\ A a 
 
 Sljf (Smu'ntmEut Arnwutant 
 
 Published every month under the auspices of the 
 Association of American Government Accountants 
 
 Entered as second-class matter June 8, 1909, at the Post Office at Washington, 
 
 D. C.m under the Act of March 8, 1879. 
 
 ... . __-r 
 
 - -* 
 
 VoL 3 JANUARY, 1910 No. 9 
 
 Uniform Standards and Methods of Accounting 
 A Fundamental Necessity. 
 
 By Allen Ripley Foote, President, Ohio State Board of Commerce; President, 
 
 * International Tax Association. 
 
 (An address before the Association of American Government Accountants.) 
 
 TOPICS. 
 
 Standards. 
 
 Purpose of Accounting. 
 
 Purpose of Government. 
 
 Development of an Exact Science of Government. 
 
 Uniform Accounting Systems for all Governments of the 
 Same Class. 
 
 Effective Economic Regulation. 
 
 Public Policies Must be Governed by Facts. 
 
 An Accounting Should be Required from the Beneficiaries 
 of all Special Privileges. 
 
 Ship Subsidy. 
 
 Protective Tariff. 
 
 Scientific Accounting and the Budget System. 
 
 A New Co-ordinate Branch of Government Needed. 
 Conclusion. 
 
 STANDARDS. 
 
 Standards are clearly defined and universally accepted 
 measures by which the rightness of moral, economic and po¬ 
 litical thoughts and actions may be determined. A standard 
 meaning for words is necessary to render language intelli¬ 
 gible. Standard weights and measures are necessary to ren- 
 
 341 
 
The Gov eminent Accountant . 
 
 der the production and exchange of commodities possible. A 
 standard unit of value is an indispensable basis for the devel¬ 
 opment of denominational currency and a system of account¬ 
 ing expressed in terms of money. 
 
 Such standards have been defined and accepted for so 
 long a time it is difficult to form an adequate conception of 
 the conditions of human life at a period when they were un¬ 
 known, or when argument was needed to demonstrate their 
 utility. Appreciation of the utility and value of such 
 standards should inspire an intense desire to add to their 
 number whenever new standards are found necessary to for- 
 hiulate human experience into concrete statements of facts 
 scientifically determined. 
 
 Those who developed mathematics into an exact science 
 rendered a service to humanity of such transcendent impor¬ 
 tance it may be thought none other can be equal to it, but 
 the day will come when those who aid in standardizing the 
 units and methods of accounting so as to make it possible to 
 formulate experience into concrete statements of facts scien¬ 
 tifically determined will be recognized as having rendered a 
 service second to none other in value. Accounting can be de¬ 
 veloped into an exact science only by standardizing comparable 
 units of efficiency and methods of record keeping. 
 
 Through the exact science of mathematics and the exact 
 science of accounting an exact science of Government can be 
 developed. 
 
 PURPOSE OF ACCOUNTING. 
 
 In private business the purpose of accounting has ad¬ 
 vanced from a mere record of exchanges between buyers and 
 sellers to an analysis of infinite detail to show the true effect 
 upon general results of every economic factor involved, and 
 also the effect of every phase of the adopted business policy. 
 Units of efficiency are standardized to render efficiency com¬ 
 parisons possible. Success in the management of business 
 undertakings is best promoted through the aid of accurate 
 and scientific accounting. 
 
 Accounting in public business was originally intended 
 simply to show the honesty of public officials and employes. 
 Lacking the incentive of achieving success under conditions 
 of keen competition, public accounting and methods of hand¬ 
 ling all business details has not made as great an advance 
 toward the creation of uniform standards and methods as has 
 been made in private business. In recent years, however, the 
 fact that the government cannot perform its duties in a satis¬ 
 factory manner without employing standards of efficiency and 
 scientific methods of accounting has been continually growing 
 clearer until it is about to receive universal recognition and 
 
 342 
 
The Government Accountant . 
 
 
 JT 
 
 acceptance. It is beginning to be understood that the help* 
 fulness of government can be best shown by the effects of its 
 policies upon the common good demonstrated by scientifically 
 stated facts. 
 
