satisfied on examination that the circumstances in which the stores were dumped were such as to render ordinary accounting impracticable at the time, while the process of clearance was complicated by subsequent emergencies. They are glad to learn Qs. 5904-5. that although considerable quantities of guns, vehicles, etc., still remain in the open at various depots, cover is being provided as rapidly as possible for those that are to be kept permanently, and proper accounts and storekeeping are instituted as the surplus quantities are cleared away.

Q. 5906, et seq

(1917-18).

Q. 5718, et seq.

Committee

78. Ammunition declared unserviceable.-The inquired into the condemnation of very large quantities of a certain type of ammunition which had been transferred to an Ordnance Depot and on inspection had been sent back to be broken down as unserviceable. They find that the ammunition had passed all prescribed tests at the time of manufacture and when it was transferred to the Depot in 1920 there was no reason to suppose that it would not last for the full ordinary life of such stores, which is about 10 years. But when the ammunition came under review at the Depot in its turn it was found that, for some reason that is not yet understood, it was badly corroded. Practically the whole stock was useless and has been sent for breaking down, not to the Depot from which it originally came, but to a contractor close by. The Committee are satisfied that no blame attaches to the War Office in this matter.

ARMY (ORDNANCE FACTORIES) APPROPRIATION ACCOUNT.

79. During the year under review the Ordnance Factories Supplies Suspense Account has been re-opened.

This Suspense Account, the nature and origin of which are fully set out in the Epitome of the Reports of the Public Accounts Committee (pp. 385-388) is in effect a fund to provide for the replacement of worn-out buildings and machinery and other necessary capital expenditure, and to it are carried all surpluses or deficiencies on the Appropriation Accounts of the Ordnance Factories. In normal circumstances a surplus consists generally of sums recovered from customers for capital expenditure in previous years, as a charge for depreciation, or for the value of stores taken from stock; while conversely a deficit is due to expenditure on raw material or plant which cannot be wholly brought into charge against a customer within the year under review. A credit balance on the Ordnance Factories Supplies Suspense Account can therefore only arise to the extent to which over a period of years the surpluses exceed the deficits.

Before the War the rule was that the credit balance on the Account might be accumulated up to a total of £100,000 but that any excess over that amount should be surrendered to the Exchequer. The account was closed during the war but in

August, 1922, the Treasury agreed, at the instance of the War Office, that it should be re-opened, and that the maximum limit up to which surpluses might be accumulated should be raised to £250,000.

It is represented to the Committee that this increase is justified partly by the increase of prices, partly by the greater variety and complexity of the armaments now required by the Army (though its strength has been reduced), and partly by the difficulty experienced in pre-war years in working with the lower limit.

The Committee have felt some hesitation in regard to this point: but in all the circumstances, and especially in view of the fact that no money can be expended out of the Ordnance Factories Supplies Suspense Account without the express Q. 5749. authority of Parliament given on the annual estimate, they do not wish to raise any objection to the change. But the question whether the limit of £250,000 is or is not more than sufficient for the requirements of the Ordnance Factories under the new conditions should be reviewed in the light of experience.

80. The normal requirements of the Ordnance Factories in Q. 5718. peace time generally necessitated only a token Vote for £100. In the year 1921-22, in order to provide against a possible cash deficiency, a Vote of £100,000 was taken. The outcome of this portion of the account shows that, apart from this grant, the operations resulted in a surplus of 18,364. The Committee are informed that this last-mentioned sum will stand to the credit of the Ordnance Factories Supplies Suspense Account, and that the grant of £100,000, which was not required for the purpose for which it was voted, will be surrendered to the Exchequer.

ORDNANCE FACTORIES ANNUAL ACCOUNTS.

para. 4.

Q. 5633, &c.

81. During the War period the Ordnance Factories were very C. & A. G.'s. greatly extended and the first step of the War Office on resum- Report ing control of them in the summer of 1920 was to restore them to a peace footing. Buildings, plant, and stocks were far in excess of requirements and had to a large extent been acquired at War prices, and as no reserve funds had been created during the period of inflation, the only possible method of financial reconstruction was to write down the capital.

A Committee was appointed with Treasury approval, and including a representative of the Treasury, to examine the situation, and on the recommendation of this Committee a net sum of £3,301,211 has now been written off the capital account. The Public Accounts Committee concur in this measure. A further write-off, which will be comparatively small in comparison with the matters already dealt with, will be necessary in the accounts of the year 1922-23 in respect of certain fixed capital, lands, roads, mains, etc.

Q. 5828.

Q. 5835.

Q. 5667.

Q. 5671, et seq.

App. 36.

Q 5642.

In this connection it may be mentioned that a payment of £39,527 has been made from Army Votes (Head VI. B. 20) as a subsidy to the Ordnance Factories in respect of the maintenance of reserve assets, representing depreciation on 50 per cent. of the value of certain plant not used to its full capacity.

A further sum of £122,262 has been similarly charged to the Army Account to cover the cost of unproductive labour, i.e., labour not employed on the production of cordite, at Waltham Abbey, undertaken to avoid the discharge of operatives while the future of that Factory was uncertain.

