LIBRARY 
 
 OF THK 
 
 University of California. 
 
 GIFT OF 
 
 Class 
 
PLAN FOR REFORMING THE 
 ACCOUNTS, RECORDS AND 
 REPORTS OF NEW YORK CITY 
 
 A REPORT TO THE MERCHANTS' 
 ASSOCIATION OF NEW YORK BY ITS 
 COMMITTEE ON TAXATION AND FINANCE 
 
 J 
 
 JANUARY 19, 1909 
 
 The Merchants' Association of New York 
 
PLAN FOR REFORMING THE 
 ACCOUNTS, RECORDS AND 
 REPORTS OF NEW YORK CITY 
 
 A REPORT TO THE MERCHANTS^ 
 ASSOCIATION OF NEW YORK BY ITS 
 COMMITTEE ON TAXATION AND FINANCE 
 
 JANUARY I 9, I 909 
 
 The Merchants' Association of New York 
 
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THE 
 MERCHANTS' ASSOCIATION OF NEW YORK 
 
 OFFICERS 
 
 HENRY R. TOWNE, President 
 GUSTAV H. SCHWAB, ist Vice-Pres. GUSTAV VINTSCHGER, Treasurer 
 WM. A. MARBLE, 2d Vice-Pres. S. C. xMEAD, Secretary 
 
 ROBERT C. OGDEN, 3d Vice-Pres. FREDERICK B. DeBERARD, Statistician 
 
 JOHN W. GRIGGS, Counsel 
 
 DIRECTORS 
 
 Nathan Bijur 32 Nassau St. 
 
 Frank R. Chambers Rogers, Peet & Co., Broadway and 1 3th St. 
 
 J. Hampden Dougherty 27 William St. 
 
 Harry Dowie De Winter & Co., 334 Greenwich St. 
 
 Thomas H. Downing R. F. Downing & Co., 24 State St. 
 
 Prof. Joseph French Johnson, Dean, School of Commerce, Finance and 
 
 Accounts, New York University 32 Waverley Place 
 
 Walter C. Kerr, Pres.Westinghouse, Church, Kerr & Co., 10 Bridge St. 
 
 James H. Killough J. H. Killough & Co., 157 West St. 
 
 Charles R. Lamb J. & R. Lamb, 23 Sixth Ave. 
 
 Wm. H. McCord Post & McCord, 44 East 23d St. 
 
 J.Crawford McCreery, The James McCreery Realty Corp.,i 12W. 42d St. 
 
 Wm. a. Marble Vice-Pres. R. & G. Corset Co., 395 Broadway 
 
 Marcus M. Marks David Marks & Sons, 687 Broadway 
 
 Daniel P. Morse President Morse & Rogers, 134 Duane St. 
 
 RoBT. C. Ogden '..125 E. 56th St. 
 
 Albert Plaut Lehn & Fink, 1 20 William St. 
 
 Edwin H. Sayre R. C. Williams & Co., 56 Hudson St. 
 
 GusTAV H. Schwab Oelrichs & Co., 5 Broadway 
 
 Henry R. Towne President Yale & Towne Mfg. Co., 9 Murray St. 
 
 George Fred'k Vietor Victor & Achelis, 66 Leonard St. 
 
 GusTAV ViNTSCHGER President Markt & Co., Ltd., 1 94 West St. 
 
 Silas D. Webb President China & Japan Trading Co., 32 Burling Slip 
 
 Clarence Whitman Clarence Whitman & Co., 39 Leonard St. 
 
 F. W. Woolworth President Guardian Trust Co., 170 Broadway 
 
 187252 
 
COMMITTEE ON TAXATION AND FINANCE 
 
 Joseph French Johnson, Chairman 
 F. A. Vanderlip 
 Herman A. Metz 
 Robert C. Ogden 
 Nathan Bijur 
 W. B. Rowland 
 
V 
 
 PLAN FOR REFORMING 
 
 THE ACCOUNTS, RECORDS AND REPORTS 
 
 OF NEW YORK CITY 
 
 (Accepted and approved by Board of Directors, January 21.) 
 
 New York, Jan. 19, 1909. 
 To the Board of Directors of 
 
 The Merchants' Association of New York: 
 
 Gentlemen : 
 
 XT OUR Committee on Taxation and Finance reports as follows 
 in relation to the City's accounting system. 
 The immense recent increase in the City's operating outlays 
 has aroused most serious public concern. In ten years those out- 
 lays have increased from $70,175,896. to $140,449,731. A further 
 increase of about $13,000,000. has been appropriated for the 
 ensuing year. While the City's operating outlays have increased 
 100 per cent, in ten years, the population has increased during 
 the same period but 35 per cent. 
 
