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institution heads to find other uses for the surplus and thus prevent its being carried back into the treasury and lost to them. Unless there is regularly considerable "salvage", which remains in or is returned to the treasury, it may safely be assumed that the fiscal system is not working properly.

Enforcement of the Legislative Intent: The enforcement of the intent of the Legislature should also go beyond the detailed estimates in some respects; for example, actual expenditures should not be in excess of requirements, high salaries appropriated should be paid only to men of high ability, or money voted to complete a building should not be spent in such a way that an additional appropriation will be necessary. If the actual programs presented to the General Assembly are carried out and no limits overstepped directly or indirectly, the savings may amount to hundreds of thousands of dollars. every year. The means of enforcing the intent of the Legislature, assuming a budget system, are:

&.

The use of very clear and definite phraseology in the appropriation act.

b. The writing of detailed schedules of estimates by budget classes to conform with the figures in the appropriation act. If the legislative committees fail to write in detail, the Governor or Budget Commission, after consultation with the heads of the agencies affected, should be required to do so in very case. C. The careful approval of all vouchers before they are paid (except as regards payments from advances authorized to be used only for purposes definitely stated.)

d. The requiring of prior approval by the Governor of certain administrative acts which result in the incurring of obligations (such as travel outside the State and building plans).

e.

The prohibiting of any public expenditures from moneys not deposited in the State treasury and paid out on State warrants under the appropriation act except in the case of certain moneys specifically provided for otherwise by the appropriation act, or by the Governor in the case of obvious omission to provide for donated funds.

Consolidated Contingent Funds: Mention has already been made of the necessity to provide a central contingent fund (appropriation) in order to permit individual appropriations to be held to a minimum.

It is a mathematical certainty that more money is required to meet contingencies if a sufficiently large separate fund is established for each state agency than if there is only one such fund. By the consolidation of such funds less money need be appropriated and in practice less money will be used for contingent purposes (many of these, upon analysis, do not turn out to be contingencies at all). The central approval of expenditures under the head of contingencies is certain to mean savings; such central approval in every case is a necessary part of the system of having a single contingent fund. Obviously the General Assembly should not permit any expenditures to be made from contingent funds if they are of such a nature that estimates could be prepared in advance and submitted for its consideration; with a central fund such expenditures can be and most certainly will be covered by the regular estimates brought in. A central contingent fund has also been demonstrated in other states to be a very decided factor in eliminating deficits which before the establishment of the central fund often ran to several times the amount of the appropriation subsequently made to the fund.

Conclusions and Recommendations:

The most important single cause of the present complete failure to realize an effective budget procedure unquestionably is the traditional attitude of the Legislature and central administrative officers toward problems of State fiscal policy and management. Governmental control (in the interests of economical and effective administration and in the interests of the taxpayers whose prosperity is fundamental to the welfare of the State) is a science which as yet has hardly begun to attract the attention of the members of the Legislature, the Governor, the Auditor of Public Accounts, and other central administrative agents of the people. The budget must be one of the chief instruments of such control and it is believed that it can be fully

successful only if given the support of an active and influential group of public men who are well informed concerning the requirements of budget procedure and who regard budget ideas as fundamental administrative principles,

Other causes of the present defects in budget procedure are easier to remedy. The present law can be and must be changed in order to set up a Budget Commission with a membership that can be expected to represent the State adequately, to provide for a budget staff, and to state such requirements as to budget procedure as can properly be incorporated in the statutes. Following the enactment of a new law, the position of State Budget Officer can be filled by a man who is competent to undertake the installation of an effective budget machinery.

It is hardly practicable to summarize all of the recommendations which are suggested by the preceding discussion. The statement of essential budget principles is in itself a recapitulation of the features which should be carried out in the budget law and in the procedure based upon the law. The only recommendation necessary is that such a law and procedure be secured. (A draft of the proposed law is presented separately.)

Another report in this series deals with the Budget Appropriation Commission and contains additional discussions of budget machinery.

CHAPTER V. AUDITING

The Audit of Expenditures:

In describing the treasury system, attention has been called to the fact that there are decided inconsistencies in the present auditing procedure. The central accounting offices, that is, the office of Auditor of Public Accounts and Treasurer's Office, may be said to be subject to no audit at all, as the State Inspector and Examiner's check of these offices is of no consequence. The departments, as contrasted with institutions, and the institutions that are under the State Board of Charities and Corrections, are subject to a pretty complete current check obtained as their documents for receipts and expenditures pass through the office of the Auditor of Public Accounts. currently. These same departments and also the other institutions and county offices which collect money for the State, are subject to a rapid biennial examination by the State Inspector and Examiner. Many institutions not under the State Board are not subject to any current checks because they have their own treasuries and their transactions do not clear through the office of the Auditor of Public Accounts as has been explained.

It is obvious that the offices of Auditor of Public Accounts and Treasurer ought to be audited once in a while at least. It would seem to be equally evident that the central treasury procedure, if it is worth anything, should apply to all parts of the State government.

The Failure of the Periodic Audit: The biennial examination of State offices and institutions made by the State Inspector and Examiner, is typical of the kind of periodic audit which is generally regarded as the old fashioned type of governmental audit and is held to be largely ineffective.

It cannot prevent irregularities, though it may discover them. As a means of detecting fraud it may be fairly satisfactory, though even in this accomplishment it often does

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