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Real estate record and builders' guide: v. 88, no. 2277: November 4, 1911

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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