THE ADMINISTRATIVE PURPOSE OF THE ACCOUNTING METHODS AND PROCEDURES. Since the issuance of Treasury Circulars 34, 35, and 36 (1911) installation has been made of new systems of accounting and reporting in the Departments of Agriculture and State and partial installations have been made in the Departments of the Treasury and the Navy. Modifications have also been made in such forms as have been currently submitted to the Comptroller of the Treasury for approval by other departments. Many questions continue to come to the commission about the significance of the requirement of these Treasury circulars, as well as about the suggestions contained in circulars issued by the commission from time to time. Within the last month a number of representatives of departments have expressed the wish for a brief statement descriptive of the administrative purpose of the constructive accounting work in progress with which the commission has been associated. The commission has also been asked to make a statement which will definitely set forth the steps to be taken in installing new forms and procedures conformable to the Treasury requirements. As this second statement asked for must be technical in character it is issued as a separate circular (No. 33), the present circular being confined entirely to more general considerations. REASONS FOR RECOMMENDING ISSUANCE OF TREASURY CIRCULARS. Every proposed change in accounting and reporting technique should be considered in relation to the information needed. The handicap under which the President and his Cabinet and Congress have labored, due to lack of systematic consideration of accounting and reporting methods, is set forth in a special message of the President, March 3, 1911, a brief excerpt from which is as follows: The chief difficulty in securing economy and reform is the lack of accurate information as to what the money of the Government is now spent for. Take the combined statement of the receipts and disbursements of the Government for the fiscal year ended June 30, 1910-a report required by law and the only one purporting to give an analytical separation of the expenditures of the Government. This shows that the expenditures for salaries for the year 1910 were one hundred and thirty-two millions out of nine hundred and fifty millions. As a matter of fact, the expenditures for personal services during that year were more nearly four hundred millions, as we have just learned by the inquiry now in progress under the authority given me by the last Congress. 72906-13 3 Without going into greater detail, the conditions under which legislators and administrators, both past and present, have been working may be summarized as follows: There have been no adequate means provided whereby either the President or his advisers may act with intelligence on current business before them; there has been no means for getting prompt, accurate, and correct information as to results obtained; estimates of departmental needs have not been the subject of thorough analysis and review before submission; budgets of receipts and disbursements have been prepared and presented for the consideration of Congress in an unscientific and unsystematic manner; appropriation bills have been without uniformity or common principle governing them; there have been practically no accounts showing what the Government owns and only a partial representation of what it owes; appropriations have been overencumbered without the facts being known; officers of Government have had no regluar or systematic method of having brought to their attention the cost of governmental administration, operation, and maintenance, and therefore could not judge as to the economy or waste; there has been inadequate means whereby those who served with fidelity and efficiency might make a record of accomplishment and be distinguished from those who were inefficient and wasteful; functions and establishments have been duplicated, even multiplied, causing conflict and unnecessary expense; lack of full information has made intelligent direction impossible and cooperation between different branches of the service difficult. RECOMMENDATIONS OF THE COMMISSION. Following this message a report was made by the commission recommending to the President the issuance of instructions, which later appeared as Treasury Circulars Nos. 34 and 35 (1911). The purpose of recommending the issuance of these instructions was to have taken certain steps which would be in the nature of a beginning toward the establishment of standard methods and procedure for accounting and reporting in the several departments and establishments of the Government. To the end that the methods standardized might meet the requirements of each service it was recommended that the comptroller request the preparation and submission of a classification in the details of accounts by departments, such as would make available to each administrative officer the information currently needed by him with respect to any subject, whether of organization, equipment, funds, work, or cost of result. WHAT IT IS THAT THE COMMISSION PROPOSES. It has been assumed by the commission that the methods of accounting used by the Government should be such as to provide for complete, accurate, and prompt information about each subject of administrative concern and in whatever classification this information may be desired; it has been further assumed that the accounting methods should be such that this data may be collected, recorded, and made available to officers at the lowest possible cost. Any method of accounting and reporting which falls short of this standard should not be regarded as fulfilling the administrative purpose for which records are kept and reports are prepared. These are also the assumptions which have been in mind in the preparation of this memorandum of constructive suggestions. Reduced to simplest terms, it is suggested that all of the records, whether pertaining to receipts, disbursements, expenses, liabilities, resources, appropriations, or funds, should be reduced to the following four classes: 1. Files of documents-containing the original evidence of each 2. Chronological registers of documents or of schedules or ab- 4. General ledgers or records of summary and controlling GENERAL PRINCIPLES GOVERNING ACCOUNTING TECHNIQUE. The general principles governing the operating of these devices for collecting, classifying, reporting, and summarizing information to make it available, whether applied to liabilities and expenditures on the one hand or to revenues and receipts of the Government on the other, would be the following: (1) For the purpose of preserving the evidence of each transaction and of providing for the exercise of administrative control over the completeness of information contained in the account and made available through the report: (a) One or more documents would be prepared for each transaction entered into each document being verified and authenticated as a statement of fact and later being filed in such manner as may preserve it as the "best evidence" of what has taken place. (b) Two or more "entries" would be made of the transactions. evidenced by documents, one of these entries being made in a register or on a schedule which would serve as an index to the classified files as well as being a record of total transactions of each class, the second entry being made to a detail or subsidiary ledger account or to a record auxiliary thereto either from the document themselves or from a register in which the documents had been entered. (2) For the purpose of establishing administrative control over the accuracy of accounts and reports: (a) At the end of each accounting period transactions which have been recorded in each of the registers of original documents would be footed and the totals would be carried to controlling accounts in a general ledger-i. e., the classification of the registers should have direct reference to the classification of controlling accounts and the controlling accounts, in turn, would be determined by the summary of information which it is thought should be regularly and promptly produced as a basis for administration. (b) The subsidiary accounts being in such detail as to provide for making available the most detailed information required, these accounts would be classified in such manner that the reports or trial balances taken from the subsidiary or auxiliary ledgers would provide for showing not only all of the details but also by subtotals any intermediate summaries that would be considered useful or desirable for administrative purposes. (3) For the purpose of bringing all the information contained in accounts promptly to the attention of officers who are responsible for administrative control, as well as for the purpose of making the facts of business currently available to the President, the Cabinet, the Congress, and the public: (a) To have forms of records which would provide for showing results obtained through each accounting office not later than the 15th of each month. (b) To provide in these reports for the assembling of such physical and statistical operative data as is necessary to the administrative interpretation of the significance of results obtained. DESCRIPTIVE REPORTS AND CONSTRUCTIVE SUGGESTIONS OF THE COMMISSION. Since the issuing of the foregoing circulars a study has been made of the accounting and reporting methods of procedure in nearly all the departments of the Government where request has been made for cooperation in the preparation of forms looking toward the installation of a complete system of accounting and reporting which would not only meet the requirements of the circulars above referred to, but also will provide for completely, accurately, and promptly making available information with respect to revenues, properties, and |