 The efficiency of the government involves the manage¬ 
 ment of its various departments as working organizations and 
 the effects of its regulations on the morals and business of the 
 people governed. 
 
 Honest accounting may be so done as to be entirely worth¬ 
 less in demonstrating economic efficiency. The accounting 
 system of the great departments of the government may be 
 done in a manner that will show an honest record for every 
 dollar received and expended without giving any clue to 
 economic facts of equal importance showing the comparative 
 efficiency of their administration. 
 
 The day is approaching when the people will demand 
 that their government shall not only show how much money 
 it has received and expended, but also an accounting for all 
 public property which shall demonstrate that its administra¬ 
 tion has been conducted with a due regard for economip 
 efficiency. 
 
 The day will come when the people will limit the power 
 of their government to collect revenue from them, by what¬ 
 ever means to an amount net greater than is required for the 
 effective performance of its duties when economically ad¬ 
 ministered. 
 
 The day has come when the demand is made that the 
 accounts of all public business shall be analyzed in sufficient 
 detail to show the true effect upon the common good of every 
 economic factor involved, and also the effect of every phase 
 of the adopted public policies. That this may be done, units 
 of efficiency must be standardized and uniform methods of ac¬ 
 counting must be developed that will render comparative 
 . statements possible. 
 
 0/5 The function of government possessing the greatest 
 power for good is its ability and duty to formulate human 
 . experience into concrete statements of facts scientifically de¬ 
 ft* termined. 
 
 This is the master key that will open the way for progress 
 0 to a better civilization. 
 
 PURPOSE OF GOVERNMENT. 
 
 RT Business accounting is rapidly being developed into an 
 exact science that can be depended upon to guide energy to 
 3 the achievement of the object of the enterprise—money making. 
 
 Public accounting needs to be developed into an exact 
 £2 science that can be depended upon to guide public policies to 
 
 ■,-rb / 
 
 343 
 
The Government Accountant . 
 
 the achievement of the purpose of government—the promotion 
 of the common good. 
 
 The people of this country are now engaged in the task of 
 demonstrating to the world that their form and system of 
 government is the best ever devised for the promotion of the 
 common good. This affirmation can be established as a fact 
 only by proving that under its administration each of its citi¬ 
 zens is guaranteed equal opportunity to the enjoyment of life, 
 liberty and the pursuit of happiness, so far as such equality 
 can be promoted by legislative exactments and governmental 
 administration. To make this guarantee effective, it must be 
 made certain that no person shall, in the exercise of rights 
 so secured to him, infringe upon the similar rights of any 
 other person. This requires the fulfilment of moral and 
 economic law and the realization of the requirements of 
 justice in the conduct of every citizen. 
 
 DEVELOPMENT OF AN EXACT SCIENCE OF GOVERNMENT. 
 
 The development of an exact science of government will 
 become possible only when the exact science of accounting has 
 made effective economic regulation a realized fact. 
 
 Progress in this direction has been retarded because the 
 policies of government have been determined by considerations 
 of political expediency rather than by the requirement of true 
 moral and economic principles. 
 
 Relative business efficiency is at once determined by rec¬ 
 ognized standards of commercial success. At the present time 
 we have no recognized standards of governmental success by 
 which relative efficiency m public service can be determined 
 or the relative efficiency of governments can be established. 
 Such standards are necessary to supply an incentive to achieve 
 success in the policies and administration of government, which 
 will be equivalent to the incentive of achieving commercial suc¬ 
 cess which inspires all efforts to make improvements in the 
 management of private business. 
 
 One penalty for permitting governmental policies to be 
 determined by political expediency is being paid by the slow 
 improvement made in the effective management of public busi¬ 
 ness, and the retarded advance toward the creation of uniform 
 standards of efficiency and methods of scientific accounting 
 everywhere shown in the administration of public affairs. 
 
