GASB proposes to redefine its role in performance measurement: the GASB issued an exposure draft in April that proposes to clari

Perhaps no single initiative of the Governmental Accounting Standards Board (GASB) has generated more sustained controversy than the board's ongoing project on performance measurement, which the GASB prefers to describe as service efforts and accomplishments (SEA) reporting. In April 2008, the GASB issued an exposure draft (ED) that proposes to clarify the board's vision of its current and future role in regard to SEA reporting.

BACKGROUND

The GASB has issued several non-authoritative concepts statements to provide itself with a principled basis for setting its technical agenda and deliberating specific issues. The first of these documents, GASB Concepts Statement No. 1, Objectives of Financial Reporting (1987), set general-purpose external financial reporting (GPEFR) as the proper boundary for the GASB's research and standard-setting activities. The second, GASB Concepts Statement No. 2, Service Efforts and Accomplishments Reporting (1994), placed SEA squarely within the scope of GPEFR, and thus within the proper purview of the GASB's attention.

The major state and local government public interest groups, including the Government Finance Officers Association (GFOA), took strong exception to the GASB's involvement with performance measurement reporting. In particular, they voiced concern at the prospect of the GASB using its position as the authoritative accounting and financial reporting standard-setting body for state and local governments to mandate performance measurement reporting, an outcome clearly suggested in GASB Concepts Statement No. 2:

This concern was bolstered by the discussion of "Possible Approaches to Establishing SEA Reporting Standards" in that same document:

The establishment of SEA reporting requirements might take many different approaches. For example:

a. Reporting standards could require SEA reporting for major agencies, departments, programs, and services of a governmental entity without specifying the particular SEA measures that should be reported. In this case, the requirement could be that SEA measures, with adequate explanatory information, be reported for all major goals and objectives of the agency, department, program, or service; and that comparisons over time and with established targets be reported.

b. As an alternative, reporting standards could establish a minimum core set of SEA measures for each major agency, department, program, or service, leaving the entity free to supplement that reporting with other measures as it deems appropriate. For this alternative, the GASB could draw on current practice to determine generally used measures for establishing the minimum set of SEA measures.

c. As another alternative, reporting standards could focus on one or more significant agencies, departments, programs, or services where relatively widely used SEA measures already exist. The GASB could require reporting of a specific set of SEA measures for these entities, with the requirement that other SEA measures be reported for major purposes or goals and objectives for which SEA measures have not been specified. (paragraph 77)

Much has changed since the issuance of GASB Concepts Statement No. 2 almost 15 years ago. The GASB has gradually come to see its role as facilitating and encouraging, rather than mandating, SEA reporting. Accordingly, the ED proposes to amend GASB Concepts Statement No. 2 to reflect the board's new vision and, it is hoped, allay constituent concerns regarding the GASB's ongoing involvement with performance measurement.

PROPOSED CHANGES

The ED proposes to amend the language of GASB Concepts Statement No. 2 to make it clear that the board plans to offer recommendations rather than set standards for SEA reporting. Thus, the ED recommends the replacement of terminology suggestive of mandatory reporting (e.g., standards and statements) by terminology more compatible with voluntary reporting (e.g., guidance and pronouncements or other communications). Likewise, the discussion on developing reporting standards (quoted above) would be eliminated entirely. Furthermore, the ED proposes to amend paragraph 2 of GASB Concepts Statement No. 2 to acknowledge that:

PROCESS AND OUTCOME

The GASB scheduled a public hearing on the ED for July 29, 2008, in Atlanta, Georgia. The board plans to spend this fall deliberating the comments it received in response to the ED. The GASB hopes to issue an amended version of GASB Concepts Statement No. 2 in December 2008. Meanwhile, the board is actively working to develop suggested GASB guidelines for the voluntary reporting of SEA performance information.

STEPHEN J. GAUTHIER is director of the GFOA's Technical Services Center in Chicago, Illinois.

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