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It has often been argued that the business community was the origin and model of improved public financial practices in the United States, including budgeting, in the early 20th century. This point of view is not the only one in the literature, but it has been around for a long time. Early budget reformers often attributed their proposals to businessmen. Henry Bruere, one of the directors of the New York Bureau of Municipal Research, attributed some of the bureau's budget innovations to railroad financier E. H. Harriman; Frederick Cleveland, one of the most important founders and promoters of executive budgeting in the United States, claimed the methods of accounting he wanted to introduce to the public sector were already established in the management of private corporations (Cleveland, 1980).
The adoption of the city manager form of government, promoted by businessmen, often involved the advocacy and adoption of business techniques, furthering the impression that business practices were superior to those in the public sector. For example, a description of Dayton, Ohio, before and after the adoption of the city manager system includes the following:
The finance department revised traditional city purchasing and accounting practices to conform with private business practices. Purchasing was centralized and specs drawn up for all purchases. Prior to 1914, the accounting system was a check on cash receipts and disbursements only, there were no cost records for city repairs and construction work. There was no way to assure that people receiving city pay were actually doing city work. All city workers received their pay in cash, there was no definite city payroll, and property records did not exist. A central account office was created, accounting was made accrual based, with the ability to monitor appropriations, accounts receivable and accounts payable (Sealander, 1988, pp. 119-120).
Such descriptions strongly suggested that improved business practices predated improved public financial practices and constituted a model for government.
Groups of businessmen have frequently pressed government to adopt business efficiency in government (Shuman, 1992, p. 31). The first director of the Bureau of the Budget, Charles G. Dawes, was one of a number of businessmen trying to set up business practices in government in 1921; part of the thrust of that effort was to import business accounting and...