Stephanie D. Moussalli
UNIVERSITY OF WEST FLORIDA

STATE AND LOCAL GOVERNMENT ACCOUNTING IN 19th CENTURY AMERICA: A REVIEW OF THE LITERATURE

Abstract: Although 19th century America offers a natural experiment in government accounting practices and voluminous original records still exist, a review of the literature on the period’s state and local government accounting finds few secondary articles and almost no contemporary literature before 1875. After that, reformers, decrying the municipal accounting practices of their time, wrote profusely so that some secondary studies of that literature exist. The governmental financial records of the 1800s varied in quality from excellent to scandalous and would, if properly sampled and described, not only fill the gaps in our knowledge of 19th century government accounting and fiscal policy, but would also allow study of the causes and effects of many alternative measurement and reporting structures.

In his 2000 presidential address to the American Account-ing Association, William Kinney [2001, p. 278, emphasis in the original] argued at length that “the domain of accounting scholarship [is] the knowledge of the individual and aggregate effects of alternative standardized business measurement and reporting structures.” However, before we can study the effects, we must know what those structures are. Unfortunately, in the area of government accounting, scholarly descriptive work is scarce. Both Edwards [2000] and Fleischman [2006] found so little material on the subject that no articles found inclusion in their compendia of scholarly accounting history articles.

Turning more specifically to the 19th century history of ac-

Acknowledgments: I would like to thank Dale Flesher of the University of Mississippi, two anonymous reviewers, and participants at the 2004 American Accounting Association annual meeting and the joint conference of the Academy of Accounting Historians and the AAA Public Interest section whose comments on this paper were very helpful. The research was partly funded by the University of Mississippi, the Government and Nonprofit Section of the AAA, and Barbara Merino and Alan Mayper of the University of North Texas.

counting by American governments below the national level,1 researchers have left the subject almost untouched. This is unfortunate because the America of the 1800s was a natural experiment in government accounting. Each state and territory, and often each town or county, chose and developed a means of accounting for its use of the public purse. If we knew more about these practices, we could undoubtedly study some of their effects, which may hold as much interest as the business sector practices to which Kinney refers.

This article is a review of the literature on 19th century state and local government accounting in the U.S. Its purposes are to review that literature, to describe what it tells us about its subject, to comment on the strengths and weaknesses of the literature, and to identify the research opportunities it creates. The paper begins with a methodological note and then proceeds chronologically, starting with the few studies addressing the practices at the turn of the 19th century. Next, the middle six decades of the century are covered quickly since almost no work has been done on that period. The last 25 years of the century, a period in which the literature is copious but preoccupied more by calls for reform than by description of existing practices, are then reviewed. The paper concludes with a discussion of what the extant literature does and does not accomplish, together with a call for scholarship on many topics that the current literature has either ignored to date or for which it has set the stage.

METHOD: DATABASES AND TIME PERIODS

An attempt was made to identify all the secondary literature and as much of the contemporary commentary as possible on 19th century accounting by governments in the U.S. below the national level. Databases and indexes searched include: Pro-Quest’s ABI/Inform, the Accountants’ Index; America History & Life; Dissertation Abstracts International; EBSCOHost Business Source Elite; the Guide to Reference Books [Winchell, 1967]; the Public Affairs Information Service Bulletin and its related online databases, PAIS Archives and PAIS International; and Worldwide Political Science Abstracts. Multiple search terms were used as appropriate for the variety of databases.

1 Although the present study does not deal with the accounting methods of the U.S. government, information on that topic is available in a number of sources, e.g., the U.S. Treasury Department [1911] which contains an excellent essay sum-marizing changes in the official bureaucratic organization of fiscal responsibilities in the U.S. government.

“Contemporary commentary” consists of treatises about the accounting of a period written by observers of the time. These include handbooks and textbooks of accounting techniques, which describe what the authors considered best practices. Also included are descriptions of the accounting methods of the era, often written for the purpose of advocating reform. Such contemporary literature is extremely scarce for most of the 19th century although it grew from a sprinkle to a deluge in the 1880s and 1890s, as will be discussed. The scarcity of literature in the area of government accounting was not duplicated in the private sector. Many bookkeeping pamphlets and treatises were published during the 19th and even the 18th century to help businesses keep their accounts. Interest in bookkeeping was widespread in the private sector, so why the paucity of literature for the public sector?

It was certainly not due to any lack of activity in govern-ment financial accounting and reporting. Americans have long believed it is in the public interest for their governments to publish financial reports. In 1819, for instance, the founding fathers of Alabama wrote a provision in the state’s first constitution: “[A] regular statement and account of the receipts and expenditures of all public moneys shall be published annually” [art. 6, sec. 7]. Many other constitutions of new states had requirements nearly identical to that of Alabama.

These requirements bore fruit. State, territorial, county, and municipal governments across the country published financial reports in profusion. As Clow [1896, p. 457] put it more than a century ago: “Material, indeed, exists in great abundance. There are tons of auditors’ and comptrollers’ reports, treasurers’ statements, debt statements…” But until the last few decades of the 19th century, it inspired almost no written commentary. And though a great deal of this primary material still survives today, it has not spawned much modern research either. A goal of the present review is to expose in some detail the gaps in our knowledge of generally accepted government accounting practice in the century before the development of official standards.

The period covered by this review is the 19th century. The early boundary, 1800, is treated a little loosely; materials covering the last several years of the previous century are included. The later limit, 1900, is observed as strictly as the nature of the

2 e.g.; Ohio, 1803, art. 1, §§21 and 22; Louisiana, 1812, art. 6, §5; Mississippi, 1817, art. 6, §8; Maine, 1820, art. 5, §4; Arkansas, 1836, art. 7, §3; Florida, 1845, art. 8, §3; Texas, 1845, art. 7, §8.

literature allows. The last few decades of the 19th century and the first years of the 20th saw an outpouring of contemporary commentary on municipal accounting. In the interests of brevity and of a focus on early government practice, literature concerning 20th century accounting is omitted whenever feasible. However, some articles written in the early 1900s about the practices of previous decades are included.
1790s – 1810s

At the turn of the 19th century, a postmaster and judge in Massachusetts named Samuel Freeman [1791] published The Town Officer, which included a section entitled “A plain and regular method of keeping town accounts, upon an inspection of which, the state of its finances may at any time be known.” The book went through eight editions from 1791 to 1815 [Wenzel et al., 1992, p. 60].

The Town Officer is currently the main evidence that, by 1800, some sophistication in state and local government ac-counting had developed in the U.S. Freeman advocated double-entry techniques and a degree of budgeting. He advised tracking public funds through 17 accounts, from appropriations through collections and expenditures to year-end closing. Freeman concluded with a call for public accountability: “…[A]t every annual March or April meeting, the selectmen should exhibit to the town a state of their accounts, having previously settled with the treasurer, and examined into the state of the collector’s bills” [Bain, 1964, p. 133].

Several secondary studies rely on The Town Officer. Bain [1964] compares the superiority of Massachusetts accounting to the cruder single-entry, three-account system advocated in a Connecticut pamphlet of the 1790s. Holmes [1979; see also, Holmes et al., 1978] analyzed The Town Officer and discovered a description of a Boston citizens’ audit committee that, in 1798, required the separate appropriations accounts to be integrated into the town ledger accounts. The stated purpose was “so that in future the Town may know which & how much they fall short of the Sums granted” [Holmes, 1979, p. 54]. In the mid-1980s, The Town Officer was re-discovered and Wenzel et al. [1992, pp. 57, 71] approvingly note Freeman’s understanding of “the fiduciary relationship of government to its citizens.

Thus, there is evidence of sophisticated government ac-counting in Massachusetts as the 19th century dawned. All the writers discussed so far agree on this point, but Holmes [1979, p. 48] goes a step farther and speculates why it was so. He points out that the colony of Massachusetts began as a joint-stock company in the early 1600s. From the beginning, the company presented accounts to stockholders. “[M]uch of the old business relationship,” Holmes argues, “carried over to the structure of the Civil government.” From this promising start, Massachusetts’ public sector accounting improved over time as observed at three points in the century preceding independence. By the end of the 1700s, Holmes concludes, both state and local accounting practice in Massachusetts had culminated in the double entry, journal-and-ledger, budget-integrated records evident in the Boston records and described in The Town Officer. Note that The Town Officer and the secondary literature based on it are the only publications this reviewer was able to locate for the early national period. What may have been happening in the rest of the country in public sector accounting at that time is unknown.
1815 – 1875

If the above studies barely lift the curtain on turn-of-the-century government accounting practices, they are followed by almost nothing at all in the next six decades. The spring 1978 Government Accountants Journal carried a promising title: “The Evolution of Governmental Accounting, Reporting and Auditing in Michigan – 1835 to 1977” [Gregg, 1978, p. 62]. Unfortunately, the only information Gregg provides on the first century of that period is that Michigan had an auditor general whose duties were so comprehensive as to preclude “an adequate system of internal control.

Similarly, Potts’ dissertation [1976] essentially begins with the 1870s. For earlier years, he mentions only that New England town meetings appropriated money and levied taxes, that the states rather than the federal government regulated the cities (unlike the practice in England), and that cities followed a variety of methods of selecting financial officers.

Herbert [1971, p. 434] briefly declares that all antebellum accounting, including public sector books, concerned only re-cord keeping and fraud detection, as opposed to management analysis, but he provides no evidence to support this claim. Previts and Merino [1998, pp. 95-97, 167-168], in their history of American accountancy, mention that around the Civil War, states and fast-growing cities had to learn to account for new taxes, large new expenditures, and rapidly increasing regulations. But the authors find very little literature on this period to include in their history. As Previts and Merino understate it, “[t]he financing and fiscal administration of the growing cities and towns during this period is less than well documented.

Note that none of the sources so far cited for this period specifically describes state and local government accounting techniques. In fact, the only specific discussion of mid-century practices that this author located is not in an accounting source at all, but in an economics article. In the 1980s and 1990s, economic historians Sylla et al. [1993, 1995] drew on state treasurers’, auditors’, and comptrollers’ reports to create a large database of 19th century state and local fiscal data.

In addition to reporting the financial data, Sylla et al. [1993, pp. 8-10] describe the quality of the records. They find great variety in public sector accounting methods for the period. Fiscal periods differed by state and over time, ranging from nine to 24 months. “Revenues” included the proceeds of loans in some states, sometimes all loans and sometimes only short-term instruments. Maryland counted its share of the federal surplus distribution in the 1830s as revenue the year it was received and again the next year when it withdrew the money from the bank. The State of Washington used a “horribly convoluted” 30-fund accounting system. Some states, Iowa and Washington “the two most egregious offenders,” measured revenues and expenditures differently. Revenues were on a cash basis, according to the authors, while spending was reported in the form of interest-bearing warrants.

