state road fund, and the auditor of public accounts will make distribution of said tax in accordance with the said apportionment at the end of each month. "Section 4070-What constitute; dividend on bank stock; annual tax; fines and forfeitures.-The school fund shall consist of the fund dedicated by the constitution and laws of this commonwealth for the purpose of sustaining a system of common schools therein: ......(5) The annual tax of twenty-six cents (26c) on each one hundred dollars ($100) of value of all real and personal estate and corporate franchises directed to be assessed for taxation. (6) Such portions of fines, forfeitures, and licenses which may be realized by the state as the amount of taxes for common school purposes bear to the whole state tax other than for the benefit of the agricultural and mechanical college." The last clause in itself offers an opportunity for very radical differences of opinion. The present interpretation given it seems to be one of the least obvious or certain. The complete revision (or repeal) of statutes governing special funds, is much needed. Financial Administration CHAPTER I. INTRODUCTION Certain requirements must be met by the State's system of financial administration if the State Government is to be run on a businesslike basis. In this report an attempt is made to indicate what these requirements are, how well they are now being met, and particularly wherein they are not being met, and what appears to be necessary to bring the system into line with the requirements and to insure the soundness of the State's financial management. The report is not limited to a consideration of the work done in the few State offices which carry some of the principal responsibilities for fiscal administration. It has been the aim to regard the work of the central fiscal offices as only a part, although a very important part, of the whole machinery of financial administration and to consider all aspects of that machinery as a whole. An attempt has been made also to emphasize the parts which the Legislature and Chief Executive play, and should play, in the plan of financial control. The terms "financial administration" and "financial control" have been interpreted broadly to include matters of revenue collection, budget making, appropriation, expenditure procedure, auditing both of receipts and expenditures, accounting and the handling of cash and borrowing. (Taxation and the questions of providing additional revenues to meet the needs of the State are treated in another report.) The importance of the budget procedure and procedure for the control of expenditures under the budget or appropriation act, has been emphasized. It is safe to say that the problems falling within the general field of expenditure control (including the budget) are so important that the subject of financial administration becomes one which has more to do with the efficiency and economy with which State undertakings are carried on than has any other subject before the people of Kentucky, ex money over to the State. The State Inspector and Examiner checks the latter officers to see that they have documents which total the amount of remittances which they made to the State. All such auditing and special test audits that may in some cases approach the character of an investigation should be handled currently, the duplicate receipt forms being sent in to the office of the Auditor of Public Accounts for this purpose. There should be a staff concerned solely with the checking of receipts, which would add the documents against the remittance made, using adding machines and comptometers. The Auditor of Public Accounts' Office already has the necessary force for this purpose. In the case of all revenues paid directly to the treasury, the entry of the accrual of the revenues on the basis of bills or assessments recorded by the Auditor, the accounting operations will constitute an automatic check. The Work of the Revenue Agents: It is to be noted that the work of the State Revenue Agents (under the general direction of the Tax Commission) has a direct bearing upon the problems of revenue control discussed here. Some of the collections made by Revenue Agents represent failures of the assessing machinery supervised by the Tax Commission while others are attributable to the defects in the system as regards miscellaneous receipts of various offices. The Tax Commission has a field force which should be able to handle the omitted assessments within its field far better than they can be handled by the Revenue Agents. To do away with the need for Revenue Agents entirely and save much larger sums than they collect, it is necessary to meet the imperative need for a better collection machinery in all branches of the State government. The possible savings should be much larger than those represented by the work of the Revenue Agents, because these few men cannot begin to cover the field adequately. Last year the Revenue Agents collected over a quarter of a million dollars. of the people in the Legislature. Arrangements are often advocated to protect favored activities against possible legislative interference, but attempts made in this direction have been very costly. A better scheme is to place reliance where it belongs, to admit the tremendous powers of the legislative body, and take steps accordingly. If the Legislature does not control the purse strings, nobody will. If the Legislature makes arbitrary cuts in worthwhile appropriations, there is a remedy which is demonstrated in other states, viz., the production and dissemination of the facts. It is believed that the experience of other States will substantiate the assertion that where the budget procedure is strongest, the arbitrary actions of legislative bodies are fewest. In the chapters immediately following six major groups of problems of fiscal administration are dealt with in turn. These are as follows: Organization for Financial Administration The Budget and Appropriation Procedure Accounting Expenditure Control A brief concluding chapter is devoted to a general discussion of the problem of bringing about improvements. The order in which the subjects are taken up is not intended to indicate their relative importance, if that were possible. The last chapters are as important as any others. The discussion of one subject, budget procedure for example, is incomplete without the data presented before and after. As suggested above, the present need is for a comprehensive consideration of all problems of financial administration and for action based upon a mature judgment concerning each subject in the light of a knowledge of all. |