bility, where before it was lacking, but this has been done at an enormous cost, after long delays, and by employment of very complex and labored processes, whereas, by following well-known, well-tried constitutional expedients, very simple and effective methods could be employed to insure responsibility for leadership, for honesty, for efficiency and economy. What the people have failed to realize is that the cause of their distress has been fundamental, not incidental in character; that they are confronted by a condition that requires radical operation instead of palliatives a constitutional adjustment which will bring into our political system the thoroughly tested mechanism that makes for responsible government and renders impossible irresponsible leadership. New York Practice a Perversion of the Principle of Representative Government It is a fact which should not escape attention that the conditions under which governments have been unresponsive to public opinion and irresponsible, dishonest, inefficient, and wasteful have been those in which no provisions have been made for the development of executive leadership and the enforcement of executive responsibility, and that among the most conspicuous examples has been the government of the state of New York-under constitutional provisions in which, in common with our other American states, the principles of direct election of the executive and short tenures have been relied on in lieu of acknowledged and accepted leadership held to true responsibility. What we have failed to see is that there can be no such thing as an intelligent government without leadership, whether this may have to do with public or private affairs. Nor must we rely alone on the experience of political bodies for this conclusion. Miscarriages in private corporate management have been largely due to the same cause-failure of members to provide themselves with the constitutional means for utilizing official agencies in developing support for responsible leadership on the one hand and an effective opposition to bad management on the other for locating responsibility, defining issues, and having these directly related to official acts-in short, a mechanism adapted to making the management of affairs responsible. Experience has demonstrated that an institution in which there is no leadership is managed worse than the one in which leadership is developed, even though the leader be an "irresponsible boss." With all of the outcry against the boss, the common sense of the community will support him until some constitutional provision is made for official leadership, and responsible leadership must, of necessity, be located in the executive. CHAPTER VIII THE INDEPENDENT AUDITOR Defects of the Constitution and Statute Law Providing for Current Review and Approval of Financial Transactions One of the prime reasons for the establishment of representative government was to call the executive to account for expenditures. It is true that the protest which led to the conference between King John and the barons was in the main against "taxation without representation," but a necessary prerequisite to obtaining the consent of representatives has at all times been an executive accounting. Audit by the Legislative Body as a Whole In some countries the king or his immediate representatives are required to appear personally and make the statement with respect to the expenditures under past authorizations by the legislative body. "Before the executive can obtain consent to further proposals for money-raising he must do two things; he must satisfactorily explain what he did with moneys previously obtained; he must satisfactorily explain what he proposed to do with future grants." It was from this practice of listening to a verbal statement or account of expenditures that the term "auditing" arose. Audit by Legislative Committee The next step in the development of a procedure for enforcing accountability through an independent audit was the appointment of an auditing committee. Instead of all of the members of the representative body being required to attend while an accounting was made, or, to put it in another way, instead of the audit being limited to the attention that could be given by a large body, a few members were designated as a special committee to take such time and to use such means as were appropriate and needful to determine whether the public money had been spent honestly and according to legal requirements. This form of examination also proved unsatisfactory as public business became more extensive and more complex. Examination by an auditing committee of the legislative body came to be merely perfunctory, unless perchance it happened that the work of the committee was dominated by an "opposition member or party. In this event the work of the committee might prove to be quite exhaustive, might have the effect of seriously embarrassing the executive in putting him on the defensive, but it seldom met the strict requirements of an audit. Creation of an Independent Auditor A third step in advance was the creation of an auditing department or office, which was made independent of the executive. This consisted. of an officer with such staff as he might find necessary, who was not in any manner responsible for authorizing contracts and payments or for disbursing public funds, but whose duty it was to review currently the business transactions, to inspect critically documents, vouchers and accounts, and to determine whether they had been legal and just. He also went occasionally into questions of revenue raising to determine whether or not the amounts charged and collected and the processes used for establishing rates of charges and collections were in accordance with the authority which had been given for raising revenue; to determine whether all of the moneys