Sources of Revenue 
 
 135 
 
 cost of necessary supervision should fix the amount of the fee charged. 
 A fee in excess of the cost of regulation would be very much in the 
 nature of a tax. 
 
 Permits , Privileges and Concessions. All permits, privileges 
 and concessions should as a general rule be let at public auction. 
 No free privileges should be granted. The fee should be of a fixed 
 amount and collected periodically. It should not be based on the 
 net or gross receipts of the business. This plan has been tried in 
 different cities and is thoroughly discredited. A city to administer 
 it successfully would have to employ a large staff of accountants 
 and detectives. 
 
 Departmental Fees. Fees charged for departmental services 
 should not exceed the amount necessary to make their respective 
 departments self-sustaining. 
 
 Municipal Enterprises. Municipal enterprises, waterworks, 
 electric light plants, gas plants, etc., should not be operated for 
 profit. The rates charged should conform to the cost of service, 
 including of course, the interest and amortization charges. To 
 charge more than this results in unequal and inequitable taxation. 
 
ACCOUNTING BASIS OF BUDGETARY PROCEDURE 
 
 By WillB. Hadley, 
 
 Chief Accountant, Department of City Controller, Philadelphia. 
 
 An accounting system to properly supplement budget proced¬ 
 ure must provide for such an analysis of actual and estimated 
 expenditures and receipts that the official and the citizen may pass 
 judgment upon the plans proposed for the new year by a comparison 
 of actual expenditures and receipts in past years with the estimated 
 expenditures and receipts for the coming year. 
 
 Such an accounting system has been developed in Philadelphia 
 by City Controller Walton, who began January 1, 1911, to analyze 
 expenditures by fund, organization unit, function (or activity), 
 character and object. These classifications are indicated in the 
 following outline: 
 
 Fund —General, Loan, Special and Trust. 
 
 Organization Unit —City Treasurer, Bureau of Water, Sheriff, etc. 
 
 Function —Fire Fighting, Isolation of Contagious Diseases, Construction of 
 Sewers and Inlets, etc. 
 
 Character —Expenses Incurred and Payment of Funded Debt: 
 Administration, 
 
 Operation, 
 
 Maintenance, 
 
 Debt Service and 
 Other Expense. 
 
 Property Acquisitions. 
 
 Net Changes in Working and Current Assets: 
 
 Stores, 
 
 Postage and transportation, 
 
 Reductions in Current Liabilities, 
 
 Abatements of Revenue and 
 Expenditures on Account of Prior Years. 
 
 Object —Personal Services, 
 
 Services Other Than Personal, 
 
 Materials, 
 
 Supplies, 
 
 Equipment, 
 
 Structures and Non-structural Improvements to Land, Land, 
 Rights, Obligations and Payment of the Funded Debt, 
 
 136 
 
2 S ' |<~AA 
 
 3 51.1 
 
 H \\ 
 
 Budgetary Procedure 
 
 137 
 
 Fixed Charges and Contributions, and 
 Pensions and Retirement Salaries, 
 Losses and Contingencies 
 
 The above sub-head titles are complete under fund, character 
 and object. Under organization unit and function only illustra¬ 
 tions are given as the complete list of these two classifications would 
 take considerable space. They are both given in full in City Con¬ 
 troller Walton’s budget statement for the year 1916. 
 
 Probably interest centers more closely upon the expenditure 
 * side rather than the receipt and income side of budget accounting. 
 Expenditure classifications for budget purposes should cover at least 
 a three-year period, namely: (1) the expenditures of the last com¬ 
 pleted year, (2) the appropriations of the current year, (3) the 
 expenditures of the current year to as late a date as obtainable, 
 (4) the estimated expenditures for the remainder of the current year, 
 and (5) the departmental estimates for the coming year for which 
 the budget is being prepared. These several groups of figures must 
 be subjected to a common classification in order that they may be 
 comparable. When so presented the eye can readily follow the 
 changes from one year to another and can note the changes in the 
 object of expenditure, in the character of expenditure, in the func¬ 
 tion (or activity), in the organization unit and in the fund. Any of 
 these changes may be significant. 
 
 In the object classification, for example, an increase in personal 
 services, materials and supplies and a decrease in services other than 
 personal would mean that more of the city’s work was to be done 
 by administration and less by contract. A decrease in rentals and 
 an increase in property acquisitions would indicate expenditures for 
 permanent properties to replace leased properties, thereby reducing 
 the fixed charges for rentals. 
 
 In the character classification a marked falling off in mainte¬ 
 nance may indicate that properties and equipment are not being 
 properly maintained. Large expenditures for property acquisitions 
 should be reflected in increased maintenance expenditures to pro- 
 / vide for the upkeep of the newly-acquired properties. Increase in 
 operation may be the result of an expansion of the existing functions 
 (or activities) or the taking on of new functions not previously per¬ 
 formed by the city government. 
 