 We need service records that will show the relative effi¬ 
 ciency of every public employee, however and whenever em¬ 
 ployed, by a school district, a township, a village, a city, a 
 county, a State, or the Federal Government. The existence 
 of such records will enable every employee to demonstrate his 
 worth to his employers—the people—and to the dispensers of 
 political patronage. Such records will develop a public opin- 
 
 344 
 
The Government Accountant . 
 
 ion that will enable every public employee to hold his posi¬ 
 tion and to win promotion by virtue of his own merit unaided 
 by favoritism of any kind. 
 
 Such records will establish the rule of filling all positions 
 in the public service, above initial primary grades, by pro¬ 
 motions from a lower to a higher grade determined by merit, 
 and by merit alone. Such records will destroy the vicious 
 principles of “rotation in office” and “to the victors belong the 
 spoils,” by demonstrating to the people the wisdom of retain¬ 
 ing elective officials in office, and of promoting them, as long 
 and as far as their devotion to the common good will justify. 
 
 An exact science of government, if developed at all, must 
 be developed by those who devote their lives to the study of 
 governmental efficiency; to formulating correct standards; 
 to the improvement of accounting methods; to the development 
 of functions; to the regulation of activities; to the unerring 
 determination of justice, guided thereto by facts with which 
 they become familiar through the services they render. 
 
 When civil public service is recognized and dealt with as 
 a profession it will attract persons endowed with a high de¬ 
 gree of brain efficiency and inspired with true patriotism who 
 will make as honorable records in their respective spheres of 
 duty as have ever been made by “the men behind the guns” or 
 by their commanders. Such men, secure in their positions and 
 performing their duties under a system of civil administration, 
 at least as well devised for its purpose as the system of military 
 and naval administration, will develop models of efficiency out 
 of the inefficient school district, township, village, city, county, 
 State and Federal Governments now existing. When this is 
 done an exact science of government can be established. 
 
 UNIFORM ACCOUNTING SYSTEMS FOR ALL GOVERNMENTS OF THE 
 
 SAME CLASS. 
 
 Efficiency can be shown only by comparison. It may be 
 indicated in private and in public business by comparisons of 
 the records of one year with another. The value of such com¬ 
 parison will grow as the experience of year after year is added. 
 But the real test of efficiency will be found in comparisons of 
 experience between all governments of the same class rather 
 than in comparisons of the experience of the same governments 
 for one year with that of other years. That such comparisons 
 may be scientifically made, the accounts of all governments of 
 the same class must be kept by a uniform system. From such 
 accounts only can comparable statistics be obtained. 
 
 The effective administration of governments requires 
 specializing the work into departments. The system of ac¬ 
 counting should be devised to cause each department to make 
 an efficiency record comparable with the similar records of all 
 
 345 
 
The Government Accountant. 
 
 other departments, and to permit a grouping of the statistics of 
 each government in statements comparable with the similar sta¬ 
 tistics of all other governments of the same class. When this 
 is done those who make civil service a profession, and those 
 who study civic problems as a scientific or a patriotic duty, 
 will be guided by the recorded facts of experience, which will 
 render their conclusions a safe basis for public action. 
 
 Comparable statistics derived from uniform systems of 
 accounting are to governments what correct service records are 
 to public employees in establishing relative efficiency, in demon¬ 
 strating true merit. It is much to the employees and officials 
 of a school district to have the people of their districts believe 
 they have administered the duties of their public trust effi¬ 
 ciently and well, but it is infinitely more to them to have the 
 people of their district know this has been done because the fact 
 has been established by comparison with the administration of 
 every school district in the State. This statement is true with 
 cumulative emphasis, as the affairs of government grow in 
 magnitude, for the employees, officials and people of townships, 
 villages, cities, counties, States and National governments. 
 
 This fact is beginning to be understood and appreciated. 
 One item may be quoted to illustrate this point, taken from the 
 New York Evening Post for January 5, 1910: 
 
 “Chicago, January 4. 
 
 “Elton Lower, president of the Civil Service Commission, 
 appeared before the City Council Finance Committee yester¬ 
 day with a request for an appropriation of $50,000 to carry out 
 a new efficiency plan which would result in an annual saving 
 of $300,000, in the opinion of Alderman B. W. Snow, chairman 
 of the Finance Committee. 
 
