The University of Michigan, an encyclopedic survey ... Wilfred B. Shaw, editor.
University of Michigan.

THE BUSINESS OFFICE

The business administration of the University of Michigan from 1842 to 1900, if we are to judge by the volume of business of which there is a record, was relatively simple when compared with the University of 1940. For a number of years after the University was established in Ann Arbor, the major items of expenditure consisted of salaries of professors, books for the library, and janitor service. It was not until the first chemical laboratory was built in 1856 that any considerable amount was required for laboratory supplies.

The budget of the University was very simple until instruction in the natural sciences was introduced. The buildings were heated by wood stoves in those days, and the earlier financial reports include expenditures for wood. There was no need for full-time business officers, and although the records indicate that a treasurer Page  270was appointed at one of the first meetings of the Board of Regents, this was a part-time position. The early minutes mention the offices of treasurer and secretary, the secretary being understood to be the secretary of the Regents (see Part I: Regents). Later, the title of "steward," indicating more or less the function of a business manager, was introduced. However, the duties of the steward did not involve the centralization of all the business functions of the University as they are now organized under the control of the vice-president and secretary in charge of business and finance.

One of the early budgets is given here-with to illustrate the expenditures of the University for one year.

TABLE IUniversity of Michigan Budget, 1854-55
Salaries of president and professors $16,900
Traveling expenses of professor of astronomy from Berlin to Ann Arbor 200
Secretary, superintendent and librarian 500
Treasurer, including traveling expenses. 120
Insurance on buildings 345
Expenses of Regents and of visitors appointed by superintendent of public instruction 400
Interest on consolidated warrant 350
Library and printing 1,200
Philosophical apparatus 500
Grounds, buildings, and contingencies, including completion of Medical College 2,500
$23,015

In addition to the above, certain expenses of the Library and Medical Departments were paid out of fees, rents, etc.

The janitors, according to tradition, worked only during the winter months, keeping the buildings clean and providing wood for the stoves. One of the janitors of the 1880's, who is still living, has said that during the winter months he served as a janitor and during the summer as a painter. It is probable that it was the general practice in the early days of the University to make repairs to buildings during the summer, using at least part of the time of those who served as janitors during the winter. It should be remembered that the University was closed during the summer, for the summer session, as now constituted, had not yet been organized. As late as 1897 there was agitation to keep the University Hospital open during the summer, and as a result the legislature appropriated the sum of $3,000 for the year 1897-98 toward this purpose. This act was in effect until the year 1919-20, with annual appropriations throughout this period.

As the University plant increased in size, the problems of operation and maintenance of buildings increased. Gradually, departments were developed for the various mechanical trades, and the budgets of the University indicate that appropriations were made for the paint, plumbing, and electrical shops, and for the care of teams. A superintendent of buildings and grounds (Professor Silas H. Douglass) had been appointed in 1847, but the position was eventually discontinued, and the idea of centralizing the control of the entire physical plant under a single individual was not put into effect until the year 1910, when James Harmon Marks ('08e) was appointed Superintendent of Buildings and Grounds. While it is possible that during the early days a single individual may have supervised the entire plant, it had gradually developed that janitors would report to various officers situated in the buildings where they worked. After the centralized control of the physical plant was established in 1910 the entire janitor service became a part of the Department of Buildings and Grounds (see Part VIII: Department of Buildings and Grounds).

The first separate heating plant, constructed in 1879, was erected directly Page  271east of Mason Hall. Some of the adjacent buildings were heated from this plant, and it was the only heating plant until the introduction of electricity and the expansion of the campus made it necessary to construct a central heating and power plant in 1894. This plant was built near the West Engineering Building and was situated in the building now being used as the Reserve Officers' Training Corps headquarters. The operation of this plant was placed directly in charge of the Department of Engineering. After the appointment of Mr. Marks as Superintendent of Buildings and Grounds the various plumbing, painting, and electrical shops, scattered over the campus, were centralized in a new structure adjacent to the heating and power plant on Washington Street. Both of these buildings were completed in 1914 and were placed under the Department of Buildings and Grounds. For many years the Washington Street power plant furnished heat and electricity solely to the main University campus. As a part of the large building program during the Burton administration (1920-25) a new tunnel system, including an extension to the then new University Hospital Building, was constructed, and since then all buildings on the main campus, including the Hospital and dormitories, have been furnished with heat and light by the Washington Street plant. For the past several years electricity has been furnished from the main power plant to some outlying units such as the athletic buildings. After the resignation of Mr. Marks as Superintendent in 1916, Lyman Russell Flook ('13e) served for two years in that capacity. He was followed in 1918 by Edward Charles Pardon ('12e), the present Superintendent.