 Collaterally with this immense increase in acknowledged oper- 
 ating outlays, there has been a further hidden increase which 
 does not appear in the City's expense account, because it has 
 been covered into the outlays for permanent improvements. 
 Every year considerable sums raised by the sale of bonds, osten- 
 sibly for permanent improvements and included in the public 
 debt, are applied to operating expenses. In these cases the orig- 
 inal expense outlay is increased by continuing interest charges, 
 which by the time the bonds are paid, equal approximately 50 
 per cent, of the original amount. 
 
 While it is probably true that a part of the increase in operat- 
 ing expenses noted is legitimate and necessary, it has been con- 
 clusively shown by recent investigations of the Commissioners 
 of Accounts, the Comptroller, and num.erous extra-official bodies, 
 
that much of the increase is traceable to waste. The opportuni- 
 ties for this waste arise primarily from the absence of an effec- 
 tive system of departmental operating and statistical records and 
 analytical accounts. 
 
 In the successful conduct of large corporations highly spe- 
 cialized operating records are found indispensable for determining 
 the outlays of services, time and materials properly required for 
 producing a given result. Such operating records develop units 
 of cost and accurate standards of comparison, and thereby expose 
 any element of waste. Without such records, intelligent control 
 of outlays is impossible. In default of them endless oppor- 
 tunities are afforded for waste, extravagance and even corruption. 
 
 Many concrete examples to illustrate this might be cited. 
 Among them are the following: 
 
 In the recent examination by the Commissioners of Accounts 
 of the affairs of the Borough of the Bronx, it was developed 
 that no proper records were kept with a view to securing economy 
 and efficiency in the care of the sewers, the repair and mainte- 
 nance of certain classes of streets, and the care of public buildings. 
 It was further developed that the labor cost in the care of streets 
 was from 200 to 900 per cent, in excess of the proper cost ; and 
 in the care of sewers, over 100 per cent, in excess. It was 
 shown that six watchmen, doing no other work, were employed 
 to watch two adjoining offices. To keep clean the Municipal 
 Building, with 52 rooms, 33 cleaners were employed at a cost of 
 $402.18 per year for each room; the average yearly cost of keep- 
 ing clean similar rooms in a large private office building being 
 $20.07. 
 
 The significant fact is that these outlays were authorized by 
 the Board of Estimate and Apportionment in the form of lump 
 sum appropriations, on the recommendation of the Borough Pres- 
 ident ; and that in the absence of analytical records the Board of 
 Estimate and Apportionment could not possibly detect the waste- 
 fulness of the outlays to which it gave its approval. 
 
 No intelligent person of business experience will dispute the 
 proposition that economy and efficiency in business management 
 is impossible without the aid of suitable analytical records and 
 accounts based thereon, adapted to show in detail the elements of 
 
 6 
 
cost entering into each outlay, to afford standards of comparison, 
 and to exhibit the economic results attained by such outlay. 
 
 The City of New York has no comprehensive system of an- 
 alytical records and accounts adapted to the promotion of econom- 
 ical administration, and your Committee believes that the waste 
 which has been shown to exist cannot be permanently prevented 
 and the present excessive operating outlays reduced to a normal 
 and legitimate basis without a fundamental reorganization of the 
 City's accounting methods, which shall provide 
 
 I : Controlling and Summary Accounts in the Department of 
 Finance. 
 
 2 : Departmental operating and statistical records and reports 
 which shall exhibit all operations in detail with refer- 
 ence to their efficiency and economy. 
 
 3: Departmental accounts correlated with the operating 
 records. 
 
 HP HE necessity for a searching reform of the City's accounting 
 system is conceded by the City authorities, and a creditable 
 beginning has in fact been made by the Department of Finance 
 with the extra-official aid of the Bureau of Municipal Research. 
 It is admitted by the Comptroller that to complete the task will 
 require the services of a large staff of specially qualified experts 
 during a period of several years. It has further been demon- 
 strated that political influences are actively opposed to this re- 
 form, and that by the operation of those influences the Comp- 
 troller was for a long time prevented from retaining the services 
 of necessary experts. 
 
 The existing condition of obscurity and confusion is peculiarly 
 favorable to abuses which have their root in political favoritism 
 and the reform proposed will tend to destroy those abuses. It 
 may, therefore, be reasonably anticipated that the political inter- 
 ests which are threatened will, in the future, as in the , past, 
 covertly impede the proposed reform. It has been shown that 
 even when the incumbent of the Comptrollership is in sympathy 
 with the work of reform, his purpose may be obstructed by the 
 withholding of appropriations and lack of co-operation. Assum- 
 
ing a Comptroller subject to hostile political dictation, it is obvious 
 that no genuine reform would be effected. 
 
