Checking lap-overs;

              96 HASKINS & SELLS October
WH I L E all of our practice offices are
cognizant of the fact that we have
had a number of quite extensive engage­ments
from railroad companies during the
past two years, many are not aware that
most of these engagements arose through
the taking over of the important trans­portation
systems by the Government
in December, 1917, and consisted of check­ing
"lap-overs."
It will be recalled that without previous
notice, President Wilson, by a proclama­tion
dated December 26, 1917, took pos­session
of all important transportation sys­tems
on December 28, 1917, and directed
that their control and operation be exer­cised
by William G. McAdoo, who was
appointed Director-General of Railroads.
While possession of the railroads was as­sumed
on December 28, 1917, the procla­mation
stated that for accounting purposes
possession and control would date from
midnight of December 31, 1917.
While the President had power under
the Act of Congress approved August 29,
1916, to take possession of the railroads,
he had no authority to enter into agree­ments
with the companies for compensa­tion
for the use of their properties until
granted such authority by the Act of Con­gress
approved on March 21, 1918, nearly
three months after the roads had been
taken over. It took nearly six months
longer for the representatives of the Gov­ernment
and of the railroad companies to
agree upon standard clauses for use in the
contracts between the Government and
the railroad companies, with the result
that few contracts were signed before the
year 1919, and, in fact, some contracts
have not yet been signed.
A few days after his appointment as
Director-General of Railroads (on Decem­ber
30, 1917, to be exact) Mr. McAdoo
issued an order reading as follows:
"Until otherwise directed, no changes
in the present methods of accounting as
prescribed by the Interstate Commerce
Commission will be required. The ac­counts
of your respective companies
shall be closed as of December 31, 1917,
and opened as of January 1, 1918, in the
same manner as they have heretofore
been handled at the close of one fiscal
period and the beginning of another,
and in the same manner that you should
have handled your account had the Gov­ernment
not taken possession and con­trol."
No other general orders relating to
methods of accounting were given until
April 3, 1918, when General Order No. 17
was issued. This order provided, among
other things, that each carrier subject to
Federal control should open new and sep­arate
books of account (designated as
"Federal Books"), such as cash books,
general and subsidiary ledgers and jour­nals,
and all supporting and subsidiary
books and records incident thereto, upon
which should be recorded transactions
which arose under and were incident to
Federal control on and after January 1,
1918.
This same order provided that all trans­actions
which arose after the closing of the
Checking Lap-overs