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remain, various peoples have found it convenient, or perhaps
comfortable because of the resulting feeling of security, to
congregate in communities which ultimately developed into
cities, the earliest form* of municipalities. In Greece such cities
assumed the functions of sovereignties, and in Italy the City
of Rome became truly sovereign and may be said to have ruled
the world.

In the Middle Ages, the cities of Europe, including England>
lost much of their importance and, with the exception of certain
cities in Italy and others in Northern Germany favorably
located for trade, left no impression upon the times. With
the passing of feudal powers, the cities by degrees acquired
local charters and became the important and influential com-
munities that are now recognized.

In the United States, many of the cities antedate the Revo-
lution, having been established under authority of royal grants
or charters. Upon the creation of the several states, the
sovereignty theretofore vested in the English Crown reverted
to the people, whose representatives formed legislative bodies,
generally known as legislatures. Since the formation of states,
cities have been created by the legislatures, under the authority
of general laws or special acts conferring charters upon the
municipalities. These charters will be more fully described in
later pages.



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2. Development of Municipal Accounts. — Records
are extant which indicate that in the earliest times cities kept
records which perhaps met all of their requirements.

In later times the methods applied to mimicipal accoimts did
not progress as rapidly as did the municipalities in numbers,
wealth, and population. Only within the last quarter of the
nineteenth century have accountants shown an active interest
in the accounts of municipalities and made persistent and sys-
tematic attempts to place the accounts of cities on the same
scientific basis required by private business concerns. Progress
in this direction has been fostered by the Federal Bureau of
Census; the Bureau of Municipal Research, a privately con-
trolled* organization having its headquarters in the City of New
York; many leagues or organizations of municipalities and
accountants; and by the Bureau of Mtmicipal Accounts, a
department in the office of the Comptroller of the State of New
York, and similar governmental agencies.

In the course of the application of modern methods of
accounting to cities, it soon became evident that uniformity in
the accounts of cities was desirable to the end that reports to
the central authority should be uniform and readily adaptable
for comparative purposes. This fact directed attention to the
lack of uniformity in accounting terminology and prompted the
Census Bureau to adopt standard terms, which are now included
in the publications of that department.

A discussion of accounting terminology, with definitions of
terms, may be found in the 1906 and 1907 census reports on
Financial Statistics of Cities Having Populations of Over

3. Definitions. — ^Accounts are systematic records or
statements of facts, usually of a financial character, either
similar or dissimilar, and so arranged as to provide stunmaries
OF balances.

Accounting: is the art of recording, classifying, sum-
marizing, analyzing, and interpreting facts relating to the acqui-
sition, production, transfer, and ownership of articles of wealth
or value.

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Municipal accounting is the application of accounting methods
and principles to the business of municipal corporations.

Corporations are legal entities created by or under author-
ity of law and are either private or public.

Private corporations embrace that large class of business
organizations, now so common, which are principally engaged
in the pursuit of gain, although there are many private cor-
porations engaged ^wholly in charitable, religious, and educa-
tional work.

Municipal corporations are subdivisions of the state, created
by or under authority of the laws of the state and endowed with
more or less power of local self-government. There are, how-
ever, certain subdivisions of the state exercising limited powers
of local self-government, which are not in fact municipal cor-
porations and are known as quasi-corporations. These embrivce
special tax districts, school districts, and, in some states,
parishes or counties.

Unlike private or business corporations, municipal corpora-
tions are not empowered to engage in business for profit ; but
they are frequently permitted to engage in the conservation or
the production and sale of certain commodities, such as water,
gas, electricity. When so authorized, it is assumed that the ser-
vice will be rendered to the consumer at the least possible cost
and at rates that will prevent a deficit without creating a profit.

4. Function of Municipal Accounts. — The chief
function of a system of municipal accounts is the preservation
of systematic records that will promptly disclose the cost of
government for a fiscal period and that will furnish reliable
data for future planning. When a plan of financial operation
in the form of a budget has previously been adopted, the
accotmts should show the results of the plan and furnish the
responsible officers with information upon which to base future

5. Comparison Between Private and Public
Accounts. — The ordinary business corporation is organized
with the aim of selling its product to the consumer at the high-
est price obtainable and of distributing its profits in the form o i

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dividends to its stockholders. Such a corporation requires and
usually maintains a profit and loss account.

