Ohio History Journal

RICHARD K. FLEISCHMAN AND

R. PENNY MARQUETTE

Chapters in Ohio Progressivism:

The Cincinnati and Dayton Bureaus

of Municipal Research and

Accounting Reform

Introduction

During the Progressive era in American history, reformers attacked

corruption, bossism, unbridled plutocracy, and what they perceived to

be the decay of traditional American morality. Following the depres-

sion of 1893, one of the most severe in the nation's history, many

reformers focused on a new common cause-the appalling condition of

the country's municipalities. Though the muckraking efforts of Jacob

Riis and Lincoln Steffens did not focus on the need for municipal

reform until after the turn of the century, the cat was definitely out of

the bag. The English observer James Bryce declared city administra-

tion America's "most conspicuous failure," while the American

educator Andrew White wrote that municipal governance in this

country was the "most corrupt in Christendom."1

A lengthy list of urban ills can be found in any of the many standard

histories of the Progressive movement. Political bosses maintained

themselves in power with the immigrant vote and the ward system of

representation. Most distressing to the Progressive was the apparent-

ly Diogenian futility of trying to find an honest city official. The

inevitable result was not only corruption, but rampant administrative

inefficiency.

Richard K. Fleischman is Associate Professor and Chairman of Accounting at John

Carroll University and R. Penny Marquette is Professor of Accounting at The University

of Akron. They would like to thank Arthur Andersen & Company for financial support

of this research.

1. Richard K. Fleischman and R. Penny Marquette, "The Origins of Public

Budgeting: Municipal Reformers During the Progressive Era," Public Budgeting &

Finance, 6 (Spring, 1986), 71.

134                                                  OHIO HISTORY

Municipal accounting and reporting were so chaotic that effective

urban governance would have been impossible even with an honest

administrator at the helm. Governmental accounting methodology was

"in swaddling clothes," observed one contributor to The Journal of

Accountancy.² The problems were glaring. There was no uniformity in

municipal accounts; different departments of the same city government

often had different bookkeeping systems; auditing of city books was

rarely done; and cost accounting methods as basic as centralized

purchasing, work standards, and control over inventories awaited

future development.³

Progressives attacked urban problems in a great variety of ways.

Much fanfare surrounded attempts at structural reform-centralization

of power in the office of mayor, direct democracy (initiative, recall,

referendum), home rule, and charter reforms (city manager and

commission forms of city government). However, the real strides

forward came as a result of the utilization of experts and the imple-

mentation of systems, what John W. Chambers has called the "new

interventionism."⁴ Cities needed better methods of accounting and

control-systems which would allow for planning, efficient administra-

tion, and oversight by a vigilant public.

The improvements in municipal record-keeping accomplished in

Cincinnati and Dayton were typical of the age. Yet, despite the high

degree of reforming activity and achievement, historians have failed to

be concerned with developments in accounting. In an early classic of

the historical literature, Richard Hofstadter highlighted the role of the

"alienated professional" classes, including lawyers, university profes-

sors, ministers, and newspaper editors.⁵ Samuel Hays subsequently

took Hofstadter to task for ignoring the contributions of engineers,

architects, and doctors.⁶ Neither considered the accountants who

played the largest role in one of the major success stories of the

Progressive era-the genesis of urban fiscal responsibility.

2. W. D. Hamman, "Efficiency in Municipal Accounting and Reporting," The

Journal of Accountancy, 17 (January, 1914), 28.

3. Edward M. Hartwell, "The Financial Reports of Municipalities with Special

Reference to the Requirements of Uniformity, "Proceedings of the National Municipal

League, 5 (1899), 127, and Frank J. Goodnow, City Government in the United States

(New York, 1904), 300-01.

4. John W. Chambers II, The Tyranny of Change: America in the Progressive Era

1900-1917 (New York, 1980).

