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Vol.LXXXVITI
NOVEMBER 4, 1911
No. 2277
OUR EPIGRAMMATIC REFORM PROGRAM
Does the Budget Carry Out the Promise Implied in "Administrative Control Through
Functional Accounting" and "Participation of the Public in Budget Making"?
RADICAL changes in public sentiment
are usually brought about by ideas
capable of epigrammatic expression. From
such ideas the current administrative re¬
form movement in this town has derived
its impetus. The purposes of the move¬
ment are summed up in the express-ions
"administrative control through functional
accounting" and "participation of the pub¬
lic in budget making." These epigram¬
matic declarations of purpose virtually ex¬
plain themselves and, once understood, re¬
quire no argument to insure conviction.
The idea that the traditional misgovern-
ment of American cities can be correct¬
ed through the introduction of proper sys¬
tems of municipal accounting has obtained
a remarkably wide currency in a very few
years. It was promulgated hy the Na¬
tional Municipal League in its "Municipal
Program," adopted in ISOO. As there ex¬
pressed, however, it made no vivid popular
impression. The title under which it was
set forth, Uniform Jlethods of City Ac¬
counting, was not sufficiently descriptive
of its main purpose. Besides, the pro¬
gram merely laid down a principle, with¬
out attempting to work out a method.
To apply the principle demanded an un¬
usual combination of theoretical knowl¬
edge and practical experience. One of
the few men in the United States who
possessed the necessary qualifications was
Dr. Frederick A. Cleveland, at once a
university professor versed in the science
of city government and a member ot per¬
haps the leading flrm of expert account¬
ants in the country. Dr. Cleveland, asso¬
ciated with the founders of the Bureau of
Municipal Research, undertook to develop
in rough outline a modern system of ac¬
counting for New York. His work in this
direction gave a deflnite and practical turn
to the idea advanced by the National Mu¬
nicipal League. That idea, expressed in
terms borrowed Ijy Dr. Cleveland from the
bookkeeping vocabulary in use in private
corporations, has hecome a notable factor
in the municipal reform movement
throughout the United States.
A Notable Fropas;auda.
Mors than one hundred cities have re¬
modeled their accounting systems in the
last dozen, and especially in the last half-
dozen, years. The improved municipal
bookkeeping propaganda has been greatly
furthered by the Bureau of the Census,
which in its desire to induce cities to
adopt uniform accounts in the interest of
comparative statistics has given its at¬
tention to devising scientific municipal
bookkeeping methods. The thoroughness
with which the bureau has gone about this
work is illustrated in a scheme for uni¬
form accounts for water supply systems
just published. The scheme is the result
of five years of study by experts of the
bureau in conjunction with representa¬
tives of the American Waterworks Asso¬
ciation, the New England Waterworks As¬
sociation, the American Association of
Public Accountants and the Ohio Bureau
of Uniform Accounting.
Meanwhile, to return to New York, the
Bureau of Municipal Research obtained a
ready hearing witli Mayor McClellan for
its views on accounting. Mayor McClellan
in 1905 appointed an Advisory Conifnission
on Taxation and Finance. The commis¬
sion was divided into three suh-commit-
tees, of which one, on accounting and sta¬
tistics, was headed by Dr. Cleveland. The
first report submitted hy the commission
related to uncollectible arrears of taxes.
It showed that some i^SS,000,000 of uncol¬
lectible taxes were being tarried on the
city's hooks, a fact which under the
method of accounting in use was ascer¬
tained only by a laborious investigation.
This report Is mentioned here in order
to reinforce the charaeterization o.f the
city's bookkeeping methods contained in
the report of the committee on accounts
and statistics, submitted in 1007: "The
Mayor and other administrative olTicers,
when desiring information with respect to
the cost of any particular branch of mu¬
nicipal activity, are able to obtain this
information only after a special examina¬
tion has been made, the accuracy of the
results of which may not be readily
proved. . . . The lack of controlling ac¬
counts has caused the city to operate on
a false basis. . . . There heing no method
of controlled cost keeping, independent of
appropriation accounts (certain large
items of departmental expenses not be¬
ing charged against department appro¬
priations), the city may not even closely
approximate the cost of operating its sev¬
eral branches or divisons of service.
"The accounting requirements of a mu¬
nicipality," continued the report, "differ
from those of an ordinary business cor¬
poration principally in this—that in addi¬
tion to the information concerning income
and expenses and assets and liabilities re¬
quired for intelligent management, the city
obtains control over its finances through a
budget. Appropriation accounts are there¬
fore necessary as a means of knowing the
amount of funds available for the various
purposes or for the various offices and de¬
partments to which authority has been
given to spend. In the past, it has been
for this purpose only that the general con¬
trolling accounts of the city have been
kept by the Department of Finance—in¬
come and expense, current asset and lia¬
bility and property accounts having been
deemed unessential or only an incident or
as memoranda to the appropriation and
fund accounts.