The municipal corporation aims to give the greatest amount
of public service to the citizens within its boundaries at a
minimum cost, hence it needs no profit and loss account, but
may require accounts showing surplus or deficiency. The
officers of private corporations may expend corporate funds for
any purpose within the scope of the corporate organization and
are rarely limited by a budgetary program. The officers of
municipal corporations may expend its funds only fot public
purposes and within the limits fixed by the charter or the
financial plan previously adopted. Hence, private corporations
need no appropriation accounts, although such accounts are an
essential feature in a modern system of municipal accounting.

The variances between public and private accounting do not
relate to differences in methods, but rather, to the subjects con-
cerning which information is sought. In both cases, the funda-
mental purpose of keeping accounts is the same. The officers
of each class of corporation desire to know the cost of carry-
ing on the business. The managers of the private corporation
desire to know whether or not the business is being so con-
ducted as to produce dividends for its stockholders ; the officers
of the public corporation, whether or not the business of the
mimicipality is being conducted within its income. In both
cases, the methods must be such as will enable the accounting
officers, whether public or private, to supply with the least
delay complete and accurate reports. Although diflfering in
details, the principles underlying public and private accounting
are the same. ' t

6. Methods of Accounting:. — Until very recently the
local officers of nearly all municipalities in the United States
have been content with systems that disclosed merely the flow
of cash in and out of the municipal treasury. Without any
attempt at uniformity, each system reflected the notions of the
individual charged with the duty of keeping the accounts, or,
as was frequently the case, the practice of a predecessor. That
a system of accounts which merely records cash receipts and

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cash disbursements is incomplete and inadequate is now gen-
erally admitted; and, in place thereof, systems are being
adopted that will show not only cash received, but also revenue
accrued, and not only cash paid out, but also expenses incurred.

In commercial bookkeeping on a large scale, the single-entry
set of books has long since been discarded and double-entry
substituted. Double entry permits the use of real and nominal
accounts, which provide an internal check on the clerical work,
and make possible the preparation of trial balances and balance
sheets from the information contained in the books.

In attempting to record all the details of a municipality's
financial transactions in a general ledger, such a book becomes
unwieldy and unsuitable for handling. To obviate this diffi-
culty, the controlling account has been evolved, by means of
which the details are found in subsidiary ledgers. In other
words, a controlling: account is an account that shows, in
summary form, items that appear in detail in other accounts.


7. Classification. — In New York State the term munic-
ipal corporation is defined by statute to include counties,
cities, towns, and villages. By the constitution of the same
state, cities are classified, according to population, as first class,
second class, and third class.

Cities, counties, towns, and villag:es are all defined as
municipal corporations comprising the inhabitants within their
respective boundaries, and formed for the purpose of exercis-
ing such powers of local government as may be conferred or
imposed by law.

Of the four classes of municipalities, cities possess the largest
measure of local self-government and present the greatest
variety of problems to the accountant.

In the following pages it is intended to take the third-class
cities in the state of New York as types and to outHne a plan
of accounting readily adaptable to the cities of that class.

No attempt will be made to outline systems recording the
transactions of public utilities, such as gas and electricity, for

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the reason that such, ordinarily, are under the jurisdiction of
public service commissions, and their accounts and reports
must follow the regulations prescribed by the commissions.

For a system of accounts for waterworks, the reader is
referred to the uniform classification of accounts adopted by
the American Water Works Association and by the Bureau of

8. Orgranization of Cities. — Cities are organized or
created by acts of state legislatures, which are usually known
as charters. In the case of each city, the charter is the funda-
mental law which confers and defines its powers. Being a
creation of statute, a city has only such powers as are expressly
granted to it by its charter, or such as may be implied from the
powers granted.

9. Features Cominon to All Cities. — In all cities the
powers are divided between executive and legislative branches.
The executive powers are usually entrusted to a mayor, or to
some ether officer by whatever name known. The legislative
powers are usually entrusted to a board or commission known
as the council, board of aldermen, or by some other similar
title. Nearly all cities have a third subdivision, known as the
judiciary, which is not a coordinate branch of the city govern-
ment and bears no resemblance to the third branch of the
Federal government which is known by the same name.

The principal source of revenue of all cities is a property
tax levied against the real property within the city limits,
according to the assessed valuation, which is determined by a
local officer or board known as assessor or board of assessors,
as the case may be. Other revenue is derived from taxes
levied or assessed against particular classes or certain kinds of
property; for example, bank taxes, mortgage taxes, liquor
taxes, and income taxes. Other revenue is also derived from
the sale of privileges, such as special franchises, vendors'
licenses, amusement permits, and dog licenses.

Cities are usually permitted to procure funds to meet current
expenses by means of temporary tax loans. Although the pro-
ceeds of such loans increase the cash in the city treasury, the.

