only. In very small municipalities the treasurer frequently keeps all of the books.

The various operating departments are managed by officers, usually called either commissioners or directors, appointed in most cities by the mayor. Those common to nearly all cities are the health, public safety, public works, and public charities. departments. There are frequently departments for other functions according to circumstances. The bulk of expenditures is incurred by these departments. Usually each has its own purchasing agent, although a few cities have central purchasing departments. Most cities endeavor to make their purchases chiefly by letting contracts, though in practice it is found necessary to make many purchases in the open market.

Invoices and pay rolls are usually prepared for payment on vouchers which are certified by department heads and their subordinates and submitted to the financial officer for audit and payment.

Sources of Revenue: The chief sources of revenue of cities are the general taxes levied annually on the taxable real and personal property within the city. There are many other sources of revenue, among which may be mentioned the following:

Water rates.

Excise taxes and liquor licenses.

Franchises.

Licenses.

Permits.

Privileges.

Rents.

Market fees.

Market rents.

Tolls.

Fees.

Court fines and penalties.

Court costs and fees.

Sale of old material.

Interest.

Control of Receipts and Expenditures: The general theory of control over city revenue is that for all moneys paid into the city treasury there shall be an independent report made by the

collecting office to the financial officer from which he can build up a record of cash receipts for the purpose of establishing a controlling account against the treasurer. The means of control over cash payments made by the treasurer originate with the financial officer, since it is only upon the order or warrant of the latter that the treasurer can pay out money. The treasurer's cash account can be reconciled with the comptroller's cash account by taking account of the warrants not yet paid by the treasurer's cheques. In many cases, however, the treasurer draws cheques on the same day on which the warrants are drawn, so that his cash account is, or should be, always in agreement with the financial officer's account.

Few cities have adopted methods by which control may be established over the amount of revenues that should accrue. This can be done absolutely only by the use of controlled financial stationery1 issued to collecting offices by the chief financial officer. This stationery should be so manufactured as to be difficult to imitate, and should be numbered and charged to the collecting agents, who must account for it either in money or unused forms.

A system should provide for daily and monthly reports of collection, the daily reports to the financial officer to be accompanied by skeleton carbon copies prepared at the time the original document is issued. At the same time daily reports of collections are made to the treasurer, who, after making the necessary entries in his books, acknowledges the receipt of the cash on the reports and transmits them to the finance officer. The latter audits the treasurer's reports by means of the collecting agents' reports and the carbon copies above referred to, thus establishing a current control over the accuracy and completeness of revenue returns.

The accounting methods of most municipalities are crude and archaic, few of them having kept pace with the modern improvements in accounting practice. Their bookkeeping consists mainly of accounts showing the condition of appropriation accounts and the inflow and outgo of cash. Accounts on the basis

'This is similar in form to the money orders used by the Post Office Department. The cutting of the dollars and cents on the margin controls the amount to be accounted for by the receiving clerk. The unused portion of each piece of stationery is preserved as a voucher.

of revenue accrued and expenses incurred are the exception, and accounts showing assets such as taxes and other revenue receivable, stores, equipment, and other permanent properties, are either not understood or considered wholly superfluous by all but a few cities.

Periodical Examinations: The following extract from "Short Talks on Municipal Accounting and Reporting," issued by the Metz Fund, August 15, 1912, is of interest:

As a means of insuring continuous conformity to the authorized procedure, it is a good plan to have the accounts audited and the procedure inspected periodically, once or twice a year, by a competent representative of the comptroller's office, or, if necessary, by an outside accountant. In addition to establishing the integrity of the accounts (if they are correct), such an inspection will determine not only whether the procedure is being scrupulously followed, but will afford the examining accountant an opportunity to suggest modifications or improvements which may be needed as conditions change with the lapse of time.

In this relation it may be of interest to quote from a letter received by the Metz Fund from the comptroller of a large New England city. He writes: "We are having an audit conducted in this city of the comptroller's records and of other department records in so far as they relate to the comptroller's records. Some criticism has arisen as to the need of such a step, some maintaining that it is an audit of the auditor and that there should be no need for such a proceeding. While I do not expect you to decide a controversy, yet I consider that a talk on such a subject would be of interest to citizens and officials throughout the country."

