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 FOR. UNIFORM MUNICIPAL 
 REPORTING. AUDITING AND 
 ACCOUNTING IN THE STATE 
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THE WORK OF THE BUREAU FOR 
 UNIFORM MUNIGIPAL REPORTING, 
 AUDITING AND AGGOUNTING IN 
 THE STATE OF OHIO. 
 
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 An Address delivered at the Meeting of the League of 
 Ohio Municipalities, at Dayton, Ohio, February 11, 1903 
 by Harvey S. Chase, I.P.A., Public Accountant and Auditor, 
 8 Congress St., Boston, Counsulting Expert to the Bureau. 
 
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Mr. President and Gentlemen: 
 
 ' Your Secretary, through the Hon. W. D. Guilbert, Auditor of State, 
 has requested me to prepare an address upon the work of the Ohio Uniform 
 Accounting Bureau, or as it is legally known, the “Bureau of Inspection 
 and Supervision of Public Offices.” 
 
 You are all familiar, doubtless, with the uniform accounting law 
 (House Bill No. 1050) passed May 10, 1902, whereby the above bureau was 
 created and the work of systematizing and making uniform the methods of 
 reporting, auditing and accounting in all the municipalities and other tax- 
 ing bodies in Ohio was begun. 
 
 You are also acquainted with the fact that the Auditor of State, under 
 the terms of this act, immediately organized the bureau by the choice of 
 Messrs. E. M. Fullington, A. B. Peckinpaugh and J. T. Tracy as Deputies 
 and Mr. S. A. Hudson as' Clerk. These gentlemen, having had much ex- 
 perience as county auditors and being familiar both with the requirements 
 of law in Ohio and with the actual practice in the various counties of 
 the state, are exceptionally well fitted to carry out the requirements of the 
 uniform accounting law. The State as a whole, and Auditor Guilbert in 
 particular, should he warmly congratulated upon these excellent selections. 
 
 Very shortly after the formation of the bureau the author of this 
 paper was requested to act as consulting expert. 
 
 The work of the bureau has been along broad lines and has consisted 
 in the main of the following matters: 1st. A thorough study of the re- 
 quirements of the uniform accounting law and also a minute examina- 
 tion and analysis of the provisions of the new Municipal Code passed at 
 the extra session of the legislature last September. 2d. The consideration 
 of the “Uniform System for Municipal Accounts and Reports” of the Na- 
 tional Municipal League, with which body your own Ohio League is very 
 closely affiliated, and the application of this system to the special require- 
 ments of the Ohio code. 
 
 This “Uniform System” is the result of the united labors of various 
 committees upon uniform municipal accounting appointed by other na- 
 
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tional associations, of which the committee of the National Municipal 
 League has acted as the central co-ordinating body. 
 
 On the various committees have been engaged many of the noted 
 municipal experts and students of municipal affairs in this country, while 
 not a few of the gentlemen have international reputations. 
 
 The process of growth of this “Uniform System” has been a gradual 
 one of the most practical character, for it has been developed not by theo- 
 retic deductions upon paper only, but by actual applications of the 
 schedules to city reports and accounts in a series of successive steps. 
 
 In laying out the system for Ohio the bureau considered primarily 
 the requirements of the Ohio uniform accounting law for the publication 
 by the bureau annually of comparative statistics of cities, villages, town- 
 ships, school districts and of other taxing bodies, respectively, as state 
 documents. 
 
 Having considered the general nature and form for these statistical 
 reports, — in which it is intended to set before the people comprehensive 
 tables of comparisons of the financial results in all taxing bodies of the 
 same class, so that any citizen can see for himself what these results are in 
 his own municipality and compare them with the results in other munici- 
 palities — it was then decided what requirements should be laid upon the 
 accounting officers of the cities. The largest cities were first considered, and 
 the forms of the reports from these offices were drawn up in such a man- 
 ner as to furnish the information needed by the bureau, from each city, to 
 make up the comparative statistical tables above mentioned. 
 
 Having worked out in detail the forms for these tables and reports 
 to the bureau by the various city auditors, there was next considered the 
 forms of the books and the arrangement of colums, ledger titles, system 
 of vouchers, cash tickets, etc., etc. The question being what will be essen- 
 tial in order that the various city auditors may furnish these reports to 
 the bureau promptly at the end of the fiscal year, promptness, as well as 
 accuracy, being essential if these reports are to be of value to those for 
 whom they are intended. 
 
 It is evident, therefore, that the bureau has, necessarily, worked back- 
 ward through four successive steps before it could arrive at the final forms 
 of pages, columns and other details of the books of original entry. It is 
 also evident that these forms and schedules which the bureau has been 
 obliged to consider last, are in reality the matters that come first in the 
 
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bookkeeping, and are, therefore, the things that every city auditor desires 
 to see first, and only after these have come to his attention does he desire 
 to follow on through the system in regular order, but in the opposite direc- 
 tion to that necessarily pursued by the bureau in laying out the system. 
 Therefore to make this whole matter perfectly clear, I will recapitulate 
 the various steps which the bureau was compelled to take, as follows: 
 
 First — Consideration of the statutes. 
 
 Second — Consideration of the proposed statistical documents to be 
 published by the bureau. 
 
 Third — Consideration of the forms and schedules for city auditors’ 
 reports to the bureau, as the basis of the above documents. 
 
 Fourth — General arrangement of city auditors’ ledgers and ledger 
 accounts corresponding with the above required reports from these officials, 
 so that these figures can be taken off immediately at the end of the fiscal 
 year. 
 
 This brings us to the fifth, the details of the accounting system as 
 already mentioned. 
 
 Throughout all this very complicated labor, in which the bureau has 
 had no precedents to guide it, — for this is the first time that an entire 
 state’s bookkeeping, including the accounts of firsc-class cities, has been 
 overhauled and systematized, — it has been necessary for the bureau to 
 keep in mind the important fact that the system to be finally adopted 
 should not depart further than is necessary from the system in practical 
 use in the cities of Ohio today. That is, its system should be in the line of 
 evolution not of revolution. 
 
 To this end we have made a careful study of the systems in use 
 in the leading cities and the bureau’s system will contain the exceptionally 
 good features of many of these present methods, while eliminating many 
 other features which cannot be reconciled with the requirements of uni- 
 formity. 
 
 I have considered it needful to make this preliminary statement of the 
 theory upon which the bureau has necessarily acted before taking up and 
 explaining the forms and tables so far drawn up and tentatively adopted 
 by the bureau. 
 
 I will not attempt to consider here the statistical publications of the 
 bureau, as these documents can only be published after a twelve-months’ 
 period has elapsed and the annual reports from the cities have been re- 
 
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ceived and tabulated. We will now, therefore, consider the forms for the 
 city auditor’s reports to the bureau. These forms are intended to com- 
 prise also the general arrangement of the city auditor’s annual reports 
 to their councils and the citizens. The annual report of each city auditor 
 to the bureau will comprise the following schedules: 
 
 “A.” Revenue and expense for the year. 
 
 “B.” Assets and liabilities at the end of the year. 
 
 It should be unnecessary to state that all the accounting should be 
 kept in “double entry.” There is no other system, as you all know; double 
 entry is imperative as a starting point, and it is unnecessary for us to go 
 further into the a, b, c, the alphabet of book-keeping, here. This funda- 
 mental being settled, we will consider the bureau’s schedules. The sched- 
 ules are based upon the National League’s system, modified so far as is 
 necessary to fit the particular requirements of law in Ohio. 
 
 The first important feature of the system is the distinction between 
 “revenue and expense” accounts, “A ’ schedules, which are statements of 
 the receipts and expenditures of the fiscal year, and the “balance sheet” 
 accounts, “B” schedules, which are statements of the city’s assets and 
 liabilities at the end of the fiscal year. 
 
 ARRANGEMENT OF TOTALS. 
 
 The second important feature of these schedules is the arrangement 
 of the summaries or statements of totals. These follow in order of im- 
 portance, and precede the detailed statements in every case, i. e., first ap- 
 pear consolidated summary statements (Schedules A-I, B-I, etc.). Then 
 subsidiary detailed statements of the items in the first schedule. Then 
 more detailed statements of the items in the secondary schedules, and so 
 on down to the least important details of the accounts. 
 
 The third important feature is the emphatic distinction between “or- 
 dinary” revenue and expense and “extraordinary” revenue and expense. 
 The former relates only to the income of the city from ordinary sources, 
 excluding sales of bonds and other capital accounts, and to the expenditures 
 of the city for ordinary running expenses, i. e., for operation and main- 
 tenance. The latter — extraordinary — relates only to the income from ex- 
 traordinary sources, like borrowed money, etc., and to expenditures for per- 
 manent construction or other capital outlay. 
 
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The fourth important feature, and the one which is practically the 
 creation of the National League, is the arrangement of the totals and 
 afterwards the details of the departments’ accounts, not in alphabetical 
 order, as has been the customary method heretofore in city accounts, which 
 renders all comparisons forever misleading and difficult, but in an order 
 based upon the general purpose or function of each department or division 
 of the municipal government. 
 
