above figures. The Comptroller has requested the sub-committee to direct public attention to the necessity of expediting condemnation proceedings.

EXAMPLE OF RESULTS ACCOMPLISHED.

The Department of Water, Gas and Electricity can be taken as an example of what has been accomplished during the last three years by re-organization and the introduction of modern accounting methods. While the situation in that department is not considered perfect by any means, systematic work, directed by the Commissioner through the Bureau of Economy and Efficiency, has enabled the Commissioner to secure striking results in preventing water waste, securing control over revenue, developing unit costs and general efficiency. The consolidation of six bureaus into one alone saved $300,000 in salaries. Water waste detection reduced the per capita consumption of water from 127 to 93 gallons per day, effecting a saving of $3,000,000 in water valued at meter rates. At the same time, with a reduction of $300.000 in operation and maintenance charges and $122,514 in the coal bill, 2 per cent. more water was pumped and in two years, without changing water rates, the revenue collected increased from $10,652,215 to $14,420,000.

A striking illustration of the effect of introduction of modern methods, cited by the Commissioner, is in the filling out of the pay rolls. The substitution of a mechanical system reduced the time required to fill out each pay-roll from 25 minutes to 25 seconds. The reports of this department, showing unit costs, etc., are now held up as a model for other cities by the Bureau of Municipal Research.

OFFICE METHODS.

During our investigations we observed an almost entire lack of fire protection for the books and records in the various departments. Some offices have safes in which many of the more important records are placed at night, but the safes are of an antiquated type and would not withstand a severe fire test. The building in which the Department of Finance is located at present is very old and in no sense fireproof. A careful report should be made as to what important records of the city nightly lie around on the top of desks or shelves, and provision made for placing them in vaults or safes as a protection against fire. Many of the records, in the event of destruction, doubtless could be replaced from information obtainable in the outside departments. but the cost of such replacement would be very great.

The practice now in vogue in many of the departments of making official communications upon regular forms should be extended to all. Where this is not done, as for instance; in case of corrections to the General Ledger Book-keeper, the letters containing such corrections are merely filed away in a letter folder. Where regular forms are used they can be placed in a binder and kept in the same manner as the regular daily reports received by the General Ledger Book-keeper.

THE PERSONNEL.

During the progress of the investigation the sub-committee has particularly endeavored, by personal observation and otherwise, to determine the efficiency of the clerical staffs. The circumstances surrounding the employment of municipal clerks makes it perhaps unfair to compare their efficiency with those in private enterprise where close. supervision, testing of results and free power of dismissal, keep the personnel up to the mark, but the sub-committee takes pleasure in recording that the progress of the installation of the new accounting system has been accompanied by a gratifying improvement in the attitude of the city's clerks toward their work. A better and more business-like spirit is appearing in the city service. Many of the men, who were appointed under the spoils system and who were carried into the competitive class without examination, or any test whatever, are dropping out through natural causes, death, old age, etc., and their places are being taken by men who have had to compete for their right to enter the public service. The great majority of the clerical force has welcomed orderly methods and there seems to be a general desire not only to carry out the suggestions of the Manual of Procedure but to improve them where possible. Whatever active or latent opposition may have existed to the improved methods in the beginning has substantially disappeared. A real esprit de corps is beginning to be manifest among the clerks, the great majority of whom want nothing better than to see their employment and opportunity for advancement divorced from every consideration except merit and service. Such resistance as still exists is passive and can never again become active unless there is a relapse in the position of some future administration. The Civil Service rules, by protecting incompetents already in the service and creating preferential classifications, have perhaps in many instances proved a handicap to the introduction of better methods, notably in the Department of Finance, where the grade of accountants is hardly as high as it should be for the performance of the important work of the Comptroller, but the extension of the installment of efficiency records in progress there, as in other departments, should steadily raise the standard.

CONCLUSIONS.

The present sub-committee reiterates the opinion of its predecessor that the general principles underlying the new accounting system are sound and applicable to the city's financial administration and operation. The details are complicated and technical compared with those of a corporation, but perhaps unavoidably so for a municipality. In any event experience will develop modifications and simplifications wherever desirable. The anticipation of the sub-committee of 1909, that it would be impossible to complete the installation, and simultaneously carry on the current work without the aid of an independent organization, has proved well founded. With due allowance for the

difficulties under which the present Comptroller has labored, the progress made subsequent to January 10, 1910, has not been entirely satisfactory, and although the Comptroller still expresses the hope that he can complete the installation before the expiration of his term of office, the above presentation of what has been accomplished with the recapitulation of what remains to be done, makes it practically certain that his hopes cannot be realized unless additional measures are promptly taken.

When completely installed and in operation the system is designed:

1. To provide accounting and auditing methods which will render it possible to determine whether the city is receiving every dollar of income to which it is entitled and getting full value for every dollar expended;

2. To give absolute control over expenditures of allowances for supplies and their use, in order to prevent waste and misappropriation;

3. To definitely determine the cost of each function in order to ascertain where economies can be effected and thus furnish an intelligent basis for budget allowances;

4. To enable the presentation currently of true and comprehensive exhibits of the city's fiscal status as to assets and liabilities, income and expenditures, receipts and disbursements, and the debt situation, to determine the city's margin of borrowing power.

