As much importance has been attached to the proper administration of municipal finances in recent years as to that of any political division. A number of circumstances may be found to account for this situation. Municipal expenditures have increased more rapidly than those of other divisions. The increase has been more rapid than the growth of wealth or population, consequently the burden has been increasing. The gradual expansion of the tax rate was viewed with apprehension by property owners, and soon they began to inquire if there were no method of relief. In cities where the tax rate was limited, borrowing was resorted to until the limit of indebtedness was reached, when the difficulty encountered was a periodic shortage of funds. It was such problems as these which led the public to demand something better in the methods of handling municipal funds. This awakening of civic interest has found expression in the formation of civic organizations, such as bureaus of municipal research, citizens' unions, and national associations and leagues, such as the National Municipal League.

Municipal Accounting. - One of the first demands which the aroused citizenship made was a more accurate system of accounting. The Bureau of the Census has defined municipal acounting in a way which is comprehensive and complete. It says that it is the art of applying accounts as aids in administration of business, or the science of analyzing, recording, and summarizing data relating to business in such a way as to disclose its condition or state at any time, to express the results of its operation for any given period, and to furnish all other information that such analyzing, recording, and summarizing can provide for its systematic and most successful administration.1

The need for better accounting methods was evidenced by the laxity which generally prevailed in handling municipal finances a few years ago, and which still prevails in many cities. Absolutely no uniformity existed The comptroller's memory was often the only record of receipts and expenditures, while a comparison of resources and liabilities could not be made. Comptroller Metz of New York City, in 1909, described the situation which prevailed in a large number of cities. He said that "the comptroller is practically helpless to protect the city except there be a reorganization of the department of finance and complete revision of the city's administrative and accounting methods," and that by hard work the comptroller has been able to "catch a few things here and a few things there, but the mass of details is so great that with all the vigilance one man can exercise, the city treasury is being plundered from all sides." 2

One organization which has been particularly active in securing reform in methods of municipal accounting is the Committee on Uniform Municipal Accounting and Statistics, which was organized by the National Munic1 Special Reports of the Bureau of Census. Statistics of Cities, 1908, p. 13.

2 This statement was made in an address before the City Club of New York in 1909.

ipal League. It is the duty of this committee to investigate systems of accounting used in different cities, and make suggestions which will increase efficiency. No uniform system is drawn up for general adoption, because the requirements of the individual cities, while similar, will not permit of the exclusive use of any one system. The committee aims to design a practicable scheme which will meet peculiar individual needs. Many other organizations have been active in securing the same results, while the favorable response from the cities indicates that they are entering upon an era of more efficient fiscal administration.

System in New York City. - New York City furnishes a good example of a city with a thoroughly reorganized accounting system. With an annual expenditure of more than $100,000,000, the need for systematic fiscal procedure is apparent. Before the reorganization the finance department consisted of a series of separate jurisdictions, which were presided over by practically independent division chiefs. These were theoretically responsible to the city comptroller, but in practice each exercised complete control in his district. The accounting and auditing functions were so broken up that one department found itself forced to duplicate records kept in other departments, which, of course, resulted in confusion, inefficiency, and waste of time. Under the present plan the accounting and auditing functions have been centralized - the former separated bureaus have been brought together under one control. Each step in the process is definitely outlined, while all fiscal information is kept on file in one place for the common use of all. It is, therefore, much easier to know the exact fiscal standing at any particular time and to keep in touch with exactly what is being done with the public funds.

Municipal Budgets. - Another mark of progress which has been gaining prominence in municipal fiscal administration is the use of some form of budget in calculating expenditures and revenues. The general plan has been for the city council to follow much the same scheme as has been described in connection with our national finances. The increased use of commission and city manager forms of government made it easier, of course, to centralize responsibility. In many cities the estimates of revenues and expenditures are carefully drawn up and submitted, and the program is definitely acted upon. The public is given opportunity to know just what the city expects to do, and can much more easily guard its funds. The accuracy with which the estimates are made is, of course, a factor which will help determine the success of the budgetary method.

Municipal Indebtedness. - A question which has confronted municipal fiscal authorities, particularly in recent years, is the enormous growth in indebtedness. The big problem, of course, with the ever increasing pressure for funds, is to be able to meet the indebtedness when it falls due. The system which was most in favor for a number of years was the establishment of a sinking fund. Many factors have combined to make this method unsatisfactory. It necessitates the investment of the funds which are set aside, and the addition of interest to the fund. The authorities who have been intrusted with the proper investment of the fund have often failed to do all that was expected. Funds have been lost from poor investments, or have been invested primarily for the benefit of particular individuals. City authorities have failed to set aside the required amount, and have often miscalculated as to what should be set aside to meet the debt. The result has been, in a large number of cases, in spite of carefully planning the sinking fund, that funds have not been available to meet the debt when it matured.

The situation just described has led many modern fiscal authorities to favor the use of serial bonds instead of the sinking fund. By this method a part of the bond issue becomes due in successive years, and is met from taxes.

For instance, one tenth of a particular issue might be paid each year for ten years. Other adjustments, of course, are possible, so that the burden of principal and interest would be exactly equal for each year of the loan, or so that some years would escape with comparatively little or no burden. This plan has the advantage of discharging the debt and interest charge as funds are available. It does away with accumulations of funds and the possibility of unwise investments, followed by a lack of means to meet the indebtedness when it is due. The chance for miscalculation is minimized, and the temptation to use public funds for private gain is removed. As a whole, the serial bond method has proved more economical and satisfactory than the use of sinking funds.