Stating the government’s major goals and objectives is essential for giving readers a basis for determining whether the reported SEA performance measures are relevant to what the organization intended to accomplish.
  • The report needs to focus on key measures of SEA performance to provide readers with information that is important, on the one hand, but does not overload them with too much information, on the other.
  • Discussion and analysis of results and challenges —in narrative form—enhances the reader’s ability to understand what has been achieved and what factors have affected the level of achievement.

            While these essential components lay out the types of information that an effective SEA report needs to present, the six qualitative characteristics described in Concepts Statement 2—relevance, understandability, comparability, timeliness, consistency, and reliability—also need to be considered if the information is to effectively communicate results to the potential readers of SEA performance reports.

How Can You Help the GASB with Its Work on SEA Performance Reporting?

            The feedback of persons interested in government performance is essential to ensuring that the GASB’s proposals meet your needs for SEA performance information. You can assist the GASB with the process of finalizing its proposed amendment of Concepts Statement 2 by reading the Exposure Draft and providing feedback.

            You can submit comments by email ( or traditional mail. The deadline for submitting written comments is July 3, 2008. A public hearing also will be held in Atlanta on July 29, 2008, in conjunction with the Professional Development Conference and Exposition of the Association of Government Accountants. Information about participating in the hearing can be found on pages i and ii of the Exposure Draft.

            Similarly, when the Request for Response on suggested SEA reporting guidelines becomes available sometime in the third quarter of 2008, sharing your views on that document will also be of great assistance to the GASB.

Further Reading