But when the rudimentary character of the present accounting records is considered and the extent to which they will have to be revised and added to, it seems sufficient to state that there is nothing of any importance in the present forms and procedure to make them worth saving, and that with a new accounting system should be installed an entirely new set of documents, books of original entry and ledgers together with a different division of work in the Auditor's office and a process of coordination between the Auditor's office and those of other departments and agencies of the State.

By far the larger part of the forms and procedure in the Auditor's office relates to the settlement of accounts with local officials of the counties and courts. Nearly all of this could be eliminated by a revision of the laws relating to county and State relations designed to eliminate unnecessary passing of moneys between the State and its counties and to make a fair division of revenues and expenditures between the State and its counties otherwise than by the splitting of fees and attempting to apportion a multitude of petty items.

Under the present system the clerical force in the Auditor's office is divided into little principalities, each so far as possible dealing with a different subject. The existence of this arrangement is due in part to the complicated county relations already discussed, and to the presence in the Auditor's office of functions which should be elsewhere. To the extent that this condition is remedied, and to the extent that the proper functions of accounting and auditing are developed the scheme of organization and procedure should be changed to one based upon processes rather than upon subjects.

The procedure by which the Auditor's office deals with the Treasurer's office would be changed entirely by an amendment to the law which would make it possible to relieve the Treasurer of the necessity of duplicating the Auditor's accounts.

The only accounting form which serves to connect an executive department with the Auditor's office is the so-called

voucher. This voucher is nothing but a list of bills transmitted. It bears none of the usual certifications and frequently is not even signed. The voucher itself furnishes no basis for audit whatever.

The forms for transmitting data and used as the basis of bookkeeping entries in the Auditor's and Treasurer's offices show very little elaboration or adaption to their purpose. The general bookkeeper makes his entries from penciled notations on blank sheets of paper. In designing the printed forms in use no consideration was given to the matter of convenience in handling and filing. The files are unusually inconvenient and expensive.

Conclusions and Recommendations Regarding General Accounts:

From the foregoing it will be evident that the State's business is not now adequately set forth in the accounts kept and the reports rendered, and that the Legislature and general administrative offices of the State do not have the information needed for the performance of a vitally important part of their work. They do not even know the total income and total expenditures of the State. They do not have accurate and reliable figures within the ostensible scope of the present accounts. the side of law enforcement (as to revenue apportionment and expenditure control) they do not have the benefit of an accounting procedure that can be depended upon.

On

Among the immediate causes of the present situation, a complex and outgrown body of law deserves special mention. Also the defects in organization for financial administration unquestionably have been major contributing causes of the difficulties. The modern technique of governmental accounting has not been given an opportunity to find a foothold and expression at any point.

The formal characteristics of effective accounting are almost entirely lacking-documents are incomplete and poorly designed, files are complex and unsatisfactory, books of record are lacking

true that the State pays dearly for any uncertainty as to the value of these warrants.

The practice of issuing interest bearing warrants is one of those time-honored customs which were originated at a time when entirely justified by the problems then to be met. It is one, however, which has long since been abandoned in most States, and it cannot be defended. Arrangements with one or more banking institutions could readily be made whereby the State could sell revenue notes to meet its requirements for cash in anticipation of revenue collections, and all of the objections to the interest bearing warrants would be done away with.

State Depositories and Handling Cash Balances: In the report on the State Treasurer's Office the depositing of State money in the various depositories is dealt with in full and it need not be discussed again here. The present methods of handling cash are shown to cost the State a great deal more for interest than is necessary. The greater part of the possible saving, however, will not be possible so long as the interest bearing warrant method of borrowing is continued. The large cash balances now carried through the year are necessary because there is no means of securing additional cash to meet the classes of payments for which warrants cannot be issued. The various funds cannot borrow from one another during the year because they do not take in any appreciable amount of additional cash till next year and so cannot repay borrowings when the creditor fund must have cash. It is estimated that the interest bearing warrant method of borrowing costs the State nearly $75,000.00 a year that can be saved. Further discussion of this subject is found in the report on the Treasurer's Office.

Proposed Methods of Reducing the Floating Debt: The proposal that the floating debt of the State be funded, covered by a serial bond issue, has been made by various interested groups of citizens and State officials who are advocating a bond issue for other purposes. It is believed that no such

financial system of the State. So far as immediate changes in law are recommended, these affect questions discussed in other chapters as well as those of accounting and are referred to elsewhere. A bill embodying the recommendations is submitted separately.

Department and Institution Accounts:

It is impracticable to attempt to present a picture of the present accounts of departments (including institutions, boards, etc.) except in very general terms. No two depart ments are alike as to the methods they use except those that have no books or accounting records at all. From no records up to the systems of the University and State Board of Charities and Corrections, there is a wide field for variation which is occupied by the other agencies of the State. It is not meant to imply that the University and State Board have model systems but these two units and a very few others appear to have given their accounting work the serious thought which it deserves and to have shown a capacity to continue further the work of making improvements found to be necessary as time passes.

On the whole the accounts of departments are very far from satisfactory. The negro institutions were found to be wholly unable to produce figures to account for their expenditures of public funds. Among the departments which should be skilled in bookkeeping procedure, several were unable to present correct figures and the departmental average of ability or care in accounting matters appears to be very low. This criticism is not inspired by intolerance of anything but the best in these matters; it is based upon experience in trying to get figures of the most rudimentary character as to receipts and expenditures without regard to classification or form of presentation.

Under these circumstances it is rather aside from the principal question to discuss the advanced problems of model departmental accounting, but it is desirable for the sake of completeness to review briefly the kinds of requirements which are most

essential to a business-like recording of a department's financial transactions.

Essential Records: There are certain minimum essentials as regards records of expenditure and receipts which cannot be disputed. Departments which provide less cannot reasonably expect to be entrusted with public moneys. These may be said to be a clear and complete register of all expenditures and a similar register of all receipts. These should be book records, loose leaf or otherwise. The documents to support the entries in the books will be considered below.

A number of departments do not meet the requirements even to the extent of keeping any book record. These include offices that might be expected to set the example for accounting practice.

The form which the registers should take is suggested by the legal requirements that expenditures do not exceed appropriations and that expenditures be reported to the Budget Commission by budget classes. A department should keep an account of its appropriation as it would keep a record of a bank account it had to draw upon and should have (in the same or another book) a means of distributing expense items to columns representing budget classes. Registers of receipts are equally simple and easy to set up.

In a larger department, especially in an institution, the problem is more complex. Appropriation and budget accounting are certain to be inadequate to produce the information needed as to expenditures. The problem is generally simple enough so far as the work of bookkeeping is concerned, but it is necessary to begin with a correct classification of expenditures. This is a matter that will be given separate consideration below.

Procedure for the recording of vouchers payable is one of a number of problems which it is hardly necessary to consider here. In most cases invoices should be vouchered and for