Evening star., 1927-04-30
BUDGET REFORMS
URGED BY BUREAU
Changes in Accounting and
Administration Said to
Be Necessary.
BY WILL p. KENNEDY.

BY WILL L. hENNED1.
To give the national budget sys-
tenn the character that it should have
two reforms are necessary, each de-
sirable in itself: % Improvement of
the accounting and reporting system,
and (2) Improvement of the organiza-
ton of the administrative branch of
Government, according to the recon-
mendations of the Institute of Gov
ernment Research, which are await
ing the return of Congress. This re-
port was written after extensive re-
search by DR.. William F. Willoughby,
director of the institute.
Five other suggestions made by this
institute for perfecting the budget
system have previously been explained
in this series of articles: ~ To give
the Budget Bureau the legal status
of an agency accountable only to the
President. as it now operates upon,
instead of a technical status in the
Treasury Department; (2) to broaden
it's Jurisdiction into a bureau of general
administration, which would absorb
the duties of several existing agen-
cies; (3) to employ supplemental budg-
cts for the revenue-producing agencies
of Government; t4) elimination of the
District of Columbia from the Federal
budget, and (5) improvement of the
appropriations system in Congress by
nine specific changes in the present
method.
Information Document.
The budget is essentially an informa-
ton document. 1t has as one of its
major functions to furnish that in
formation regarding the financial con-
dition, operations and needs of the
Government that will enable those in
authority intelligently TO judge past
performance and frame future finan-
cial policies. The budget in presenting
information is dependent upon the
character of the accounting system of
the Government, DIR. Willoughby
argues. If that system is defective
and does not produce the information
that It is desirable should be presented
in the budget, then the budget to that
extent will be unable fully to perform
its mission
The accounting system of the Ma
tional Government, though materially
improved over what It was few years
ago, is still far from satisfactory, the
study by the Institute for Government
Research shows. Probably the great
est defects from the budgetary stand
point are: The keeping of the accounts
on a cash instead of an accrual basis;
the failure to keep proprietary ac-
counts; the failure to make proper
fund distinctions, and disregard of
distinction between revenue" and
''non-revenue" receipts and between
expense" and outlay" expenditures.
The remedying of the two first
named defects would require an i'm
portant modification of the whole ac-
counting system; the other could cas-
lily be remedied by a change of practice
under the existing system, according
to DIR. Willoughby.
To illustrate: receipts and eXpendi-
lures of such special funds as those
for reclamation. forestry and the
like are treated, or at least reported,
as receipts and expenditures of the
general fund; income received through
the sale of assets, such as bonds
given to the Government by railroad
companies for advances made to them,
are treated the same as income re-
ceived in the way of taxes, and eX-
penditures made in the way of MAX
ing such advances or the purchase of
other securities, such as Federal Land
Bank bonds, are treated exactly as if
they were the same in kind as ordi-
nary disbursements to meet the cur
rent costs of operating the Govern
ment. Under this system Of book
keeping q surplus of some millions
might be shown as result of the
operations for the year when in fact
the operations for the year had pro-
duced deficit, or vice versa.
Figures Misrepresent.
This procedure makes the figures
in the budget statement misrepresent
the balance between the true annual
income and expenditures. The pro-
ceeds of the sale of surplus war
material and of the liquidation of war
loans made to foreign governments,
railroads. etc, have been treated as
though they were current annual in
come and have swollen the SURPRISES.
In the budget for 1926, for example.
1t was estimated that the fiscal wear
1925. then half over, would show n
surplus OF $67.000.OO0. But examina.
tion Of the figures used in arriving at
that result reveals that included
among the receipts were items of $50.
O00,O 900 resulting from the repayment
or loans made to railroads dur
ing the war, and of SO, 900 900 |
from the sale of farm loan
bonds which had been purchased |
during the war to keep the Federal
Land Banks in operation. Both these |
transactions represented the liquida. |
ton of capital assets. as much as if |
an individual had sold some bonds, |
and should not have been available |
Continued on Page 2, Column 2)