Distribution panel question

In today’s inspection, the service panel with the main cutoff is outside, next to the meter. The distribution panel is inside the garage.
The ground wires and neutrals are together on the same buss bar.
I’ve seen this before, but I’ve never asked… why is this not correct? What can happen?

I refer to that as a sub panel or remote distribution panel.
The risk is a chance of the ground becoming live.
This link has a quick discussion on the subject in a chat room which was easy to google up.(you can also do a search here).http://www.diychatroom.com/f18/neutral-grounds-separate-bus-bars-61645/

Makes sense. I was explaining to the client it needed to be changed, and he asked, “Why? What would happen?” and of course, the realtor said, “It’s probably been like that since the house was new…” since 1986.
Thanks for the reference.

This may help a bit from Mike Holt:


And another form Mike

Here is a picture that was a home built the way your describing. With the meter and the main breaker outside and this part in the garage.