This testimony on charter schools is based on a report prepared at the request of the Subcommittee on Labor, Health and Human Services, Education, and related agencies by the General Accounting Office. Remarks focus on charter schools' instructional innovations, autonomy, accountability systems, and the challenges they pose for federal programs. Unlike traditional public schools, charter schools operate under charters or contracts with school districts, state education agencies, or other public institutions. The 134 charter schools approved thus far in the in nine states: Arizona, California, Colorado, Hawaii, Massachusetts, Michigan, Minnesota, New Mexico, and Wisconsin, have been developed by teachers, school administrators, parents, and private corporations. To date, 11 states have charter-school laws and another 14 may consider such laws in 1995. It is concluded that charter schools offer a new model for public schools that can be freer than traditional schools to use diverse and innovative approaches to education. The autonomy of charter schools poses challenges for holding them accountable for student performance. Accountability depends in part on how well student performance is assessed and reported. A final issue is whether charter schools can be treated as local education agencies (LEAs) for the purpose of receiving federal funds. The Secretary of Education has said that the Department of Education intends to encourage states to develop legal arrangements that best support state and local purposes and will work with states to address issues raised by the General Accounting Office on a case-by-case basis. (LMI)