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SEA Reporting Project – General Information

History of SEA Reporting Initiatives

The notion that accounting and financial reporting includes more than just numbers and financial information predates the creation of both the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board ( GASB ). By the time the FASB was established in 1973, the accounting profession had already embraced the idea that nonfinancial information—most notably including operational and service performance information—was a necessary ingredient in fully accounting for an entity’s financial position and results of operations, and reporting them to the public. When the FASB and the GASB began to develop their conceptual frameworks, the foundations upon which their future actions would be built, the importance of reporting nonfinancial performance information, or service efforts and accomplishments (SEA) reporting, was already ingrained in the professional accounting literature. In other words, the perspective that financial reporting includes SEA performance information is not a creation of the FASB or the GASB. The following paragraphs highlight the recognition of nonfinancial performance information as an important element of the measurement of the results of governmental services.

As far back as 1936, the National Committee on Municipal Accounting (NCMA), one of the GASB’s predecessors, issued Municipal Accounting Statements, which envisioned that governmental financial reports would consist of two parts—financial statements and statistical tables. The latter included a table of “statistical facts of general interest to the citizen,” such as basic factual information about a government and selected service efforts information (numbers of employees, levels of service provided, and quantities of capital assets).

The NCMA’s successor, the National Committee on Governmental Accounting, published Municipal Accounting and Auditing in 1951, the antecedent of Governmental Accounting, Auditing, and Financial Reporting or the “Blue Book.” The Blue Book, which was considered to be authoritative governmental accounting literature through the 1968 edition, continued to view the statistical tables as a part of the financial report.

In 1971, the American Accounting Association’s Committee on Concepts of Accounting Applicable to the Public Sector issued a report that divided what entities are accountable for 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 American Institute of Certified Public Accountants (AICPA) established a study group in 1972 to identify the objectives of financial reporting, often referred to as the Trueblood Committee. The group’s report—which eventually became the starting point for the Concepts Statements subsequently developed by the FASB and the GASB—stated that indicators of earning power have limited value for assessing the performance of governmental and not-for-profit organizations. This report explained that more useful indicators provide information about the achievement of the organization’s principal goals. The Committee stated, “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” (pages 50 and 51).

In 1978, the FASB published the Research Report, Financial Accounting in Nonbusiness Organizations: An Exploratory Study of Conceptual Issues, which discussed issues related to the concepts of financial accounting in nonbusiness organizations and identified the need for information about management performance, including an interest in how well money was spent. Later that year, the FASB issued its Concepts Statement No. 1, Objectives of Financial Reporting by Business Enterprises, which noted that financial reporting is “not restricted to information communicated by financial statements” (paragraph 5). FASB Concepts Statement 1 then noted that the scope of financial reporting was extremely broad and that “the [FASB] will draw boundaries, as needed, in other parts of the conceptual framework project or in financial accounting standards” (paragraph 5). The Concepts Statement also stated, “Financial reporting includes not only financial statements but also other means of communicating information that relates, directly or indirectly, to the information provided by the accounting system. . . . Information communicated by means of financial reporting other than financial statements may take various forms and relate to various matters” (paragraph 7).

In 1980, the FASB published the Research Report, Reporting of Service Efforts and Accomplishments, which focused on nonbusiness entities and concluded, “To the extent that general purpose external financial reporting aims to provide information about organizational performance, service efforts and accomplishments information would be an appropriate component of financial reporting” (Conclusion 1). This report was followed by FASB Concepts Statement No. 4, Objectives of Financial Reporting by Nonbusiness Organizations, which noted, “Nonbusiness organizations generally have no single indicator of performance comparable to a business enterprise’s profit. Thus, other indicators of performance are usually needed” (Highlights section). FASB Concepts Statement 4 also stated that “financial reporting should provide information about the performance of an organization during a period” and “information about the service efforts and accomplishments of an organization” are a major part of “the information most useful in assessing its performance” (Highlights section).

