Accounting ... online

the same to the Council.

The commissioner of accounts is ex-officio city clerk and as
such performs all of the duties incident to the office* of clerk,
including clerk of the Council at its meetings. He is the city
collector and is responsible for the proper and prompt col-
lection of taxes, assessments, water and other rents, licenses,
fees, and of all money due the city from any source whatso-
ever. He is also charged with the duty of assessing property
located in the city.

The judiciary power is vested in a court having civil and
criminal jurisdiction.

The subordinate officers and employes are nominated for
positions in the various departments by the commissioner hav-
ing direct supervision, and the appointment is effective after
confirmation, by the Council.

The Civil Service Commission is appointed by the Council
and is vested with powers incident to such commissions.



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i 39 MUNICIPAL ACCOUNTING 13



THE BUDGET



PURPOSE AND METHOD OF PREPARING

14. Purpose of a Buds:et. — From an economic point of
view, it is generally admitted that municipalities should not
permit expenditures to exceed revenues. In other words, it is
conceded that a policy of "pay as you go"' is better than the
practice of first incurring the debt and then raising the money
to pay. The better policy has been adopted by the officials of
many municipalities and is imposed on many cities by pro-
visions in the charters.

Control over expenditures is obtained by means of a budget,
an instrument which has been defined as follows : A budgret
is a formal, complete, and final statement of a financial plan
for a fiscal period, showing the authorized expenditures for
that period and the estimated revenues and other means of
meeting the expenditures.

15. Procedure in Preparing: and Adopting: a
Budg:et« — Cities that are on a budgetary basis because of char-
ter requirements, must look to the charter for guidance as to the
procedure to be followed in the preparation and adoption of
the budget. In the case of municipalities other than cities,
whose officials desire to adopt the budgetary plan, the govern-
ing boards will usually be found possessed of power to provide
for the adoption of the plan by rule, ordinance, or local law.

16. In a t)rpical city of the third class in the state of New
York, that is to say, a city having a population of less than
50,000, the procedure leading to the preparation and adoption
of the budget is, briefly, as follows :

Within 30 days preceding the end of the fiscal year, the heads
of all departments empowered to authorize or control expendi-
tures are required to submit to the mayor estimates in writing
of the probable revenues and expenditures for the next fiscal
year in their departments. Thereupon, the mayor is required



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14 MUNICIPAL ACCOUNTING §39

to lay the estimates so submitted to him before the Board of
Estimate and Apportionment.

Within 30 days after the commencement of each fiscal year
the Board of Estimate and Apportionment is required to make
an itemized statement in writing of the estimated revenues and
expenditures for the fiscal year ; this statement is known as the
annual estimate. After completion, the annual estimate is sub-
mitted to the Common Council by the Board of Estimate' and
Apportionment, with such explanatory matter as the board
may deem necessary.

The Common Council is- required to consider the estimate,
give a public hearing thereon, and adopt the same as submitted,
or it may diminish or reject any item therein contained and
adopt the estimate as so amended. The Council may not, how-
ever, diminish or reject any item which relates to salaries, the
indebtedness, or estimated revenues, or amounts due upon
judgments, or to sinking funds, or the estimates submitted by
the Department of Education.

When the Council shall have adopted the estimate, it must
be entered in its minutes, and the sums therein estimated
for expenditures thereupon become appropriated in the
amounts and for the several departments, offices, and pur-
poses as therein specified, for the fiscal year.

When the amount required to be raised by tax to meet esti-
mated expenditures is determined, the Common Council is
required to levy and raise that amount by a tax against the
property liable therefor within the city.

17. Budgetary control is that control which, by means of a
budget, the tax-laying board or commission secures over the
expenditures of all municipal departments. Upon the adoption
of the budget, the sums therein allotted to the various depart-
ments become known as appropriations, the amoimt of each
indicating the extent to which each department may incur liabil- ^
ity without further authorization or appropriation by the
budget-making board. The limitation on the spending power
of each department will be found in the city's charter, in a
local law or by-law, or in the resolution adopting the budget.



