CHAPTER VIII

ACCOUNTING AND STATISTICAL INNOVATIONS

TH

HE transition from private to federal control, the separation of the accounts as between the corporation and the Government, and the provisions of the contract between the Director General and the railroad companies, necessitated a great deal of additional accounting work. Shortly after federal control began, and before the separation was made between federal and corporate accounting forces, the railroads were instructed to keep two sets of accounts—one reflecting federal transactions, the other reflecting the affairs of the railroad company.' When the federal and corporate forces were split, the former was concerned only with the federal accounts; but very heavy additional burdens were placed upon the accounting department by the special accounts and statistics required by the Director General, the Division of Accounting, the Division of Capital Expenditures, and other departments of the Administration. In July, came still further burdens, from the order requiring the standardization of operating statistics in greater detail than had been customary on the majority of roads.

As an offset to these additional burdens, several innovations were ordered which had the effect

*General Order No. 17, April 3, 1918.

of reducing the normal accounting requirements pertaining to inter-road transactions. Since the policies of unification, diversion of traffic, pooling of freight cars, and many other practises tended to destroy the normal relation of operating expenses to operating revenues of an individual road, several accounting short-cuts were authorized. While the diversion of traffic and the unification of facilities and equipment might distort the records of performance and earnings of an individual railroad, the Government was primarily interested in the net results for all of the roads as a national system. It was not particularly interested in the absolute accuracy of the accounts of an individual road as a unit or in its relation with other roads. It will be shown later that the operating efficiency of the individual units could be determined by the new system of operating statistics.

The first step in the simplification of revenue accounting was the adoption of the universal interline waybill. The plan provided that all freight moving as through shipments over the rails of two or more railroads was to be billed through from point of origin to destination regardless of the absence of joint rates. This method eliminated a great deal of re-billing at junction points, reduced the delay to freight on that account, and simplified revenue accounting.

* General Order No. 11; March 16, 1918.

Then came the instructions* to discontinue the technical and arithmetical checking of bills as between roads in federal control. This change was meant to apply particularly to the tens of thousands of inter-road bills each month for freight claims, car repairs, equipment rents, joint facilities and the like, and the statements pertaining to the settlement of joint revenues on interline freight and passenger traffic. The billing road was enjoined to use care in the preparation of the bill and the debtor road was obliged to assume its technical and arithmetical accuracy.

The next step** provided simplified bases for the apportionment of interline freight revenue. Instead of continuing the former plan under which each road determined from the waybill records the balance due it from each road and the amount of its indebtedness to each road, the debit or credit balances as between roads were to be based on what were termed "road to road per cents." These per cents were to be computed for each route from the records of 1917. In effect the new plan provided for a division of joint freight revenues as between carriers in the same proportions that such revenues on interline freight traffic were divided in the year preceding federal control. Later on a "short cut" was authorized for the simplification of interline passenger revenues.†

A further reduction in accounting work was authorized on June 12‡ when accounting for freight

*General Order No. 20, April 22, 1918. *General Order No. 21, April 22, 1918. +General Order No. 32, June 29, 1918.

General Order No. 31, June 12, 1918.

car hire (per diem) was discontinued as between roads in federal control. Simplified bases were provided also in the same order for the making of bills for joint facilities, and under date of October 5 a plan for reducing the accounting work connected with the exchange of bills for repairs to equipment was made effective.*

Under the rules of the Interstate Commerce Commission the accounting practises of the railroads have been standardized for many years. To a very limited extent this standardization applied to the statistics of performance-locomotive-miles, train-miles, car-miles, ton-miles, and passenger-miles. But no steps had been taken to bring about uniformity in the field of operating statistics. Each road had gone its own way in developing the reports which were designed to show the efficiency of the various operating activities and to reflect unit costs.

The need for uniformity in this field as well as in the field of accounting was realized when an attempt was made during the first three months of federal control to put together a composite picture of operating results from the large number of special reports which had been sent to the Director General at his request. There was so much diversity in the content of the reports and in the bases used that it was impracticable so to combine the figures as to show the results for a region or for the railroads as a whole.

To meet the needs an Operating Statistics Section was organized early in May and, effective *General Order No. 47, October 5, 1918.

August 1, a system of standardized operating statistics was promulgated. While the new plan was designed primarily to supply the central administration and the regional directors with the necessary information for each road and each region, the forms were drawn so as to be equally valuable for intra-railroad purposes. As a result the complete statistical indices of performance and operating efficiency were made available to the operating officers of all railroads and to the public, as well as to the Railroad Administration, without the former uncertainties and qualifications as to bases and methods. The operating officers were furnished with much more information than they had ever before had concerning neighboring roads with which they could fairly make comparisons, and in the majority of cases the new reports gave them more information concerning their own roads than theretofore had been available to them.*

*See Annals of the American Academy of Political and Social Science, November, 1919, "The Accomplishments of the United States Railroad Administration in Unifying and Standardizing the Statistics of Operation," by present writer. The article is reprinted in full in the Appendix.