 The relative use of loan moneys for current expenses and reve- 
 
138 
 
 The Annals of the American Academy 
 
 nue moneys for permanent improvements and property acquisitions 
 is clearly set forth in the fund expenditure classification. The 
 classification by organization unit shows the expenditure for each 
 department and bureau and the classification by function (or activ¬ 
 ity) shows the expenditures, actual or estimated, for each one of 
 the many functions of the government of the city. 
 
 In order to have available for budget purposes the actual 
 expenditures for the last completed year, it is necessary to keep 
 expense, stores and property ledgers, together with a complete 
 analysis of expenditures by the foregoing classifications. These 
 analyses can be best secured by punching the information upon 
 cards and sorting and tabulating the results thus obtained by means 
 of machines. What would ordinarily be a very tedious task, if 
 done upon analysis sheets, thus becomes a very simple one and the 
 results are secured in a minimum of time. 
 
 General account receipts are presented in the budget in a state¬ 
 ment which shows the actual receipts of past years and the esti¬ 
 mated receipts of the coming year for which the budget has been 
 prepared. In the budget for the city of Philadelphia referred to 
 above, the estimated general account receipts are presented in two 
 ways, viz.: (1) the departmental estimates of what will be received, 
 the purpose of which is to show any discrepancies in the five-year 
 average, (2) the five-year average made by the city controller as 
 required by act of assembly, which estimate limits the amount of 
 general funds which may be appropriated by city councils. In 
 addition to this annual estimate there is usually a fund surplus 
 available at the closing of the year’s books, arising from an excess 
 of the actual receipts over the estimated receipts and from merging 
 balances of appropriations. These are the only sources from which 
 general funds may be secured for appropriation, with the exception 
 that city councils may authorize a temporary loan not exceeding 
 $1,200,000 redeemable in four months. 
 
 The amount of loan funds that becomes available for appro¬ 
 priation each year depends upon the increase in the assessed valua¬ 
 tion of taxable property, upon changes in the gross amount of funded 
 debt outstanding, upon the increase in the amount of city loans held 
 as investments by the commissioners of the sinking fund and upon 
 changes in the status of other liabilities of the city. 
 
 Special and trust funds become available for appropriation 
 
Budgetary Procedure 
 
 139 
 
 through the receipt by the city treasury of money for special and 
 trust purposes, being appropriated then only for those specific 
 purposes, for which it was received. 
 
 In addition to classified statements of expenditures and receipts, 
 a budget to be complete should include comparative balance sheets, 
 with actual and estimated figures, and comparative operation and 
 surplus accounts with actual and estimated figures. Such balance 
 sheets, operation and surplus accounts may be found in City 
 Controller Walton’s budget statements for 1915 and 1916. 
 
 Budget accounting is a source of information by means of 
 which the citizen can fairly judge the results secured by officials and 
 their programs for future accomplishments. I say “fairly judge” 
 because I do not believe that the great majority of American citizens 
 want to judge unfairly or in ignorance, if the basis for fair and intelli¬ 
 gent judgment is presented in the budget. It serves a second 
 purpose in that it is a bulwark of defense for the honest official. 
 With it he can defend his past performances and explain the various 
 increases asked for. 
 
UNIT COSTS IN RECREATIONAL FACILITIES 
 
 By Paul T. Beisser, 
 
 Fellow, New York School of Philanthropy. 
 
 Of the $17.34 per capita paid in 1912 in cities of over 30,000 
 for all governmental costs, sixty-four cents per capita represent 
 the expenditures for recreational facilities. 1 That is, of the total 
 expenditures for governmental expenses 3.7 per cent went to recrea¬ 
 tional purposes, including museums, art galleries, bathing beaches, 
 playgrounds, parks and all other recreational facilities. The total 
 spent for recreation in 1910 was $16,108,808.00, or fifty-nine cents 
 per capita; while in 1903 only thirty-four cents per capita 
 were appropriated for this purpose. The per capita expenditure 
 of the thirty-three “cities” of Massachusetts in 1908 was 
 eighty-seven cents. 2 The 1914 Year Book of the Playground 
 and Recreation Association of America shows 342 cities maintain¬ 
 ing 2,402 playgrounds and recreation centers at a total expenditure 
 of $5,700,223.81 for the year 1913. The Detroit Recreation Com¬ 
 mission shows for the coming year a carefully drawn budget of 
 forty items amounting to $169,299.00. 
 
 These facts indicate that recreational facilities are beginning 
 to figure as items in the municipal budget. While the appropria¬ 
 tions are as yet inadequate they are sufficiently large to be taken 
 carefully into account, and they are rapidly increasing. A further 
 indication of the growing importance of this item in the budget is 
 the fact that the usual practice is to establish such facilities under 
 private initiative, playground and recreation associations and the 
 like, and when they have proven successful to have them taken over 
 by the cities. This means that in the future the cities are likely to 
 take over many of the burdens now resting on private shoulders. 
 There is cropping up also a tendency to take many recreational 
 facilities out of the “commercialized amusement” class and run 
 
 1 Financial Statistics of Cities Having a Population of Over 30,000. United 
 States Census Bulletin, 1912. 
 
 1 The Cost of Municipal Government in Massachusetts. 1908, p. 17. 
 
 140