 Your Committee therefore believes that the reform of the 
 City's accounting should be entrusted to a temporary special 
 Commission to be created under an Act of the Legislature, clothed 
 with such power as to be absolutely secure against adverse influ- 
 ence or obstruction until its work is completed; and a plan for 
 such a Commission is submitted: 
 
 Plan for a 
 
 Commission to Devise and Instal a System of Accounts, 
 
 Operating and Statistical Records and Reports 
 
 FOR THE City of New York. 
 
 Number and Qualifications. 
 
 Five or seven members. Preferably business men of high 
 standing and of proved ability in the management of large busi- 
 ness affairs. In addition, Comptroller to be ex-officio a member. 
 
 Appointments and Tenure. 
 
 Appointments to be made by Comptroller. Vacancies to be 
 filled by remaining members. Tenure during good behavior. 
 
 Duration of Existence of Commission. 
 
 Until completion of work, but not to exceed five years. 
 
 Compensation of Commissioners, 
 To be fixed by Supreme Court. 
 
 Powers and Duties of Commissioners. 
 
 To appoint, and fix the compensation of, a secretary, counsel, 
 accountants, engineers, clerks, and such other assistants as may 
 be necessary, such appointments to be exempted from the provi- 
 sions of the Civil Service Laws. 
 
 To examine into the functions, organization and operation 
 of every division of the City Government, including the local 
 Courts, and those parts of the County Governments whose ex- 
 penses are paid by the City. 
 
 To subpoena and examine under oath any City official or 
 employee. 
 
 S 
 
To examine the books and papers of any City office (or County 
 office as aforesaid). 
 To devise : 
 
 (a) A system of controlling accounts for the Department 
 of Finance. 
 
 (b) A system of operating accounts for each Department, 
 Bureau, Board, Commission or other division of the City Gov- 
 ernment. 
 
 (c) A system of operating records for each division (as 
 above) adapted to show all the physical facts affecting efficiency 
 and economy. 
 
 (d) A system of reports for each division which shall set 
 forth in prescribed tabular and statistical form, for each fiscal 
 period, and in comparative form for a series of years, in sum- 
 mary and in detail, all the financial, operating and physical de- 
 tails pertinent to a full exhibit of the efficiency and economy 
 with which the division is administered. 
 
 (e) To instal and put in operation in each division as 
 speedily as practicable, the systems and forms so devised. 
 
 Devolution. 
 
 Upon completion and installation of a complete system of 
 accounts, operating records and reports for each division of the 
 City Goverment, the existence of the Commission to terminate 
 and the supervision, maintenance and modification of the system 
 devised by the Commission to thereafter devolve upon a Bureau 
 of the Department of Finance. 
 
 Expenses and Disbursements. 
 
 The Commission, from time to time, to certify to the Board 
 of Estimate and Apportionment the sums of money required by 
 the Commission for the proper prosecution of its work, and the 
 Board of Estimate and Apportionment to be required thereupon 
 forthwith to appropriate such sums for the uses of the Commis- 
 sion. Disbursements to be made by the Comptroller from such 
 appropriations, upon certificate of the Commission. 
 
VOUR Committee is of the opinion that a Commission of 
 prominent business men would be best qualified for the 
 end in view, and most satisfactory to the public; and it suggests 
 that in the event of the authorization of such a Commission, the 
 Comptroller would doubtless be willing to select the appointees 
 from names submitted to him by a number of the principal busi- 
 ness and civic organizations of the City. 
 
 Your Committee calls attention to the highly efficient aid 
 afforded to the Comptroller by the Bureau of Municipal Research 
 in revealing existing defects in the City's financial and business 
 methods ; and also to the valuable aid which it has given to the 
 Comptroller in devising and installing improved accounting 
 methods in the Department of Finance and through it in the other 
 City Departments. It is the opinion of your Committee that the 
 entire reorganization of the City's accounting system could be 
 effectively done by that Bureau (which is an extra-official body, 
 without legal powers) provided that it could be assured of the 
 support of future Comptrollers and guaranteed against obstruc- 
 tive influences. 
 
 We therefore recommend that there be prepared and presented 
 to the Legislature a Bill for a temporary Commission to devise 
 a system of accounts and of operating and statistical records and 
 reports for the City of New York, in accordance with the plan 
 set forth above. 
 
 Your Committee further recommends that if this Report be 
 approved by you, it be referred back to your Committee with 
 power to act when and if your Committee thinks expedient. 
 All of which is respectfully submitted. 
 
 Joseph French Johnson, Chairman, 
 
 F. A. Vanderlip, 
 
 Nathan Bijur, 
 
 Herman A. Metz, 
 
 William B. Rowland, 
 
 Robert C. Ogden. 
 
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