Furthermore, price information service can safely extend to the central approval of purchases not made under either contract or special standing discount agreements. The central purchasing service can prevent wide discrepancies in prices and material losses. The law can safely require all departments and institutions to estimate their needs for staples on a quarterly, half yearly, or yearly basis conforming to a general schedule for the entire State so that it will be easy for united action to be brought about. The law also can safely place restrictions around the letting of contracts to any but the lowest bidder.

It is estimated that savings of over a hundred thousand dollars per annum should be entirely practical of realization without any hardships to any department or institution.

Methods of Central Purchasing:

As suggested above, central purchasing may take either a complete or a limited form. Complete central purchasing would involve requiring all purchases to be made through the central purchasing office or under some arrangement approved by the central office. There is always some arrangement made for special and emergency buying direct where the central purchasing extends over a very large organization so it may be said that complete central purchasing, strictly speaking, is out of the question.

Limited central purchasing would include, as a very minimum, the making of periodic supply contracts, either for fixed or indeterminate quantities of the several articles covered. Obviously not nearly all articles would be included, though the bulk of the money spent for supplies might easily be covered by such contracts. The making of such contracts presumes that the necessary machinery and procedure for estimating requirements will be set up. This can generally be left to the departments and institutions but must be recognized as an important problem. The better the estimating procedure the more widely useful the supply contract method of purchasing may be.

As pointed out above, Kentucky has already this form of central purchasing in a limited degree. The desirable line of progress would seem to be to extend it to the several other State units in so far as practicable. Every large department and institution should be required to prepare supply estimates periodically but the numbers and kinds of articles to be included cannot be determined arbitrarily.

The letting of contracts need not necessarily be taken out of the hands of the department officers. Arrangements should be made, however, so that the departments and institutions may not act independently in forming an opinion as to the best means of securing the supplies bought on contract. The assistance of a central purchasing office should be available and the procedure required should compel attention to the information and service which the central office can give. To this end it is proposed that the approval of the purchasing office be required if contracts are not let to the lowest bidder. Such an arrangement may be regarded as conforming to the recognized and established practice for buying in quantity. It opens the way for the development of central purchasing in bulk to the greatest extent that such purchasing can demonstrate its value. In order to prevent wholesale evasion by any department, the Purchasing Officer should have authority to add articles to the supply estimates of departments.

All departments at Frankfort except the largest (the State Board of Charities and Corrections, the Department of Good Roads and Highways, and the proposed Board of Education) should be required to combine their estimates and, so far as they buy on contract, come under the Governor's supply contracts. The Governor probably should have the authority to extend his contracts to include any of the relatively smaller departments and institutions wherever located.

The present printing contracts represent forms of supply contracts which can remain on the present basis so far as the requirement that all departments use them is concerned. On the other hand the forms of contracts are open to criticism

as considered in the report on the Board of Printing Commissioners.

The office supply contract policy should be governed by the same principles that apply to the purchases of other commodities. Not nearly all supplies used should be covered by contract and each department not located in Frankfort, and each institution under district management should have its own contract if any.

For purchases which cannot be estimated on a periodic basis there is no single recognized method. There are several possible plans to follow. The development of continuing agreements with certain dealers whereby they offer fixed discounts from list prices and the State assumes absolutely no obligations is highly desirable. Such agreements are now made with departments and institutions and can just as well be made with the State government as a whole so that the benefit can be realized by all. A central office should be able to secure discount quotations and price lists for practically all kinds of commodities and should be able to keep all departments and institutions informed as to the prices offered. Purchases not made under approved discounts should require the approval of the purchasing office unless they are of such a nature as to be made locally and are so designated on a more or less permanent basis.

Possible Plans of Organization for Central Purchasing:

Concerning the form of organization for purchasing which might be adopted in Kentucky, several possible methods present themselves:

(1) It might be possible to extend the functions of the Board of Printing Commissioners.

(2) The existing facilities of the Board of Charities and Corrections might be extended to other units.

(3) There might be set up a new office of Purchasing Officer under the Governor.

With reference to the first proposal, there is to be interposed the objection that a Board of ex-officio officers, popularly elected, having no very special interest and often no experience in purchasing, would be very unlikely to give the close and special attention which the problem requires. So far as there are any discretionary matters to be dealt with, the Chief Executive officer of the State, rather than a Commissioner, is the proper authority on whom the responsibility should rest.

In favor of the second suggestion in may be said that in some instances the purchasing facilities of the institutions might be utilized by departments. On the other hand, the opportunities to develop a service adapted to the needs of all departments may be seriously restricted by having it taken care of by one of the largest expending State agencies. The aid of the State Board of Charities and Corrections in obtaining advantageous prices for smaller supply contracts can be secured without losing the advantages of a strictly central purchasing office.

It is probably more in keeping with the recommendations which are made in other reports for the reorganization of the State departments, that the third suggestion be adopted. Obviously, the position of Purchasing Officer must not be treated as a political perquisite of the administration. This is one of those cases where, unless the thing is done right, it should not be done at all.

Comments on the Legal Requirements With Respect to Supply Contracts:

With respect to the restrictions on the contract-making power, a good deal might be said. In general, the tendency everywhere has been to hedge public contract-making bodies with so many restrictions that they cannot always make favorable terms. Thus, in Kentucky, it is very doubtful whether the particular time which is set for making printing and paper contracts will permit them to be made advantageously. The contract period may (and it apparently did in 1919) terminate at the end of a sharply rising market. At such

Higher Authority for the Audit:

The results of an adequate audit should be of three kinds : 1. The prevention of fraud or the detection of fraud if any exists.

2. The elimination of losses due to evasion of taxes, duplicate payments, extortionate prices, and other results of loose administration.

3. The enforcement of the intent as well as the letter of the appropriation act.

The second and third (especially the latter) are the greatest opportunities for savings. In connection with the enforcement of the intent of the appropriation act, it must be remembered that the Auditor has no actual powers going beyond the mere enforcement of the letter of the law and that he cannot compel anyone to accept arbitrary rulings of his own as to what the Legislature meant by certain items.

The Auditor can, however, raise questions as to the Legislature's intent and can see that the Legislature itself is informed. as to evident departures from its intent which could not be controlled under the appropriation act as drawn. The only difficulty in this matter is that the average auditor does not have any impelling interest to discover or point out departures from the intent of the Legislature and if he did the Legislature ordinarily does not have any great interest in listening to the details as to how moneys have been expended unless fraud is involved.

Many of the facts which the Auditor should report, no matter how important, are so technical that they are not easy to understand or appreciate in their full significance. Often there will be, and always there should be, so many special matters taken up in the Auditor's report to the Legislature that attention to them all requires special interest in auditing and fiscal problems.

The British System: Considering the fact that one of the principal excuses for having an audit, with the very heavy ex