 “Mr. Lower’s plan, which has the approval of the Civil 
 Service Reform Association, contemplates the establishment of 
 a bureau of experts to keep a constant record of the efficiency 
 of municipal employees, to investigate and examine, and in 
 general to carry out the provisions of the city civil service act. 
 
 “It aims, in a few words, to apply to the municipal ser¬ 
 vice what has been tried and found successful in large cor¬ 
 porations. Boston, New York and Washington, it is said, 
 have long been figuring on such a scheme as Mr. Lower has 
 proposed.” 
 
 The grouping of accounts should be devised to bring into 
 full view and correct relation every item and factor necessary 
 to show true conditions and to establish relative efficiency. 
 
 Fundamentally, it is the business of every government to 
 show the care and thrift with which it preserves, maintains, 
 improves and uses government property of every sort and kind. 
 Dollars invested in property or supplies should be looked after 
 and accounted for with as much accuracy as dollars invested in 
 current funds. This is a sadly neglected field of investigation. 
 
 346 
 
The Government Accountant. 
 
 When rightly investigated and the wastage of negligence and 
 unthrift have been corrected, the fact that wastage of public 
 property and supplies is an important factor in the increased 
 cost of government will be clearly demonstrated. 
 
 Next in order is the development of all sources of revenue. 
 Such sources should be classified properly to show the contribu¬ 
 tion made to the public treasury by every vocation, industry or 
 business. Such accounts will show the diligence of public 
 officials in collecting all that is lawfully due to the govern¬ 
 ment from the taxpayers in each class and the care with which 
 they look after the small change that should come into the 
 treasury by means of fees, fines, and dues of every class, and 
 salvage from the sale of wornout or discarded machinery, 
 tools, furniture and waste material of every kind. It is not 
 a violent assertion to state that the loss caused by lack of effi¬ 
 ciency in these respects is a far heavier burden on taxpayers 
 than all losses caused by dishonesty. The negative graft 
 caused by failure to collect what is due to the government is 
 far greater than the positive graft caused by failure to account 
 properly for all money collected. 
 
 The lack of a comprehensive appreciation of all that is 
 included in the exact science of accounting is shown by the 
 fact that popular thought is almost wholly centered upon 
 honest accounting for all money received. It seldom looks 
 after the efficient collections of all money that should be se¬ 
 cured. It has never grasped the fact that effective thrift in 
 expenditure is more important than honesty in expenditure, 
 because losses caused by incompetency and wastefulness are 
 enormously greater than losses caused by dishonesty. It is as 
 important to show what becomes of things bought with money 
 received as it is to show how money received has been expended. 
 
 EFFECTIVE ECONOMIC REGULATION. 
 
 There can be no effective economic regulation without 
 scientific accounting. This is true of all regulation. It ap¬ 
 plies with equal force to the regulation of private affairs by the 
 person interested; to the regulation of partnership affairs by 
 the partners interested; to the regulation of corporate affairs * 
 by the shareholders interested; and to the regulation of public 
 affairs by members of legislative bodies and by the public 
 officials in the departments of administration and justice. 
 
 There can be no scientific accounting without a grouping 
 of items that will correctly show the relation to each other of 
 every essential economic factor in all statements showing costs 
 of living, costs of products, costs of services and costs of gov¬ 
 ernment, whether rendered by a person, a partnership, a cor¬ 
 poration or a government. Such an analytic grouping is 
 especially needed in public accounting. 
 
 It is the function of associations devoted to scientific study 
 to formulate statements of economic principles and analytic 
 
 347 
 
The Government Accountant. 
 
 groupings of the items of accounts designed to bring into 
 view and show the correct value of every economic factor in¬ 
 volved. By so doing they can erect scientific standards for the 
 guidance of the people. In this way, and in this way only, 
 can a correctly informed public opinion be created that will 
 require public regulations and public policies to conform with 
 scientific economic standards. 
 
 Effective economic regulations cannot be formulated or en¬ 
 forced without the guidance of scientific economic standards. 
 The requirements of such standards must be recognized in all 
 regulations required by law. Attempts to make such standards 
 conform to the requirements of law will destroy them. 
 
