District of Columbia: Actions Taken in Five Cities to Improve Their Financial Health

GAO discussed five nearly insolvent cities' actions to improve their financial condition. GAO noted that: (1) the cities had similar financial problems due to changing demographics and their reluctance to stay within their means as revenues decreased; (2) the cities' populations of poor and elderly persons who required services increased while government aid for social and other programs decreased; (3) the cities tended to mask their worsening financial conditions with accounting and budget manipulations; (4) three states established financial boards to oversee city operations and one city's school district's finances; (5) the boards also helped the cities better manage their financial affairs; (6) all five cities have established creditable budget and accounting operations, cut costs, gained the cooperation of workers and businesses, and improved their financial management systems and productivity; and (7) the cities have addressed their structural problems by finding new funding sources, improving collections, shifting functions and costs to other entities, and strengthening their economic development programs.