To stay competitive, these companies must strive to maintain top-notch performance. Despite great strides in the private sector, few state or local governmental units possess a comprehensive performance measurement program.
A New Way to Measure
Gathering performance information involves new ways of measuring government programs. Performance measurement is the process of determining how effectively and efficiently taxpayer resources are being utilized - both for the delivery of services and the administration of programs. In other words, it is the report card from which citizens can determine the operational effectiveness of their state or local government. It involves collecting and analyzing data, benchmarking, and budgeting.
Benchmarking is essential since it provides a reference point by which the governmental unit can measure or judge performance. In 1987, the Governmental Accounting Standards Boards (GASB) began to look at strategies for measuring what citizens get for their money, and how economically, efficiently, and effectively funds are being used.
GASB Statement No. 1
GASB Concept Statement No. 1, Objectives of Financial Reporting, states that financial reporting should assist in fulfilling the government's duty to be publicly accountable and should enable annual report users to assess accountability. If governmental reporting is to be an effective tool, it will have to go beyond financial accountability and focus more on "performance accountability."
GASB Statement No. 2
To further develop this objective, GASB Concept Statement No. 2, Service Efforts and Accomplishments Reporting, discusses the need for state and local governmental units to develop and implement measures of "service efforts and accomplishments (SEA)" and to experiment with reporting performance measures of SEA in annual financial reports.
Performance Measures
SEA indicators, in general, are measures designed to assess the effectiveness of services provided by governmental units. In GASB's overview document, "Service Efforts and Accomplishments Reporting: Its Time Has Come," a set of comprehensive performance measures for twelve service areas is set forth, including public assistance programs, higher education, and fire/police departments.
The performance measures provide useful guidelines for assessing whether or not a service is accomplishing its mission and achieving its goals and objectives in a cost-effective manner. The measures also provide supplementary information to the budget or financial statements of a governmental unit. Performance measures are based on the following three indicator categories and some explanatory information:
- Service Efforts (inputs) gauge the volume or amount of resources used to deliver a service to citizens, or what it takes to achieve an outcome. This could include dollar amount of expenditures, hours of labor, or use of equipment.
- Service Accomplishments (outputs and outcomes) measure the amount of services delivered to citizens so that the type of service and the quantity of services a unit provides can be examined. Efficiency measures calculate the correlation between resources expended and the amount of services provided to the public. Measures can include unit costs, labor hours to provide a service, or equipment used to provide a service.
- Service Efforts Related to Accomplishments (efficiency indicators) measure the quality and productivity in the delivery of a service to the public, including citizen evaluations, timeliness, and accuracy. Input/output indicators or productivity indexes are also measured. These measures often are difficult to identify and relate to the actual service being offered. This problem is caused by the inability to set a certain correlation between the secondary effects and the service. After determining the measures, data can be collected from several sources such as public surveys, financial records, and employee time sheets.
- Explanatory Information provides information relevant to a service that helps annual report users understand the performance of the SEA indicators and factors affecting the governmental unit's performance.
Measures like these can provide governmental leaders and the public with the information they need. SEA indicators can be used to manage results as well as assess governmental performance. In the planning stage, SEA indicators can be used to set goals and objectives for various governmental programs and to allocate resources to those programs. SEA indicators can also provide a reference point to evaluate whether established goals are being achieved, and to modify programs to enhance performance. When assessing performance, the measures need to indicate:
- Which programs provide the "biggest bang for the buck" (economy).
- Which programs work well (efficiency).
- Who really gets the services (effectiveness).
- Which programs actually produce (program results).
- Which programs can be reduced and/or eliminated.
After the data are gathered, it is important to compare them against established benchmarks. Continuous updating and gathering of information is part of the process.
The information should be reported at frequent, specified dates, with department heads held responsible for accurate data and improvements in performance. Performance measures must be refined on an ongoing basis. The budget is just one of the many tools that can be used to implement measures and improve performance.
In summary, while state and local government accounting has focused principally on reporting inputs and other financial matters such as how money is spent (safety, parks, streets, etc.), the emphasis now shifts to outcomes and results. Financial reporting for governmental units must link the relationship between taxpayers and services provided.
In a society of competing demands, financial reporting must attempt to determine if the quantity and/or quality of the service provided is appropriate to accomplish the purpose intended, or if a feasible mix of services is being provided. Overall, the main reason for reporting on government services is to determine how they really measure up.