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i 39 MUNICIPAL ACCOUNTING 15



FORM OF BUDGET

18. In its final form, the budget should include appropria-
tions of revenues, as well as of expenditures, so arranged as to
correspond in terminology and in classification with the
accounting plan. It should be divided into two parts ; namely,
(1) appropriations; (2) provisions for meeting appropria-
tions.

19. Classification of Expenses. — In the budget and in
the accounting plan expenses are classified by governmental
function and by objects of Expenditure.

The functional classification and the standard expense
accounts are in use in municipalities in the state of New York
using systems of accounts formulated by the comptroller of
that state.

20. The classification by governmental function is

based upon the classification adopted by the Bureau of Census
in its annual reports of the financial statistics of cities and is
as follows:

I. General Government.
IL Protection of Person and Property.

III. Conservation of Health.

IV. Sanitation and Promotion of Cleanliness.
V. Highways.

VI. Charities and Corrections.
VII. Education.
VIII. Recreation.
IX. Public Utilities — Non-Commercial.
X. Miscellaneous.
XL Municipal Indebtedness.
XII. Construction and Permanent Improvements.

(Financed from current revenues.)
XIII. Public Utilities— Commercial.

21. The classification by objects of expenditure

requires the use of four standard expense accounts, which, in
connection with the possibility of further itemization or sub-



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16 MUNICIPAL ACCOUNTING § 39

division, furnish all the details which reasonably may be
required. The four standard expense accoimts are as follows :

1. Salaries, Wages, and Fees.

2. Purchase of Equipment.

3. Materials and Supplies.

4. Expenses.

If further itemization be required, the accounts Materials
and Supplies and Expenses may be subdivided as follows :

3. Materials' and Supplies.

(a) Fuel.

(b) Food.

(c) Other materials (specify).

(d) Other materials (specify).

4. Expenses.

(a) Traveling.

(b) Printing and Advertising.

(c) Maintenance of Equipment.

(d) Office Expense.
(•e) Insurance.

(/) Repairs to Buildings by Contract.

(g) Light and Power.

(h) Rent.

(i) Other expenses (specify).

(;) Other expenses (specify).

22. Classification of Receipts. — Receipts are classi-
fied as revenue and non-revenue. Revenue receipts include
such as are applicable to the current maintenance and support
of government, such as taxes, licenses and permits, fines and
penalties, interest, rent, departmental earnings, etc.

Non-revenue receipts include the proceeds of temporary
tax loans, transfers, refunds, and other receipts which are
received and paid by the municipality as a fiduciary, that is to
say, as agent or trustee, and in which the municipality acquires
no proprietary interest.

23. Further Classification of Expenses and
Receipts. — Besides the classification of expenses and (rf
receipts already described, expenses and revenues are segre-



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139



MUNICIPAL ACCOUNTING



17



gated or classified by departments. This means that appropria-
tions for expenditure by the mayor are listed under the head-
ing Mayor, and appropriations for expenditure by the Common
Council are listed under the heeding Common Council, and so
on with each department, and likewise with revenues. If it be
expected that receipts will be forthcoming from any depart-
ment, that fact should be shown in the budget, under the name
of the department expected to produce the revenue.

The departmental titles, or headings, must correspond to the
names of the offices or departments found in the various munic-
ipalities. In almost all instances, however, the titles will bear
close resemblance to the titles in the following outline of a
budget.

outline: of budget

24. The following abbreviated form of a budget will show
only functional and departmental classification of expenses and
sources of income, with the standard expense accounts inserted
only after the first subdivision. It must be understood that the
expense accounts are used in connection with each department
to which they are applicable.

APPROPRIATIONS



I. General Government



Aldermen or Council :



1.


Salaries, wages, and fees


(g) Light and power


2.


Purchase of equipment


(h) Rent


3.


Materials and supplies


(i) Other expenses




(a) Fuel


Mayor




(b) Food


City manager




(c) Other materials


Board of Estimate and Apportion-


4.


