administration but responsible to a body that can distinguish between a small or large measure of service to the State, and can make use of the information the Auditor prepares. The office of State Treasurer being an executive and clerical one and not one that has to exercise independent control over anything, it is futile and expensive to have it independent of the Governor, though as indicated above there are few serious results from the present arrangement. It has been allowed to continue in our States as an elected office though it is not elective in the federal government or in other countries. Probably the principal objection to the election of the Treasurer is found in the significant influence which the independence of the office has toward preventing the development of a strong finance department as an integral part of the State administration under the direct control of the Governor of the State. The comments which have been made do not apply to the offices of Inspector and Examiner and the State Tax Commission. These latter offices were created by legislatures whose thought on the subject of State organization conformed to more modern, and, it is believed, more enlightened principles. The fact that the State Inspector and Examiner was not placed under the Auditor of Public Accounts, though his functions are in large part those of audit, must be regarded as indicating a recognition of the inadequacy of the audit machinery controlled by an independent elective officer. The attempt to duplicate audit machinery, however, could hardly be expected to be successful and economical. The Objection to Divided Responsibility for Auditing: The Auditor of Public Accounts does all of his auditing in connection with the current review of documents sent to his office when claims are to be paid and money is deposited. The State Inspector and Examiner on the contrary is solely concerned with the checking of departmental and institutional records at the offices of the departments and institutions. The latter officer is in no respects subject to the direction of the former. The Auditor of Public Accounts is often confronted with difficult problems in connection with his work which he cannot himself settle but must turn over to the State Inspector and Examiner. When any problems arise involving opportunities for constructive work, the Auditor of Public Accounts must ignore them. Even when not aware of opportunities to improve his own office, the Auditor of Public Accounts can have no difficulty in recognizing many needs for improvements in many offices he deals with. The current audit in the Auditor's office is by far the most important audit. It should be developed to a point considerably in advance of that now reached. It could be associated with the giving of constructive assistance to departments and institutions and the simplification of the departmental and institutional problems so that auditing in the field such as that done by the State Inspector and Examiner will become almost entirely unnecessary in many departments. By combining audit agencies and taking other steps to be considered below, a far better audit is possible and at the same time the need for very expensive field auditing can be done away with. Financial Organization in Other Countries: It is interesting to note that the objections to the organization for financial administration in Kentucky are confined to characteristics which are peculiar to this and some other states and are not found in the organization of the federal government or in the organization of other important national governments. In practically all English speaking countries and alsewhere, the auditing officer is an appointed official independent of the administration whose responsibility to the legislative branch is clearly recognized. In England the auditor's report is dealt with by a committee whose chairman is a member of the minority party. Conclusions and Recommendations: The need for a strong organization for financial administration may be said to deserve to be regarded as one of the most urgent needs having to do with the business-like and efficient management of the State's affairs. The two principal offices which should be developed are: (1) An independent auditing office. (2) A finance office or department representing the chief executive of the State. The requirements to obtain an effective independent auditing office are in brief the concentration of all auditing work in one office and the selection of the head of the office on some basis that will make him responsible and responsive to the legislature and will make a long term practicable. The requirements to develop an adequate finance office or department representing the Governor are the consolidation of all other financial units (not properly placed in the auditing office) and the selection of the head of this important administrative branch on some basis that will make him the agent and aid of the Governor in fiscal matters. The need for a strong budget office must necessarily be one of the important considerations affecting the structure and functions of this department. The following steps toward the realization of the independent auditing office and finance department under the Governor are recommended. (1) An adjustment of duties and change of title so as to make the present State Inspector and Examiner the State Budget Officer. (2) The transfer of the State Inspector and Examiner's routine auditing work to the Auditor of Public Accounts. (3) The initiation of a Constitutional amendment to strike out the provisions of the Constitution which deal with the mode of selecting the Auditor of Public Accounts, provide for a State Treasurer, and limit terms of office. (4) After the amendment of the Constitution, the amend 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. CHAPTER III. TREASURY ADMINISTRATION Introductory: The problems of handling the State's cash are of interest and practical importance as judged from two points of view. First, the handling of cash necessarily affects the problems of accounting, auditing, and budget procedure because a central procedure and control is practical only to the extent that the actual funds of the State departments and institutions clear through the central fiscal offices. The cash procedure necessarily determines the lower limits as to the adequacy of other fiscal procedure. Second, the handling of cash affects the interest expense and interest income of the State and the ability of the State to meet claims surely and promptly so as to encourage dealings with the State which will be favorable as regards price and cash discounts. In the following paragraphs the problems of treasury administration will be dealt with from each of the two points of view in turn. Partial Decentralization of the Treasury: The State treasury proper does not receive or carry all of the cash belonging to the State. A good many of the departments and institutions in Kentucky actually do make use of the State treasury to keep their funds, but there are quite a number of institutions that do not, but on the contrary have their own treasuries and their own bank accounts with varying sums of money in them. Among these institutions are the following: University of Kentucky. Eastern Normal School. School for the Deaf. School for the Blind. Western Kentucky Industrial College. Kentucky Normal and Industrial Institution for Colored Persons. Confederate Home. |