It is true that many persons not concerned with the active management of business do not see the necessity of an independent audit made by an outsider. But the experience of thousands of enterprises has so conclusively demonstrated the wisdom of such a procedure that the subject is no longer debatable. A large proportion of well-conducted private concerns, even though their regular office staff includes an auditor or a comptroller, have periodical examinations of their accounts made by professional auditors, and the proportion is constantly increasing. They have learned that the moral effect of an audit on the office staff is salutary; that many a man who, if left to his own devices, might misappropriate funds and falsify the accounts to conceal the misappropriation, would absolutely be deterred from so doing if he knew that an audit of the accounts would be made which would mean exposure. Even the employee who does not have the handling of funds will do his work better if he knows that he may be criticised by an outsider.

The inside auditor, from too close contact, loses his ability as well as his disposition to criticise, hence the outside auditor is needed to supply this deficiency. The professional accountant, moreover, by reason of his contact with the affairs and problems of many widely different concerns, is in a position to make valuable suggestions as to the accounting methods, organization,

and business policies of his client, and such service has frequently bridged the gap between failure and success. The need for independent audits is even greater in public business, where tenures of office are frequently of short duration and where there are not the same influences at work which make for strict accountability in private business. There is no reason why systematic audits of municipal accounts should not be made by a properly equipped State department.

Audit of Revenue: The auditor should carefully examine the method of control over revenues, and if it is adequate in principle, he should make tests to satisfy himself that all the revenue to which the city is entitled has been accounted for. If the method of internal check does not sufficiently safeguard the city's interests, his judgment must be guided by circumstances. He must adopt such a procedure as will be necessary to satisfy himself that the cash turned in is the amount collected, and that the amount collected is the amount to which the city is entitled.

Taxes: As general taxes constitute the major portion of the revenues, he should pay particular attention to the method of accounting for them. He should ascertain whether the uncollected taxes recorded on the tax rolls agree with the summary or controlling account in the general ledger. He should see that abatements made are authorized and should make tests to ascertain that the proper amount of interest and penalties has been collected on past-due taxes. He should notice whether alterations have been made in tax assessments in the tax roll and should make sure that all alterations are authorized.

The laws of most States provide that when taxes are in arrears a certain length of time, the tax liens (in some cases the property itself) shall be sold by the city to indemnify it for the taxes unpaid. The auditor should make a note of all taxes in arrears in respect of which the city has not availed itself of its prerogative thus to indemnify itself.

Assessments: Assessments due the city for improvements, such as sewers, grading and paving streets, etc., benefiting particular properties, should also receive attention. In most cases the city undertakes these improvements, financing them by borrowing on public improvement or assessment bonds and then assessing the property benefited to recover the amount spent. Frequently the city bears a percentage of the cost. The auditor should look into the condition of assessments levied to see that

they are accounted for in cash or accounts due, and whether the conditions attaching to the assessments are being complied with, such as the payment of principal within a stated period, interest, penalties, etc.

Rents and Franchises: The auditor should see that rents for all properties of which the city is lessor are accounted for and that the income from all franchises granted by the city has been accounted for.

Audit of Outstanding Accounts: The general theory of verifying accounts receivable by sending confirmatory statements to debtors may properly be applied in the audit of municipal accounts. Such a plan would be particularly useful in verifying unpaid taxes, and in many cases would probably be fruitful of results, although there will probably be somewhat more difficulty in reaching persons so indebted than ordinary trade debtors.

Audit of Expenditures: The method of internal audit of claims against the city should be carefully inspected. All vouchers should be approved by the heads of departments in which they originate and should be certified by the subordinates who have knowledge of the facts as to delivery of goods or performance of services, quality, prices, correctness of calculations, etc. If vouchers are by law required to be approved by the council or a council committee, the auditor should see that this rule has been complied with. Payments of an unusual character, such as judgments, damage claims, etc., should be carefully scrutinized. Particular attention should be paid to pay-roll vouchers to see that they are not "padded." Usually the salaries and number of incumbents of all positions other than those of laborers are fixed by the council. Tests may be made by reference to the council's resolutions relating to these matters. Payments of bonds and bond interest should be carefully scrutinized and audited by reference to canceled coupons and bonds, or, in the case of interest on registered bonds, to the record of bonds outstanding.

Tests of prices paid for supplies, particularly those used in large quantities, such as coal, forage, etc., will often reveal improper methods of administration. For example, it will sometimes be found that one department buys coal at one price and that another department pays the same contractor consider