Expenses


ment




(a) Travel


Board of Contract and Supply




(b) Printing and adver-


Purchasing agent




tising


City comptroller or commissioner




(c) Maintenance of equip-


of accounts




ment


City treasurer or commissioner of




(d) Office expense


finance




(e) Insurance


Receiver of taxes or tax collector




(/) Repairs to buildings


City, clerk or clerk of council




contract


Assessors



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18



MUNICIPAL ACCOUNTING



i39



Law Department — Office of cor-
poration counsel

Civil Service Commission

Office of commissioner of public
works

Office of commissioner of public
safety



Office of city engineer

Elections

City or municipal court

Municipal buildings and offices

Undistributed expenses



II. Protection of Person and Property



Bureau of Building Inspection

Plumbing Board

Plumbing inspection

Sealer of weights and measures

Public pound; dog catcher



Bureau of Police — Police force

Bureau of Police — Care and main-
tenance of buildings and grounds

Bureau of Fire — Fire-fighting
force

Bureau of Fire — Care and main-
tenance of buildings and grounds

III. Conservation of Health
Administrative expenses (Board Isolation hospital or isolation at

of Health and health officer) homes

Conservation and Inspection Auxiliary activities

Public-health laboratory

IV. Sanitation and Promotion of Cleanliness
Bureau of Sewers Refuse and garbage disposal plant

Street cleaning Sewage disposal plant

Refuse and garbage collection and Public comfort stations

disposal

V. Highways
Administration of highways — Of- Highways and bridges — Care and

fice of Bureau of Streets or maintenance

Highways ^ Highway buildings

Snow and ice removal

VI. Charities and Corrections
Commissioner of charities or Veterans' relief

overseer of poor City hospital

Outdoor poor relief * Correctional institutions

Poor in institutions or families Probation Board or officer

Vn. Education



Administration

Elementary schools — Expense of
instruction

High schools — Expense of in-
struction

Other schools — Expense of in-
struction



Operation and maintenance of

school plant
Health service in schools
Auxiliary agencies
General expenses — Schools
Public library



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;39



MUNICIPAL ACCOUNTING



19



VIII. Recreation
Park Department Band concerts, celebrations and

Playgrounds entertainments

Public baths Memorial Day observance

IX. Public Utilities — Non-Commercial
Public market Cemetery

Public docks

X. Miscellaneous
Judgments and settlements Deficiencies in collection of taxes

Refunds of taxes State and county taxes

XI. Municipal Indebtedness
Redemption of debt Interest on funded debt

Contributions to Sinking Fund Interest on temporary loans

XII. Construction and Permanent Improvements
Assessments against City prop- City's share of assessment work
erty Other construction items



XIII. Public Utilities — Commeroal



Operation and maintenance, Water
Department



Administrative and general ex-
penses
Water debt

PROVISIONS FOR MEETING APPROPRIA'f IONS
I. Estimated Revenues — Miscellaneous Revenues



Special taxes:

Bank stock taxes

Mortgage taxes

Insurance taxes
Licenses and permits:

Liquor licenses (Excise tax)

Marriage licenses

Dog licenses

Amusement licenses

Vendors* licenses

Departmental permits
Fines and penalties:

Police or city court fines
Interest and penalties:

On taxes

On bank balances
Rent of city properties
State apportionment for schools
Departmental earnings:

City court (fees)

City treasurer



City clerk (fees)

Law department

Municipal buildings

Bureau of Police

Bureau of Fire

Bureau of Building Inspection .