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moneys so received are not revenues. The power to borrow
money, liowever, is not inherent in cities, and does not exist
unless expressly granted in the charter or by a general law
which applies to all cities.

Other receipts include the proceeds of sales of bonds, assess-
ments against property to pay for improvements, and funds
which are held in trust by the city.

10. Constitutional Liimitations on Municipalities.

The constitutions of many states impose limitations on the
powers which may be granted to municipalities, including cities,
and in the constitution of the state of New York the limitations
are found in Section 10 of Article VIII.

The charters of the cities of the third class in the state of
New York are not uniform. The cities, however, are classi-
fiable as follows :

Group A, where the municipal activities are practically all
administered by a government having one executive head and a
single set of financial officers, and in which the various depart-
ments are subject to one control or supervision.

Group B, where the administration of municipal affairs is
distributed among a number of more or less independent but
correlated commissions or boards.

Group C, where the administration of municipal affairs is
vested in commissioners who, acting collectively, constitute the
council, and individually are heads of various departments.
This method is commonly designated as the commission form
of government.

11. Group A Charters. — The following is* an analysis
of the charter of a city typical of those within Group A.

The executive power is vested in a mayor, elected by all the
voters of the city for a term of years named in the charter and
usually paid a salary in an amount prescribed in the charter.
He is required to enforce the laws .of the state and the ordi-
nances of the Common Council and may appoint and at pleasure
remove the heads of the administrative departments.

In his capacity as manager of the affairs of the city, the
mayor is assisted by an advisory board known as the Board of

I LT 234— 16

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Estimate and Apportionment, usually composed of the mayor,
president of the Common Council, comptroller, corporation
counsel, and the city engineer.

The same officers who constitute the Board of Estimate and
Apportionment, except that the commissioner of public works
is substituted for the president of the Common Council, con-
stitute the Board of Contract and Supply, which is charged
with the duty of letting contracts for the performance of any
work or for the supply of any material required by or for the
use of any officer, board, or department of the city in all cases
where the expense of such' work exceeds a sum specified in the

The administrative officers are comptroller, treasurer, cor-
poration counsel, city engineer, commissioner of public works,
and commissioner of public safety, who are elective or appoin-
tive as the charter may prescribe.

The comptroller is the auditing officer, to whom all claims
against the city must be presented for audit and allowance. He
is required to superintend the fiscal affairs of the city and to
manage the same pursuant to law and the ordinances of the
Common Council. He is required to keep a separate account
with each department of the city ; to draw orders or warrants
on the treasurer in payment of audited claims, and to perform
such other duties as may from time to time be imposed upon
him by law or by ordinance of the Common Council.

The treasurer is tax collector, custodian of city funds, and
disbursing officer. No money may be paid out by him, except
upon the order or warrant of the comptroller, and he is
required to render to the comptroller daily a statement of all
moneys received and paid out by him.

The corporation counsel is required to be an attorney and
counsellor at law. He is the legal adviser of the Common
Council and of the several city officers and is required to
appear for and protect the rights and interests of the city in all
actions and proceedings brought by or against it.

The commissioner of public works is the head of the Depart-
ment of Public Works and is charged with the supervision of
construction and of repairs to streets, parks, city buildings, and

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public places and, in cities owning a system of waterworks,
usually with the superintendence of such system.

The commissioner of public safety is the head of the fire
and police departments, having power to appoint a chief of the
fire department and a chief of police, firemen, and policemen.

Other city officers having special and limited powers and not
directly concerned with the management of city affairs are a
commissioner of charities, judges of inferior courts of civil
and criminal jurisdiction, assessors, a sealer of weights and
measures, and members of a Board of Health.

Nearly all cities also have a Board of Education, consisting
of three or more members, usually appointed by the mayor,
which is charged with the management and control of the
public schools.

The legislative power of the city is vested in the Common
Council, composed of aldermen elected from the several wards
or subdivisions of the city. The meetings of the Common
Council or, as it is sometimes called, the Board of Aldermen,
are presided over by the mayor or by, a president who, in some
cities is chosen by the council from its members, while in other
cities he is elected by the electors of the city at the same time
and for the same term as the mayor.

The Common Council has authority to choose a clerk, who is
also city clerk, and whpse duties include the keeping of the
minutes of the Common Council and other boards and the
issue of licenses, permits, etc.