As long as the installation is delayed, the taxpayer cannot know how far the annual budget increases are justified by the city's growth in population or business, nor the bond-holder have the data essential to judge the value of his securities. The debt of the city has trebled, and the Budget doubled since the consolidation, paralleling the burdens of some European countries. At a time when the placing of the city's bonds abroad is contemplated, the glaring defects in the city's statements when compared with those of European cities of equal importance, cannot fail to be remarked, to the detriment of the city's credit. New York should assume the position among the cities of the world to which its greatness entitles it. The imperative need of the reform being conceded, the plans for its execution approved, the machinery devised, it is the deliberate opinion of this sub-committee that no expense should be spared to promptly and effectively place the system in complete operation. Economy in expenditure, however commendable, is a positive extravagance when it interferes with the realization of a reform fundamentally necessary to the accomplishment of lasting economies and intelligent administration. The experience of every business corporation which has adopted modern accounting methods to control the cost of operation and prevent waste proves this. Civic bodies in 1909 recommended to the Legislature an expenditure of $200,000 annually for five years to accomplish the installation of the accounting system by means of a special organization. Unless immediate steps are taken to insure the completion of the installation, the work may drag along until the end of the present Comptroller's

administration, when the fate of the reform may again be in doubt. The opposition of persons interested in perpetuating the conditions against which the reform is directed is no longer active, but that does not necessarily imply that it is dead. As late as last year the system, so far as it related to the auditing of claims, was attacked in several of the charters proposed before the Legislature. Fortunately the attack failed because of the protests of the Chamber of Commerce and other bodies but they deliberately proposed to remove from the jurisdiction of the Comptroller 95 per cent. of the claims against the city, practically giving the heads of departments which incurred expenditures, the determination of their correctness, leaving to the Auditors and Comptroller only the "rubber stamp" function. Regardless of the expense involved, therefore, it seems to the sub-committee that provision should be made immediately for a sufficient force of expert accountants to finish the installation at the earliest possible moment. When completed, a suggestion, already broached, to embody the changes in a revised edition of the Manual of Procedure for adoption by the Board of Aldermen as a city Ordinance, and thus rivet the reform into the city's statutes, would perhaps be the most practical method of insuring the city against a relapse under some future administration.

Whatever changes in the Charter or existing laws are necessary to put an end to such statutory anomalies as still block the path of the reform, should be made forthwith. Success for the system depends upon keeping the records in the outside departments, and their prompt and accurate transmission to the Department of Finance. It is obvious that the failure of any department or office to make the necessary reports will interfere with the continuity of control, and the full current presentation of the city's financial and operating condition. Without questioning the considerations which gave independent corporate existence to the Board of Education, and Public Service Commission, and some smaller offices, it is manifest that they should be under full budgetary and accounting control, since they are supported by taxes and bond issues. It is equally manifest that the Comptroller's authority to enforce the accounting methods prescribed should be unequivocal, that his jurisdiction should at least embrace supervision of the accounting staffs of all outside departments, and that he should be clothed with power, consistent with the spirit of the Civil Service, to change or remove incompetent clerks or accountants who may stand in the way of the completion of the reform.

Respectfully submitted,

HOWARD THOMPSON, Of the National City Bank.

L. C. GEER, Of the Corn Exchange Bank.

PROF. JOHN R. WILDMAN, Of New York University.

ALFRED A. RITCHIE,Of BARROW, WADE, GUTHRIE & Co.,

and

A. PYOTT SPENCE,

Certified Public Accountants.

Sub-Committee of Examiners.

APPENDIX.

LATEST PHASE OF THE WORK.

While the examination of the sub-committee was in progress, Comptroller PRENDERGAST asked and obtained from the Board of Estimate and Apportionment authority to issue $34,400 special revenue bonds for the employment of accountants, searchers and clerks to determine the amount of uncollectable tax assessments now carried on the city's books, to establish a Property Register and Ledger and for other work incidental to the preparation of a Balance Sheet for the city. Under date of July 3, 1912 the Comptroller transmitted to the sub-committee reports of the organization effected to do this work and the detailed plans for its accomplishment from which it appears, that divisions have been created for the following purposes:

1. Determination of the amount of uncollectable assessments. The information obtained will be used:

(a.) As the basis for opening an account on the General Ledger of the city, which shall include all of the assessments for local or other improvements found charged against the city on account of city-owned property now or in the past.

(b.) To furnish data relative to all assessments found to be open on the books and chargeable to exempt corporations, institutions, or individuals other than the City of New York.

(c.) To determine the open items of assessments which may be found to be uncollectable, due to vacation or abatement of assessments or from whatever other cause, (not heretofore written off) so that the same may be ordered "cancelled" and removed from the books of the Bureau of Assessments and Arrears.

2. Determination of the amount and value of city-owned property. 3. Analysis of Street Improvement Fund Accounts, 1859 to 1912. In connection with the above the Examiner, in charge of the Division of Expert Accounting, writes to the Comptroller that the deficiencies due to the city having assumed a part of the cost of improvements amounts at the present time to approximately $13,000,000, while the amount of outstanding assessments deemed uncollectable because assessed against city-owned or other exempt property is $15,000,000 or a total of $28,000,000 paid out of outstanding revenue bonds which must be provided for by the issue of corporate stock if the city is to be relieved of carrying this burden indefinitely in its present form. He points out, however, that the above figures are only an estimate and may be materially modified when actual conditions are determined. As the $15,000,000 uncollectable assessments also includes assessments on city-owned property for street and park openings, the examination, when completed, will also determine the extent of such deficiencies and permit the replenishment of the fund for street and