Sealer of weights and measures

Board of Plumbing Examiners

Board of Health

Street cleaning department

Public baths

Commissioner of charities

City hospital

Board of Education

Public library

Park department

Public markets

Public docks



Total, miscellaneous revenues



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20 MUNICIPAL ACCOUNTING § 39

II. Earnings of Commercial Public Utilities
Municipal Water Department: Other revenues

Sales of water Total, earnings -of commercial pub-

Other revenues lie utilities

Municipal Lighting Department: Total, estimated revenues
Sales of current

III. Current Surplus of Prior Year

Available for reduction of taxation

IV. Contributions From Sinking Funds

(Give title of each fund)

V. Tax Levy

To balance

Total budget



THE ACCOUNTING PLAN

25. Since the charter provisions of various cities vary in
details, it will be found necessary to refer to the charters to
know the details required to be exhibited in each particular
city. Notwitjistanding the .variation of details, it will generally
be found that, fundamentally, the powers and duties of the
officers as a whole are the same and^ that it is possible to
formulate a system of accounts following general principles and
permitting such variations in details as the local conditions
ihay require.

BOOKS USED

26. It is assumed that the reader is familiar with the books
commonly used in business, such as Cash Book, Journal, and
Ledger. The ordinary form of journal and ledger is intended
to be used in operating the plan described herein. The Cash
Book should.be specially ruled by columns developing totals
for posting to controlling accounts, the details of which are

' posted to subsidiary records.

Other books of original entry required are : Order Register,
Claim Register, Warrants Payable Register,

27. Order Reg:ister.-:;-The Order Register is used to
enter orders presented to the comptroller for his approval



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RECORD OF ORDERS AND CONTRACTS


of
Ord«r


Date


Vendor


Account to be^Chvged


LF.




Cms Reference
Claim Not


Bureau


Account


Code No.


Budget


Other CUim%


















































































































































































































































































































































































































































































































































































































































































































































































































































-










^






^_






























-,



Fig. 1



RECORD OF AUDITED CLAIMS


Date


Claim
No.


Name of Oaimant.


Description of Claim


Account to be Charged


LF.


Order or

Contract

Na


Bureau


Account


Code No.



































































































































































































































































































































I L T 234 § 39



FiC2



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Bui^M




APPROPRIATION LEDGER




CodoNoi




Account














Date


Order No.


Ctwfn No.


Namo of OamMnt


RMorvofor
Odors and
Contracts


Rosor

Cancol


to( AimN
ro of

bd Gail


» o*:?!.. "-«-


















T




1


— —


















1
























fir












































































1












































f
























f
























It












































































1




























































^ . .^,.^— -..^






1— »->> J.






J-L __— LL





Fig. 3









Amount «^
ResotyoCahc


r Amount
•lod Claim


RMorveCanc*


Amoun
ilod Oain


\ of Amount of Amount
1 Rmwvo CancoM Ciairr


.'


Amount of
Claim








































-+ - -


































1






























1


1















1




















Jf












1




























1




















































































, ^




^ ^


J__ J-JJ^_





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§ 39 MUNICIPAL ACCOUNTING 21

before the debt may be incurred. The form is as shown in the
Record of Orders and Contracts shown in Fig. 1. As in the
Cash Book, totals are developed for posting to the controlling
account in the General Ledger and the details are posted to sub-
sidiary records. The totals are posted to the controlling account
by means of periodical entries which diminish the a,ppropria-
tions and set up reserves to meet the vouchers when presented.

28. Claim Register. — The Claim Register, the form of
which is shown in Fig. 2, is the book of original entry of claims
presented for audit. The claim when presented for audit
should be accompanied by a copy of the order previously
issued, which furnishes the comptroller with the information
required to cancel the reserve previously established. This is
done by the entry of the amount of the order in a column pro-
vided for that purpose, the total of which is posted periodically
to the controlling account in the General Ledger and the
details are posted to a subsidiary record.

This book also contains a column for the claims audited, the
total of which is posted to a controlling account in the General
Ledger and the details are posted to a subsidiary record.

29. Warrants Payable Register. — After claims are
audited, accounts are drawn on the treasurer or disbursing
officer by the comptroller and entered in a Warrants Payable
Register, the totals of which are posted to the audit side of an
account in the general ledger called Warrants Payable and to
the credit side of cash.