In the Business Office proper, more or less centralization of financial matters gradually developed, but such centralization was not completely effected until shortly after the year 1900. The office of the secretary of the University gradually developed into the central business office, although the treasurer retained some of those functions ordinarily handled in a central business office. Early in the history of the University the plan of financial organization prevailing in state and municipal governments was followed. This plan provided for a treasurer and a secretary, each serving as a check on the other, in the same way that state auditors and treasurers, county clerks and treasurers, or city officers check each other. This was quite natural, for accounting technique, particularly in our educational institutions, had not developed to a very high point in this country, and modern accounting systems with their checks and balances were unknown. Therefore, in considering the development of the Business Office of the University, it is necessary to include both the secretary's and the treasurer's offices. Although the functions of the two officers were not clearly defined, the treasurer's duties were largely confined to collecting money and making disbursements, whereas the secretary kept the more detailed accounts of receipts and disbursements.

This essentially simple procedure was maintained under James Henry Wade, Secretary of the University from 1883 to 1908, and Harrison Soule, Treasurer during approximately the same period. Both of these men were of the highest character. The inadequate system of accounting, however, which involved the keeping of a special petty cash fund which was not regularly entered upon the University's books, and the practice of the Secretary of using University coal in his home, according to a custom of long standing, led to strong criticisms of the Secretary by the attorney general of the state. This brought about the resignation of the Secretary and the payment Page  272on his part for some of the coal used and a reimbursement of the special fund, which had been used for purposes which he had deemed necessary but had not reported to the auditor-general. The whole discussion led to a reorganization of the business administration of the University and to the appointment of Shirley Wheeler Smith ('97, A.M. '00) in 1908 as Secretary of the University.

For a great many years the budget of the University consisted principally of salaries of professors. With the establishment of many new departments of instruction and the rapid expansion of the plant, the budget became more and more complicated, but there was little effort to simplify it until shortly after 1900, when a new procedure and new forms for preparation of the budget were instituted. The summaries of budgets for 1907-8 and 1911-12 as printed in the Regents' Proceedings show a marked change in form and organization.

After the year 1900, with the rapid development of instruction in the sciences and in the various branches of engineering, the business functions of the larger universities expanded enormously throughout the United States, and the problem of efficient business management of all our larger institutions became more and more complicated. It was evident that centralized financial control was an absolute necessity if budgets were not to be overdrawn and if bills were to be paid promptly.

The appointment of a new superintendent of buildings and grounds in 1910, alluded to previously, brought under central control the various activities connected with the operation and maintenance of buildings and grounds, including the operation of the central heating and power plant. The reorganization of the budget and the establishment of a central purchasing department at about the same time marks the real beginning of centralized accounting and business control. A full-time purchasing agent was appointed in 1911, and on February 1, 1914, John C. Christensen (Kans. State Agricultural Coll. '94) came to the University as Assistant Secretary.

Since that time, by centralizing in the Secretary's Office accounting control of all University departments, the University business administration gradually has been extended to include the entire institution. The purchasing procedure was reorganized, and eventually all purchase orders, including orders for books, went out over the signature of the purchasing agent. The accounting system also was reorganized, and an effective method of budget control was instituted in the Secretary's Office. In 1927, in recognition of these changes, Mr. Smith's title was changed to Secretary and Business Manager. In the previous summer, Herbert Gale Watkins ('12) had been appointed Assistant Secretary of the University, succeeding Louis Paul Buckley ('05l), who had held that position since 1920.

