First, no good comes from permitting government officials to perform their duties in secret. Second, officials who have become accustomed to operating without accountability are loath to relinquish the power that comes from conducting their business without public scrutiny. Third, when public officials resist efforts to shine a light on their activities, there is often something to hide. Fourth, public scrutiny is often a prerequisite for changing harmful, entrenched practices.
It is the responsibility of each police department across the country to report data correctly and accurately, especially when it involves people having been killed. Not reporting data can be seen as corrupt and questionable. In my opinion it is perfectly acceptable to withhold funds from departments that refuse to share data.
There have several attempts to hold police department more accountable, and many departments have announced internal reforms that indicate they are going to make changes. These changes are not happening though, or at least not fast enough. If it takes withholding money to make them more accountable then that's what we need to do.
Civil rights advocacy groups are correct that police departments should provide the statistics on the demographics of the individuals killed by police, regardless of the reasons necessitating that action. However, they are wrong to request that federal funding be withheld from these departments if they fail to provide such data. Withholding funding will not change the facts or change behaviors, only social pressure and regulation can do that. As usual, civil rights advocates are focusing an incredibly minor and meaningless issue, derailing attention from the true issues.