 Schedule A-i gives the consolidated summary of the total cash re- 
 ceipts and expenditures for the fiscal year, not including duplicated items, 
 which are given elsewhere. 
 
 REVENUES AND EXPENDITURES. 
 
 Schedule A-n divides the total revenues and expenditures into distinct 
 categories, “ordinary,” “extraordinary” and “trust funds,” which together 
 make up the actual cash transactions of the city, omitting duplications. 
 These duplications, viz. : transfers, refunds, rebates, re-loans, temporary 
 tax loans repaid, etc., are set up below in totals, with the title “Tempo- 
 rary Accounts.” The grand totals of Schedule A-n, which include these 
 duplications, make up the totals per the Auditor’s books and cover all the 
 financial transactions of every kind which have passed through the books 
 of the city auditor during the year. 
 
 Schedule A-iii takes up a more detailed study of the “ordinary” 
 and “extraordinary” items, arranged in groups, according to general pur- 
 poses and functions, and considers the questions pertaining to “funds.” 
 These fund questions are exceedingly important, and will be fully con- 
 sidered later in this paper. 
 
 Schedule A-iv expands the items of the previous schedule in still 
 more detailed figures and gets down to the receipts and appropriations and 
 expenditures by departments and divisions, still grouped according to the 
 league’s system as adapted to the Ohio code. 
 
 Schedule A-v and A-vi are for trust funds and temporary accounts. 
 
 Schedule A-vii takes up the budgetary questions, balances forward, 
 appropriations, additions, expenditures and balances remaining, transfers 
 to and from, etc., with the departments still grouped as before, and, finally, 
 Schedule A-viii consists of the ultimate details of each department’s ac- 
 counts, so far as the Auditor’s reports will deal with them, taken up in or- 
 der separately and with sufficient space given to each, so that all the im- 
 
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portant divisions of the expenditures, viz., salaries, expenses, rent, light- 
 ing, printing, etc., can be completely set forth. 
 
 It will he seen that the schedules progress consistently and steadily 
 from the gross statements to the details, each schedule being an amplifi- 
 cation of the preceding one and in complete harmony with it, and all ar- 
 ranged upon a definite, consistent and uniform system applicable to any 
 and all municipal accounts. 
 
 SECOND GRAND DIVISION. 
 
 The second grand division of the schedules relates to the assets and 
 liabilities of the city, labeled “B,” and these also are logical and clear. 
 
 B-i gives the assets and liabilities in gross figures, arranged to show 
 first, the total current assets (cash, taxes not yet collected, etc.), as against 
 the total current liabilities (vouchers not paid, etc.) ; secondly, the 
 contingent or doubtful assets and liabilities; thirdly, the trust funds and 
 special deposit accounts for which the city acts as agent or trustee, and, 
 finally, the actual sinking funds on the asset side contrasted with total 
 bonded debt on the liability side. 
 
 The permanent, but not available, assets of real estate, buildings, 
 equipment, etc., are also stated in totals, and are offset by a balance account 
 or surplus on the credit side. This “surplus” is detailed in Schedule 
 B-vn. 
 
 Thus a concise and accurate statement of the condition of the city at 
 the end of each year is given at a glance. 
 
 The succeeding “B” schedules are amplifications of the items in this 
 first schedule up to and including B-vii, and thereafter may be carried 
 out by succeeding schedules into any details which are considered important 
 by the officials in any particular city. 
 
 THE FUNDS. 
 
 By the code there is established in each city various funds into which 
 are received the proceeds of the tax levy, not to exceed ten mills, and in ad- 
 dition there are established as many other funds as there are special levies, 
 A T iz., school fund, library fund, sinking fund, interest fund, etc. 
 
 Out of the proper fund are taken the appropriations by Council at 
 the beginning of each six months, these appropriations being limited to the 
 
amount already in the fund — each balance thereof — together with the 
 amounts properly estimated to come in during the current six-months 
 period. 
 
 HANDLING OF APPROPRIATIONS. 
 
 These appropriations, duly made by Council, will be taken by the 
 City Auditor and set up in his general books through a journal entry 
 charging the proper fund account and crediting the various appropriation 
 accounts. The form of this journal entry should correspond, evidently, 
 with Schedule A-iv of the uniform system, so that the opening and all 
 subsequent entries may fit in with the requirements for the annual report 
 upon this schedule at the end of the year. This requirement is also funda- 
 mental, and should be noted very carefully by all City Auditors, City So- 
 licitors and City Councils. 
 