In the U.S., the only source of information about the public sector accounting practices of the middle decades of the 19th century was published in the economics literature by Sylla et al. [1993], as just noted. Similarly, Bain [1964, p. 130], writing in the Canadian Chartered Accountant, notes that “early treatises were often contained in works that were not primarily concerned with accountancy.” Bain had to tap the early political science/government literature for historical coverage of government accounting.
1875-1900

With the dawn of the Progressive era, the dearth of atten-tion to public sector accounting ended. Articles poured out of accountants’ offices across the country in the late 1800s, mostly concerned with the reform of municipal accounting. Accountants of a Progressive persuasion hoped to find in government regulation an antidote to what they saw as the corrupt power of corporations. They sought cleaner government as a prerequisite for such regulation. But not all accountants regarded curbing the private sector as the goal of reforming the public sector. A different view was espoused by Elijah Watts Sells [1908, p. 59] at a banquet of the New Jersey Society of Certified Public Accountants:

[I]t is the unassailable truth that almost any one of the men who stand at the head of our great business insti-tutions is far more competent to run the Government, and would run it more economically, more wisely, and more honestly than any of those who are in the business of running governments.
I know as a matter of fact that the management of our great properties is generally intelligent and eco-nomical, and that the management of our Government bureaus is generally loose, irregular, and frequently dishonest;…

Sells knew whereof he spoke. As one of the founders of Haskins & Sells (now Deloitte), he had personally evaluated the books of many companies and governments. His speech was intended to be provocative. It was not what Sells said about government officials that was so controversial – muckraking was a favorite pastime of the period. What was controversial was his claim that private corporations were more honest and competent than government.

Whether their politics were traditional or Progressive, ac-countants across the country threw themselves into the reform of government financial reporting in the last decades of the 19th century. Intended to effect changes in how governments accounted for the public purse, their profusion of articles were generally more polemical than descriptive. Recent scholarship has used this literature to guide research on turn-of-the-century government accounting. The review of the 1875-1900 period which follows will deal with both the copious contemporary literature and the secondary research based on it.

Scandals: The accounting writers of the last two decades of the 19th century and first decade of the 20th were not unbiased. They had a reform agenda which strongly colored their views of the government accounting practices of their time. Yet, they also provided their interested descendents with first-hand information on the accounting practices of the late 1800s.

In a famous example of such muckraking, Charles Waldo Haskins [1901] lamented the scandalous municipal bookkeeping practices his firm had found when conducting a 1900 audit of Chicago’s books [see also, Cleveland, 1903; Previts and Merino, 1998, pp. 169-170]. In Cook County, there were perhaps 317 tax-levying entities. Town collectors delayed remitting collections to the city, which borrowed money while waiting, and sometimes kept more money for their own pay than the law allowed by a factor of three. Collectors’ reports of unremitted taxes were not audited; receipts were often reported late and not audited or itemized; and special assessment accounts went unposted for five years in the 1890s. A previous auditor had found half a million dollars missing from the special assessments fund. He also found a vault containing a jumbled mass of bonds and interest coupons for the city. According to the Engineering Record [“Municipal Accounting,” 1903], Chicago trust funds had been raided for operating expenses; the balance of collections for school taxes was unknown; departmental books did not balance with the controller’s books; the controller was forbidden to investigate before authorizing disbursements; various funds were commingled; and the special assessment books of original entry were regularly destroyed.

Chicago was not alone in shoddy bookkeeping, according to accountants from other cities. The secretary of the Boston Statistic Department, Edward Hartwell [1899, p. 129], studied the financial statements of a number of cities at the end of the 19th century. He considered the quality of the municipal books very poor. They contained “ill-digested” material; covered too short a period (only one year); failed to sum column totals; failed to give percentages or ratios; inadequately recorded capital, loans, and liabilities; failed to list all employees; and almost entirely neglected capital improvements and repairs. The secretary of the League of Wisconsin Municipalities [Sparling, 1899] came to a similar conclusion about his state’s municipal accounts. Department and activity accounts were commingled, inter-departmental services were not tracked, debt was neither completely listed nor was the city’s ability to service its debt, and terminology was not uniform. In Milwaukee, according to another writer [Winkler, 1895, p. 120], the aldermen controlled the funds for the public works of their wards. In Portland, Oregon, account-ing was so lax and the public so inattentive that few knew what the tax rates were, invoices were paid for goods not received, over $300,000 of public funds were lost in bank failures, and contracts were overpaid to employers who could deliver votes [Strong, 1895]. Clow [1896, p. 457] explained the general problem with the municipal financial records of the time vividly:

[The material’s] crudity is appalling. City documents seem compiled to meet the requirement of the law or to make a job for the city printer, – anything except to give intelligible and desirable information….each state has its municipal system….Thus…we have a myriad of financial systems to take into account.
Municipal Accounting Reforms: In addition to writing muckraking exposés of public recordkeeping, late 19th century writers filled many pages proposing detailed improvements. Their focus was clearing out corruption and confusion in the cities. Other levels of government received much less attention.3 In 1894, the National Municipal League (NML) was founded. It was a roaring organizational success. Within six years, hundreds of organizations somehow affiliated with the NML had appeared across the U.S. [Fleischman and Marquette, 1987, p. 297].

The published proceedings of NML annual conventions contained a profusion of articles decrying municipal corruption and praising or proposing reforms.4 Typical of the genre is a 1908 article by the auditor of the District of Columbia, Alonzo Twee-dale, in which he described the D.C. accounting system created by Congress in the 1870s and 1880s. He found the accounting rendered difficult by the fact that D.C. monies, technically funds of the U.S. government, were commingled with national government monies in the books. Nevertheless, because of the attention of the federal government to the District, the chart of accounts was modern, transactions were booked promptly, appropriations and revenue accounts were integrated with expenditures and collections, a daily cash flow statement was maintained, and a daily statement of funds from the U.S. Treasurer was kept. Furthermore, the District had made an important technological improvement – loose-leaf ledgers, which allowed the subsidiary account expenditures to be summarized easily and balanced to the monthly control account.

3 This focus on cleaning up municipal government was typical of the Progressive movement in general not just its accounting branch. Interestingly, a similar
effort at reforming municipal administration and accounting occurred at about the same time in England [Jones, 1989].

4 From 1897 to 1910, the series was titled Proceedings of the…Conference for Good City Government and of the … Annual Meeting of the National Municipal
League. (Note that articles from this series are cited in the reference list under the names of the relevant authors.)

Fleischman and Marquette [1987] found that Ohio cities were early adopters of Progressive-era accounting reforms, including uniform accounting methods, central municipal pur-chasing, and budgeting. The Cincinnati and Dayton Bureaus of Municipal Research promoted cost accounting reports, double-entry bookkeeping, and monthly expense and revenue reports [Fleischman and Marquette, 1988]. Contemporary Ohio writers believed the cities to be in desperate need of such improvements. The president of the Cleveland Civic Federation [Blandin, 1895, pp. 112-113] described the city government before 1887 as “a growth, not an organization.” Fiscal power was so decentralized that “no system of accounts of city affairs was possible.” Invoices were sometimes paid twice and sometimes paid even though no goods had been received. Cash was scattered among numerous hands and corruption, in the opinion of the president, was everywhere.
In 1887, Ohio began a massive municipal reform, inspiring much commentary among accountants. Blandin [1895, pp. 113-115], at the NML’s first meeting, noted that cities had to establish a department of accounts to handle all bookkeeping, city councils had to approve all contracts over $250, and some separation of financial powers was required. At the fifth meet-ing, Kibler [1899, p. 192] observed that the accounts department head had to submit detailed annual reports to the mayor and the auditor. Despite these efforts, a former auditor for Cleveland [Crosby, 1899, p. 153] deplored the habit of “many of our larger municipalities” of delaying the publication of annual financial statements for as much as a year.

As for other parts of the country, the Minneapolis city at-torney [Simpson, 1895] wrote of new charter limits on tax levies and bond issues, which resulted in very low debt. In St. Paul, W.H. Lightner [1895] noted approvingly that expenditures in each department were made by debt certificates, redeemed the following year with tax collections. Taxes were levied to cover the needs of specific funds and could not be used for another fund. The mayor of Chattanooga [Ochs, 1895, pp. 397, 404] praised his city’s financial management, which he attributed to “a proper spirit among the authorities” rather than particular regulations. As a consequence of this conscientiousness, wrote the mayor, Chattanooga’s per capita expenditures were $7.75 in 1890, as opposed to $18.86 in San Francisco and $15.43 in Richmond.

San Francisco had a “one-twelfth act” which limited monthly expenditures from any fund to one-twelfth of the amount appropriated for the year. This reform did not operate perfectly, observed I.J. Milliken [1895], as some vendors stopped deliveries in the last two months of the fiscal year because some of their invoices had been outstanding for two years. In New York, F.W. Holls [1896] was especially impressed by the 1895 establishment of a state board of municipal control with the power to dictate uniform accounting for all cities with populations under 250,000 and to vet the details of all bond issues. Powers [1905, p. 257], a Census Bureau statistician, observed approvingly that New York State also began supervising county trust fund accounts in 1892, leading to standardized bookkeeping.

State and local government budgeting may have originated or become more common in this period although on this point, the literature is divided. Marquette and Fleischman [1992] noted that there was some discussion of budgeting before 1900. Clow [1896, pp. 458-459] argued that cities were the only governments in the U.S. that “prepare[d] genuine budgets” – the states and national government did not have to since they either raised taxes or ran deficits as necessary. This contradicts Potts [1977], who finds no evidence of government budgetary accounting in this country before the 20th century. Supporting Potts, Allen [1908] claimed that New York only began its use of budgeting in 1906.

One of the most popular reforms of this period, strongly backed by the NML, was the push for standardized accounting and financial reporting by local governments. In 1899, the NML published a model city charter with a proposed uniform accounting system and specific controls for municipal debt, franchises, and contracts [NML, 1899, pp. 220, 230-233].5 Two years later, the NML set up the Committee on Uniform Municipal Accounting and Statistics [Hay, 1996, p. 553].6 One of the main creators of the proposed system was Frederick Cleveland [Matika, 1988], who favored accrual-basis accounting for cities rather than the cash-basis accounting that he found prevalent [Cleveland, 1904].

Numerous organizations joined in the campaign to stan-dardize municipal accounting [Baker, 1900]. The American Association of Public Accountants, a predecessor of the AICPA,

5 See Rowe [1899] for a detailed explanation of the proposed accounting system, including a chart of accounts. For an NML committee description of the
municipal evils standardized accounting should help cure, see Wilcox [1899, pp.
51-54].

6 A predecessor committee had started operations in 1897 and had produced a working plan of municipal accounting by 1898 [Hartwell, 1905].

began publishing the Journal of Accountancy in 1905, which included, nearly from the beginning, occasional articles on municipal accounting and the need to standardize it [Previts and Brown, 1993]. The Association of American Government Accountants (AAGA) began publishing The Government Accountant in 1907. At first it covered only the federal government. How-ever, LeGrand Powers, the chief statistician of the Bureau of the Census (BC) [Powers, 1909], was an early AAGA president. The BC had begun collecting details of state and local government finances in 1880, a Herculean task. Under Powers’ leadership, the journal soon began advocating uniformity in public sector accounting practices.

The BC itself also published essays on the quality of state and local government accounting in the early 20th century. Based on its experience trying to collect and report comparable statistics for all the states, a 1907 special report and a 1915 essay [U.S. BC, 1907, pp. 3-35, 131-216, 613-844, 953-974; 1916, pp. 11-60] provided extensive, systematic information about turn-of-the-century differences in the states’ handling, recording, and reporting of public monies, as well as their taxation and property valuation systems. Many differences were noted in these reports; for example, some states allowed offices other than the treasurer’s to collect and spend public funds. Some states recorded trust fund expenditures in the trust funds themselves; others simply passed the money through to the general fund, where it was finally spent. In some states, private trust fund obligations were classified as state debt, while in others such obligations were not. Some states used modified accrual-basis accounting, while others used “antiquated” cash receipts and payments only. Some states collected local governments’ revenues and passed them on to the counties or towns; elsewhere, the counties collected all money and forwarded the state’s share to the capital [U.S. BC, 1916, pp. 11-14].

These and other differences between the states are what make research use of early state and local records difficult. Certainly the differences rendered the job of the BC gargantuan. In its own defense, the BC [1907, pp. 953-961; 1916, pp. 15-28] developed and published detailed definitions of government accounting terminology. These definitions, which the state and local governments were forced to recognize at least minimally in their reports to the BC, contributed to the early 20th century development of uniformity in public sector reporting and generally accepted government accounting practices. Powers [1905] ardently advocated uniform accounting due to his experience in trying to create comparative reports for the cities and states from very diverse books. The BC essays and the articles by Powers are probably the most systematic and detailed information available about turn-of-the-century government accounting in the U.S.

General acceptance of these nascent government account-ing standards advanced state by state and often city by city. According to Powers [1907, p. 256], the movement for uniform public sector accounting started in Minnesota, long before the NML was created. An 1865 law required Minnesota counties to publish annual financial statements containing specified information, and an 1878 supplement required the state examiner to be an accountant with the power to force the counties to comply with correct bookkeeping. Within ten years, Powers noted, financial administration had improved so much that the counties’ new interest income more than equaled the examiner’s salary. Massachusetts followed with similar reforms in 1879 and 1887, eliminating customary “gross abuse of the fee system” by county officials (presumably bribes).

Reform headed west about the same time [Hartwell, 1905, p. 210]. In 1892, Wyoming placed an examiner over the state and county accounts to make sure they were kept current and uniform. H.B. Henderson [1900], the state examiner, averred that whereas once only two Wyoming counties had kept within their budgets, by 1899 all did so. Indeed, so much more efficient did government become that expenses dropped significantly despite a population increase. Both the Dakotas followed the Minnesota and Wyoming lead [Powers, 1907].

Powers [1909, p. 26} was able to report by 1909 that about one-third of U.S. cities with populations over 30,000 had made substantial progress toward uniformity by using the BC account classifications. The other large cities had made some progress, while smaller towns continued in their old ways. By contrast, Marwick, Mitchell & Co. [1908, p. 216] took a rather gloomier view that “no properly denned system of accounting [was] in use” in cities as of 1908, a terrible situation given that “the management of a city can be judged in a very large measure by the books it keeps.

Two articles by NML members [Chase, 1904; Woodruff, 1908] generally agreed with Powers’ account of the movement for uniform municipal accounting. State legislation beginning in Minnesota and Massachusetts in the 1870s imposed some uniformity on counties. More state legislation and the censuses of 1880 and 1890 extended the movement to some cities by the 1890s, when discussion of the need for uniformity was wide-spread and the NML formed.

According to Chase [1904, pp. 39-40], a pre-eminent municipal accounting expert [Previts and Merino, 1998, p. 178], in the beginning of the standards movement:
the prospect for uniform municipal accounting was… sufficiently discouraging…and it was only by leaving uniformity of accounting severely alone for the time being, and devoting all available energies to the simpler side of the question, namely, uniform municipal reports based upon a re-distribution of the city treasurer’s accounts at the end of the year – this re-distribution being made upon uniform and comparative schedules – that any progress could be achieved (emphasis in the original).

Chase credited the U.S. BC with motivating a great deal of the change in attitudes toward uniform reporting among state and local officials because of the its requirements for periodic comparable accounting. In the late 1890s, the NML proposed model uniform municipal accounting, but this remained just a proposal at century-end.

It should be noted that not everyone thought uniformity the cure for the era’s municipal scandals. The secretary of the Louisiana Ballot Reform League, W. B. Spencer, told the NML in 1895 that the centralized financial regime under Reconstruction had seen such terrible corruption that a new charter was enacted in 1882 decentralizing power. This had led to even worse corruption. The solution lay in ballot reform, he believed, not uniform accounting.

Municipalization of Public Works: One of the hottest debates in municipal finance reform at the turn of the 20th century was how to clean up the city franchises. Political machines notoriously granted the franchises for road construction, street car service, sewage, and so forth to favored companies in exchange for votes. The preferred Progressive solution to this problem was the “municipalization” of public works; that is, the cities would

7 The model system was adopted by many cities over the early decades of the 20th century [NML, 1899; Rowe, 1899; Hartwell, 1902]. By 1913, Indiana’s director of municipal accounts reported that 28 states had implemented uniform systems of accounts for at least some of their state and local entities [see “State Supervision of Municipal Accounts,” 1913]. Nevertheless, uniformity was still not universal in the 1980s [Ingram and Robbins, 1987].

simply seize ownership of the works and run them. This plan had many opponents also. At the NML, the argument turned heavily on the accounts.

NML vice president Charles Richardson [1896, p. 200] ar-gued that municipalization would provide much better service at far lower cost, would give the voters every reason to monitor closely the activities of the officials in charge, and would finally overthrow the spoils system. It would, in short, “rescue our cities from the slimy, paralyzing folds of these corporate anacondas.” Edward Bemis [1895, pp. 125, 127] of the University of Chicago agreed that governments should own “local monopolies” and also argued for “[c]omplete publicity of accounts, with the power…in the city auditor…to prescribe methods of bookkeeping.” For years, Cleveland [1909, p. 218] held that municipalization demanded uniform and high-quality government accounts as a prerequisite.
Loomis [1896, pp. 208, 210-211], on the other hand, vehemently opposed municipalization on the basis of “the time-worn, but time-honored, argument against all socialistic schemes.”8 He argued that the cost might not be lower, despite the “all but innumerable” statistics showing them to be so, because these accounts normally failed to include any charges for the physical plant, interest, repairs, legal costs, and taxes. The president of the National Electric Light Association [Cahoon, 1900], a commentator from Massachusetts [Allen, 1899], Robert Montgomery [1904], and a law professor from the University of Illinois [Tooke, 1899] all agreed with Loomis that reasonable cost and profit calculations for public service entities needed to include all the costs that appear on the books of private companies. Accounting for these activities should, in today’s terms, be on a full accrual basis and should follow private sector GAAP.

But the theory and practice of public works accounting diverged in the 1890s. Professional accountants agreed on the principles, but in at least one case where municipalization had already occurred, costs were still understated. In Philadelphia, the city owned the gas works. It ignored depreciation in calculating the necessary tax rates, and, by 1897, the works were completely dilapidated, leading to a scandal and a demand for good accounting for public works [Rowe, 1899]. These writers were debating whether to use enterprise-type accounting for these enterprise-type activities.9 This Progressive-era political debate over the ownership of public works may have begun the serious consideration of separating commercial from government activities in American public sector accounts.

General Commentary: Turning from reformers’ polemics to more general studies of the public sector accounting of the late 1800s, one finds that broad contemporary commentary, like that of the BC, was quite scarce. E.S. Mills published “Public Accounts” in St. Paul in 1878, a short pamphlet that Potts [1976, pp. 49-51; see also, Bain, 1964, p. 132] believes was the “first treatise of public accounts in the United States.” Mills criticized the cash basis that he said governments generally used and proposed a new system based on either double or single entry.

Clow [1896, pp. 460, 465] acknowledged that cities often published statements of assets and liabilities at century-end. However, he was appalled by most cities’ “worthless” financial reports, which often consisted of a simple list of expenditures, extending for hundreds of pages if necessary. Boston published the best reports he had seen, but, even in that city, the mayor complained that he could not get a report that told him the annual costs of the city’s departments.

It is interesting that Clow found Boston’s accounts superior at the end of the 1800s, just as Holmes [1979] finds them to have been at the end of the previous century. Other Massachusetts cities also seem to have been better at financial reporting than their contemporaries. According to Powers [1906, p. 211], in the early 1890s when his office was first collecting municipal finance data around the country, almost the sole exception to the rule of “cold indifference and contempt” to the task on the part of municipal officers was the auditor of Cambridge. Powers used the Cambridge schedule as the model for reports required from other cities.

Unfortunately, general commentary on turn-of-the-century state or local government accounting is still scarce today, and

9 See also, Cleveland [1904]. The use of enterprise-type accounting in the public sector has been debated for many decades. See, for example, Pool [1948] and
Monson [2002].

10 Note that Monson [2002, pp. 40, 43] dates the beginning of the debate some what later, around 1910. In England, Jones [1989, pp. 60, 64, 65; see especially,
p. 69] dates it to the first decade of the 20th century. There, the question was the privatization of municipal services, and it turned on the allocation of overhead and depreciation expense.

most of it relies on 19th century authors’ descriptions of the accounts then kept by the governments. For example, Potts [1976], who discusses the subject briefly, relies mostly on Mills’ 1878 pamphlet and Chase’s 1904 article. Previts and Merino [1998, pp. 167-173] seem to base their brief coverage on Potts, Mills, and some of the Progressive reformers mentioned in this review. Fleischman and Marquette [1987, 1988] and Marquette and Fleischman [1992] also use the Progressive-era reformers in their work. Thus, modern secondary studies all ultimately rely on 19th century authors’ views of contemporary practice. At the turn of the 20th century, most writers were grinding some big reform axes. It is hard to tell from their writing what the state of public sector accounting actually was, and, thus, difficult to diagnose the degree to which their biases have colored today’s historiography.

DISCUSSION

Comments on 19th Century Practices: At the beginning of the century, we know that rather sophisticated accounting and reporting practices existed in at least one Massachusetts town, while a few towns in Connecticut had much poorer techniques. For the six decades from 1815 to 1875, we know that the states had different fiscal years, and that some of them misclassified payables as revenues, double-counted revenues, and used different measurement bases for revenues and expenditures. The 1815-1875 information comes to us from economic historians, not accounting scholars. That is all the literature tells us about the first three-quarters of the century, and it is very little.

We know more about the last 25 years of the century, though still not much, because accountants wrote a great volume of contemporary commentary in those decades aimed at the reform of municipal accounting. Specific scandalous practices in a few dozen cities are recorded, as are improvements that were implemented in a handful of them. State-level financial controls probably improved over the period. Many contemporary writers detailed what they thought good municipal accounting and reporting should be, and the NML proposed a uniform system of municipal accounting that had wide acceptance. The need for enterprise-type accounting for municipal utilities was debated. Some of the governments may have used a form of budgetary accounting. The BC, in the interests of imposing uniformity on the state and local governments’ reports, published informative and systematic comparisons of some of the different practices among the states. In a small step toward such uniformity, some of the larger cities began using BC account classifications toward the end of the century. Except for the BC’s work, most of the information about this period concerns the accounting by cities.

Two observations may be made concerning the 19th century’s public sector basic financial records. First, it is remarkable how copious they are. There are “tons of” these records, as Clow [1896, p. 457] acknowledged over a century ago. This suggests that American state and local governments were widely expected to be financially accountable to the people who supported them, a point ignored by Progressive reformers. Second, the effectiveness with which the governments met their public accountability obligations varied from excellent to scandalous over the whole century. There is some evidence that Massachusetts governments did a better job than most others throughout the period. Based on this review of the literature, we probably do not have enough information to draw other general conclusions about the century’s public sector accounting.