collected had been properly accounted for; and whether proper steps were being taken to collect charges that had come into arrears. The function of this office was something more than that of an auditor. That is, it had the effect, not only of giving to the state the benefit of a verification of the legality of transactions, but, being current in its operation, the review of vouchers and accounts had the effect of preventing the consummation of transactions that would lead to the subversion of public funds. The independent auditor came to be a comptroller of expenditures—a person who was in a position to prevent irregularity and losses due to discoverable neglect or attempted diversion, which were reduced to a minimum. Provisions of Constitutional Law in New York No provision was made in the first constitution of the State of New York for an auditor or comptroller. The office was established by statute about the beginning of the last century, and in 1821 the office of “comptroller" was given a constitutional standing. By the constitution of that year the comptroller, as well as the treasurer and a number of other officers were made independent of the governor by a provision for their appointment as follows: "The senate and assembly shall each openly nominate one person for said office respectively; after which they shall meet together. If they shall agree in their nominations the person so nominated shall be appointed to the office for which he shall be nominated. If they shall agree the appointment shall be made. by joint ballot of the senators and representatives of the assembly." The constitution of 1846 provided that the comptroller "shall be chosen at a general election and shall hold office for two years," which provision has been reincorporated in the present constitution. Defects of the Present Constitutional Provisions Defects in the constitution pertaining to the office of comptroller are of two classes: 1. It has established the office, but has failed to prescribe the duties which are fundamental to it It has failed to protect the independent character of the auditing functions. As constructive recommendations are to be incorporated in a subsequent report the first of these defects will be left without discussion at this time. The comment in this report bears entirely on the second constitutional defect, namely, on the results of the failure to protect the office, or, to put it in another way, on the acts of the legislature which have laid upon the office duties and functions that are at variance with its constitutional purpose. Defects in Legislation Governing the Office The history of the comptroller's office would be an interesting chapter in a study of irresponsible government. It is sufficient for the present purpose, however, to describe the result. Being left almost entirely in the control of the legislature and in its establishment being made a creature of statute law, the office was assigned three absolutely discordant and irreconcilable duties, namely: 1. The comptroller was required to determine what revenue charges should be set up and what amounts were to be collected. 2. The comptroller was also required to collect the revenues, the amount of which was to be determined by his own official acts. 3. The comptroller was required to audit and verify the collections as well as the accruals which were made in his own office. Here we have an auditing office, established as a part of the constitutional machinery for fixing and enforcing administrative responsibility, and yet laboring under administrative duties assigned to it by statute, the effect of which is to destroy the disinterestedness of its audit and verification. The auditor as an instrument for enforcing responsibility has had turned over to him by an irresponsible representative government the very autocratic powers that the representative system was established to correct, when these powers were exercised by the executive. The Present Organization of the Office Lest it be thought that the conclusion above reached is unwarranted, the present organization is shown in outline below-arranged by working units and subdivisions of personnel, according to functions performed by each (previous to the law of 1915). 1. Activities having to do with determining what revenue charges shall be set up for collection. Transfer Tax Bureau Imposes transfer tax and penalties under the transfer tax law. Corporation Tax Bureau Locates taxable corporations; obtains evidence necessary to levy taxes; makes the levies; handles matters relating to reduction of capital stock, etc. 2. Activities having to do with collecting revenues. Transfer Tax Bureau law. Collects transfer taxes imposed under transfer tax Corporation Tax Bureau Collects taxes imposed on corporations; issues warrants for unpaid taxes, etc. School Debt Tax Bureau Collects taxes due under school debt tax law. 3. Activities which have to do with auditing financial transactions. Finance Bureau Has supervision over auditing of all accounts against state; supervises sinking funds, trust funds and bond sales. Audit Bureau Makes audits of state institutions, boards, commissions and departments; passes on contracts for maintenance of state institutions; keeps appropriation and retirement fund accounts; prepares financial and budgetary statements; prepares the comptroller's annual report, etc. The Land Tax Bureau Has charge of matters relating to the admission and rejection of taxes on non-resident lands; prepares deeds for land sold for taxes; examines assessment rolls; reports on matters referred by the commissioners of land office; makes computations relating to state aid, to highways, etc. Stock Transfer Tax Bureau Examines records of companies, transfer agents and persons engaged in the brokerage business to determine whether required tax is paid. |