Summary: This report explains GAO's proposed accounting standards and guidelines for legislative service organizations (LSO), which range from the Arts and Automotive Congressional Caucuses to the Democratic and Republican study groups. GAO believes that the LSOs should report their financial operations on the accrual, rather than the cash, basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recognized when incurred. Financial statements should disclose matters affecting the statements' use, understanding, and interpretation. The Committee on House Administration has adopted regulations specifically for LSOs, including provisions that allow LSOs to carry over unexpended funds to following years. LSOs can use their financial statements to increase awareness of the House regulations governing their operations, as well as exceptions to the regulations granted by the House Committee on Administration. In addition, related party transactions and the nature of certain common control relationships should be disclosed if the nature of those relationships could significantly affect an organization. At least three LSOs, for example, share their executive directors with outside groups, while another LSO shares its staff printer with an outside organization.
