heads. An example of this is found in the Reclamation Service of the National Government, the head of which has an appropriation of approximately $100,000,000. For his own information and protection he allots the fund to the construction, operation, and maintenance of many widely separated projects upon estimates, and requires cost accounts to be kept and reports to be made along the same lines. The United States Indian Service, spending many millions each year in about twenty-five different states, and through more than two hundred agencies, operates under a system of executive allotments. Some of the executives of the city of Philadelphia, e. g., the chief of the Bureau of Highways, have self-imposed systems of allotments. In other places executive allotments are a legislative requirement. For example, the state of New York requires monthly allotments of appropriations for all charitable institutions to be approved by a fiscal supervisor. Many quasi-public institutions operate on monthly or quarterly allotments. The method is of increasing use in private institutions. It is the best known and most effective means of exercising central control over the planning of current work.

Requirements Collateral to Allotments

The requirement that executives must currently allot on estimates could not be made effective as a means of control without some means being established for obtaining complete and accurate information with respect to work authorizations. This would be provided for in regulations governing the keeping of allotment and cost accounts, the making of unit cost reports, and the independent inspection of work and reports of work cost. These collateral requirements are discussed in the chapters that follow.

Summary Statement of Advantages

The advantages of such a system of allotments (compared with the plan of segregating the appropriation bill in such manner as to show minutely the various activities which are authorized as was done in the bill" and "act" of 1913) may be summarized as follows:

1. A system of allotments based on estimates, and of estimates based on cost data gives to administrative and executive officers a means whereby they may effectively participate in and control the working plans of departments before authorizations are given for the expenditure of money; it provides the first essential to efficient management, the element of planning work and estimating cost before work is undertaken

view and revision of estimates by departmental experts after the amount of the appropriation has been fixed and determined by legislative act

3. The plan of executive allotment suggested provides for holding in reserve certain parts of the total amount appropriated in order to accommodate the appropriation to the fluctuating needs or demands of the department

4. Such a plan also provides for quarterly or other periodical reconsideration of plans for work in hand, and for turning back to the general fund amounts not required

5. A means is provided for the exercise of direct accounting control over detail accounts showing economy of management, by making provision for having the analysis of expenditures under allotments regularly reported. These cost data would serve as a basis for future planning as well as provide the means for the exercise of current control over the efficiency of subordinates.

Difficulties Experienced with Present Accounting Installation

The desirability of making a change to get away from the present methods is evidenced by the difficulties that have been experienced in the introduction of the new system of accounting and reporting. This has been thrown into utter confusion at times by the fact that appropriation accounts are required to be kept on an expense or cost accounts basis. This requirement leaves out of consideration the essential difference in the purpose of the two classes of accounts. "Fund" and appropriation accounts are created for the purpose of setting up authorizations to spend and limitations to the amount of liabilities which may be incurred; the charges against appropriation accounts must necessarily be purchases and payments. The more there is expended, the smaller the appropriation balance remaining.

The purpose of cost accounts is to ascertain whether the activities or work for which a particular officer is responsible is being economically and efficiently carried on. The test here is not what is bought and paid for, but what is used. Certain parts of this work may be done entirely by issues from stores. These may be from balances on hand at the beginning of the work. In any event, the cost of doing the work has nothing to do with the amount of supplies or materials which have been purchased within the same period and the result of charges to cost accounts is to increase the cost with each hour of time or unit of things used. Even though there is a very close approximation between amounts paid for services and materials purchased and the amount used during the year, the content of the two classes of accounts is quite different. Besides, the record of uses must run throughout the period as the things in stock are issued or men are assigned to different work. Any attempt to get at cost through the fund accounts against which purchases are charged must necessarily destroy the value of the data for either purpose of control.

Value of Cost Data to the Manager

The administrative value of cost data depends on setting up standards for judgment. These standards are necessarily stated in terms of subdivisions or jobs of work, in order that the administrator may keep his eye on the relation of the cost of a particular job or process to the average cost. The executive officer does not have time to follow in detail each transaction, but he does have time to watch the trend of the relation of costs by subdivisions to averages or "norms" or standards" that are considered as a guide. Whenever there is a departure from the norm or standard, his attention is at once excited and he begins to ask questions. It is through answers to questions of this kind that he is able to obtain the perspective necessary to direct and control a large department of work and gradually build up an efficient service.

Significance of Separating the "Appropriation Ordinance " from "Work-Program "

As has already been said, the significance of separating the "appropriation ordinances" from the "work-program" is that each becomes an instrument of control over an important subject that is quite separate and distinct from the other. One serves as a medium of control over purchase management; the other serves as a medium of control over the work management. By making a work-program such an instrument of control, the information needed to make it effective would come through costs which may be interpreted in terms of established standards and in harmony with all of the constructive work which has been begun in the city. Furthermore, through the adoption of these proposals the constructive work, which at the present time is more or less confused, could be carried to its logical conclusion and every desirable result that has been planned might be realized both in current administration and in budget making.

CHAPTER VI

ADVANTAGES TO BE GAINED IN THE EXERCISE OF ADMINISTRATIVE CONTROL OVER APPROPRIATION AND FUND ACCOUNTS AND REPORTS

The means for exercising control over appropriation and fund accounts has already been established. In so far as it is defective, the only need is for further elaboration. In the several departments this is done through:

1. The exercise of control over contracts and purchases
2. Inspection of deliveries and contract work

3. Voucher certification

In the department of finance, as the central accounting office of the city, control is also exercised by means of:

1. Independent inspection of deliveries and work under contract 2. Audit

3. Central accounting records

In the board of estimate and apportionment, acting as a central executive committee, control over purchasing and controlling relations is exercised:

1. By standardization of specifications for supplies, materials, and

equipment

1

2. By standardization of legal provisions for contracts

Control by Board of Estimate and Apportionment

The board of estimate and apportionment, in its capacity as central executive committee, has provided the means for exercising control over contracting and purchasing relations of the city by providing itself with the means for promulgating general orders or regulations. The organic means for doing this has been through the establishment of two bureaus, namely: (1) the bureau of standards, and (2) the bureau of contract supervision.

The Bureau of Standards

The organization provided for carrying on the work of the bureau of standards divides itself into three sections, viz.: (1) administration; supplies and materials.

Division of Salaries and Grades

The division of salaries and grades has devoted itself to the development of specifications for the establishment of positions and salaries and grades by resolutions of the board of estimate and apportionment. This has been done in close coöperation with the civil service commission, to the end that scientific specifications and classifications might be developed as a basis for establishing standard rates of pay, standard titles and civil service standards for grades of work to be done within each group of positions. The various occupations of city employees have been tentatively divided into the following services:

In order that the specifications may be still further definitized, each service is subdivided into groups, for example, the professional and scientific service is divided into: