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CHAPTER II CENTRAL FINANCIAL CONTROL IN ILLINOIS GENERAL VIEW OF THE LEGAL PROVISIONS From the earliest history of the state there has been a constitutional officer, independent of the executive branch, known as the auditor and vested with power to inquire into the legality of expenditures and the accuracy of accounts. No expenditure by any state agency is valid without an appropriation for such purpose and no payment can be made by the treasurer without the signature of the auditor certifying that the given expenditure indicated on the voucher falls within an existing appropriation. This process is so familiar and so universal that it calls for no special comment at this point. In the history of the administrative agencies in Illinois a point was reached as early as 1905 at which the statutory authority of the gov- ernor in many instances to review expenditures had become a physical impossibility owing to the large number of independent agencies and the heavy draft on the governors time from various sources. To e~e Atom ~o perform oy Deputy a part of tine work of approving vouchers, the legislature established in that year an official known as the institution audit clerk.3 From 1905 until the adoption of the Civil Code the General Assembly made an appropriation to the gov- ernor for this employee, the importance of whose work was redected in the salary provided ($3,000), which in 1905 equalled that of the highest administrative positions. The enactment of the Civil Code in 1917 provided for the enlargement of the work of the institution audit clerk who became henceforth a member of the newly organized department of finance, with the title of administrative auditor. The Civil Code likewise established a new procedure for making up the biennial budgets, and vested in the finance department power to inquire into the reasonableness of expenditures, and to enforce its views by refusal to approve vouchers presented by the spending departments. Before examining specifically the legal authority vested in the director of finance, it is important to view the office in the large. The purpose in the minds of those who created the once was to provide machinery through which the governor as the chief executive could exercise an immediate and direct control over the administrative policy, program, and work of substantially the whole government. This purpose in turn was the by-product of the belief that only by . . ~. . ~. . , . ~.. . 3 Session Laws 1905, p. 62. 15

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16 FINANCIAL CONTROL OF RESEARCH such a concentration of power could an adequate degree of unity and coordination in the administrative services be achieved; and the ulti- mate goal of efficiency was conceived in part as a function of the unity and coordination of these various divisions. This purpose was sought not only through the establishment of far-reaching financial control, but equally by linking over a hundred scattered authorities into eight great departments and the Department of Finance. Whether this theory was sound and well conceived, or whether on the other hand it was pushed beyond the limits which are properly to be fixed in the interest of the very efficiency which was sought, is not now in question. For the moment, the necessary thing is to acquire a clear- cut picture of the office itself. The specific powers vested in the Department of Finance fall nat- urally into three groups: one intended to enable the department to acquire the necessary information on which it could make intelligent decisions; one intended to strengthen the budget-making process; and one intended to vest in the finance department a continuing power of independent review and control of the financial aspects of the process of administration. In the first group of powers may be noted (1) the power to prescribe and require the installation of a uniform system of bookkeeping, accounting and reporting; (2) to prescribe the forms of accounts, reports and vouchers; (3) the power to supervise and examine accounts and expenditures of the several departments and of every private institution receiving money from the state; and (4) to investigate duplication of work and the efficiency of the administration of departments. In the second group is found authority to prepare and submit to the governor the biennial budget, in the course of which the budget superintendent sends out estimate blanks, reviews the returns, makes further investigation and organizes the budget. The key power vested in this field is the authority to "approve, disapprove, or alter the estimates." These words give the department an effective power to revise estimates on the basis of its judgment concerning the financial situation of the state as a whole and of the needs of any particular service. The only recourse open to a department which suffers from the revision of the director of finance is to make appeal to the gov- ernor before final submission of the budget to the legislature and to make a further statement before the appropriation committees of the legislature. The third group of powers is of greatest interest both on account of their intrinsic importance and their novelty in American fiscal practice. These powers are intended to vest a right of review of

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IN STATE GOVERNMENTS 17 administrative decisions involving the expenditure of money in the hands of the finance department. The specific clauses in question vest power (1) to keep summary and controlling accounts; (2) to examine and approve or disapprove vouchers, bills, and claims of the several departments; (3) in settling the accounts, to inquire into and make an inspection of articles and materials furnished or work and labor performed, for the purpose of ascertaining that the prices, quality, and amount of such articles or labor are fair, just, and reasonable, and to disallow any excess. In addition it may be noted that each department must prepare and submit to the finance depart meet, before its appropriation becomes available for expenditure, an estimate of the amount required for each activity to be carried on. The approval of the finance department is not specifically required for the proposed allocation of funds, but its authority to disapprove vouchers gives it a means of ensuring that its wishes in the distribu- tion be given consideration.4 It does not require deep study to grasp the far-reaching authority vested in the Department of Finance by these statutory provisions. The powers of the department go far beyond an audit to raise the question of fairness, justice and reasonableness of the financial side of administration; and it is obviously difficult to separate questions of this sort from questions of departmental policy and internal depart- mental operation. A fair reading of these clauses would seem to indicate that the intent was to establish a continuous review of the whole administrative process in the interest of efficiency. The director of finance therefore becomes something more than a finance officer; he occupies in the law of Illinois a position analagous to that held in the British system by the Treasury.5 1 It must always be remembered that the director of finance is an appointee of the governor and like other directors may be removed by the governor at will. The broad decisions therefore are those of the chief executive; the control of the spending departments is control by the governor; the practical limits drawn either against the spend- ing departments or the finance department are the limits set by the governor; the enforcement and execution of these limits is the duty of the financial department. By other sections of the Civil Code the freedom of departments and institutions in making purchases and in securing printing is cur- tailed. These sections for the most part continued an already pre- vailing system. The Department of Public Works and Buildings is 4 Laws, 1917, p. 2. ~ 6 See Willoughby, Willoughby and Lindsay, Financial Administration of Great Britain, ch. 8.

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18 FINANCIAL can TROL OF RESEARClI vested with power to make contracts for and superintend telephone and telegraph service, to purchase and supply fuel, light, water and other office and building service, to supply all office furniture saving certain supplies distributed through the secretary of state, to supply the various materials and commodities required by state institutions, to purchase all tools and materials for construction of state highways, and to have general supervision over the erection of all public build- ings. The department also acts as a central office for control of . printing. Summarizing these legal provisions from the point of View of the bureau engaged in research,6 we find that it is subject to the following elements of central financial control: 1. The forms of accounts, records, and reports are fixed by the Department of Finance. 2. The bureau estimates for appropriation are subject to alteration or reduction before approval by the director of finance. 3. The appropriations to the bureau are available only after it has prepared and submitted to the director of finance a plan of expenditure. 4. All vouchers showing expenditure are submitted to the director of finance for review and approval, and are subject to disapproval (1) on ground of illegality or inaccuracy, (2) on question of their fairness, justice, and reasonableness. 5. All purchases, except emergency purchases, are made on requisi- tion by the Department of Public Works and Buildings. 6. All printing is supplied for the scientific bureaus by the Depart- ment of Public Works and Buildings. 7. The legality and accuracy of all expenditures is determined by the auditor and by the director of finance. 8. Travel outside of the state requires the approval of the governor. A detailed statement of the legal provisions defining the various types of control, and so far as ascertainable, the practical operation thereof, follows. ACCOUNTING CONTROL The Illinois Civil Code authorizes the Department of Finance (1) to prescribe and require the installation of a uniform system of book- keeping, accounting and reporting for the several departments; (2) to prescribe forms for accounts and financial reports and statements for the several departments; (3) to supervise and examine the accounts and expenditures of the several departments; (4) to keep such sum- mary and controlling accounts as may be necessary to determine the 6 But not the University of Illinois, which is substantially free from these elements of control.

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IN STATE GOVERNMENTS ~9 accuracy of the detailed accounts and reports from the several depart- ments; (5) to prescribe the form of receipt, voucher, bill or claim to be filed by the several departments with it. These provisions vest complete power to install and enforce a uniform accounting system. Such an accounting system was inaugurated July 1, 1917. The standard accounting heads set up were ten in number; salaries and wages; departmental owe expense; traveling expense; operating supplies and expenses j industrial working capital; school supplies; repairs; equipment, buildings, and land. The Department of Finance requires from each division a monthly report of disbursements and encumbrances. The purpose of this report is to show the balance in the annual allotment for each account of each division that is free and available for additional future con- tracts or for savings and retrenchments. The report therefore includes (1) the name of the account; (2) the annual allotment; (3) bills passed to date of report; (4) cash balance; (5) unpaid bills for materials and services rendered; (6) contracts and orders outstanding; (7) total encumbrances; and (8) free balance. The monthly reports are useful to superintendents and division chiefs as a current statement of their financial situation, enabling a comparison of bills passed and encumbrances with annual allotments and monthly estimates, and furnishing the basis for careful study of free available balances and planning for future activities. The director of the department likewise uses them as a means for supervising and guiding the work of the several divisions, and for arranging transfers. The director of finance uses them to prevent deficits in any institu- tion or division, as a basis for approving transfers and for allotments from contingency funds, as a basis for approving amendments in the annual estimates, and, in general, as the means by which the facts of financial operations are revealed and arranged in an orderly manner. The monthly reports become the source from which are made up the controlling accounts kept in the finance office for each division and institution of the state. The controlling accounts show annual and monthly estimates, bills passed for the month and for the period, the percentage of bills passed to the estimates for the month and period, the encumbrances, and the available balance for the remainder of the fiscal year. Any deficits in the monthly or period expenditures are entered in red ink and are made the occasion for correspondence between the finance department and the division concerned. At first there was some complaint that the accounting forms were numerous and complicated, and that an excessive amount of time and energy Yeas required, especially by the smaller divisions (including some scientific bureaus), to meet the new requirements. To a certain . . . . ,

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20 FINANCIAL CONTROL OF RESEARCH extent these complaints were justified and in the autumn of 1918 some adjustments were made. In some early cases, the finance officials were unduly insistent, owing to their feeling that a firm attitude was necessary to secure observance of the new regulations. On the other hand, many instances have been cited to the writer by these finance officers which indicated at least carelessness and indifference on the part of divisions and institutions, some of which were engaged in scientific work. The passage of time has now made these forms and methods habitual, which in turn has properly permitted a relaxation of the meticulous attitude of the finance department. It remains true, however, that even today more time is required to make the necessary reports to the director of finance than was formerly required to deal with the auditor alone. There is compensation for this, however, from the point of view both of the whole state adminis- tration and of the scientific division. The state gains the immense advantage of uniformity and intelligibility in its financial operations; and the division has always before it an up-to-date, accurate picture of its exact financial condition and is thus enabled to plan its own work intelligently and prudently. The chief of one of the smaller scientific divisions, who sends back regularly several forms in blank, as they do not apply to his work, states that he uses the monthly financial record in laying out the work of the division and finds it of great value. None of the division chiefs interviewed complained of the undue burden or complexity of the accounting procedure, although there are, naturally, specific cases in which the division differs from the view of the finance department. In the judgment of the writer, the scientific divisions in Illinois expend sums large enough to warrant their inclusion in the common accounting systems, quite apart from general considerations of uniformity. Thus the appropriation to the Health Laboratories in 1923 was $64,960, to the Institute for Juvenile Research $139,560, and to the Geological Survey $211,270. It should be added that the uniform accounting system is a pre- requisite to any effective financial control, and in Illinois as elsewhere underlies the- process of budget-making, audit, and review of expenditures. BUDGET CONTROL The provisions of the Illinois Code governing the budget-making process are intended to secure a carefully considered financial and work program for the whole state in view of anticipated revenues. The director of finance is the officer responsible for the preparation of the budget on behalf of the governor, who after approving submits it to the legislature. The Civil Code provides specifically that the

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IN STATE GOVERNMENTS 21 director of finance distribute the proper blanks not later than Septem- ber 15. These blanks show revenue and expenditures for two pre- ceding years, the appropriation made by the previous General Assembly and the expenditure therefrom, an estimate of the revenues and expenditures for the current fiscal year, and an estimate of the revenues and expenditures for the two succeeding years. The blanks are returned by November 1. The director of finance is authorized to make inquiries and investigations and may "approve, disapprove, or alter the estimates." On or before the first of January, he submits his estimates of revenue and expenditure to the governor, who not later than four weeks after the organization of the General Assembly submits the budget to the legislature. The governor also transmits the estimates of receipts and expenditures, as received by the director of finance, of the elective officers in the executive and judicial depart- ments and of the University of Illinois.7 The estimates are submitted by the departments under the accounting heads already explained. The Civil Code contains no further provisions concerning the budget process, but several significant practices have developed which need to be presented in order to secure a complete picture. The division and institution heads submit their estimates to the head of the depart- ment before they are sent to the director of finance. The head of the department confers with them and may suggest modifications in view of the program of the department as a whole. The director of the department, and usually the head of the division as well, consult with the director of finance and explain to him in detail the reasons for the estimates. These conferences may continue from November 1 to January 1, and afford a complete opportunity to the spending departments to justify their estimates to the director of finance. When the budget is presented to the legislature, it is sent directly to the House Appropriation Committee, a large body composed of over forty members. Subcommittees are appointed by the chairman to visit and consult with the heads of some of the divisions and institu- tions asking for funds. The detailed consideration of the budget by committee then proceeds. The director of finance and the superin- tendent of the budget are always in attendance, as is the head of each department while his estimates are under advisement, and frequently the head of the division or institution. The committee thus hears (1) the report of its own subcommittee, (2) the recommendation of the director of finance, (3) the views of the director of the depart- ment, and (4) the views of the head of the division or institution, and Tin spite of the explicit language of the Code, the Department of Finance reduced the estimates of the attorney general for the biennium 192~25, although the attorney general is an elective state officer. See Third Illinois Budget, p. 6.

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22 FINANCIAL CONTROL OF RESEARCH in addition has before it the financial history of the division or institu- tion for three years. The division chiefs are not expected to lobby in favor of their appropriations. It is generally understood that the chief responsibility for appropria- tion rests with the House of Representatives, although occasionally the Senate takes an initiative of its own. This was notably the case in the 1923 session in which the appropriations of several scientific agencies were at one stage entirely eliminated. The misguided factional political fight which caused this disaster fortunately abated in view of the vigorous representations made by the director. of the department and the heads of divisions, and eventually the appropria- tion was restored. It should be added that the governor in Illinois possesses the-item veto, which in recent years has been extensively used. The two-thirds vote required for repassage is so difficult to secure that his disapproval becomes practically an absolute veto. Before commenting on this procedure it is worth while to contrast briefly earlier financial practice. Until 1917 each division was inde- nendent of the other. and had its own direct connections with the Each unit made its estimates with abso lutelY no knowiectge of or relation to the estimates of others. Each , , appropriations committee. division fought for its own appropriation before the committee and many lobbied persistently during the whole session. The appropria- tions committee therefore became the centre of a tremendous pressure from the one hundred and twenty spending units. It is said that appropriations were determined in no small measure by the personal impression made by the division chief. Thus normal schools were prosperous or poverty-stricken in proportion to the salesmanship of their president. This scramble for appropriations and the attendant necessity for button-holing legislators was very distasteful to most of the men who were operating the scientific services of the state. The allotment of funds was many times unsatisfactory, and the governor used his veto power rather freely. In" the two sessions of 1915 and 1917 the estimates of the depart- ments were compiled by the Legislative Reference Bureau. Its work was strictly compilation and did not include the present power to revise and recommend. Each department and division continued to appeal directly to the appropriations committee. The Civil Code of 1917 produced the first executive budget in the 1919 session. Governor Lowden supported the Department of Finance vigorously and for the first time in the history of Illinois the estimates of the spending agencies were revised and correlated with the antici

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IN STATE GOVERNMENTS 23 pated revenues before presentation to the appropriations committee. Incidentally it may be observed that from the point of view of the appropriations committee the new plan was an enormous advantage. The committee now had a well-planned, coordinated work and finan- cial program before it, which enabled it to consider the appropriation as a unit. This study is concerned, however, with the edect of the new plan on scientific research and to this topic we return. In the first place it is clear that the division chief no longer appeals directly to the appropriations committee for money. Nearly every one of the one hundred and twenty independent units became a division of a larger department, and the division estimates pass first of all to the depart- ment director. So far as could be ascertained, the attitude of the director has been uniformly sympathetic toward the plans and esti- mates of scientific divisions. It should be noted that in case of the Geological Survey, Water Survey, and Natural History Survey, the proposals for expenditure and the general plans for scientific under- takings are submitted to the Board of Conservation and Natural Resources, a body of scientists drawn from related fields and qualified by at least ten years' experience in the practice or profession of their subject.8 This arrangement seems to have given complete satisfaction to the three surveys and to have added weight to their requests for . . . appropriations. The review by the director of the department has raised no import- ant question. The review by the director of finance, however, presents somewhat different issues. The director of finance is naturally not a scientist, but a man usually of business training and experience. The superintendent of the budget from 1917 to 1923 had for many years been an employee of the state government. the financial officials properly assumed a critical attitude toward expenditures. Their office necessarily became a buffer between the spending departments and the appropriations committee of the Gen- eral Assembly. They sought for proper reasons to avoid expenditure rather than for proper reasons to incur expenditures. In spite of this attitude, the scientific departments unite, so far as the writer could ascertain, in testimony as to the fairness and careful consideration given to their estimates by the finance office. In every By the facts of the case, case they were given full and ample hearing with every opportunity to explain the value of the work on which they were engaged. It has not been found possible to determine accurately the reductions brought about by the superintendent of the budget in the original estimates 8 See the author's report, "The Status of Scientific Research in Illinois Bulletin 29. National Research Council, pp. 39~2.

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24 ^~[ C0~0[ OF ~8 prepared by the departments Ibere brave been cases of substantial reductidD, some of Chub brave bees restored by Me CeDera1 Assembly. WbeD an agreement ~ reached between Me Onance department sod the scientific division, the burden of defending Me estimates before the legida~re fold primarHy OD the superintendent of Me budget and Me director of the departments altbougb Me bead of the acientiOc agency always teas the oppor~Di~ to appear before the appropriations committee. It should be Doted Cat the estimates as Anally submitted brave back of them Me Sight of Me Onance department and of Me governor and consequently are likely to be much more favorably received Can if Hey emanated from the division alone. Examination of Me action of Me legislature on the estimates of Me scientific , . . - dlvlslons supports this conclusion. Ibe following table sbo~s the Approved estimates on Me one bard, in comparison aid appropriations on Me other band, Me increases and decreases, and Me govembr~ veto for the Osca1 years 1915-1925. Issue I. ~ . ..^ . Oclenrmo umt 1923~5 Oeologicu1 Survey......... Na~1 Custom Survey.... water Survey............. Ample Rese~rcb Institute. P~cbopat~c Institute..... Bealtb Labo~todes.... ... Totals ............. lO21~3 Geolog1ca1 Survey......... Natu=1 factory Survey.... water Survey............ Revere Rese~rcb Institute Psycbopst~c IusOtute.... Webb [abo~todes...... Totab..... lDl9-21 Geolog16~1 Whey......... ~atu=1 Baton Survey.... water Survey............. J~e~le Reae~cb I=ti~e. ~cbopat~c IDsutute. . Bealtb [aboratodes'. . . a. . I........... Approved Ap- estimites portion Increase Decrease . . bl94,870211,270 16,400 . . . . . . . . . 113,22510g, 100 . . . . . . . . . 4,125 71,70074,800 3,100 . . . . . . . . . 13D, 58013g, 160 . . . . . . . . . 400 87,27076,970 . . . . ~ . . . 10,300 US, 560 64,960 . . . . . . . . . 600 . 072,185 678,260 19,500 15,425 . 167,2S5 439,285 282,000 . . . . . . . . 125,185 12S, 185 0 . . . . . . . . . 86,700 86,700 0 . . . . . . . . . . 158,?35 159,036 300 . . . . . . . . . 119,180 119,450 270 . . . . . . . . . dad, 000 56,600 0 ..... I I 1 703,685 986,255 282,570 . . . . . . . . . 1 1 . 99,095 137,004 37,309 . . . . . . . 68,495 70,495 2,000 . . . . . . . . . 71,000 71,000 O . . . . . . . . . .......... ......... ......... ......... ......... . 203,542 { ~ } {327,000 ~ ~ ~ ~ ~ ~ ~ ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a. . . . . . . . . . . . . I . ~ . 442,732 809,041 360!3~ ......... Govern or's veto ~ O ~0 o o o o 260,000 ,000 o o go o 251,000 o o o o

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llV STATE GOVERNMENTS TABLE I. (Continued) 25 Scientific Unit 1917-19 Geological Survey......... Natural History Surrey.... Water Survey ~ Juvenile Research Inst. . Psychopathic Institute. . . Health Laboratories..... . . . Totals............. 1915-17 Geological Survey..... Natural History Survey.... Water Survey............. Juvenile Research Inst. Psychopathic Institute. . . . . .. Totals ............. Approveda estimates 129,575 66,750 21,700 110,368 .......... 39;4, 653 dl2,840 685,886 87,130 20,000 52,300 95,249 .......... 40,304 294,983 Appro . . Increase proton 122,484 ......... 44,280 ......... 16,500 ......... 87,168 . . ... .. .. 35,007 ......... 11,760 ......... 317,199 ......... 86,495 ......... 20,000 ......... 51,000 ......... 52,000 ......... ......... ......... 39,315 ......... 248,810 ......... Decrease 7,091 22,470 5,200 23,200 309,646 1,080 368,687 635 o 1,300 43,249 . . . .... . . 989 46,173 Govern- or's veto 19,700 1,070 o 16,200 o 1,800 38, 770 o o o 9, 500 o 9,500 a. From 1915 to 1919, departmental estimates were not approved by the director of finance. b. This table omits the item for printing, because while it is shown in the budget estimates for each division, it appears in the appropriation act as a lump sum figure for the department which cannot be alloted to the .. . . cllmslon. c. A reappropriation of $21,447 not included in the preceding figures in this line was vetoed by the governor. d. Estimates and appropriations for personal service only; other items are lumped with the departmental appropriation. e. There are no earlier appropriations for the Institute of Juvenile Research. f. The estimates of the Health Laboratories were not segregated in this instance. The appropriation was $37,920. From this table it appears that during the six fiscal years, 1919-1925 the legislature added to the approved estimates a total of $668,379 and took from the estimates $15,425, a net addition of $652,954. This includes two large items of $250,000 for an oil survey and $326,000 for purchase of land for the psychopathic laboratory, together with several smaller items. It appears therefore that not only has the legislature been favorably disposed to the estimates coming before them with the approval of the finance department, but also that the heads of divisions have been able to win legislative approval of items presumably not favored by the finance department.

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IN STATE GOVERNMENTS 31 meets have clearly lost the element of discretion which was found in the possession of a contingent fund, and now are required to show cause to the head of their department and to the governor for the use of contingent funds. CURRENT REVIEW OF VOUCHERS The Civil Code authorized the Department of Finance "to examine and approve or disapprove vouchers, bills, and claims of the several departments, and no Voucher, bill or claim of any department shall be allowed without its approval and certificate; in settling the accounts of the departments, to inquire into and make Reinspection of articles and materials furnished, or work and labor performed, for the purpose of ascertaining that the prices, quality and amount of such articles or labor are fair, just, and reasonable, and that all the requirements have been complied with, and to reject and disallow any excess." No cause is assigned in the Code on the basis of which vouchers may be disallowed, but the language used in the following section, "fair, just, and reasonable," has been construed to vest in the finance department the power to review questions of expediency as well as questions of law arising from the expenditures of other departments and institutions. During Governor Lowden's administration a con- troversy arose on this issue and was referred to the Governor's advisers for opinion. It was said on one side that unless a director of a department, in planning with his division heads for the work under their charge, can depend upon appropriations regularly made by the legislature and approved by the governor, his executive and administrative efficiency are greatly impaired. It was alleged further that when the finance department undertakes to criticize individual decisions of a division or institution, without knowing or being in a position to know the reason for the decision, he transcends his authority. The opinion given the Governor supported a broad interpretation of the powers of the director of finance. The Code was intended, the opinion held, to embody the idea of supervision of expenditures, review of current business transactions, critical inspection of vouchers and documents, and determination of the legality and justness of claims against public funds. "As a matter of power, therefore, con- sidered in the abstract, it is my judgment that the director of finance can question the expediency or propriety of any expenditure. But power is not always coupled with right. It is to be presumed that in the exercise of this vast power the director will be guided by prudence, moderation, zeal for successful, efficient and harmonious administra

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32 FINANCIAL CONTROL OF RESEARCH tion, as well as by a consideration of the express powers vested in other departments."9 At first the drastic powers hereby vested were commonly used and much irritation resulted on both sides; more recently a modus vivendi seems to have been established. So far as could be ascertained the scientific bureaus have had no serious trouble on this score.~ The sections under consideration seem to transfer final power of decision in any expenditure of money from the division to the Department of Finance. All vouchers pass through the office of the finance depart- ment before payment, and while in many cases the expenditure has already been made or the contract completed, thus making it difficult to control that particular transaction, the director of finance can nevertheless serve notice that future expenditures of the sort are not in his judgment fair, just, or reasonable, and will therefore be ~is- allowed. It must be kept in mind that the director of finance acts on behalf of the governor, and that any important decisions would become the decisions of the governor by appeal. Thus the governor may undertake a general policy of retrenchment and issue orders that not more than eighty per cent of the appropriation to each department may be expended. The machinery of the Illinois Code makes such an order easily enforcible. Or in order to prevent deficits each division may be required to hold ten per cent of its appropriation in reserve until the last month or months of the fiscal period. Other reasons may be responsible for this sort of executive control. A difficult question arises as to the advisability of this grant of power. Central control is defensible in order to secure lawful and efficient use of public money and has been reasonably effective for this purpose. The case now under consideration seems to involve, in addi- tion, vesting the power of policy determination in the chief executive rather than ire the legislature. After presumably careful consideration, the legislature has appropriated certain sums of money to ensure the execution of specific purposes. So far as the appropriation is needed to secure these purposes, the division may be presumed to have received authority to proceed to spend. If now the chief executive reserves ten per cent of the appropriation for savings or denies approval of proposed expenditures within an appropriation, it will happen in some cases that the program approved by the legislature will either be abandoned or curtailed. On the other hand, in some cases such an order might do no more than enforce rigid economy and the most intensive use of the money available. It must be added, however, Compare State vs. Herrick, 140 N. E. 31, cited below, p. 44. 10 It was not possible to find the number of cases or amount of money involved - in the exercise of this power.

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IN STATE GOVERNMENTS 33 that the scientific divisions present very slight opportunity for elimina- tion of unwise expenditure of this sort. The whole trend of development of executive powers seems to point to the conclusion that the governor must be'reckoned with as a policy- determining official of the highest importance. The executive veto strengthened by the item veto and the power to reduce items, and made practically absolute in many states by the requirement of two- thirds of the legislature for repassage, has already made the governor the most important single policy--~naking officer. There is little differ- ence so far as the interests of a scientific division are concerned between the veto of an item of appropriation at the outset, or the later reduction in the sum available through the voucher control of the director of finance. In the former case, to be sure, there is a greater degree of publicity and a rather remote possibility that the legislature may override the veto. In the judgment of the writer, it is unwise to permit the decision of a scientific department as to the use of money appropriated to it to be overruled by an administrative officer whenever the issue involves a question of the conduct of scientific inquiry. The chief of the scientific division may be presumed to be more competent to settle 'such questions than any 'officer in the finance department. In order to make the case in mind more clear, it may be illustrated by sup- posing a requisition to be made by the chief of the Geological Survey fo'r certain heavy boxes to be used to transport the core of a deep well boring to his laboratory for examination. Whether the core is worth examination, whether it should be examined in the held or in the laboratory, the necessary precautions for shipment and preserva- tion, are all questions of a professional order, expenditure for which within the terms of the appropriation act should be controlled by the scientist. On the other hand, when questions of accounting, business pro- cedure, and general purchasing are concerned, the writer sees no reason why scientific agencies should seek to except themselves from the prevailing arrangements, unless it can be clearly shown that the state on the-whole would benefit by making the exception. The line of distinction here suggested may seem difficult to preserve. In specific cases doubt may perhaps arise; but a wise restraint on the one hand and a loyal cooperation on the other would suffice to clarify the principle and permit its regular application. The truth of the matter is, that state administrative systems are now going through a period of extensive reorganization induced by- the lax, inefficient, extravagant and sometimes corrupt use of public funds under the highly disintegrated plan of government which

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34 FINANCIAL CONTROL OF RESEARCH formerly prevailed. Scientific divisions, although in almost every case with a relatively clean record, are now caught as all other state- agencies are in the reaction in favor of a comparatively centralized and integrated plan of administration. The same tendency may be observed as well in American municipal government and in the federal government. The professional character of the scientific divisions, their freedom from the spoils influence, the respect which they com- mand in state legislatures, the value of the service which they perform, will naturally combine to make the new methods of control rest in fact more lightly on them than on other branches of the state govern- ment; but they can hardly expect to continue to operate under condi- tions which are rapidly passing away. CENTRALIZED PURCHASING Centralized purchasing for the institutions now administered by the Department of Public Welfare has been the rule since 1909. In 1917 the Civil Code provided that the Department of Finance should have power to prescribe uniform rules governing specifications for the purchase of supplies, the advertisement for proposals, the opening of bids and the making of awards; to keep a catalogue of prices current and to analyze and tabulate prices paid and quantities purchased. These powers are intended to secure uniformity and to give the department authority to review the work of the superintendent of purchasing in the Department of Public Works and Buildings. The Civil Code vests the chief responsibility for purchasing in this latter department. It makes contracts for telephone and telegraph service; purchases all fuel, light, water and other like office and build- ing services for the several departments; procures all furniture, general office equipment and supplies, all clothing, instruments and apparatus, subsistence and provisions for the charitable, penal, and reformatory institutions; and in general all supplies and equipment of every sort, including the tools, machinery, supplies and materials to be used in constructing or maintaining state highways. It also leases storage accommodations and office space and has general supervision over such storerooms and offices. So far as the scientific divisions are concerned a satisfactory modus vivendi seems to have been established. Repairs not to exceed $60 and emergency repairs on automobiles do not need requisition. Blanket requisitions are allowed covering express, freight, telephone, telegraph, press clippings, garage rent, printing and developing films, blue prints, lantern slides, map materials and miscellaneous small supplies. In the purchase of scientific apparatus the superintendent of purchasing

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IN STATE GOVERNMENTS 35 issues authorization to the Water Survey Division to act for the Purchasing Division so that the Water Survey can be sure to get exactly the kind or quality of technical apparatus desired. Chemicals purchased from the University of Illinois chemical stores and other purchases from the University are covered by blanket authorizations. Large expenditures proposed by the three surveys are submitted to the Board of Natural Resources and Conservation for approval. If these projects receive the approval of the board there is then no difficulty in persuading the Department of Finance and the Division of Purchases and Supplies to issue the authorization. Another scien- tific agency reports that the Division of Purchases is always con- siderate to follow instructions carefully as to specifications, especially if the product of a particular company is designated. Complaint is made chiefly on the score of delay involved. The amount of clerical work is also somewhat increased. The writer was unable to make a first-hand examination of the records of the superin- tendent of purchases and of the finance department so far as it con- trols purchasing, but from his general acquaintance with the situation has reached the conclusion that no detriment to the prosecution of scientific investigation can be traced to the operation of the system of centralized purchasing. The purchasing agent states that all requisi- tions that do not require an advertisement are handled on an average in four days, while requisitions that require an advertisement take ten days. The following quotation from the director of a scientific division seems to reflect the opinion of the professional stars: While there are some inconveniences and occasional delays resulting, and while our clerical work is greatly increased, these disadvantages are, in great part, counterbalanced by the better prices which a general purchasing agent can get because of the bunching of requisitions in much larger orders than we should make separately. Our requisitions are almost invariably approved and we consequently purchase about as freely as if we were independent, although we find it best, and sometimes necessary, to make careful explanations in order that a responsible officer with no adequate knowledge of our work or its needs may understand what he is doing in authorizing our purchases. On the whole, I think that the system is correct in principle for a state govern- ment and I am willing to put up with inconveniences which seem unnecessary in our case, because I have abundant reason to believe that they are essential in many others. I should add that if our requests are reasonable, our expenditures economical, and our business management correct and careful, recognition of these facts in Springfield is very useful when new estimates are being handled by legislative committees.

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36 FINANCIAL CONTROL OF RESEARCH THE CONTROL OF PRINTING There has been central supervision of printing in Illinois for many years. The constitution of 1870 vested in the governor power to dis- approve contracts for stationery and printing paper and all other printing ordered by the General Assembly; but the General Assembly was directed to fix the maximum price. A statute of 187a established the commissioners of state contracts, consisting of the attorney gen- eral, secretary of state, treasurer, and auditor ex-officio.~t All printing was henceforth done under the general supervision of this board, a maximum price being fixed by the General Assembly in accordance with the state constitution. The governor appointed a printer expert to prepare specifications, read proof, and to estimate amount of paper required. No report could exceed 400 pages except with the approval of the commissioners of state contracts and the governor. In 1899 the legislature imposed certain requirements as to form, intended to conserve space, but no effective administrative authority was set up to enforce them, arid the amount of central supervision remained nominal. The Efficiency and Economy Commission reported in 1915 that "the law relating to state contracts for printing, binding, stationery, and fuel prescribes a highly complicated series of arrange- ments, in which duties and responsibilities are distributed between the governor, secretary of state, state Board of Contracts, and printer expert; while many details are definitely specified in the law, and at the same time no provision is made for some important matters. As a result, no single authority can be held clearly responsible for mistakes or inefficient methods." - Finally in 1915 a comprehensive statute was enactedi3 which, prior to the Civil Code, established ~ considerable degree of central control. The governor, with the consent of the Senate, was authorized to appoint a superintendent of printing for four years, with a salary of $5,000 a year. All printing is done under the general supervision and direction of this official. He is authorized to give general directions for the making up of matter in all classes of printing, so as to avoid unnecessary charges for composition or press work. By the law he is authorized to determine the manner, form, style, size and arrangement of type, the spacing of lines, the width of borders and margins, the method and material of all printing, having due regard to economy and workmanship and the purpose for which the work is needed. H enforces in general all the requirements of the state printing law. See Revised Statutes, 1874, p. 993. 1" See Efficiency and Economy Report? pp. 165-179, for a comparative study of printing laws in several states. 13 Laws of Illinois, 1915, p. 671. .