82. Manufacture of locomotives.-It will be remembered that when the demand for war munitions suddenly fell off after the armistice, it was decided by His Majesty's Government that, amongst other work, the manufacture of 100 locomotives should be put in hand at Woolwich Arsenal in order to avoid throwing workmen out of employment. Fifty engines have been completed and the remaining 50 are in parts, further work on these having been suspended. The total expenditure incurred in connection with these machines up to the 31st March is in round figures £1,133,000. The difficulties of finding a purchaser for these locomotives were explained to the Committee last year. Since then, two of the completed locomotives have been tried on the Southern Railway system, and the Committee note that the reports are extremely satisfactory. The Disposal and Liquidation Commission have quite recently effected a sale of sets of parts of 12 locomotives which have not been erected.

With the same object of avoiding the discharge of workmen, other kinds of work known as "alternative work" have been undertaken at the Arsenal at competitive prices, such as breaking down munitions, manufacturing keys, railway wagons, etc. The loss realised in respect of these transactions and written off in the accounts for 1921-22 is £122,710, on a total production of £664,088. No further work of this kind is now being done, and the Committee wish to make clear that although the payments received for this alternative work did not cover the full cost of production, they did, in fact, obtain for the Government a contribution towards the standing establishment charges of the factory, and to that extent relieved the Exchequer.

83. Cost Accounts.-The Committee are informed that as from the 1st April, 1922, a revised system of costing has been. introduced in the Ordnance Factories with the object of bringing the system there prevailing into line with modern factories in order that short period costs and other detailed information might be available with the minimum amount of clerical labour. It is hoped that the introduction of this system will secure a more efficient control over production in the factories, and the

Committee will look forward with much interest to hearing of the practical results achieved when the system has had a fair trial. They are glad to learn that the Committee which is Qs. 5644-7. enquiring into certain matters connected with the Admiralty accounts took an opportunity of seeing the new system at work at Woolwich, and that Committee will doubtless consider the possibility of the application of similar measures to Admiralty establishments.

GENERAL.

84. Certificate of Superior Authority.-Accounting Officers in certain cases are required to give an annual certificate that authority superior to that of the Department concerned has been obtained where required. In paragraph 45 of their Fourth Report the Committee of Public Accounts, 1920, asked the Treasury to consider whether it was desirable to extend the requirement of this certificate (which has been limited to the three Service Departments, and the Ministries of Pensions, Shipping and Munitions) to the more important of the Civil Departments.

The Committee are informed that on examination of this Q. 2181. question the Treasury have now come to the conclusion that this special certificate should for the future be limited to the accounts of the fighting services and to the Ministry of Pensions, these being the Departments which have financial powers delegated to them to an extent not applicable to other Departments of the Service. This proposal is supported by the Comptroller and Auditor General, who points out that the multiplication of special certificates may be held to imply that the signature of the Accounting Officer standing by itself at the foot of an account (as it does in most cases) is not in itself a complete certificate of the correctness of the account. The Committee recommend that this proposal be adopted.

85. Gifts of Public Property.-In their Reports of the last two vears the Public Accounts Committee have called attention to the practice of making gifts of public property without express Parliamentary authority, and recommended that in all cases where the value of any property to be included in a gift exceeds £10,000 the concurrence of Parliament should first be obtained.

This matter has now been further considered by the Treasury, Q. 3115. who submitted the following proposal to the Committee :

66

"Where it is proposed to make a gift of public stores or

property not requiring replacement, either of an unusual nature or exceeding £10,000 in value, the Treasury will present to the House of Commons a Minute giving particu"lars of the gift and explaining the circumstances. Treasury assent to the gift will not be given until fourteen

Q. 3137.

C. & A. G.'s
Report.
Para. 3.
Q. 3903.

Q. 3908, etc.

days after the issue of the Minute, except in cases of special 66 urgency. The existing practice of requiring Treasury "assent and notification in the Appropriation Account of all such gifts (of whatever size) remains unchanged."

It appears to the Committee that this proposal will sufficiently secure the object for which they have contended.

It will be noted that under the procedure proposed it is intended to maintain the condition that Treasury assent shall be obtained to each gift, and as the gifts will continue to be noted in the Appropriation Account they will also come before the Public Accounts Committee for review. In these circumstances the Committee informed the Treasury that they approve of the procedure proposed and of its immediate introduction.

86. Special Advances to Contractors.-Under powers defined by the Public Accounts Committee in 1890 after exhaustive consideration and since exercised, Departments are allowed, in what are known technically as special cases' to make advances to contractors, which are not claimable under the specific conditions. of their contracts. The object of this is to avoid the necessity of surrendering at the end of a financial year money provided in the estimates for that year, and not allowed for in the Vote for the succeeding year. These special cases must satisfy conditions which have been rigidly defined, and were set out in paragraph 24 of the Report of last year.

In that paragraph the Committee of 1922 recommended that, as an invariable rule, the advances in such special cases should be limited to 80 per cent. of the total value of the work done. We are glad to learn that this recommendation has been accepted. Two further questions connected with these advances have come to our notice.

(a) In certain cases in which special advances of this character had been made by the Air Ministry it was noticed that when payment was made for the goods delivered under the contracts, only that proportion of the advances allotted to a particular delivery was abated from the amount of the claim in respect of it. It was represented to the Air Ministry by the Comptroller and Auditor General that in cases where contractors had received general advances not due under their contracts, no further payments should be made until invoices fully covering the advances have been received and fully certified. The Committee agree with the view taken by the Comptroller and Auditor General as to the correct procedure and they learn that in the case of the Air Ministry it was only departed from owing to an oversight.

(b) The Committee of 1890 accepted the view that in the special cases in question interest would not be chargeable to the contractor on these advance payments made for reasons of public convenience. The present Committee is informed that this practice