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institution under the control and management of this Board; by Seetion 22, Chapter 84, of the General Laws of the Second Called Session of the Thirty-sixth Legislature, the powers and duties of the then existing State Printing Board were vested in the State Board of Control, and by Chapter 56 of the General Laws of the Third Called Session of the Thirty-sixth Legislature the Northwest Texas Insane Asylum was placed under the control of this Board.
The general duties of the State Board of Control contemplate the administration of the laws relating to the various offices, departments, boards and institutions consolidated under its supervision and control; and, excepting perishable goods, technical instruments and books, it is the duty of the Board to purchase all supplies for all of the departments of the State Government, all State schools and all other State institutions, except the State Prison System.
According to a clause appearing in the caption of the Board of Control Act, the evident intention of the author of the Act was to charge this Board with the duty of auditing all departments and institutions of the State Government; but the Attorney General has held in an official opinion, that sufficient authority has not been delegated in the law to warrant the exercise of such power. Therefore, the activities of the auditing department have been confined to the institutions coming under the general supervision and control of this Board.
The head of each department of the State Government, institution and school, and the State Prison System, for which appropriations are made, shall submit to the Board, not later than September fifteenth, next preceding the regular biennial session of the Legislature, a general itemized account of all expenditures for the preceding two fiscal years, accompanied with an itemized estimate of the biennial appropriation to be requested of the following Legislature. The Board is thereupon required to investigate and consider such items, to conduct hearings and to obtain information from every available source, and through its auditors and examiners, relative to the legitimacy and necessity of such expenditures and requests, and then to prepare an appropriation budget for the Legislature.
OBJECTS OF BOARD. The object sought primarily in the creation of the State Board of Control, was the development of more efficient business methods in the management of the various State institutions and the realizing of a great saving by competitive buying in large quantities in the open market. This is founded upon the notion that many separate State institutions cannot be run as cheaply under separate financial managements as if their business control were under the direction of a single central board. The principle of administering large business units under centralized control for the purpose of effecting efficiency and economy, it was urged, applies with equal force in this particular phase of the business of Government. It was thought, also, that a board, required to devote its whole time to the affairs of the State's institutions, would exercise more careful supervision than boards whose members were preoccupied with other affairs and held only occasional meetings to consider the institutions' needs.
FIRST ANNUAL REPORT OF STATE BOARD OF CONTROL.
If the Board of Control can demonstrate the development of greater efficiency and economy on the business side of the management of our State institutions, while keeping their professional side up to standard, it will doubtless justify the expectations which led to its creation and commend itself to the tax-paying public. While it is realized that, to many minds, the supreme test of merit of this Board in the administrative machinery of the State Government is going to be fiscal efficiency and the saving of money to the tax payers, the members of your Board are not unmindful of the value and importance of the professional side of our eleemosynary institutions and their problems. Mere fiscal economy may avail little or nothing if the professional side of these institutions be neglected and their number of inmates be allowed to increase from year to year. It is fundamentally necessary, therefore, to seek out the causes of the State's eleemosynary charges and to devise preventive methods and scientific treatment of inmates in order to lessen this burden on the State.
But a right understanding of the State's fiscal resources is the keystone to both the administrative and supervisory structures of its institutions. It is human nature that the better a man knows how much money he is going to have to spend, the more he will get for it. This applies to public institutions as well as to individuals. Until it is ascertained how much money man be raised, the expenditures of the State Government cannot be intelligently apportioned.
Just as in every department store there is a responsible form of administrative government which requires every employe to make an accounting to some one higher in authority, so that no one department is left to the administration of a group of individuals with divided authority and responsibility, in like manner your Board of Control has instituted a centralized system of accounting into which is articulated the accounting of the entire scope of expenditures of each institution and department over which this Board has direct administrative control. This is true as to the other institutions and departments only in the accounting for supplies for which this Board acts as the purchasing agency.
MERITS OF ORGANIZATION. This form of organization makes it possible to discover if one department or institution is performing the service that should be done by another, or if there is a duplication or overlapping of duties; it makes possible a definite program for each, with an appropriation commensurate with the work it has to do; it avoids wasteful competition among institutions for appropriations in excess of a fair and just apportionment to each, or in excess of their needs; it helps to correct the feeling in a locality where there is a State institution that such institution exists for the advantage of that particular locality; and the centralized purchasing agency makes possible a comparative study of the needs of the various institutions and departments to the end that detection of wasteful or unscientific consumption of supplies may be made and corrected and that there may be a standardization of purchases. It will enable your Board to stabilize and standardize salaries in those institutions, at least, over which it has direct control.
To facilitate the performance of its duties, the Board is authorized
to combine under it such divisions and subdivisions of its work as may be necessary to effectuate the purposes of the Act creating it.
METHODS. The establishment of a closer relationship between the purchasing and receiving agencies of the State has practically eliminated the possibility of substituting articles of inferior value in making deliveries, a practice which had obtained to an alarming extent in the past and resulted in great loss to the State. The uniform policy of refusing to accept such substitutions and the exaction of adequate refunds where it is conclusively shown to have been done in the past, are rapidly contributing toward the complete destruction of this very expensive and reprehensible annoyance.
The installation of a system providing for the careful checking of all bills before they are approved for payment by the Comptroller is proving to be of great value. This department not only applies all contracts, checking the terms and conditions of the original purchases, but carefully verifies the extensions and footings on each invoice, the result of which has been the location of numerous mistakes, running from small sums to large amounts, most of which, strange to say, have been against the State. This system also prevents the possibility of duplication and the approval of the same bill a second time for payment, an oversight from which the departments and institutions have not been altogether free in the past.
Through the division of public printing, the Board handles all of the stationery and printing requirements of the State, aggregating about $400,000 annually, including printing of the first, second, third and fourth classes, and audits and approves for payment all bills for stationery and printing to any and all departments and institutions of the State Government.
In handling the new contracts, the Board materially widened competition by permitting any citizen to bid on any part of the State's requirements down to a single item for any one institution, which greatly stimulated interest in bidding, and will result in considerable saving and improved service to the State.
Paper stock for institutions operating their own printing plants, blank paper and envelopes in quantities above ten thousand lots are now being purchased in the open market direct from jobbers at wholesale prices, which has also resulted in a large saving.
The State uses annually four carloads of tags for the Feed Control division of the Texas Experiment Station at the Agricultural and Mechanical College, which are now being purchased in the open market at a saving of about $1500 per car over the best competitive bid received at the time the contracts were being awarded, all bids on this particular item having been rejected.
The Board was particularly fortunate in letting the contract for printing of the second class, which includes all blank forms, and is the largest item in the entire printing requirement. This benefit largely accrued from a change in the former plan, from a level or unit rate on cach job without regard to quantity to a definite figure based on
FIRST ANNUAL REPORT OF STATE BOARD OF CONTROL.
actual operations, thus shifting the gain from doubling forms on large runs from the contractor to the State.
On class five printing, the stationery contract, it is conservatively estimated that a saving of $35,000 to $50,000 a year has been made by adopting the plan of permitting bids on any item or group of items instead of following the method heretofore obtaining, which considered no bid covering less than the entire requirement.
Owing to the marked increase in prices of both labor and material, some items in the new schedules are on a higher basis; but the entire printing and stationery contract will result in a very substantial saving to the State.
All purchases of supplies are made on a competitive basis, and each bidder is required to submit an affidavit, declaring that he has not violated the anti-trust laws of the State within the past twelve months and that he has not communicated his bid to any other competitor.
Under the law the Board is authorized to enter into contracts for State supplies, covering a period of one year, which procedure has been generally followed by former Purchasing Agents. The law, however, permits shorter term contracts, even to the extent of a rejection of all bids and allowing open market purchases until such time as, in the judgment of the Board, satisfactory term contracts may be made.
In the face of the extraordinary conditions which have prevailed, it is of no particular credit to any one to undertake to forecast the future; but the Board, consistently believing in the theory that prices would decline, at the time of making the awards last spring, entered into very few annual contracts, and these covered only such lines as must necessarily respond very slowly to a declining market and are difficult to purchase satisfactorily in small quantities, drugs being the principal item of this character.
The contracts for groceries and dry goods were awarded on a three months' basis, and the wisdom of such action was fully demonstrated when the Board found that contracts for the second three months' supplies of these goods could be made at prices averaging about 38 per cent lower than those submitted in the original bids. These goods are now being purchased daily in the open market, a plan which entails a vast amount of extra labor; but until conditions become more nearly normal it will save the State large sums of money.
All bids on flour, corn meal, sugar and other staple articles used in large quantities were rejected, and have been purchased in the open market in as small quantities as good business methods would sanction, each succeeding purchase being made at greatly reduced prices, and the enormous saving to the State over the annual contract plan would be difficult to estimate. For example, the lowest bid received on sugar at the designated time for making the annual contracts was $21.70 per hundred pounds, and it has since been purchased for less than $10 per hundred
The purchases made by your Board will approximate $1,000,000 annuallly.
Through the purchasing division, and throughout the entire operations of the Board, the supreme effort has been to make its work constructive and not destructive. It has simply endeavored to apply to the affairs of the State Government the recognized business principles essential to the success of private enterprises. In its effort to curtail expenditures, there has been no disposition on the part of your Board to impair efficiency or throttle proper and legitimate activity and development. The aim has been to make every dollar perform its full American duty, and to confine all purchases to the real requirements of the departments and institutions rather than measure them by the largeness of the appropriations, which, unfortunately, has too frequently been the rule in the past.
ACCOUNTING AND REPORTS. As stated above, a uniform system of bookkeeping and accounting has been installed throughout the institutions which are under the general supervision and control of this Board, which articulates with the general record kept in this office, and they are regularly audited from time to time. A careful inventory of the stock of merchandise at each institution has been taken, which, with all subsequent purchases, has been duly charged on the books in this office, and the storekeepers are regularly credited with all goods and supplies dispensed. The wisdom of this system and the benefits derived from it are so readily apparent that no comment should be necessary.
A system of reports has also been inaugurated, which each institution is required to file with this Board promptly at the close of each month. There are six of these reports, namely: Report of Live Stock, Dairy Report, Movement of Population, Report of Local Revenues, Farm and Garden Report, and Statement of Appropriations Expended and Unexpended. These reports cover the entire range of activities during the month, and enable this office to compile readily and accurately a comprehensive summary as well as any comparative and consolidated data that may be desired.
Through the splendid co-operation of the departments and institutions other than those under the supervision of this Board, inventories have been extended to include all property of every kind belonging to the State. A detailed classification, showing the estimated value of each item, appears elsewhere in this report, and represents the first complete inventory of the State's property ever compiled, so far as your Board is able to ascertain.
The Board will submit to the Thirty-seventh Legislature, with a view to obtaining an official expression upon the subject of fire insurance, accurate data showing the amount required to pay the annual premiums on fire insurance policies covering the full insurable value of all property belonging to the State, together with a careful estimate of the value of all property destroyed by fire during the last five years. Owing to the wide distribution of the property belonging to the State and its consequent freedom from the hazard of any one conflagration, it has been frequently suggested that the State can well afford to carry its own fire risk. A consideration of the data suggested should enable the Legislature to determine the question and to direct the proper official accordingly, thus relieving all parties concerned of further responsibility in connection with this matter.