 PUBLIC POLICIES MUST BE GUIDED BY FACTS. 
 
 The conduct of a person, partnership, corporation, or 
 municipal body; of a school district, township, village, city, 
 county, State or of the- Federal Government, when guided 
 without the information that can be derived only from a sci¬ 
 entific system of accounting, is necessarily guided by guess¬ 
 ing, prejudice and superstition. The science of accounting is 
 to the government of the person, and of every combination of 
 persons for private or public purposes, what the science of 
 navigation is to ocean travel. It must be depended upon to 
 guide action to the desired objective point. A correct obser¬ 
 vation of an untrue compass, or an unintelligent observation 
 of a true compass must inevitably cause an error in direction. 
 
 All theories as to a proper course must submit to the arbi¬ 
 tration of facts. Tested by ascertained facts, all theories must 
 stand or fall. Those who honestly advocate and those who 
 honestly oppose a policy should vie with each other in requiring 
 that scientific and uniform standards and methods of account¬ 
 ing shall be employed for its administration. A knowledge 
 of facts is necessary for the rendering of just judgments. 
 Scientific and uniform standards and methods of accounting 
 are fundamentally necessary for the demonstration of facts. 
 Charges of dishonesty or incompetency are more frequently 
 based on the results of a policy guided by unintelligent ac¬ 
 counting than upon dishonest entries showing receipts or dis¬ 
 bursements. Losses caused by ignorance are enormously 
 greater than losses caused by dishonesty. Scientific accounting 
 safeguards honesty. It tends to prevent dishonesty. 
 
 Honesty and intelligence must be combined to eliminte 
 errors voluntarily or unintelligently made. When errors are 
 eliminated, all records will tell the truth; all personal conduct 
 will be right; all policies will be sound; the prosperity of the 
 people will rest upon a foundation as enduring as the laws of 
 nature that govern the fruitage of the earth. 
 
 348 
 
The Government Accountant. 
 
 AN ACCOUNTING SHOULD BE REQUIRED FROM THE BENEFICIARIES^ 
 
 OF SPECIAL PRIVILEGES. 
 
 Whenever a government grants a special privilege, a due 
 regard for the common good demands that an accounting be 
 required from the beneficiary of the privilege that will clearly 
 show all of the economic results of its administration. With¬ 
 out the information that can be derived only from a scientific 
 system of accounting a government is powerless to regulate 
 intelligently the administration of any privilege it may grant. 
 It is fundamentally necessary that it shall be a settled princi¬ 
 ple of public policy that every grant of a special privilege 
 shall provide that the beneficiaries of the privilege shall keep 
 the accounts of its administration as public accounts, in form 
 prescribed by the government, and that they shall be audited 
 annually by a certified public accountant. When the exercise 
 of a privilege involves the supplying of a service to the public, 
 the grant should provide that charges shall not be higher than 
 is necessary to produce an annual income sufficient to pay all 
 costs of ownership and operation and a reasonable profit for 
 the compensation of owners and managers. This is a funda¬ 
 mental basis for the intelligent regulation of all public service 
 utilities. When regulated on this basis, every public service 
 utility will become, as the grant of the privilege desigJ 4&C 5 fl it 
 should be, an important factor in the development of the com¬ 
 mon good. 
 
 SHIP SUBSIDY. 
 
 An intelligent application of this proposition to the policy 
 of subsidizing ocean steamship lines will settle that question in 
 a way that will effectually establish our merchant marine 
 wherever government aid is required for the accomplishment 
 of such a purpose. The bill should provide that every bene¬ 
 ficiary of a subsidy authorized by the act shall operate his ships 
 between ports on a sailing schedule and that all charges for 
 services of every kind shall be according to rate schedules 
 approved by the government. The bill should also provide 
 that all accounts of the beneficiary pertaining to the opera¬ 
 tion of the service shall be kept as public accounts, in form 
 prescribed by the government, and shall be audited annually 
 by a certified public accountant, and that the subsidy shall be 
 an amount which, in addition to all income derived from opera¬ 
 tion, is sufficient to pay a reasonable dividend upon the capital 
 necessarily employed, with a flexible differential based on per¬ 
 centage of increase in business from year to year. 
 