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IN STATE GOVERNMENTS 37 Any report not in the form required by- law or rule may be returned for correction and may not be printed until the changes ordered by the superintendent of printing have been made. The number of reports when not fixed by statute may not exceed the probable and reasonable demands of the state. The superintendent of printing was required to purchase all printing paper and stationery for the use of the state and to fix standards of quality. Since 1915, all appropriations made for printing, paper and sta- tionery have been to the superintendent of printing on the basis of estimates furnished him by each officer and institution. To officer of any institution is entitled to printing in excess of the amount appro- priated or allotted to each; maximum prices continue to be fixed by- the General Assembly. The Civil Code incorporated these provisions by transfering the superintendent of printing to the Department of Public Works and Buildings. The element of supervision and review does not enter in the office of the superintendent of printing, but rather in the office of the director of finance. The procedure now employed is as follows: each director and each elected state officer determines the number of reports to be printed and makes a requisition therefor. If the requisi- tion originates in one of the code departments it goes first to the director of the Department of Public Works and Buildings and then to the director of finance, who sends it, after approval, to the superin- tendent of printing. The Department of Finance mav Question the ,, ,` . , ~ ,, . ., . . ., . .. , ~ . . . . propriety of the requisition and it is generally this department which makes any changes in the number of copies to be printed. If the requisition originates in the office of an elected state officer, it is sent directly to the superintendent of printing. In either case his office acts in a clerical capacity only and does not raise any question as to the propriety of the printing required. The Department of Finance does not edit or review the subject-matter which is proposed to be printed. A monthly statement of the condition of the printing fund of each department or office is sent to the head thereof and to the director of finance. The printing allotments to the scientific divisions in Illinois for recent years are shown in Table V, on the following page.~4 To appropriation is made for the Institute for Juvenile Research, this being taken care of by the appropriation made for the Division of Criminologist. No appropriation is shown for the Division of Criminologist for the years 1919-21 because this division did not 't These figures were furnished by the superintendent of printing.

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38 FINANCIAL CONTROL OF RESEARCH exist prior to that time. These appropriations are made for the departments in lump sums and in most cases the director of each department apportions the appropriations for the divisions under his department. No figures are given for the years 1923-25 under the division of Diagnostic Laboratory and the Biological Laboratory. These divisions both come under the Department of Public Health and this department handles its appropriation as a lump sum, making no apportionment for the different divisions. Therefore, the appro- priations for these divisions can only be ascertained after the money is expended. TABLE V. Scientific unit Water Survey...... Natural History Survey. . . Geological Survey....... Psychopathic Institute. . . Criminologist ................. Diagnostic Laboratory......... Biological Laboratory......... . . . 191~21 1921-23 4,300 . 00 4,000 . 00 5, 100 . 00 6 ,000 . 00 10,800. 00 13,800. 00 900.00 1 ,250. 00 ........... 1,250. 00 1,767.53 2,998.38 20.18 402.09 1923-25 3 ,000 . 00 4, 800. 00 13,600. 00 1 ,060.00 1, 060. 00 Inquiry among the heads of scientific divisions revealed some dis- satisfaction with the delay involved in sending requisitions through the rather circuitous route which they are required to travel. It is said that it requires substantially longer to have printing done than under the former plan-when each division made its own printing con- l;racts, usually with some local printer. Examination of the printed reports of several divisions does not reveal any lowering of standards as to quality of printing and binding, and the writer did not learn of any serious complaint concerning the operation of the printing law. THE CONTROL OF TRAVEL Funds for travel are carried under separate heads in the appropria- tion acts. Expenditures for travel are subject to approval of- the department head and the Department of Finance in the same way as are other expenditures. There are special requirements for travel outside the state, which must be authorized by the governor, who usually acts upon the recommendation of the director of finance. The appropriations for travel for the four most recent biennial periods are shown in the following table:

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IN STATE GOVERNMENTS 39 TABLE VI. Appropriations for Travel Illinois 1917-192515 Scientific unit Geological Survey........... Natural History Survey. . Water Survey........ Psychopathic Institute.. . 1917-19 1919-21 1921-23 14,700 21, 100 19,300 4,600 8,000 17,700 6,000 5,000 5,000 720 3,000 3,500 1923-25 17,000 14,000 5 ,000 2, 500 15 The appropriations for travel for the Institute of Juvenile Research and Health Laboratories are not segregated. SUMMARY The Illinois plan has now been in operation for nearly eight years, cut in the middle by a change of executive leadership from Governor Lowden to Governor Small. It is not yet possible to pass judgment on the wisdom of the system as a whole in view of the varying condi- tions of political leadership which a state may be required to endure. The present administration is not one in which prevail forward-looking ideals of efficient conduct of public affairs; but it is unfair as well as unsafe to make any generalizations on the effect of such leadership on state government until it is possible to examine the records and make a careful survey of all relevant facts. So far as the conduct of scientific investigation is concerned, the writer has reached the conclusion that the Illinois plan cannot prop- erly be charged with increasing the difficulties which are to be met. It must always be borne in mind that the root of many difficulties in the prosecution of scientific work under public auspices is lack of adequate funds. If the operation of the budget system in Illinois had tended to depress the funds available, the Civil Code would properly be charged with making the conduct of scientific investigation snore hazardous; but such is not the case. The appropriations for the conduct of the scientific institutions and divisions have more than held their own; and in the case of the water survey, an apparent reduc- tion is explained as the result of the conclusion of a long and rather expensive investigation on sewage disposal. If the consolidation of divisions into departments and the subjection of the departments to the leadership of political appointees and a governor who is animated by political motives, had resulted in the replacement of scientists by others for partisan reasons, or had resulted in the attempt to use the scientific agencies as pawns on the political chessboard, then the Code would have been properly subject to criti- cism. Waiving all account of the experience of non-scientific divisions,

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40 FINANCIAL CONTROL OF RESEARCH institutions, and officials, the fact is that the scientific agencies have been almost without exception free from political interference. Man- aging officers in state hospitals have unfortunately been turned back into the group of political appointments; but they are administrative officials and not scientific investigators. The director of the Psycho- pathic Institute was apparently forced to resign for political reasons. The director of the Geological Survey resigned but for other than political reasons, and the appointment of his successor was on grounds of professional competence. Otherwise the heads of the scientific agencies in Illinois have remained unchanged since 1917. The director of the Department of Registration and Education was indicted in 1922 and convicted of granting medical licenses fraudulently, but the scientific surveys formerly under his charge were not subjected to political pressure. In short, the writer found that even under an administration domi- nated by the motives of the present Republican governor, the scientific agencies were practically untouched. They seem to be protected by their professional character, by technical aspects of their work? by their relation to the State University, and by a feeling that the people will not tolerate interference in their work. If the conduct of scientific work is found to be hampered by useless requirements of accounting and reporting or by inability to secure readily proper supplies and equipment, or by prohibitions on the publication of its results through the veto of an administrative officer, the Code would properly be charged with the responsibility therefor. The testimony of the heads of the scientific divisions, however, does not indicate that these difficulties are met with to any substantial degree. In so far as the Illinois Code transfers the power to decide, within an appropriation, what scientific investigations shall be permitted, or what scientific apparatus or supplies are needed, or what scientific results are worthy of publication, the author feels that this central financial control has overshot the mark. The responsibility for the conduct of a scientific investigation, within the limits of an appropria- tion, should rest with the scientist in charge. To date, this respon- sibility has remained with the scientific division, although it must be recognized that the machinery for transferring this responsibility to the Department of Finance is to be found in the provisions of the Code. Bibliography. The following references bear directly on the operation of the Illinois government under the Code system of 1917, but do not refer specifically to the status or operation of the scientific agencies: Laws of Illinois, 1917, p. 2, Civil Administrative Code; Laws 1919, p. 946, State Finance Act, Illinois Efficiency and Economy Committee Report, lgl5- Lowden, Frank O., Problems of Civil Administration, in 210 North American Review, 186 Lowden, F. O., Executive Responsibility in Illinois, in VIII Proceedings

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IN STATE GOVERNMENTS 41 of the Academy of Political Science, pp. 1-6, Lowden, :F. O., Reorganization in Illinois and Its Results in 113 Annals 155-160, U. S. House of Representatives Select Committee on tie Budget, Hearings on the establishment of a national budget system, 66th Congress, first session, pp. 3-33, testimony of Governor Lowden; pp. 33~7, statement of Omar H. Wright, Department of Finance Annual Report, 1917-18 to date, Ibid., Bulletins 1-5, Ibid., First, Second and Third Budgets, Report of the Directors, 1918 to date. Wright, Omar H., Development of the Budget in Illinois, in VIII Proceedings Academy of Political Science, pp. 6~68, Woodward, Charles E., The Illinois Civil Administrative Code, in VIII Proceedings of the Academy of Political Science pp. 7-17; Dodd, Walter F. and Sue H., Government in Illinois, Ch. VIII, Dodd W. F., Reorganizing State Government, in 113 Annals 161-172, Dodd, Walter F. State Reorganizations and the Federal Problem, in IX Proceedings of the Acad- emy of Political Science, pp. 142-151; Wright, Henry C., A Valuation of a System for tine' administration of State Institutions through One-Man Control as Operated in Illinois, published by N. Y. State Charities Aid Association, 1922, White Leonard D., The Status of Scientific Research in Illinois, in Bulletin No. 29 of the National Research Council; Cleveland, F. A., and Buck, E. A., The Budget and Responsible Government, pp. 148-164, Fox, Leonard P., State Budget Systems, pp. 9~95, published by Pennsylvania State Chamber of Commerce Barth, Harry A., Financial Control in the States with emphasis on control by the governor; Buck, A. E., Administrative Consolidation in State Governments in VIII National Municipal Review, p. 637, Supplement. Moley, R., State Movement for Efficiency and Economy in Municipal Re- search, No. g0; Powell, Fred W., Recent Movements for State Budget Reform in Municipal Research, No. 91; Hemenway, H. B., Organization of the State Executive in Illinois, in 6 Illinois Law Review, pp. 112-124, Fairlie, John A. The Illinois Administrative Code, in 11 American Political Science Review, pp. 31~315; Fairlie, John A., Budget Methods in Illinois, in 62 Annals, pp. 85-90 Fairlie, John A., Governmental Reorganization in Illinois, in 9 American Political Science Review, pp. 252-257; Bell, F. H., The Illinois Budget, in 62 Annals, pp. 73-84.