The GASB’s immediate predecessor, the National Council on Governmental Accounting (NCGA), published Objectives of Accounting and Financial Reporting for Governmental Units: A Research Study. The 1981 study stated that the overall goal of accounting and financial reporting was “To provide (1) financial information useful for making economic, political and social decisions, and demonstrating accountability and stewardship, and (2) information useful for evaluating managerial and organizational performance” (paragraph 9). The study noted that “information useful for evaluating managerial and organizational performance has not been limited to ‘financial’ information” (paragraph 9).

In 1982, the NCGA issued its Concepts Statement 1, Objectives of Accounting and Financial Reporting for Governmental Units. NCGA Concepts Statement 1 incorporated the overall goal of accounting and financial reporting that was introduced in the 1981 study. Among the six general objectives presented in the Concepts Statement was the following objective:

To provide information useful for evaluating managerial and organizational performance:

  • For determining the cost of programs, functions and activities in a manner that facilitates analysis and valid comparisons with established criteria, among time periods, and with other governmental units
  • For evaluating the efficiency and economy of operations of organizational units, programs, activities, and functions
  • For evaluating the results of programs, activities, and functions and their effectiveness in achieving their goals and objectives
  • For evaluating the equity with which the burden of providing resources for governmental operations is imposed.

One year after its creation in 1984, the GASB passed a resolution calling for state and local governments to experiment with SEA reporting. Then GASB Concepts Statement No. 1, Objectives of Financial Reporting, was issued in 1987. The first objective is that financial reporting should assist in fulfilling a government’s duty to be publicly accountable and should enable users to assess that accountability. This objective has several sub-objectives, including that financial reporting should provide information to assist users in assessing theservice efforts, costs, and accomplishments of the governmental entity.

In 1989, the GASB began publishing a series of Research Reports titled Service Efforts and Accomplishments Reporting: Its Time Has Come. The researchers recommended that SEA indicators become part of general purpose external financial reporting (GPEFR) but noted that, at that time, those indicators did not possess the characteristics necessary for inclusion in GPEFR. The researchers recommended that the GASB continue to encourage experimentation with SEA reporting. The GASB subsequently passed a second resolution encouraging the development of SEA performance measures and experimentation with SEA reporting.

GASB Concepts Statement No. 2, Service Efforts and Accomplishments Reporting, issued in 1994, stated that “. . . for GPEFR to provide information that will assist financial report users to assess performance for accountability and decision-making purposes, it is necessary to broaden its scope to keep pace with the evolving information needs of those users. . . . Having considered the information users need for assessing accountability and making decisions, and the role of financial reporting in providing information to assess performance, the GASB believes that SEA information is an integral part of GPEFR” (paragraph 49 ).

As part of its SEA research, the GASB conducted a survey in 1996 of 5,000 state and local governments regarding their use and reporting of SEA performance measures. More than half of the 900 respondents said they had developed some types of SEA performance measures and nearly half said that they used SEA performance measures for decision making in some way; however, only one-third of the respondents used output or outcome measures.

In 1997, the Sloan Foundation awarded the GASB with a grant to further SEA research, to address developmental needs for performance measurement, and to further encourage reporting of SEA performance information to citizens. This grant was renewed in 2000 and 2003 for additional 3 year periods. This project had six phases. The phases were:

  1. Establish a clearinghouse for performance measurement on the Internet- www.seagov.org.
  2. Analyze and evaluate the uses and effects of using performance measures for budgeting, management, and reporting by conducting interviews and surveys and then preparing case studies of the findings.  
  3. Analyze and evaluate users’ responses to performance measures by holding citizen discussion groups at various locations across the country.  
  4. Develop a set of suggested criteria that will help entities effectively communicate and report performance information.
  5. Encourage experimentation with the suggested criteria for external performance reporting.
  6. Evaluate the effectiveness of the suggested criteria for reporting performance information and assess whether they have developed sufficiently for further Board consideration.

It is important to note that the purpose of the SEA research project was to encourage experimentation with external reporting of performance information, to provide nonauthoritative guidance for the communication of performance information, and to assess how successful the guidance was in assisting state and local government organizations to effectively communicate the results of their operations.