5. Richard Hofstadter, The Age of Reform (New York, 1955), 148-64.

6. Samuel P. Hays, "The Politics of Reform in Municipal Government in the

Progressive Era," in D. M. Kennedy, ed., Progressivism: The Critical Issues (Boston,

1971), 90.

Chapters in Ohio Progressivism                              135

Modern analysis has revealed broader roots of the Progressive

movement than Hofstadter imagined. Historians such as Wiebe,

Weinstein, Huthmacher, Buenker, and Thelen have extended the base

far beyond the professional classes to a more "universal framework,"

including businessmen, consumers, taxpayers, and citizens.⁷ Local

studies have become significantly more important given these widened

parameters of Progressivism.⁸ Still, except for the work of Augustus

Cerillo on the budgeting and accounting activities of the New York

Bureau of Municipal Research, little has been done in the municipal

accounting area.⁹ This study of the activities of the Cincinnati and

Dayton Bureaus of Municipal Research will focus on this neglected

facet of urban Progressivism.

The accounting profession was in a nascent state of development

during the early Progressive era, which might explain in part this lack

of attention. Accounting in this country was imported from abroad in

great measure. Foreign creditors and stockholders of large domestic

enterprises hired leading English auditors in an effort to safeguard their

investments, particularly in the railroad industry. The presence of

these overseas experts spawned the growth of branch offices here and

the rise of a domestic profession to staff them. In 1887, the American

Association of Public Accountants came into existence, a direct

predecessor of the current practitioner organization, the American

Institute of Certified Public Accountants.

It was not until 1896 that the title "Certified Public Accountant" was

first legally recognized in this country and the first C.P.A. examination

administered. Throughout the first decade of the twentieth century,

various states passed C.P.A. legislation-Ohio in 1908. However,

these early years of the profession's development did not impact

governmental accounting which remained the province of untrained

bookkeepers. It was not until 1906 when the American Association was

invited to work with the Keep Commission investigating accounting

methods in the federal government that the public sector became a

subject of interest to the profession. There had been some earlier

associations as C.P.A.s were occasionally hired as experts to install

7. Michael H. Ebner and Eugene M. Tobin, The Age of Urban Reform (Port

Washington, New York, 1977), 3.

8. Ibid., 4-5.

9. Augustus Cerillo, Jr., "The Impact of Reform Ideology: Early Twentieth-Century

Municipal Government in New York City," in Michael H. Ebner and Eugene M. Tobin,

The Age of Urban Reform (Port Washington, New York, 1977), 82-85.

136                                             OHIO HISTORY

accounting systems in state and municipal governments, but generally

the young public accounting firms viewed governmental auditing with

disdain.

The State of Ohio has enjoyed a certain notoriety in the multitude of

historical studies of the Progressive era. In particular, two of the most

famous reform mayors, Cleveland's Thomas L. Johnson and Toledo's

Samuel "Golden Rule" Jones, were Ohio-based. Lincoln Steffens, the

consummate muckraker, brought national attention to the state with

his 1905 article in McClure's Magazine, "Ohio: A Tale of Two Cities,"

as he contrasted Johnson's Cleveland and Boss George Cox's Cincinnati

as a respective prototype and antithesis of good urban government.

Hoyt Warner has written a seemingly exhaustive, five-hundred page

book on Progressivism in Ohio, but just as with other historians,

Warner devoted little attention to municipal accounting reform.10

Consequently, the leadership role of accountants in Ohio's Progressiv-

ism requires investigation and, if the record warrants, due credit given.

Municipal Progressivism

The first decade of the twentieth century was a seminal period in the

development of a municipal accounting methodology. More sophisti-

cated techniques and a new awareness of purpose were just develop-

ing. Most of the new procedures emanated from New York City, but

contributions were also forthcoming from traditional Progressive

strongholds, including LaFollette's Wisconsin and Johnson's Cleveland

(Tom Johnson and his administration in Cleveland were in the van-

guard nationally in the areas of systems development and citizen

awareness).11 The end results were a heightened utilization of budget-

ing, a greater involvement of expert accountants and auditors in

municipal finance, and the installation of accounting systems to

guarantee control and accountability.

The National Municipal League (NML hereafter) was organized in

1894 as the capstone organization for various local and regional efforts

to improve urban governance. Its Committee on Uniform Accounting

Methods had initially written and subsequently popularized standard-

ized accounting schedules which brought the benefits of uniform

10. Hoyt L. Warner, Progressivism in Ohio, 1897-1917 (Columbus, 1964).

11. Richard K. Fleischman and R. Penny Marquette, "Municipal Accounting Reform

c. 1900: Ohio's Progressive Accountants," The Accounting Historians Journal, 14

(Spring, 1987), 89-92.

Chapters in Ohio Progressivism                           137

reporting practices to a number of state and local governments.¹² The

State of Ohio was the first to mandate common accounting forms for all

constituent municipalities, villages, and even school districts. In 1902,

a fifty year-old state scheme of grouping municipalities for legislative

purposes was declared unconstitutional, and suddenly no legal govern-

mental form existed for any Ohio municipality. Progressives hoped the

state legislature would adopt liberal municipal charters, but the results

were far different. The Ohio Code of 1902 was extremely disappoint-

ing, but the accounting provisions were encouraging. In a reactionary

attempt to maintain control, the state government provided a great

service in the area of municipal accountability by requiring standard-

ized financial reporting. The clear result was Progressivism but for all

the wrong reasons.

Perhaps the most important antecedent of the Cincinnati and Dayton

Bureaus of Municipal Research (founded in 1909 and 1912, respective-

ly) was the organization of the New York Bureau of Municipal

Research (NYB hereafter) in 1906. The accountants and political

scientists of this agency, acting as advisors to New York City Comp-

troller Herman A. Metz, revolutionized municipal governance in the

country's largest city. More importantly, the NYB did not hide its light

under a bushel. Reports on the success of the new techniques were

distributed to state and municipal governments the length and breadth

of the country, thanks to the resources of a fund the independently

wealthy Metz endowed. Municipal experts associated with the NYB

were available for hire to conduct surveys for municipal governments

anxious to reform their systems. The NYB organized the endowment

of the Training School of Public Service, a postgraduate program in

municipal administration. Graduates of this institution went forth from

New York City to become leaders in the municipal reform movement.

The success of the NYB spawned a number of similar efforts in many

major American cities. Chester E. Rightor wrote an article on these

research bureaus which appeared in the 1916 National Municipal

Review, the official publication of the NML. At the end of his piece

Rightor listed twenty-three such agencies functioning in the United

States-five of these (Akron, Cincinnati, Cleveland, Columbus, and

Dayton) were located in Ohio.¹³ It is within this context of significant

12. Richard K. Fleischman, "Foundation of the National Municipal League," The

Journal of Accountancy, 163 (May, 1989), 297-98.

13. Chester E. Rightor, "Recent Progress in Municipal Budgets and Accounts,"

National Municipal Review, (1916), 637.

138                                            OHIO HISTORY

municipal Progressive activity in Ohio that we now focus on the

activities of the Cincinnati and Dayton Bureaus of Municipal Research.

The Cincinnati Bureau of Municipal Research

By a large margin the most active and productive research agency in

the State of Ohio was the Cincinnati Bureau of Municipal Research

(CBMR hereafter). Perhaps its success was in part explained by the

fact that municipal governance was at such a low ebb under Boss

George Cox that there was more to accomplish. It has even been

suggested that the CBMR was initially established for the purpose of

gathering evidence to overthrow the machine.¹⁴ However, the Bureau

delineated for itself a nobler purpose-to study the methods of city

government, to recommend improvements in methodology, to promote

efficiency and economy, and to furnish the facts necessary for an

informed citizenry. In its inaugural statement the CBMR recognized its

role in the betterment of municipal accounting, "In many respects the

work of the Bureau resembles that of expert accountants who are

summoned by business men to examine their methods and point out

where savings can be made or better results secured."¹⁵

The CBMR was founded in 1909 as a cooperative effort of a

half-dozen organizations including the City Club and the Chamber of

Commerce. Rufus E. Miles, formerly of the NYB, was recruited as

director, with another New York trained colleague, F. R. Leach, as

associate director and head of accounting-related operations. The staff

was composed of faculty and students from the University of

Cincinnati's political science department. It is no coincidence that the

birth of the CBMR corresponded to the decision of the NML to hold its

annual convention in the Queen City that very year. The NML

traditionally chose its venues carefully and would never have come but

for the confidence that the reign of Cox was over.

The initial focus of the CBMR was the Parks Department whose

accounting was in an absolute shambles. A single-entry system was in

effect which offered no hope for accountability. Expense statements

were totally unsupported by documentation, and entries to the various

funds were so confused as to defy sorting out. Proper cost accounting

techniques were totally absent. There was no inspection of supplies, no

knowledge of quantities, and no way to check for waste or pilferage.

14. Norman N. Gill, Municipal Research Bureaus (Washington, 1944), 17.

15. Cincinnati Bureau of Municipal Research, Annual Report (Cincinnati, 1910), 8.

Chapters in Ohio Progressivism                           139

Small lot purchasing was so rampant that in 1909 the average order for

a $25,000 supplies and materials budget was $30. All of these defects

were outlined in a report the CBMR prepared for the Parks Depart-

ment. By the next year the Parks Department had reacted positively to

the suggestions, and there was in place a modern double-entry account-

ing system and cost accounting controls which the Bureau called

similar to a first class business corporation and to the system in place

in New York City.16

Over the course of the next seven years, the CBMR worked closely

with nearly every department in city government. The major focus was

on improved record-keeping and revamped accounting methods. De-

partments had differing requirements for accurate statistics, but the

bottom line was "strict accountability." The city came to be able to

depend on departmental reports for planning and control purposes.

The CBMR also dealt extensively with the departments in introduc-

ing cost accounting methods. The Bureau sent a letter to Mayor

Schwab in 1911 requesting a Committee on Economy and Efficiency

whose agenda would include a feasibility study of work standards, the

utilization of monthly cost statements, heightened supplies control and

inspection, and the introduction of purchase price standards.¹⁷ The

CBMR not only lobbied successfully for the implementation of cost

accounting generally, but also accepted credit for improved cost

methods in seven different city departments. The monetary impact was

greatest in the Purchasing Department where the Bureau estimated

annual savings of $70,000 in supply procurement alone. The CBMR in

its 1913 report noted proudly, "The Purchasing Department has

already reached a state of efficiency which is attracting attention

outside of Cincinnati. It has not only proved its ability to save money

for this city, but it is exercising influence over other cities."¹⁸ The

Bureau bragged further in a pamphlet distributed in 1913, "Cincinnati

will soon be one of the few cities in the country where accurate figures

as to cost are obtainable."

The Bureau also worked with the City Auditor in an attempt to

overhaul the accounting methods for the entire city. In particular, the

Bureau identified three major problems: the single-entry accounting

system in use; the absence of control documentation over assets other

than cash; and an over-reliance upon an accounting system based on

cash flows rather than the actual earning of revenues and the incurring

16. Ibid., 11-13.

17. CBMR, Annual Report (Cincinnati, 1911), 10-11.

18. CBMR, Annual Report (Cincinnati, 1913), 7-8.

140                                              OHIO HISTORY

of expenses.¹⁹ Corrections to the system came haltingly, but with the

coming of home rule a new general accounting system became effective

on September 1, 1913. The new method featured double-entry account-

ing and monthly expense and revenue reports. Rightor concluded that

Cincinnati was one of the few cities in the country with complete

control over its assets and liabilities.²⁰

Another major focus of the Bureau was budget. In its first year of

operation the Bureau urged on Mayor Schwab three suggestions in the

budget area: (1) a standardized, printed form to be circulated to all city

departments for estimating purposes (showing past and present expen-

ditures); (2) a policy that these estimates be made public; and (3) that

public hearings be held on them.²¹ A reluctant Schwab accepted the

uniform blank of the Bureau's design and also acquiesced in the

hearings. The Times-Star called the 1911 hearing "the most represen-

tative body of citizenship seen in Cincinnati in many years."²² The

CBMR rated the city's "budget methods among the best in the

country.^"23 The budget did not lack of precision. The 1913 edition had

a line item of $9,794.67 to cover the cost of the new general accounting

system implemented that year.²⁴

Another idea imported from the NYB was the municipal budget

exhibit concept. Following the success of expositions held in New

York in 1908 and 1910, the innovation spread to other cities. In 1912,

Lent Upson was hired by Mayor Hunt of Cincinnati and the CBMR to

organize a municipal exhibition. The immediate cause was the need of

the administration to secure voter approval to levy taxes beyond the

one percent of assessed valuation as provided in Ohio's Smith Law.

The Bureau, on the other hand, was motivated by the nobler goal of

citizen education.

The exhibit was advertised extensively. Speeches were made before

every organization whose members were willing to invite the promot-

ers. Advertising appeared in the monthly billings of merchants, water

bills, and streetcars. Clergymen made announcements from their

pulpits.²⁵ The Cincinnati press, particularly the Enquirer, was respon-

sive to the cause. The end result was the largest municipal exhibit held

19. Ibid., 5-7.

20. Rightor, "Recent Progress . . .," 631.

21. CBMR, Annual Report (1910), 15-16.

22. Rufus E. Miles, "The Cincinnati Bureau of Municipal Research," in The Annals:

Efficiency in City Government (Philadelphia, 1912), 267.

23. CBMR, untitled pamphlet distributed at 1913 Budget Exhibit.

24. Zane L. Miller, Boss Cox's Cincinnati (New York, 1968), 215.

25. Lent D. Upson, Practice of Municipal Administration (New York, 1926), 67.

Chapters in Ohio Progressivism                           141

outside New York City. Estimates of attendance varied from 109,000 to

150,000.26 The 1912 exhibit was so successful that another was

attempted the next year with even greater crowds. The Enquirer

estimated the 1913 numbers at 180,000. Incidentally, Cincinnati voters

approved the tax levy by a two to one majority, a remarkable

achievement in itself.

The CBMR had an enviable track record of accomplishments during

its early years. However, as there came to be increasingly less to

reform, contributions to the Bureau declined. Pledges plummeted from

a high point of $21,627 in 1913 to a meager $9,330 in 1915.27 The

Cincinnati Bureau went out of existence during World War I.

The Dayton Bureau of Municipal Research

The Dayton Bureau of Municipal Research (DBMR hereafter) was

born out of the home rule legislation of 1912 that accorded voters in all

Ohio's municipalities the right to select one of three governmental

structures prescribed by the state legislature. The founding force

behind the Dayton Bureau, as well as its sole financial support, was

John H. Patterson, President of National Cash Register. Patterson as

early as 1896 had advocated the introduction of business methods into

municipal government and the education of the citizenry. He felt the

city was "a business enterprise whose shareholders are the people."28

Patterson interviewed several candidates for bureau director from the

NYB's Training School of Public Service. The position was given to

Dr. Lent Upson, an exceptionally active and prolific municipal re-

searcher, who was to go on to occupy a similar post in Detroit after

1915. Upson was succeeded in turn by Chester E. Rightor, another

distinguished director, who wrote an excellent book on Dayton's city

manager system and who, with A. E. Buck of the NYB, reported for a

decade to the National Municipal Review on local and state govern-

ment advances in the budget-making process.

Like every municipality in Ohio, Dayton found itself with choices

following home rule in September, 1912. The DBMR urged a revamped

structure of government. Many of the problems with the old system

were accounting-related; i.e., excessive expenditures, absence of

quality specifications for contract-holders, and no cost or work stan-

26. Cincinnati Enquirer, October 1-15, 1912, passim.

27. CBMR, Annual Report (1913), 27 and CBMR, Annual Report (Cincinnati, 1915),

11.

28. Chester E. Rightor, City Manager in Dayton (New York, 1919), 2.

Chapters in Ohio Progressivism                           143

did a survey of the Department of Public Safety. The DBMR partici-

pated in the preparation and publication of municipal budgets through-

out its short history. The Bureau designed the item classification

format of the budgets and generated citizen input through public

hearings. The DBMR called the Dayton budget model "one of the most

complete budgets found in any city."³⁰

One of the parameters of municipal Progressivism was the increased

participation of experts in city governance. Henry M. Waite, Dayton's

first city manager, was influenced by the DBMR to utilize specialists.

In particular, he appointed a local public accountant as his director of

finance. The new official took steps to institute controls over appro-

priations which insured greater accountability. No less an astute

observer of the urban scene than Frederic Howe, a trusted minion of

Tom Johnson, was impressed with the business methods and expert

supervision in Dayton.31

The DBMR, in cooperation with the Cincinnati Bureau, installed a

new accounting system for the Department of Finance. The salient

feature of the new system was improved control over the financial

records. Previous to 1914, the city had depended solely on the annual

State Auditor's investigation. Afterwards the city retained a C.P.A.

firm to audit the accounts continuously. Rightor called the new

accounting system the most modern of any city government by virtue

of its absolute control over public funds.³² In 1914, the city at the

Bureau's behest instituted a central purchasing system that included

standardization of costs and specifications.

A municipal exhibit was also conducted in Dayton in October 1915

by the DBMR. As was the case in Cincinnati, the city fathers had a

vested interest-the need for a two-thirds majority for passage of a one

million dollar bond issue. Fifty thousand citizens attended the exhibit

during its ten-day run, and the bond issue subsequently passed.

A testimony to the success of the DBMR and the city manager

innovation was the decision of the NML to hold its 1915 annual

convention in Dayton. Never before had such a small city venue been

selected. Like its Cincinnati counterpart the DBMR went out of

existence during the war.

30. Rightor, "Recent Progress .. .," 644.

31. Frederic C. Howe, The Modern City and Its Problems (College Park, Maryland,

1969), 116.

32. New York Bureau of Municipal Research, Citizen Agencies for Research in

Government (New York, 1916), 54.

144                                               OHIO HISTORY

Conclusion

The Cincinnati and Dayton Bureaus of Municipal Research were

typical of the substantial number of reforming groups that failed to

survive a rechanneling of energies precipitated by America's entry into

World War I. However, it is not to be thought that the disappearance

of these civic organizations signaled the end of municipal Progressiv-

ism in the two Ohio cities. Rather, one does observe in the 1920s, as

Blaine Brownell has pointed out, an "intensification of the quest for

efficiency and social control" at the expense of political democracy.³³

The Cincinnati and Dayton bureaus were not reborn after the war

because the job had been done and the pressing problems solved. City

officials in the 1920s saw the value in utilizing trained accountants to do

the necessary record-keeping and auditing tasks. The systems required

for adequate planning and fiscal control were by then in place, thanks

to the earlier efforts and successes of the municipal research bureaus.

33. Blaine A. Brownell, "Interpretations of Twentieth Century Urban Progressive

Reform," in David R. Colburn and George E. Pozzetta, eds., Reform and Reformers in

The Progressive Era (Westport, Connecticut, 1983), 17.