In 1929 Alexander G. Ruthven was appointed President, and shortly thereafter he reorganized the administration of the University along corporation lines with the appointment of three vice-presidents, one of whom was designated as vice-president and secretary. After the resignation of Robert A. Campbell as Treasurer in 1931, the Secretary's Office was reorganized into four major divisions, namely, accounting, purchasing, cashier, and investments. The title of Shirley W. Smith was changed to Vice-President and Secretary in Charge of Business and Finance and that of John C. Christensen to Controller and Assistant Secretary, with the heads of the four major divisions designated as chief accountant, purchasing agent, cashier, and investment officer.

The total force of the Business Office now aggregates approximately seventy-five Page  273

TABLE II
Educational Plant Assets, June 30, 1940
Lands $ 6,346,304.58
Buildings 35,916,137.47
Land improvements 1,952,908.87
Equipment 13,809,181.28
Total $58,114,532.20
Income for Year Ended June 30, 1940
Including Hospital Excluding Hospital
Amount Per Cent Amount Per Cent
Student fees $1,860,181.32 18.41 $1,860,181.32 23.47
State appropriations 4,610,000.00 45.62 4,610,000.00 58.16
Federal land grant 38,428.88 .38 38,428.88 .48
Sales and services 288,655.37 2.86 288,655.37 3.64
Hospital receipts 2,177,476.72 21.55
Income from endowment 547,420.09 5.42 547,420.09 6.91
Gifts for current use 434,470.47 4.30 434,470.47 5.48
Miscellaneous 147,297.95 1.46 147,297.95 1.86
Totals $10,103,930.80 100.00 $7,926,454.08 100.00
Expenditures for Year Ended June 30, 1940
Including Hospital Excluding Hospital
Amount Per Cent Amount Per Cent
General administration $ 508,978.51 5.25 $ 508,978.51 6.65
General expense 591,739.77 6.10 591,739.77 7.73
Instruction 4,619,194.93 47.61 4,619,194.93 60.32
University Hospital 2,045,142.83 21.08
Organized research 207,124.57 2.13 207,124.57 2.70
Extension 131,041.12 1.35 131,041.12 1.71
Libraries 371,922.84 3.83 371,922.84 4.86
Operation and maintenance of physical plant 920,883.51 9.49 920,883.51 12.03
Service departments 115,881.51 1.19 115,881.51 1.51
Physical-plant additions from current funds 5,614.76 .06 5,614.76 .07
Prizes, student aid, and other aid 185,393.62 1.91 185,393.62 2.42
Totals $9,702,917.97 100.00 $7,657,775.14 100.00
persons. In 1940, its functions may briefly be defined as follows:

All financial management is centralized under the vice-president and secretary in charge of business and finance, who is responsible to the president and the Board of Regents. This includes direction of the central Business Office, the Department of Buildings and Grounds, and various other departments or divisions dealing with business or service functions, such as the Printing Department, the Binding Department, and the various storehouses.

Professor Lewis M. Gram, Director of Plant Extension, supervises and directs the expansion of the plant, including new construction. Financial control of new construction, however, is centralized in the Business Office. The vice-president in charge of business and finance serves as secretary of the Board of Regents and Page  274has an assistant secretary to assist him in performing this function, while the controller and assistant secretary is charged with the responsibility of detailed administration of the Business Office and assists the vice-president and secretary in such matters as may be delegated by him.

The growth of the University from 1855 to 1940 may be seen at a glance if the information in Table I be compared with a few excerpts from the annual financial report of the year ending June 30, 1940, given in Table II.

SELECTED BIBLIOGRAPHY

Financial Report, Univ. Mich., 1917-40.
Proceedings of the Board of Regents …, 1864-1940.
University of Michigan. Catalogue of Graduates, Non-Graduates, Officers, and Members of the Faculties, 1837-1921. Ann Arbor: Univ. Mich., 1923.
University of Michigan Regents' Proceedings …, 1837-1864. Ed. by Isaac N. Demmon. Ann Arbor: Univ. Mich., 1915.