In 1999, GASB researchers visited 26 state and local governments to conduct case studies of (a) the depth and breadth of actual use of SEA performance measures by these governments for budgeting, management, and reporting; (b) the effect of their use; and (c) the extent to which governments are ensuring the relevance and reliability of SEA performance measures. Over the next two years, the GASB staff also conducted 19 citizen discussion groups on government SEA reporting. Research reports summarizing both efforts were published.

In 2002, the GASB published a report on a follow-up to the 1996 survey, finding that the use of SEA performance measures by state and local governments was continuing to grow and that the respondents planned to increase their use of SEA performance measures. However, there still was a tendency to use input, activity, and output measures more than outcome measures.

In 2003, the GASB published a Special Report, Reporting Performance Information: Suggested Criteria for Effective Communication, describing a set of 16 suggested criteria that state and local governments could use when preparing external reports on SEA performance information. The report provided nonauthoritative guidance to state and local governments on what they could do to produce effective SEA reports. The criteria included recommendations such as clearly stating the major goals and objectives of the organization, presenting information at different levels of detail, focusing on relevant measures related to the organization’s goals and objectives, presenting information regarding citizen and customer perceptions, and reporting on a regular and timely basis.

The GASB followed up on that report by publishing a 2005 guide to help interested individuals become informed consumers of SEA reports that are prepared using, to some degree, the GASB suggested criteria. The main feature of the guide was a “user’s tour” of an SEA report that follows the GASB suggested criteria to help readers understand what they would be likely to find in a report and how to use the SEA performance information to assess a government’s performance.

Over the three years following publication of the suggested criteria, the GASB staff monitored the use of the suggested criteria and conducted research on their value and the importance of the GASB’s involvement in SEA reporting. The research included field interviews with preparers, attesters, senior management, elected officials, and citizens, and a random telephone survey of government finance officers. The findings of the interview research indicated that the suggested criteria were being used and were perceived as being valuable in preparing SEA reports. Those responding stated that the GASB’s involvement was important to furthering the reporting of SEA performance information. Respondents also indicated a preference for the GASB to provide suggested guidance at this time. The results of the telephone survey indicated that 40 percent of the respondents reported some outcome or results information to citizens frequently and another 30 percent do so occasionally. At the December 2006 Board meeting, the staff presented a report to the Board on the findings of the research and recommendations for future action.

In March 2007, the Governmental Accounting Standards Advisory Council (GASAC) reviewed a prospectus prepared for a potential SEA reporting project.   A variety of points of view, both positive and negative, were voiced by the GASAC members.   The average ranking of the SEA project by the members was high in relation to all of the projects being considered for addition to the Board’s current agenda at that time.   They also recommended that, at this time, any guidance provided for SEA reporting be voluntary.

The SEA reporting project was added to the GASB’s current agenda in April 2007.   The project consisted of two parts: (a) potential amendment to Concepts Statement No. 2, Service Efforts and Accomplishments Reporting, and (b) the development of suggested guidelines for voluntary reporting of SEA performance information.  

A task force of 19 experts in SEA performance information and reporting was appointed by the GASB chairman in May 2007.   In October 2007, the task force met to discuss issues associated with the project.   The task force members generally agreed that there was no need to add new criteria and that there were opportunities to combine some of the 16 suggested criteria.   Strong support was voiced for focusing on the most essential components of an SEA report.   Concepts Statement No. 5, Service Efforts and Accomplishments Reporting, an amendment of Concepts Statement No. 2, was issued in November 2008.

In July 2008, the Board issued a Request for Response, Suggested Guidelines for Voluntary Reporting of SEA Performance Information.   A user forum and public hearing were held in November 2008.   Thirty-five comment letters were received on the Request for Response.   The Board considered this written and oral feedback and the feedback received in developing the guidelines in the Proposed Suggested Guidelines for Voluntary Reporting, SEA Performance Information issued in June 2009.   [insert number] comment letters were received on the Proposal.   The Board considered this written feedback received before issuing the Suggested Guidelines for Voluntary Reporting, SEA Performance Information in [insert date ].


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