"As a means of meeting the demands of
the executive and of the people for accu¬
rate information and as a means of en¬
abling department heads to obtain the
data necessary for economic and efTicient
administration , . . direct accounting con¬
trol over the affairs of the city should be
extended in such marmer as to include de¬
partmental records. This may be done by
installing a unifcft-ni system of depart¬
mental accounting and by installing in the
office of Comptroller a system of con¬
trolling accounts over departmental in¬
come and expenses and over current in-
well as capital assets and liabiiities of the
city."
The recommendations of the Advi.sory
Commission, of which Comptroller Metz
was a member, included a "segregated
budget"; that is, a budget in which sepa¬
rate appropriations were to be made for
each class of service recognized in the
functional classification that was to he
worked out for the proposed svstem of ac¬
counting. By the time the McClellan ad¬
ministration went out of ofliee Comptrol¬
ler Metz ihad made a beginning towards
remodeling the city's bookkeeping methods
and the Board of Estimate had adopted a
preliminary or makeshift form of segre¬
gated budget. The segregation of budget
appropriations was an indispensable fea¬
ture of the plan to secure administrative
control through accounting. It was equally
indispensable for securing the co-oper¬
ation of the public in budget making.
The city stood committed hy the McClel¬
lan administration to the two reform
ideas of "administrative control through
functional accounting" and "participation
of the public in budget making."
Control Through Aceonntlng.
An illustration of the sort of control
that may be achieved through functional
accounting was given on this page last
week in describing the borough ad¬
ministration of Manhattan. A sample
sheet, taken from the weekly reports of
the Division of Stone Block Repairs in
the Bureau of Highways, showed among
other things that 5,580.7 square yards of
stone block repairs were done on con¬
crete foundations during the week ended
October 7, and that the average labor
cost was GO cents a square yard. The la¬
bor was superintended by twenty-eight
foremen. The cost per square yard of
the work superintended by foreman Troy
was $1.10. The inference was that fore¬
man Troy had either permitted his men
to loaf or that his men had worked un¬
der unusual conditions. If the head of
the bureau knew of no valid reason for
the high cost, he would naturally call
for an explanation. By the syslem of
functional accounting which has been in¬
troduced in the borough administration
of Manhattan, control is exercised over
all responsible employees of the various
departments under Borough President
McAneny. If the system were in use in
all the city departments, the Board of
Estimate would be in a position to ex¬
ercise the same control in a large way
that the Borough President of Manhattan
now exercises in matters pertaining to his
office, and if the budget were made up
in conformity with the classification' of
services contained in the system of func¬
tional accounting, not only the Board of
Estimate but the public as well would be
able to appraise intelligently the demands
for appropriations made by department
heads.
When the present members of the Board
of Estimate took office they were pledged
to administer the affairs of the city with
the utmost economy. The pledge-seemed
to assure a reduction in the cost of gov¬
ernment. They were committed to the re¬
form ideas previously accepted by the
McClellan administration, namely, "ad¬
ministrative control through functional
accounting" and "participation of the
public in budget making." In carrying out
the latter idea the Board of Estimate
acted upon a suggestion put into prac¬
tice during the last year of the McClellan
administration by the Bureau of Munici¬
pal Research. The private Budget Ex¬
hibit given under the auspices of the bu¬
reau was superceded by an ofHcial ex¬
hibit. The attendance at the first Munici¬
pal Budget Exhibit was about 800,000.
The attendance this year rose to nearly
1,000,000. There is no doubt, consequent¬
ly, that the Budget Exhibit has heen a
popular success.
Results .Vchieved.
How has the epigrammatic reform pro¬
gram worked -in practice? The members
of the present Board of Estimate have
been in office nearly two years. At least
a majority of them, presumably aU, have
been friendly to the program. What
notable achievement can be traced to the
leading ideas contained it?
There seems to be little reason to doub't
that numbers of the men of substance in
this town have been disappointed in their
expectations. Two years ago it was gen¬
erally believed that the proposed new sys¬
tem of accounting, coupled with agencies
advocated in connection with it, as, for
example, a central purchasing depart¬
ment, would speedily bring about import¬
ant economies. According to estimates
given out by spokesmen for the reform
movement, a saving of $30,000,000 would
be possible in the budget. As a matter
of fact, each of the two budgets made up
by the present Board of Estimate has im¬
posed augmented demands upon taxable
propei-ty.
Of course, explanations are not want¬
ing. Indeed, a large part of the budget
increase for which the present Board of
Estimate is responsible has been due to
the inclusion in the budget of appropri¬
ations which were formerly added to the
public debt. Another important part of
the increase has heen occasioned bv the
falling due of obligations incurred, many
of them for seryices which should have
heen paid for out of current tax levies,
by past administrations. However, the
only explanation which can be given in
extenuation of the failure of the present
Board of Estimate to realize the expecta¬
tions entertained in connection with the
new system of functional accounting is
that that system has not been fully in¬
troduced. It is in operation in perhaps
three or four departments. At the rate
at which it has so far been introduced, a