 These provisions will secure the establishment of lines 
 between ports where the promotion of commerce is desirable. 
 It will supply the two most important factors in the develop¬ 
 ment of commerce, regularity of service and low transporta- 
 
 349 
 
The Government Accountant. 
 
 tion charges. They will enable the government to deliberately 
 fix sailing dates and rates of charges, in order to promote com¬ 
 merce, that will not produce sufficient income to pay dividends, 
 permitting dividends to be paid out of the subsidy until such 
 time as an increased volume of business may render a subsidy 
 unnecessary. The development of commerce is the true ob¬ 
 jective point, not the building or sailing of ships. When a 
 sufficient volume of commerce has been established, the ships it 
 requires will be built and navigated without the aid of a sub¬ 
 sidy. 
 
 To grant a subsidy without providing for governmental 
 control over the ports between which the ships are to sail, their 
 sailing dates, the charges for their service, the accounting of 
 their operation and the dividends they are to earn, will be to 
 deliberately give away money collected from taxpayers with¬ 
 out securing an equivalent in value for the promotion of the 
 common good. 
 
 PROTECTIVE TARIFF. 
 
 The principle, American protection for American indus¬ 
 tries, is as vitally necessary for American commercial inde¬ 
 pendence as the principle that every citizen shall owe allegiance 
 to no other government is to American political independence. 
 
 When American protection is granted to an industry in 
 order to enable it to overcome an existing difference in economic 
 conditions, the purpose is to protect such industry until 
 through its economic development and other economic changes, 
 it is able to operate without the aid of governmental protection. 
 The effective application of this principle is absolutely depend¬ 
 ent upon a system of statistical information that will show 
 accurately, at all times, all changes in economic conditions at 
 home and abroad which in any way affect the economic condi¬ 
 tion of a protected industry. Such economic changes may be 
 entirely independent and outside of the industry itself, such as 
 increased cost of production in foreign countries, or decreased 
 rates of interest, taxes, or transportation charges in this coun¬ 
 try. To such changes must be added decreased cost of produc¬ 
 tion on the part of the industry incident to decreased cost of 
 material or wages and the economies that result from improved 
 machinery and increased output. The amount of protection 
 required at any time is, or should be, determined by the differ¬ 
 ence between the total of economic advantages enjoyed by the 
 American producer in comparison with the total of economic 
 advantages enjoyed by his foreign competitor who seeks to sell 
 products in our home market. Protection will become effect¬ 
 ively established only when applied under the guidance of a 
 statistical accounting system that will continuously adjust this 
 difference in economic advantages in accordance with scien¬ 
 tifically ascertained facts. 
 
 As the principle of protection is applied by means of an 
 
 350 
 
The Government Accountant. 
 
 import duty, the amount of the revenue tariff, plus cost of 
 transportation from a foreign country, is always an important 
 factor in the economic advantages possessed by an American 
 producer selling in our home market. 
 
 The adjustment of the difference in economic advantages 
 may be illustrated as follows: 
 
 ANNUAL ADJUSTMENT OF ECONOMIC DIFFERENCES. 
 
 Years . 1 2 3 4 5 6 7 8 9 10 
 
 Ocean Transportation... 5434565445 
 Federal Revenue Tariff.. 10 10 12 12 11 11 10 10 9 9 
 
 American Economic De¬ 
 velopment . 45 50 55 60 55 50 65 70 80 86 
 
 Total Value of Ameri¬ 
 can Economic Posi¬ 
 tion . 60 64 70 76 71 67 80 84 93 100 
 
 Total Value of Foreign 
 
 Economic Position . . . 100 100 100 100 100 100 100 100 100 100 
 
 Federal Protection Duty 
 Required to Adjust 
 
 Economic Difference.. 40 36 30 24 29 33 20 16 7 0 
 
 It will be observed that in the last two years the total of 
 cost of transportation, revenue duties and American economic 
 development gives the American producer points of advantage 
 nearly equal and finally equal to the total of foreign economic 
 advantages. 
 
