Municipal governing laws are by no means perfect, particularly the older ones. They are especially deficient along accounting lines and in relation to the formulation of financial plans (budgets). It is not so many years since laws were prepared by members of the legal pro fession, who, as a rule, had little knowledge of and less patience with accounting requirements and orderly financial planning.
It is at this point that the fiscal officer en counters the first serious obstacle if he is de sirous of modernizing his accounting methods. In private enterprise it is comparatively simple to obtain authority to make changes in methods or even to reorganize the accounts completely. The situation is different in a municipality. It has no sovereign power What authority it possesses is derived from enactments of the State legislature. Frequently it is found that the law requires certain specific procedure which is not the best course or method to fol low,or that well-nigh insurmountable legal provisions prevent doing in a direct, orderly, business-like manner that which accounting principles require. In fact, in very many cases the obstacles encountered have the effect of discouraging officials, impairing their enthusiasm and retarding the development of better ac counting systems.
The first step in reorganizing the accounts of a municipality is to study its laws and ordinances, and sometimes that discloses the impracticability of undertaking the task until •changes are made in the applicable laws and ordinances. It is evident that from time to time municipal laws must be changed by amend ment and repeal until sound accounting prin ciples shall be matters of law as well as of necessary business procedure.
Rudiments of an Adequate System.—Ac countants are quite generally in accord respect ing the goal or aim to be attained in municipal accounting, but they are not in agreement as to all details or methods of reaching results. In a measure, that is because of the different con ditions existing in the various classes of mu nicipalities or in municipalities of the same class operating under different laws. Nevertheless, it is possible to state with assurance that an appropriate system 'of municipal accounts must embrace certain elements. While it is not pos sible in limited space to make the outline in clusive of all features tho following is believed to include the important characteristics.
Bookkeeping.— That the accounts, summa ries, schedules and reports supply the informa tion necessary to intelligent Judgment and ap praisal of results the accounts should be kept according to the double entry plan of book keeping. The single entry system is the more primitive but it exhibits in the form of a final statement one relation only — that of asset and liability. The double entry system discloses not only that relation but presents a classified sum mary of operations. The final summaries under a single entry system exhibit proprietary con ditions. Under the double entry plan it is con venient and practicable to show whether or no the municipality has rendered the best service of which it is capable at the least cost, and whether its proprietary interests have been pro tected against the misuse and infidelity of its officers.
Terminology.— It is of vital importance that correct terminology be employed. It should be uniform in all departments of a municipality, and, if uniform terms be used by all municipal corporations, that greatly adds to the useful ness of final summaries, statements and reports. The terms to be employed should be selected with care. The Federal Census Bureau early realized the importance of establishing proper accounting terminology and for years has in corporated in its report of the statistics of cities what is believed to be the best accounting terminology obtainable.
Centralization and Co-ordination.— To have a complete system of accounts requires that every transaction be recorded. That should be done in the bureau where the transaction arises and, if possible, by the person in charge thereof. To utilize this record and to adapt it to the purposes of control, the various transac tions must be classified and summarized and finally brought into statements of account in a central office. That should be the office of the chief fiscal officer of the corporation. When that plan is followed, reports and statements from the general ledger will reflect the opera tions and the condition of the municipality as a whole in such manner as to serve the purposes of officials and the public.