Historiographical Comments: The literature produced about an era’s accounting may be divided into that written contemporaneously – bookkeeping manuals, articles, and the like – and that written in a later era – secondary studies. These historiographical comments will focus on the secondary literature.
Accounting historians have almost entirely ignored Ameri-ca’s 19th century state and local governments. Fewer than two dozen articles, by the most generous count, have been written on the subject. As a result, today we have, to paraphrase Kinney [2001, p. 278], very little knowledge of the 19th century’s alternative standardized governmental financial measurement and reporting structures.

The few studies that have been done, while interesting and informative, derive their knowledge of the period’s practices from the work of 19th century authors. This material, one step removed from the actual accounting of the time, is not ideal. In defense of accounting scholars, the original books and reports of the governments of the 1800s, while ubiquitous and voluminous, are difficult to use as they are geographically scattered and thoroughly non-uniform. By contrast, the contemporary treatises are relatively concise and more generally applicable than any given primary source document. They resemble modern authoritative standards in that they instruct the reader in what is believed to be generally accepted practice. They are based on first-hand knowledge. In short, contemporary literature is a partly digested primary source.

Nevertheless, the neglect of the basic primary sources is a weakness of historical scholarship on the public sector. Inter-estingly, the neglect is not duplicated in studies of the private sector. Primary materials for the private sector are spotty, non-randomly distributed across businesses and often crude. Furthermore, handbooks on business bookkeeping were much more common in the 1800s than were manuals on government bookkeeping. Yet, historians of private sector accounting do not confine themselves to the contemporary manuals; they also consult the original books of the periods they study.

Note that there is an enduring pattern of neglect in the lit-erature concerning public sector accounting. Before the 1880s, very few handbooks or articles were written on the subject. Since it is the availability of such literature that drives the sub-sequent scholarly attention, almost no research has been done on government accounting in the U.S. during most of the 19th century. Neither today’s accounting scholars nor the writers of the past have ever been as interested in the business of government as in the business of the private sector.

This relative disinterest has a number of consequences. First, we have created a vast period of ignorance of how governments accounted for the public purse in the first 75 years of the 19th century. Second, even for the Progressive decades at the end of the century, our secondary research is necessarily colored by the political agendas that impelled the 19th century accountants to write so prolincally. Most of the articles and books they wrote decried the low quality of the accounts and agitated for change. How accurately do they describe the practices of the time? Without consulting the original records, we cannot be sure. Even when the goal was simply to describe what was then seen as correct procedure, as in Mills’ 1878 pamphlet, contemporary practice diverged from the prescriptions to some unknown extent. Third, because we do not consult the original documents and because few writers of the 1800s were interested in the states, we have little knowledge of state practices for any part of the century.

A final consequence of the historiographical neglect of public sector accounting is that we know nothing of the development and spread of nascent generally accepted government accounting practices in the 1800s. Nationally accepted authoritative standards for state and local governments did not develop in the U.S. until well into the 20th century. Some observers therefore conclude that the subject had no history before 1900. Figle-wicz et al. [1985, p. 74], for example, assert that “[s]ince little in the way of nonbusiness accounting systems developed earlier than the turn of the century, the history of governmental…accounting can be considered to have begun around 1900….”

Shyam Sunder [2006a, slide 14], 2006-2007 president of the American Accounting Association, referred to this sort of reasoning, pointing out that it is tempting “to identify the history of accounting with the organized efforts to produce written rules” because “[s]uch efforts leave documentary traces for historians” to study, whereas norms, “even if they are widely accepted, leave nary a footprint, except in fiction.” Accounting historians, who know better, need to produce studies to refute the strange notion that American government accounting history began with the NML and Progressivism.

FURTHER RESEARCH

Basic Description: This review suggests the need for considerable descriptive work into the accounting and reporting methods used by different governmental entities in the U.S. in the 1800s. Financial documents and bookkeeping techniques in many places at many different times need to be described in detail. This work must precede histories of specific topics and the testing of various theories using historical data.

But this is an opportunity, not a problem. Accounting his-torians working on the public sector are in a position similar to that of Carolus Linnaeus, the 18th century botanist whose taxonomy of living creatures to this day informs scientific classification, or that of 21st century geneticists, whose databases of genetic sequences will provide the data for generations of future scientists. Fortunately, the primary source data for governmental accounting are not so difficult to acquire as in botany or genetics. An expectation of accountability made the publication of governments’ financial records quite common in 19th century America, as is undoubtedly the case in a number of other countries. Many of the books still survive in municipal, county, and state archives across the country, often right down to the handwritten books of original entry.

Indeed, the proportion of the original public sector records that has survived to the 21st century is probably much greater than the proportion of records of for-profit concerns. It is far more likely that the financial records of any given governmental entity of the 19th century still exist than is such survival for a particular private business. It may therefore be possible to use systematic sampling techniques, even random sampling, to identify a group of governments whose practices could then be classified in a descriptive rubric. Researchers might thus create a historical version of Local Government Accounting Trends and Techniques [Cornwall, 1988], showing with reasonable accuracy the range and frequency of 19th century government accounting practices.

As discussed earlier, previous studies describing some of the primary sources have been published by the U.S. BC [1907, 1916], whose essays cover some of the variety in techniques across the states. Also, a group of economic historians [Sylla et al., 1993] wrote a brief essay on the quality of a large group of state and municipal reports they had examined. But, while people in other disciplines such as government practitioners and economists have provided useful information, it is not their primary purpose to investigate the history of accounting or to discuss its implications. Accounting historians need to look at the state, county, and town books themselves.

