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Summary: GAO met recently with representatives of several public interest groups interested in state and local governmental affairs to discuss the need for accounting standards. Such standards are badly needed to inform citizens, investors, and the federal government more fully of the way in which funds are spent. Recently, cities have had problems producing reliable financial information. Existing standards produce reports that are long, complex, and difficult to understand, as well as reports which often ignore important liabilities. The Financial Accounting Standards Board, which sets standards for the private sector was, willing to set new accounting standards, but state and local governments do not consider them acceptable to do the job. The state and local government officials believe that the Board is extremely busy and might not give this additional task prompt and adequate attention and that the Board might try to apply commercial accounting standards to government. The public interest group representatives agreed to support a Government Accounting Standards Board and a foundation to support it. They agreed that it should be funded by other than the federal government. To obtain funding, public interest groups suggested that they would undertake a program to persuade recipients of revenue sharing to commit a small portion of the funds they receive to finance this project. When supplemented with funds from other interested parties, it is hoped that this will provide sufficient funds to support the Board. GAO believes that this would be a better method of obtaining funding than withholding a portion of revenue sharing at the source.