 Of course none of these conditions remain in a perma¬ 
 nently fixed condition from year to year, all are subject to 
 frequent changes; even the rate of revenue tariff here shown to 
 change but little for the entire period, may be changed ma¬ 
 terially. 
 
 The adjustment of economic differences, like the settle¬ 
 ment of trade balances, is an ever-recurring contingency. 
 Such adjustments can be properly made only through the work 
 of a thoroughly organized and equipped permanent protective 
 tariff commission clothed with ample authority to investigate, 
 verify and apply ascertained facts to the problem of promoting 
 the common good through adequate protection for American 
 industries. 
 
 The adoption of this system will substitute the stability 
 of a scientific method of administering the economic principle 
 of American protection for American industries for the exist¬ 
 ing uncertainty of legislation guided by an uninformed elec¬ 
 torate. 
 
 SCIENTIFIC ACCOUNTING AND THE BUDGET SYSTEM. 
 
 Argument is not needed in your presence to demonstrate 
 the advantages of the budget system of public financial admin¬ 
 istration. Equally obvious to you are the advantages of a 
 scientific system of accounting to serve as an indispensable basis 
 for the budget system. You have no more time than you will 
 need to get this foundation well made before public policy will 
 
 351 
 
The Government Accountant. 
 
 require that the budget system shall be erected upon it. It will 
 not be long before public opinion will hold the executive branch 
 of a government to a strict responsibility for estimated expen¬ 
 ditures as well as for expenditures actually made. Scientific 
 accounting must furnish the information without which relia¬ 
 ble estimates cannot be made. Scientific accounting must fur¬ 
 nish the evidence that expenditures have been economically 
 made. By this means only can a scientific system of co-ordinat¬ 
 ing revenue and expenditures be established. 
 
 It is the business of those responsible for the financial man¬ 
 agement of a government to see that each department gets the 
 money it needs, that no money goes where it is not needed, that 
 revenue is procured in the least troublesome and least expensive 
 way, that an exact yearly balance is struck, that the policy of 
 expenditure is self-consistent and reasonably permanent from 
 year to year. Such an administrative policy cannot be effec¬ 
 tively carried out without the adoption of the budget system. 
 
 An important step in this direction has been taken by the 
 Federal government. What is virtually a revolution in finan¬ 
 cial methods was effected last year in the adoption of section T 
 of the Sundry Civil Appropriation bill, approved March 4, 
 1909, the precise language of which follows: 
 
 “Immediately upon the receipt of the regular annual es¬ 
 timates of appropriations needed for the various branches of 
 the government it shall be the duty of the Secretary of the 
 Treasury to estimate as nearly as may be the revenues of the 
 government for the ensuing year, and if the estimates for 
 appropriations, including the estimated amount necessary to 
 meet all continuing and permanent appropriations, shall exceed 
 the estimated revenues, the Secretary of the Treasury shall 
 transmit the estimates to Congress as heretofore required by 
 law, and at once transmit a detailed statement of all of the said 
 estimates to the President, to the end that he may, in giving 
 Congress information of the state of the Union and in recom¬ 
 mending to their consideration such measures as he may judge 
 necessary, advise the Congress how, in his judgment, the esti¬ 
 mated appropriations could with least injury to the public 
 service be reduced so as to bring the appropriations within the 
 estimated revenues, or, if such reduction be not, in his judg¬ 
 ment, practical, without undue injury to the public service, that 
 he may recommend to Congress such loans or new taxes as may 
 be necessary to cover the deficiency.” 
 
 The New York Journal of Commerce , in its issue for 
 December 13,1909, commenting upon this provision editorially, 
 says: 
 
 “Careful examination of the terms of the new law reveals 
 the fact that it is destined to accomplish more than merely a 
 balance between receipts and expenditures. The happy-go- 
 lucky methods by which appropriation bills have been delayed 
 
 352 
 
The Government Accountant. 
 
 until the closing days of the session will have to be reformed 
 if the law is to be really operative. It comes as near giving the 
 President a veto of separate items of an appropriation bill as 
 anything that could be devised under our system, and it is, 
 briefly, the most beneficent change that has been introduced 
 into our system of national finance since its organization.” 
 