THE ACCOUNTS

30. General Ledger Accounts. — In the General Ledger
the accounts are segregated into four groups as follows :

Current Capital

Assessment Trust

By this method the accounts dealing with the same class of
transactions are grouped in the General Ledger, which is phys-
ically subdivided by colored sheets or tabs bearing the name of
the group. The groups in effect comprise separate and distinct



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22 MUNICIPAL ACCOUNTING §39

ledgers, although they are within the same volume and are self-
balancing. The value of such a separation will be obvious
when it is pointed out that funds applicable to one of the four
purposes named may not be applied to any one or more of the
other purposes.

31. The accounts in the current group contain the
record of the current operations of the city. These accounts
are closed periodically into a Current Surplus account which
indicates the result of the financial plan adopted at the begin-
ning of the fiscal period. If current revenues exceed current
expenses a surplus will result. On the other hand, if the
cfxpenses exceed the revenues a deficiency will follow.

32. The accounts in the assessment group record the
transactions in connection with city improvements that are
financed by means of special assessments levied against groups
of property owners. These accounts, if all assessments have
been paid during the fiscal year, will show neither a surplus nor
a deficiency.

33. The accounts in the capital group record the trans-
actions in connection with city improvements made at the
expense of the city at large and which are financed by the issue
of bonds, or by appropriations.

City properties, at their appraised or assessed values, are
included in this group and represent assets of the city, which,
when set up against the bonded debt (liabilities) show the
capital surplus.

34. The accounts in the trust grroup record the receipt
and disbursement of funds in which the municipality acquires
no proprietary interest and acts only as agent or trustee.

35. Subsidiary Records. — ^As already defined, a con-
trolling: account is one that shows in summary form the items
which appear in detail in other accounts. The other accounts,
which show the details are called subsidiary accounts. In
this Section, the controlling accounts are indicated by means
of an asterisk (*) preceding the title; for example,

♦Current Revenues.



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§ 39 MUNICIPAL ACCOUNTING 23

For subsidiary records two or more books should be used.
Because of the large number of items relating to expenditures
for which appropriations may be made, one subsidiary ledger
is used to record such expenditures and is called the Appropria-
tion Ledger, or Ledger A. All other subsidiary items may be
recorded in a single volume, known or denominated as
Ledger B.

For the purposes of Ledger B, any ordinary form of com-
mercial ledger may be used. Ledger A requires special ruling
of the form shown in Fig. 3.



CURRENT ACCOUNTS

36. The current accounts in the General Ledger are as
follows :

Debits Credits

Current Cash Current Claims Audited

Taxes Receivable — Current Current Warrants Payable

Taxes Receivable — County Current Loans

Tax Sale Due to Other Accomits

Taxes Receivable — ^Arrears Due to County Treasurer

Due From Other Accounts Reserve for Current Obligations

Sinking Fund Contribution Re- Current Revenues — Estimated

quired Current Revenues — ^Unestimated

Estimated Revenues Current Appropriations

Current Surplus

Explanations for the use of these accounts follow and illus-
trative entries are given for transactions of frequent occurrence.



BNTRIBS RECORDING THB BUDGBT

37. At the beginning of a fiscal year the books of a city dis-
closed a current surplus of $5,000. The Board of Estimate and
Apportionment prepared and the Common Council adopted a
budget with appropriations amounting to $425,000, estimated
revenues in the sum of $10,000, sinking fund contributions to
meet maturing instalments on the bonded debt provided for in
the budget in the sum of $10,000, and after applying the cur-
rent surplus on reduction thereof, a tax levy of $400,000.

I L T 234—17



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24 MUNICIPAL ACCOUNTING § 30

This information is transmitted to the comptroller by the
city clerk, who delivers to the comptroller a copy of the budget
adopted by the Common Council.

Thereupon, the comptroller makes the following entry in his
Journal :

Current Surplus $ 5,000

Estimated Revenues 10,000

Sinking Fund contribution required 10,000

Taxes Receivable — current 400,000

To ^Current Appropriations $425,000

38. Camments -011 the Foregoing: Entries. — Cur-
rent Surplus in the General Ledger will be debited when the
item is posted. It is assumed that at the date of this entry the