propriating definite amounts each year, or definite amounts for particular undertakings, or indefinite amounts for one or more years for certain expenditures generally of a more or less mandatory character. Others are represented by the ordinary annual appropriations and by the underlying budget so far as the budget system applies. Whatever may be the character of the authorization it is necessary that the individual departments and offices shall have exact information as to moneys available for their use and that general administrative officers have classified and summarized data relating to these authorizations in order to know and meet the financial requirements of the government as a whole. This demand for definite information as to expenditure authorization cannot be met unless the laws which create these authorizations are made definite, unambiguous, and consistent. 3. The amounts of outstanding authorization for expenditures cannot be known unless the expenditures under these authorizations are also known, and hence it is necessary that definite and complete information be supplied with reference to expenditures under authorizations. It is necessary to go even deeper than this and show what obligations for expenditures have been incurred under authorizations, since without this information it is impossible to prevent over-expenditure of appropriations. 4. The accounts of a government should show expenditures also classified according to purposes and nature to the extent needed for any administrative uses and cost statistics. 5. In addition to these requirements the accounting system of a government should produce, in whatever form and detail is required for administrative and legislative purposes, information as to the source and character of revenues. The following requirements are correlaries of the above, for without them the information required cannot be produced. 1. There must be a single unified system of accounts for the entire State government into which the accounts and records of all departments are integrated and for which summary and controlling accounts are maintained in a central accounting office. This requirement involves almost necessarily a central treasury, a single complete audit system, and a properly prepared budget. 2. Accounting forms and procedures must be designed and installed which will produce all the information required, not only with accuracy but also with the greatest economy and efficiency. There are certain fundamental principles with reference to governmental accounting forms and procedure which must be adhered to, but which need not be enumerated here. In taking up the consideration of the accounting system of the State as it actually exists we may dispose of the last two requirements named above at the outset. The State does not have a single unified system of accounts. The only approach to a general accounting system for the State is a set of records pertaining to receipts, disbursements, and balances of the State Treasury. These records do not comply with the requirements specified however because, first, they are not co-extensive with the financial transactions and relations of the State, and second, because the accounts of departments and offices are not coordinated with them in such a way as to produce a single, consistent, and integrated system of accounts. Also the forms and procedure now in use are but ill adapted to their purposes and, what is of still greater importance, are so incomplete and of so accidental a character that it is hardly worth while to discuss them in detail. The effect of an incomplete and fragmentary system of accounts and of inferior forms and procedure will necessarily be realized in the information produced, and these defects will be plainly apparent in connection with the following detailed consideration of the information produced by the present accounting records of the State as compared with these standards and requirements already stated. Information as to Assets and Liabilities: The subject of accounts for permanent investments in public improvements and in plant and equipment for use of departments, offices, and institutions is of too remote interest for discussion in this report. Even the matter of accounts for stores of supplies and materials, and for accruals of income and expense may be passed over, not because they are unimportant, nor because there is any difference of opinion as to their desirability, but solely for the which the State is not now prepared, and which it would be useless to discuss until the more rudimentary accounting requirements have been met. Excluding these items there remain only cash and indebtedness to be considered under this title. The amount of money belonging to the State and in its possession at any given time has probably never been known in recent years. In the first place, the accounts of the Auditor's Office show only cash in the Treasury, and take no account of cash in the possession of State agencies maintaining their own treasuries, viz: The Department of Health The Western Normal School The School for the Deaf The School for the Blind The Western Kentucky Industrial College The Kentucky Normal and Industrial Institute Various boards and commissions In the second place the Auditor's books are synchronized with the Treasury only and do not take into account cash. actually received but not yet deposited, and expenditures actually incurred and vouchered but for which warrants and checks have not been drawn. Even at the close of the fiscal year no adjustment is made to bring the books in the Auditor's Office into agreement with the facts. This would not be so serious if there were accounts of accruals and liabilities to represent the unentered items, but as it is, the actual financial con ment of the statutes to provide for the selection of the Auditor of Public Accounts by the General Assembly and the creation of a finance or treasury department to include all fiscal units except the auditing office. Suggestive bills covering the first three matters are submitted separately. so as to show currently the condition of appropriations. This system of accounts must show at the very least-both in detail and in groups and summaries-amounts and purposes of appropriations, expenditures against appropriations, and balances; and it should show in addition the extent to which appropriations are encumbered by contracts, orders, and unpaid bills in order that obligations in excess of appropriation balances may not be incurred. An examination of the accounts of the State for the last completed fiscal year does not bring to light many instances in which expenditure authorizations have been exceeded, although it does reveal a few of such cases. But the fact that the State has not suffered greatly from the lack of proper accounting of expenditure authorization up to the present time is due chiefly to the effective parts of the budget being so limited in scope and in detail, and being so little elaborated for the purpose of securing economy and efficiency in governn:ent expenditures, that there has been very small need of information on this subject. With a more highly organized budget, the elimination of special funds, and a more vigorous administration of the State departments and offices, and with the adoption of a more complete and edequate auditing system the necessity for definite, complete, accurate, and up-to-date information as to the condition of appropriation accounts will become greater and greater. At the present time an effective expenditure control is thwarted at the very source by ambiguous, incomplete, inconsistent, needlessly involved, and in some respect impracticable appropriation laws, including both those for the annual budget. and those establishing special revenue funds. A revision of the laws governing the State's finances is possibly the most acute need of the State government at this time, and the accounting system of the State will be hindered in its development and in the accomplishment of its purposes until this revision is made. The truth of this statement can be realized fully only by attempting to trace through the labyrinth of provisions of law |