 V The importance of this provision of law is not overesti¬ 
 mated. The improvement it will induce in the management of 
 our system of national finance will be a continuing beneficence. 
 But of equal importance will be the improvements it will in¬ 
 duce in the public accounting system made necessary to fur¬ 
 nish a correct basis for the estimates and recommendations it 
 requires from the Secretary of the Treasury and the President. 
 It is your duty to devise and establish the accounting changes 
 required. 
 
 A NEW CO-ORDINATE BRANCH OF GOVERNMENT NEEDED. 
 
 The founders of our government won undying fame for 
 their wisdom in providing for three independent departments 
 of government exercising co-ordinated powers. To the wis¬ 
 dom of these provisions we today ascribe the stability of 
 our institutions. The time has come when the need of a 
 fourth independent and co-ordinate department—a depart¬ 
 ment of accounts and statistics—has been demonstrated. To 
 the work of such a department posterity is certain to ascribe 
 the efficiency of their government. 
 
 If public administration is to become as efficient as pri¬ 
 vate management, the duties of prescribing accounting sys¬ 
 tems, so as to bring into view and assign to its true place of 
 importance every economic factor and social detail necessary 
 for correctly guiding public opinion, must be performed by 
 public officers who are independent of the legislative, executive 
 and judicial departments of the government, whose work it 
 is their duty to review and audit. The functions of such 
 a department will be scientific, not legislative, executive, or 
 judicial. The duty of its officers will be to examine all evi¬ 
 dence and determine whether or not all sums due to the gov¬ 
 ernment have been collected, and whether or not all public dis¬ 
 bursements have been made as directed by authority of ordi¬ 
 nance or law. Their certificate will vouch for the honesty 
 of every person responsible for,the handling of public funds, 
 and their comparative reports will demonstrate his executive 
 efficiency. 
 
 The higher duties of the department will be to formulate 
 standards of efficiency, tabulate and publish comparative sta¬ 
 tistics showing the results of experience, and demonstrating 
 
 353 
 
The Government Accountant . 
 
 3 011 
 
 2 098429456 
 
 by scientifically ascertained facts the effects of governmental 
 policies in promoting or retarding the common good. 
 
 The department of accounts and statistics should be modeled 
 after the judiciary. Its officers should be appointed or elected 
 in the same manner as the Justices of the Supreme Court. 
 They should enjoy the same tenure of office, receive the same 
 compensation, and be equally as independent of the legisla¬ 
 tive or executive branches of government. 
 
 The functions of this department will be to promote 
 efficiency, prevent waste or fraud, and to report facts, uninflu¬ 
 enced by the commercial or political necessities of any person, 
 set of men, or party, and to supply correct information for 
 the guidance of the public policies adopted by the people. 
 
 When those things are done there is no reason in the nature 
 of things why public administration may not become as effici¬ 
 ent as private management. The doing of these things will 
 make all American units of government—the school district, 
 the township, the village, the city, the county, the State and 
 the Federal government—the most efficient organizations for 
 the promotion of the common good produced by twentieth 
 century civilization. 
 
 These things will be done when the business men of the 
 country unite in demanding that they shall be done. 
 
 CONCLUSION. 
 
 It is not your function to enact laws. It is your func¬ 
 tion to analyze laws and the construction given them, with 
 the purpose of giving a proper explanation of their admin¬ 
 istration and effects through the statistical statements fur¬ 
 nished from the accounts you keep. 
 
 The creative powers you may exercise are of the highest 
 order. It is your function to erect standards by which the 
 intelligence and justice manifested in laws may be determined. 
 
 Cause your work to honor you, and you will make a con¬ 
 tribution to the common good that cannot be computed in 
 terms of the money of accounts, but it will inspire to honorable 
 conduct all with whom you come in contact. 
 
 Upon your patient and intelligent work the effective 
 administration of our public business depends. 
 
 From the scientific standards and methods you employ 
 must be drawn the information by which alone our progress 
 in civilization can be intelligently guided. 
 
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