Newark evening star and Newark advertiser., 1912-12-19
OF WORKS
ADMITS DEFICIT
Retraction of Attack on Ex-
perts' Report Made
Today.

tCOmttnue0 from first P0Ke.)
ception was made to the statement
that a deficit was actually shown.
Mr.. Sl1errerd's statement to the
board, admitting the deficit and dis
putting that it exists through mis-
management is in part as follows;
A Book Deficit"
'In attempting to prepare the
statement of accounts of the water
department the experts agree that
the deficit, as stated in their report,
is only apparent and is caused en-
tirely by the method of bookkeeping
which has become more or less obso
lete, and that the entire book deficit
arises from the item of depreciation
which it is agreed may be divided
into two parts, one representing the
obsolete plants of the Belleville and
Clifton avenue pumping stations and
the other the fair depreciation of the
balance of the operating plant in use.
In the preparation of the balance
sheet for the Public Utilities COM
mission, which we had hoped to be
able to present to the board today,
but which cannot be ready until next
week, the depreciation will be so di-
vided in order to show the obsolete
portion of the plant.
The bonds which We're issued for
the old pumping system did not
carry sinking. fund payments, and
n ri Ilor 10, %
being carried by refunded water
bonds, so that at the present time the
water department is carrying fixed
charges not only for the new supply
and Cedar Grove reservoir, but for
practically the entire cost of the
pumping system.
Charges Paid from IncOme.
All of these charges are being met
by the revenues of the department.,
and in addition a large part of The
reconstruction work has been paid out
of income.
Il would call attention to the sact
that the apparent deficit as found by
the books of the department to be
S274,OO0 in round numbers at the end
of 1911 is a reduction in the last three
years from a book deficit of $685., 500.
This item had heretofore been called
surplus and deficiency and is shown
each year in the annual reports. The
book deficiency is not an actual de-
ficit in any of the accounts of the de-
partment, nor was it any more than
is represented by the obsolete pump
ing plant, for which in the year 1901
a depreciation item of approximately
half million dollars, together with
the accumulated depreciation which
was then charged against the balance
of the property of the water depart
ment, made a total depreciation OF
$S17,OOn. This item in the report of
1901 changed book surplus of about
$780, 600 to a book deficiency of S432,-
OOO, and this deficiency as a book item
increased TO some extent from year
TO year until the last few years
Since investiga ting this account
proposition and since the controversy
in regard to adjusting the accounts of
the water department l have made
numerous inquiries. particularly
among operators of private water
companies, to ascertain how these ac-
counts are kept, and find that in
variably the practise has been to con-
slider that the amount of money spent
from revenues on reconstruction work
has been considered sufficient to off,
set depreciation, and this practise has
also been invariably followed in water
department accounting matters. In
other words, it has not been the hrdi-
nary practise to charge off deprecia-
ton, and in the case of Newark
where SO much reconstruction has
taken place, du" to the rebuilding of
practically the entire distribution sys-
tenn in the last fifteen years, it was
not necessary to charge so much off
Tor depreciation as appears on orr
books. The practise was. however
lnaugurated by me particularly on
account of the fact that the denart-
ment was carrying on its books what
might be called dead assets in the
pumping plants which had been
abandoned
Il would, therefore, report to w.,
that whatever apparent deficit has
appeared from year to wear hos 80.
III any way been due to mismanage-1
neht or to misapplication of funds
nnt was entirely created by this ac.
tlon on my part in charging off tha
M,65EOOO which appears as denrecio
tion' and which in the new statemen+
VIII be divided as stated ahova 49,
TWO items, one representing obsolas
oehce o.i Oh plant and the other depreci-
alton on operating plant"
A slight tilt followed the readins
Of Mr. sherrerd's report.
william e. Allen. the expert who