Evening star., 1927-04-30

Continued from First Page0
for use for current expenses. Yet
they were included in accordance with
the traditional bad accounting method
of the Government.
The extent to which the failure to
distinguish between revenue" and
"non-revenue" receipts and expense"
and capital outlay" can mislead in
respect to the real character of finan-
cial oprations is excellently brought
out in recent address by Gerard
B. Winston, Undersecretary of the
Treasury. at the annual convention
of the American Bankers Association.
He pointed out that one billion
of the public debt reduction was made
through a reduction in the cash bal
.ance of the Treasury and thus repre-
sented no improvement in the net as
| opposed to the gross debt.
His statement showed that the APP
parent large debt reduction by no
means represented a corresponding
improvement in the net worth of the
Government, at least two billion
of it representing a corresponding
reduction in the assets. This very
| important fact was obscured because
the reports are not so rendered as to
reveal tie nature of receipts and ex-
penditures.
Figures Swollen improperly"
The figures for annual receipts and
expenditures are also swollen improp-
! erly by transactions in various trust
funds the Government operates. Thus
| in the total of expenditures there is
| included the amount invested during
the year for the Government life in
surance fund, while the premiums
paid by the veterans who have taken
out life insurance are included in the
receipts. The overhead cost of this
/ insurance. which the Government
/ bears, are properly included as an eX-
/ pense Of the Government, but the in
yestment of the premiums is not truly
/ part of the cost to the Government.
/ The operation of the District OF
! Columbia teachers retirement fund
and other trust funds--the Grill Sery-
! ice retirement fund. the foreign serv-
! ice retirement fund, the Indian trust
funds-are also included and further
! blur the picture of the annual cost of
| the Government.
The extent to which the Bureau Of
! the Budget was handicapped by de-
| fective accounting system in formula t.
| ing the budget was at once appre-
ciated by the first director Of the bud.
get, Gen. Charles G. Dawes. In his
address at the second regular meeting
Of the Business Organization of the
| Government, after calling attention TO
! the difficulty his bureau had in deter
mining the facts regarding the finan.
cIal condition and operations Of the
/ Government, he vigorously criticized
the disgraceful and archaic system
| which chaTacteriZeS Government ac-
| counting" and he declared that for
130 years the Treasury Department
has kept only a cash account and has
| never had a balance sheet.
IAN accounting system like this.
he said, is nothing short of n calam
ity in Government accounting"
The Bureau or the Budget, DR.
! Willoughby finds, has attempted tc
take some account of these distinc
tions in the preparation of its financial
statements. Thoroughly satisfactory
statements cannot, however, be pro
pared until the Government has rad
ically reformed its accounting anC
reporting system.
| From the information standpoint
one of the greatest improvements re
sulting from the adoption of the bud
get system was the adoption by
the bureau of the budget of the uni
of organization as the primary basi:
for the classification of estimates anC
by the House committee on appropria
rtions following the same principle o
classification in the preparation of it: