More governments have been issuing public performance reports, but are the reports useful to citizens and elected officials, and is the information in them relevant and reliable? To assure accountability, auditors have important roles to play in auditing or attesting to the quality of performance information. And some auditors prepare and issue government performance reports. As an auditor, whether you approach performance reporting as an attester, a preparer, or both, news from North American standards setting organizations is important to your practice.
In the U.S., the Governmental Accounting Standards Board (GASB) voted in April 2007 to add a project to its current agenda that could result in voluntary guidelines for governments to help them effectively communicate accountable, valid results to the public. In Canada, the Public Sector Accounting Board (PSAB) has already acted, approving a “Statement of Recommended Practice” for this purpose. In recent years, innovative auditors in both countries have anticipated these actions, resulting in local, state, and provincial examples of auditors testing relevance or reliability of performance information, assuring performance reports, and reporting performance.
“Suggested Criteria” for Performance Reporting Based on GASB Research
“Service Efforts and Accomplishments (SEA) Reporting” has been a research project at the GASB for at least 20 years. The GASB project is intended to help governments report to the public the measures they develop and use to gauge the outcomes they achieve in pursuit of their public policy goals. GASB’s SEA research produced a “Special Report” on “Suggested Criteria” for performance reporting in 2003, and a “Guide for Users” of performance reports in 2005. The GASB and others, including the Association of Government Accountants, have been encouraging governments to experiment with performance reporting that follows the criteria.
The GASB’s suggested criteria are not prescriptive. They do not say what performance measures should be reported, and nor will the eventual guidance issued by the board. Instead, the criteria are meant to help governments report compelling performance information citizens can trust in a user-friendly way. Criteria include, for example:
- The report should contain information that readers can use to assess the reliability of reported performance information;
- Reported performance measures should be relevant to what the organization has agreed to try to accomplish, and, where possible, should be linked to its mission, goals, and objectives as set forth in a strategic plan, budget, or other source.
- Reported performance information should include comparative information for assessing performance, such as to other periods, established targets, or other external and internal sources;
- The report should include a discussion of identified external and internal factors that have had a significant effect on performance and will help provide a context for understanding the organization’s performance; and
- Reported performance measures should be consistent from period to period; however, if performance measures or the measurement methodology used is significantly changed, that change and the reasons for the change should be noted.
While the GASB is only just moving from research to an active board project, in Canada, the Public Sector Accounting Board already issued a “Statement of Recommended Practice” (SORP) called SORP-2, Public Performance Reporting, approved by the board in June 2006. SORP-2 provides recommended practices for reporting performance information in a public performance report and is, like the GASB’s suggested criteria, neither prescriptive nor a template. The SORP recommends, for example, that public performance reports:
- Provide information that appears reliable and valid;
- Describe the organization’s strategic direction in the report;
- Compare actual to planned results and explain variances; and
- Describe lessons learned and key factors that influence performance;
- Provide comparative information about trends, benchmarks, baseline data or the performance of other similar organizations;
- Disclose the basis for reporting.
In May 2007 the PSAB issued a Guide to Preparing Public Performance Reports (PDF) to help governments in Canada follow these practices. The guide introduces each recommended practice as a question and suggests features that would make it clear whether the practice has been applied or not.
The PSAB Statement of Recommended Practice was developed from principles that arose from a collaboration among the Auditor General of Canada and several provincial auditors. The CCAF-FCVI (formerly the Canadian Comprehensive Audit Foundation) played an important role in documenting and updating the principles as auditors tested them in practice. The CCAF-FCVI principles (PDF) have been used as the basis for assuring performance reports by the auditors of several provinces, including Alberta, British Columbia, Quebec (PDF), and Saskatchewan.
To encourage U.S. state and local governments to use the GASB suggested criteria, the Association of Government Accountants (AGA) established a program, funded by the Alfred P. Sloan Foundation, to help governments strengthen performance reports. The AGA recognizes outstanding reports through “Certificates of Achievement” in SEA Reporting. Performance reports are evaluated by reviewers, many of whom are auditors, on how well the reporting organization informs the public about its performance, consistent with the GASB’s suggested criteria. Reviewers award Certificates of Achievement to the best reports, and provide feedback on all submissions to help governments improve future reports. The Fiscal Year 2006 winners were the Cities of Bellevue (Washington), Palo Alto (California) and Portland (Oregon); King County (Washington) Metro; King County Department for Natural Resources & Parks; and the Oregon Department of Transportation. The experiences of auditors who prepared winning reports, such as the city auditors of Palo Alto and Portland, illustrate how auditors can build their capability to strengthen public accountability through public performance reporting.
A newer, related AGA program, the “Citizen-Centric Government Reporting Initiative,” is aimed at helping governments produce brief, attractive, easy-to-understand reports on government finances and service performance. In a pilot citizen-centric project, Portland, Oregon, became the first major metropolitan city in the U.S. to create a four-page summary of city finances and service performance, issued in May 2007 as the Auditor’s Report to Residents (PDF).