The principal revenue of the city is derived from taxes,
levied by the Common Council, upon an estimate of revenues
and expenses previously prepared by the Board of Estimate and
Apportionment. Upon the adoption of the estimate it becomes
the tax budget and the amounts therein estimated for expendi-
tures become appropriated in the amounts and for the several
departments, offices, and purposes as therein specified for the
fiscal year. After the adoption of the annual estimate, the city
has power to borrow money for the payment of the debts and
expenses of the city within the amounts appropriated therefor
for the fiscal year, in anticipation of the receipt of the taxes and
revenues applicable to such purposes.

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12. Group B Charters. — ^The following is an analysis of
the charter of a city typical of those within Group B.

The mayor is the chief executive officer and is vested with
authority and charged with the duties generally incident to the

The chief fiscal officer is the city chamberlain, who performs
such duties incident to the office as the Common Council may
direct. He is required to maintain such records as will at all
times reflect the status of the various funds of the city, which,
in cities of this type, are or may be classified as follows : Fire,
Police, Improvement, Sewer, Light, Water, Public Works,
Poor, General City, and School, He is required to report
monthly to. the Common Council as to the financial condition
of the municipality.

The officers, other than boards, are city judge, city clerk, city
attorney, and city engineer, who are vested with the authority
and charged with the duties incident to offices thus designated.

Important administrative functions devolve upon various
boards designated as follows : Board of Public Works, Board
of Fire and Police Commissioners, Department of Public
Instruction, Board of Healthy Department of Charities.

The Board of Public Works consists of three members
appointed by the mayor. This board is vested with the charge
and management of all thoroughfares, sewers, waterworks,
light plants, and appurtenances thereto. It appoints an engi-
neer and a superintendent of public works.

The Board of Fire and Police Commissioners consists of
three members, appointed by the mayor, who appoint the chiefs
of the fire and police departments and several subordinates.
The board is charged with the duty of auditing the payroll of
call firemen and claims against the fire and police department
other than fixed salaries.

The Board of Education consists of three or more members,
appointed by the mayor, who have general supervision of all
property used in the school system and the moneys raised for
public-school purposes. They prepare an annual budget and,
when finally adopted, file the same with the city clerk, where-
upon the Common Council includes the amount thereof in the

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tax and assessment roll for the ensuing year to be collected b)r
the city chamberlain and credited to the general school fund of
the municipality.

The Board of Health consists of three members appointed by
the mayor; they appoint the city physician and possess the
powers of a board of health as defined by statute.

The Department of Charities is under the supervision of a
commissioner of charities, who is appointed by the mayor and
who investigates all requests for public aid and approves or dis-
approves of them. He files a statement of accounts and claims
periodically with the Common Council, which possesses the
power of audit in relation to the same.

.The legislative power is vested in a Common Council, which
consists of the mayor and aldermen, who enact city ordinances
and possess the power of audit except in cases where the power
is vested in one of the boards established under the provisions
of the charter.

13. Group C Charters. — ^The following is an analysis of
the charter of a city t)rpical of those within Group C.

The executive, legislative, and administrative powers in a
municipality having this form of government are vested in
commissioners. They are five in number, and acting collec-
tively constitute the Council and individually are denominated
as follows :

Mayor, who is, ex-officio, commissioner of public affairs and
a member of all city boards ; commissioner of public safety ;
commissioner of public works ; commissioner of finance ; com-
missioner of accounts.

The mayor, as commissioner of public affairs, is responsible
for the enforcement of the laws. He is the presiding officer of
the Council and is charged generally with the oversight of all
departments, boards, and commissions of the city, the Board
of Education being an exception to this general provision.

The commissioner of public safety, as the title implies, has
charge arid supervision of the police, fire, sanitary, health,
charity, and correction departments; Subordinate officers, of
which the health officer is an illustration, aid him in the per-

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formance of his duties. Collateral duties are imposed upon
him by the charter, as, for example, inspection of plumbing,
weights and measures, etc.

The commissioner of public works has charge and super-
vision of all public thoroughfares, public buildings, parks,
water department, and all real and personal property owned,
leased, or controlled by the municipality not in charge of any
other department. He is also charged with the duty of recom-
mending to the council necessary public improvements and has
charge of construction of such when authorized.

The commissioner of finance is ex-officio city treasurer and,
therefore, has custody of all money coming into possession of
or belonging to the city. He is required to maintain proper
books of account, so that he may at any time inform the Coun-
cil as to the financial status of the municipality or of any
department thereof. He is the disbursing officer, making pay-
ments, however, only upon the order of the Council by cer-
tificate of the commissioner of accounts, taking an appropriate
voucher therefor. He is ex-officio auditor, and examines and
audits all bills payable before they are allowed by the Council.
It is also his duty to prepare an annual budget and to present

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