Unrest in Government Accounting

CPA Journal, The, Mar 2008 by Foltin, Craig

If the GFOA wasn't the strongest opponent of GASB 34, it was certainly the most outspoken. It said: "Governments cannot be asked to incur significant costs to provide information of no demonstrative value." GFOA members even referred to GASB as arrogant and militant. In May 1999, they voted to authorize their board to cut off funding of GASB. At the time, GFOA contributed $400,000 per year to GASB's $3.5 million budget. Despite the controversy, GASB stood by its position and enacted the standard, and GFOA continued its funding of GASB. The conflicts between GASB and GFOA that followed remained minor until SEA reporting became a central topic of discussion.

SEA in Government Has a Checkered Past

Since GASB's inception, SEA reporting has been a topic of discussion. Early on, GASB began espousing the concept of public accountability. In 1989, GASB started publishing research reports on SEA. In April 1994, GASB took it one step further and issued Concepts Statement 2, Service Efforts and Accomplishments Reporting. This was a clear reminder that SEA reporting could someday become a requirement. More pressing issues, such as a new reporting model, were the primary focus, however, and SEA requirements seemed a distant future consideration.

In 1997, almost obscured behind the GASB 34 debate, GASB began an unprecedented six-phase project accelerating government performance research that included a clearinghouse website (www.seagov.org), interviews and focus groups of officials and citizens, and the publication of findings and recommendations in a report.

The reaction to this SEA report was mixed. A study by Richard E. Brown and James B. Pyers ("Service Efforts and Accomplishments Reporting: Has Its Time Really Come?," Public Budgeting and Finance, Winter 1998) found "that such data (SEA) are extremely difficult to gather and present correctly.... Even if such data are technically solid, they are very powerful and lend themselves to misuse, even outright abuse." They concluded: "Requiring SEA reporting either might not be possible or would not succeed. Indeed, it may even do genuine harm."

Not surprisingly, the GFOA voiced opposition to GASB's efforts on SEA, issuing an official policy statement, "Performance Measurement and the Government Accounting Standards Board," on June 18, 2002. GASB still progressed with SEA, and in August 2003 issued "Special GASB Report-Reporting Performance Information: Suggested Criteria for Effective Communication," authored by James Fountain, Wilson Campbell, Terry Patton, Paul Epstein, and Mandi Cohn. This publication presented 16 suggested criteria for developing external reports on performance information. The report also included background information, research data, and an explanation of the importance of reporting SEA information.

Not all of the feedback was negative. The Association of Government Accountants (AGA) embraced GASB's research and created a new Certificate of Excellence in Service Efforts and Accomplishments Reporting. Although that certificate program does not evaluate baseline performance, it does encourage state and local governments to issue performance reports based upon GASB's 16 suggested criteria. Reports in accordance with a specified criterion receive the certificate. AGA also provides a similar certificate for federal agencies. For more about the program and entities that have successfully used GASB's criteria in their reports, see www.agacgfm.org/performance.