Additional resources – Frequently asked questions

The following article provides an overview of the GASB’s research on SEA reporting and answers some frequently asked question about the project and the GASB’s position on the consideration of reporting of nonfinancial information as part of general purpose external financial reporting (GPEFR). The GASB staff developed the answers provided in this article with input from individual Board members. The Board speaks through final pronouncements only after extensive due process.

For the most up-to-date information about the status of the GASB’s SEA project, visit the GASB’s SEA Project Page.

Q: Why was the SEA project placed on the GASB’s research agenda?

A: The GASB began its study of SEA reporting issues soon after it was established. The decision to add the SEA project to the research agenda in 1984 was based primarily on the past work of other standards setters. Both the National Council on Governmental Accounting (NCGA)—the predecessor standards-setting body to the GASB—and the Financial Accounting Standards Board (FASB) addressed SEA in financial reporting objectives as part of their conceptual frameworks.

The FASB first addressed SEA reporting in its Concepts Statement No. 4, Objectives of Financial Reporting by Nonbusiness Organizations, issued in 1980. The FASB Concepts Statement states, “Ideally, financial reporting also should provide information about the service accomplishments of a nonbusiness organization. Information about service accomplishments in terms of goods or services produced (outputs) and of program results may enhance significantly the value of information provided about service efforts.” The NCGA spoke to the issue of SEA reporting in its Concepts Statement 1, Objectives of Accounting and Financial Reporting for Governmental Units, issued in 1982. The NCGA stated that financial reporting should provide information “[f]or evaluating the results of programs, activities and functions and their effectiveness in achieving their goals and objectives.”

Q: Does the GASB believe that SEA performance information is part of general purpose external financial reporting? (GPEFR)

A: Yes. GASB Concepts Statement No. 1, Objectives of Financial Reporting, states that “[f]inancial reporting should provide information to assist users in assessing the service efforts, costs, and accomplishments of the governmental entity. This information, when combined with information from other sources, helps uses assess the economy, efficiency, and effectiveness of government....” In addition, Concepts Statement No. 2, Service Efforts and Accomplishments Reporting, further describes why the GASB believes SEA performance information is essential to assist users in assessing accountability and in making informed decisions. Concepts Statement 2 clarifies that the GASB’s goal in considering standards for the reporting is directed at information about performance results as distinct from establishing standards of performance.

The term general purpose external financial reporting (GPEFR) is often confused with general purpose financial statements (GPFS). Basic financial statements replaced GPFS with the introduction of the new financial reporting model. General purpose external financial reporting (GPEFR) not only encompasses the basic financial statements, it extends to other information that could be included in separate reports.

Q: What does the Sloan Grant research entail?

A: In 1997, the Alfred P. 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. The six phases of the project are described below:

1. Establish a clearinghouse for performance measurement on the Internet -www.seagov.org

2. Analyze and evaluate the uses of and effects of using performance measures for budgeting, management, and reporting by conducting interviews and surveys and then preparing cases studies of the findings. (These case studies can be found that the SEA website. A CD-ROM of the case studies was issued in 2000, and the GASB expects to publish a Research Report bases on the cases studies in the near future.)

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.

Q: What was accomplished as a result of the SEA project prior to receiving the Sloan Grant?

A: Highlights of GASB activities related to the SEA project (prior to receiving the Sloan Grant) follow:

• 1984—Added SEA reporting project to research agenda.
• 1985—Issued a resolution that encouraged experimentation with SEA reporting.
• 1987—Issued Concepts Statement 1, which recognized the importance of SEA in general purpose external financial reporting.
• 1989—Issued a second resolution that encouraged the development of SEA measures and experimentation with SEA reporting.
• 1989—Issued the first SEA-related Research Report, Elementary and Secondary Education.
• 1990—Issued Overview Research Report covering twelve service areas.
• 1994—Issued Concepts Statement 2.
• 1995—Issued the final of nine reports in the first SEA research series.

Q: After spending all of this staff time and money, has not the GASB already made a commitment to issue standards for SEA reporting?

A: No. Although the GASB believes that SEA performance information is part of general purpose external financial reporting (GPEFR) as stated in its two Concepts Statements, this position does not equate to a decision to establish SEA reporting standards.

Although financial reporting traditionally has involved information communicated in financial statements, as noted in the answer to a previous question, the scope of financial reporting was viewed broadly by the NCGA in the past, and by the FASB and the GASB in the current standards-setting environment. This view includes information beyond that generally found in financial statements derived form the accounting system. Research Reports and Concepts Statements issued by the FASB, the GASB, and the NCGA recognized that to achieve the objectives of financial reporting for nonprofit organizations and governments, additional nonfinancial information is needed to help users evaluate service results. Each organization also recognized that the ability to measure service accomplishments is still undeveloped and that such performance measures may not yet satisfy the qualitative characteristics of accounting information. Both the FASB and the GASB have encouraged research and experimentation with the collection, measurement, and reporting of nonfinancial or performance information in an effort to assist the Boards in assessing the qualitative characteristics of that information.

Q: How can the GASB advance SEA reporting without establishing specific or generic SEA reporting standards for specific programs?

A: The GASB’s research into the use and reporting of SEA performance measures provides insight into ways in which the reporting of SEA performance information might be achieved without establishing reporting standards that would require the use of specific or generic SEA program measures. For example, current research on suggested SEA reporting criteria indicates that guidance can be provided that would assist in developing reports on SEA performance information without setting forth specific measure to be reported.

The GASB recognizes that SEA performance measures relate specifically to the services of a reporting entity so that users can assess the extent to which the entity’s programs achieve their mission and accomplish their goals and objectives. Such measurements are inherently idiosyncratic and will vary by entity, service, and location.