Causes and Effects: If adequate systematic description is done of the government accounting of the 1800s, there could be enough data to conduct quantitative research on many questions of great interest. What, for example, are the causes of the variation in accounting and reporting techniques over time and across governments? The secondary literature already touches on the subject with William Holmes’ speculation [1979] that the colonial origin of Massachusetts as a joint-stock company explains its superior financial reporting. Could it be that the 19th century accounts of the first 13 states differ in quality by their original status as a proprietary or a royal colony? An alternative hypothesis is that states with well-established, powerful commercial economies kept better fiscal records. Perhaps in Louisiana, Massachusetts, and New York, antebellum government accounting was better than the accounting in Kentucky, North Carolina, or Vermont.

Perhaps the difference in accounting sophistication is most distinct across regions, in frontier versus settled areas, in regions settled by the English rather than the French or Span-ish, between states with strong versus weak executives, or as a function of population size or levels of wealth. With enough data for quantitative work, historians could chronologically expand studies such as Zimmerman’s [1977] which uses modern data to test agent-principal explanations for municipal reporting variations, or the work of Sneed and Sneed [1997], who examined the creation of fiscal illusions by states with higher levels of spending. State and local governments developed nascent generally accepted accounting practices in the 19th century; it might be possible to study the effects of those developments. What is known now is that the quality of public sector accounting varied enormously in the U.S. of the 1800s. This variation and the large number of governmental entities should make positive research on causes and effects possible.

Other Historical Topics: A systematic database of 19th century practices would also provide information for any number of non-quantitative studies that would fill the vast gaps in our knowledge of state and local government accounting. The ever-popular story of standards development, for example, would be an obvious beginning. Sunder [2006b, p. 2] points out that the drift to formal standards began in U.S. private sector accounting about 75 years ago. It probably began long before that in the public sector. When and how did such standards develop in that century’s mélange of regulated and unregulated environments? What innovations spread and which were lost? Are any of them of interest to today’s standard setters? How did these developments compare to those in other countries at the same time?

Other subjects of interest include the reactions of cities to the early good government movement of the Progressive era and the changes that occurred in municipal accounting with the rise of population and public spending.12 To what extent did the Progressive accounting literature described in this paper present an accurate or biased picture of contemporary practices? When did budgeting first appear and how did it spread among state and local governments? What can be learned about audits of government financial reports? How were state and local taxes administered, accounted for, and reported? How did they differ from state to state and across the century? What do the practices in the field imply about the history of government accounting thought? What role did state and local government accounting play, if any, in the country’s development of democracy?

Study of these and other subjects would provide exciting contributions to the history not only of accounting but of government as well, contributions that would interest political scientists, historians, and economists, as well as accounting scholars and those interested in the history of public affairs. State and local government accounting is an understudied area in which historical research would rapidly improve our “knowledge of the… effects of alternative … measurement and reporting structures” [Kinney, 2001, p. 278]. However, additional descriptive work must come first. Surely this is not beyond the inclination or capabilities of accounting historians, all of whom are accustomed to meticulously account for trees to describe forests.

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Accounting History
Announcement
The sixth Accounting History International Conference “Accounting and the State”
Wellington, New Zealand 18 – 20 August 2010
Sponsored by: School of Accounting and Commercial Law, Victoria University of Wellington
and
Accounting History Special Interest Group of the Accounting and Finance Association of Australia and New Zealand
Papers will be accepted across the full range of accounting history topics and methodological and theoretical perspectives. As the conference is taking place in a national capital city, authors are encouraged to think about the relationships between the State and accounting, such as:

Accounting in the public sector at the national, sub-national and local levels;

New public financial management;
Taxation and public finance;
Regulation of the profession and standard setting process;
The State and accounting in social institutions;
Accounting education and the State;
Regulation of the not-for-profit sector;

– Regulation of corporate governance, fraud and collapse;
– Comparisons between the public and private sectors;
– Accounting, politics and public policy.
– Accounting reforms and their implications for inter-generational equity;
– The roles, influence and impacts of transnational State-like organisations, such as the EU.

Submission and Review of Papers: Papers written in the English language should be submitted electronically no later than 19 March 2010 to 6AHIC@ballarat.edu.au. All papers will be subject to a double-blind refereeing process and will be published on the conference web site, as refereed conference proceedings, unless otherwise advised.

Notification of Acceptance: Notification of papers accepted for inclusion in the conference program will be made by 10 May 2010.
Conference information is available at the Conference website: http://www.vuw.
ac.nz/6AHIC. Inquiries may be directed to the Conference Convenor, Philip
Colquhoun, Victoria University of Wellington, at the following e-mail address:
philip.colquhoun@vuw.ac.nz
Information about visiting Wellington can be found at http://www.wellingtonnz. com/ and for visiting New Zealand see http://www.newzealand.com/

197 AD HOC REVIEWERS

The editor expresses his profound gratitude to the following ad hoc reviewers who have served AHJ with dedication and distinction over the years since publication of the last list:
Francisco Badua, Case Western Reserve University
Robert Bloom, John Carroll University
Jesse Boyles, University of Florida
Kees Camfferman, Vrije University
Maria Dyball, Macquarie University
Tonya Flesher, University of Mississippi
Giuseppe Galassi, University of Parma
Jan Heier, Auburn University, Montgomery
Helen Irvine, University of Wollongong
Roxanne Johnson, University of Scranton
Cheryl McWatters, University of Alberta
Marta Macías, Universidad Carlos III Madrid
Barbara Merino, University of North Texas Christopher Nobes, Royal Holloway, University of London
Chris Poullaos, University of Sydney
Vaughan Radcliffe, University of Western Ontario
Lúcia Rodrigues, Minho University
Sally Schultz, SUNY, New Paltz ”
Ken Shackleton, University of Glasgow
Joel Thompson, Northern Michigan University
Gregory Waymire, Emory University Omar Zaid, University of Western Sydney Henri Zimnovitch, Université de Poitiers