 The appropriations having thus been set up as credits — each appro- 
 priation upon its own page of the ledger as a credit — the expenditures are 
 entered by the Auditor in monthly totals against these credits, and the 
 available balance of the appropriation should be shown by a balance 
 column in the ledger. 
 
 At the end of the year, twelve monthly charges having been made 
 and two semi-annual credits having been posted, the credit balance, if any, 
 will be returned, through a journal entry, to the credit of the proper fund, 
 as required by the code. 
 
 It is evident that by these means the gross expenditures under each 
 appropriation will be ready immediately upon closing the books Decem- 
 ber 31, to be taken off upon Schedule A-iv and be transmitted to the 
 bureau. 
 
 There will be one “appropriation ledger,” comprising the accounts in 
 Schedules “A” (which can be divided into two or more books, if necessary, 
 in the larger cities) and one balance sheet ledger containing the accounts 
 or Schedules “B.” 
 
 If the appropriation ledger “A” is subdivided, it should be into “A” 
 appropriations only, general fund, and “AA,” special funds accounts, 
 schools (if included in Auditor’s accounts), etc. Special assessment ac- 
 counts should also be set up in a separate ledger, “S. A.” By this dis- 
 tinction in the ledgers the extraordinary items, which relate only to capi- 
 tal accounts, i. e., to balance sheet accounts, will be completely separated 
 
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from the ordinary (maintenance) items, which are Ledger A accounts. 
 This distinction is also fundamental. 
 
 COLUMNAR CASH JOURNALS. 
 
 Preceding these ledgers, in the accounting, there will be columnar 
 cash journals of a size convenient for handling and of a number sufficient 
 to comprise in their ‘columns all the active accounts — impersonal — of the 
 city, i. e., all of the appropriations and the subdivisions under these ap- 
 propriations. There will be three or four of these books An a small city 
 and perhaps twenty or thirty in a large city. The ledgers herein ex- 
 plained correspond, in the main, to the present general books of Cincinnati, 
 while the columnar cash journals correspond almost exactly to the books 
 used for many years in Cleveland. In a large city the receipts journals 
 and the expenditures journals will be different books; in a small city 
 they may be consolidated. Each warrant or group of warrants will be 
 entered in gross in one column of the cash journal and distributed in detail 
 among the other columns under the proper headings, these headings being 
 printed in with the book. Each page of the cash journal will be self- 
 proving; the total of detail columns must equal the total of the gross 
 column. At the end of the month the totals are posted to the ledgers and 
 the process begins again. 
 
 It is unnecessary, in fact, impossible, to go into all the details of such 
 a system in a paper like the present one. These details will be worked 
 out practically and thoroughly as each city takes it up by the examiners 
 for the bureau. Enough has been given here, possibly, to allow you gen- 
 tlemen to get a general idea of the bureau’s plans so far as they have been 
 completed up to the present time. 
 
 TACKLING THE CITIES. 
 
 The bureau has decided to undertake at first the examination and re- 
 arrangement of the annual reports of the five largest cities of Ohio, viz., 
 Cleveland, Cincinnati, Toledo, Columbus and Dayton, and to confine itself 
 to these cities for the present. Various members of the bureau are now 
 at work in these cities, endeavoring to run up against as many of the 
 “bumps” as possible and to unearth as many of the “bugs” as possible, 
 these “bumps” and “bugs” being the knotty points and problems peculiar to 
 each city which require thorough attention and investigation before the new 
 methods can be finally applied and stay applied. 
 
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There are many of such intricate problems, of course, and we must ask 
 you all to be patient with us, as members of the bureau. Criticise us by 
 all means, but criticise us in a friendly spirit, remembering that the task 
 which the legislature laid out for us is an overwhelming one. One that 
 is new in the history of this country, if not in the history of the world, 
 and one that will take a long time and much arduous labor to complete. 
 
 The aim of the bureau is to assist you, to work with you and for you 
 as municipal officers, to make your labors more effective by means of the 
 uniform system, and we therefore hope you will, in the same spirit, 
 work with us and for us. 
 
 Ohio has put herself upon a pinnacle before the world by the passage 
 of this uniform accounting law, and although this enactment was preceded 
 some ten years by a somewhat similar law in Wyoming, yet the circum- 
 stances and the great size of the Ohio cities and the magnitude of their 
 financial transactions so completely overshadow Wyoming that the project 
 is substantially a new one, and its success will redound solely to the credit 
 of this State and thereby to the credit of all of us together; to you, gentle- 
 men, as much as to the bureau, if by active and persevering co-operation 
 there is finally attained a practical, every-day system of uniform municipal 
 accounting and reporting in the great State of Ohio. 
 
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