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About SEA Reporting – Government Accountability

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The following text is drawn from GASB Concepts Statement No. 2: Service Efforts and Accomplishments Reporting (GASB Concepts Statement No. 5, Service Efforts and Accomplishments Reporting, did not amend these paragraphs).

    GASB Concepts Statement No. 1 describes accountability as a broad concept that forms the cornerstone of all financial reporting for state and local governmental entities. Although Concepts Statement No. 1 recognizes that financial reporting should provide information to assist users both in assessing accountability and in making economic, social, and political decisions, it states that accountability is the paramount objective from which all other objectives must flow. Accountability is a relationship between those who control or manage an entity and those who possess formal power over them. It requires the accountable party to provide an explanation or a satisfactory reason for his or her activities and the results of efforts to achieve the specified tasks or objectives. Consistent with this notion, Concepts Statement No. 1 states that "accountability requires governments to answer to the citizenry-to justify the raising of public resources and the purposes for which they are used. Governmental accountability is based on the belief that the citizenry has a 'right to know,' a right to receive openly declared facts that may lead to public debate by the citizens and their elected representatives."

    Governmental accountability is similar to private-sector accountability in that it includes a requirement to render an account or explain one's actions to someone else who has the authority or power to assess performance and to make a judgment and take action. The process includes (a) the requirement to render the elements of accounts, (b) the analysis of that information and the making of a judgment by those to whom one is accountable, and (c) the exercise of power in the form of allocating praise or censure.

    Governmental accountability can be viewed from several perspectives. For example, from an accounting perspective, in 1970 the American Accounting Association's (AAA) Committee on Concepts of Accounting Applicable to the Public Sector divided what entities are accountable for into four parts:

    1. Financial resources.
    2. Faithful compliance or adherence to legal requirements and administrative policies.
    3. Efficiency and economy in operations.
    4. The results of government programs and activities, as reflected in accomplishments, benefits, and effectiveness.

    From a functional perspective, accountability has been presented in the form of a ladder comprising five distinct levels.(1) The levels move from more objectively measured aspects (legal compliance) to aspects requiring more subjective measures (policies pursued and rejected). The ladder is generally consistent with the analysis of the AAA's committee.

    Level 1: Policy accountability—selection of policies pursued and rejected (value)
    Level 2: Program accountability—establishment and achievement of goals (outcomes and effectiveness)
    Level 3: Performance accountability- efficient operation (efficiency and economy)
    Level 4: Process accountability—using adequate processes, procedures, or measures in performing the actions called for (planning, allocating, and managing)
    Level 5: Probity and legality accountability—spending funds in accordance with the approved budget or being in compliance with laws and regulations (compliance)

    Each of these levels is a necessary part of accountability. General purpose financial statements (GPFS), which aid in assessing probity and legality accountability, provide the foundation upon which other bases of accountability can be developed. The information provided in GPFS is essential for assessing whether the entity has exercised adequate fiscal stewardship over the resources provided to it. Although level 1, policy accountability, represents an important part of accountability, the assessment of performance at that level requires the analysis of competing values among different services. Information on the value of services required for assessing policy accountability requires determining the relative value of a service to society or recipients, or the comparative value of two or more distinct services and is beyond the scope of GPEFR. Therefore, this information has been excluded from the elements of performance measurement reporting.

    In discussing the ladder, J. D. Stewart warns (see footnote 10) that there are no universal solutions to accountability. He states that analysis and assessment of what is needed for accountability may be different for each level, each service, and each entity in terms of the right to information, the duty to report, the power to impose sanctions, and the relevant information to provide.

    A third view of accountability is from the perspective of the key characteristics of an accountability system, for example: (a) focuses on outcomes, (b) uses a few selected indicators to measure performance, (c) provides information for both policy and program management decisions, (d) generates data consistently over time, and (e) reports outcomes regularly and publicly.

    These three views highlight the need to develop and communicate information that encompasses both the financial and nonfinancial aspects of performance to those to whom the entity is accountable.


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