Rhine Army of Occupation under Articles 8-12 of the Rhineland Agreement (Head I). For this second payment a receipt of like amount was obtained out of the Reparation payments made by Germany, and is included in the excess receipt of 1,095,1737. 19s. 6d. referred to below.

Of 210,000l. provided for Rewards to Inventors, (Head VI.A.8), only 3,5531. was spent, progress in the settlement of certain disputed cases having been unexpectedly slow. This saving was applied, with Treasury sanction, to accelerate certain approved programmes of manufacture for 1925-26 and succeeding years on Tanks, guns, replacement of ammunition, and on repair of equipment and vehicles, and to meet the consequent additional expenditure for Staff of the Chief Inspector of Armaments.

The main increases in sums receivable occurred under Heads V and VI, and there was a deficit of 363,1367. under Head VII.

As explained in the Account, the increase under Head V was due chiefly to receipts from the sale of stores, the largest item being for the sale of surplus officers' clothing, under a decision reached after the Estimates were framed. Under Head VI, increases were caused by (a) adjustments on the Indian Accounts for overcharges to Army Funds in previous years, and (b) receipts on account of the Army of Occupation, Germany, including 250,000l. for 1923-24, and 400,000l. received through the Treasury from the Dawes Annuity for services rendered by Germany under Articles 8-12 of the Rhineland Agreement.

The deficit on Head VII arose from an adjustment of the Contributions by India for Non-Effective Services which, from 1919, have been brought to account on a provisional basis. Certain alterations in some of the items to be covered by the contributions led to a revision of estimates, involving a reduction of 375,000l. in the amount payable for the period 1919 to 1925.

Costing Heads-General Abstract of Account.

3. The Heads of Account, page 5, show surpluses amounting to 2,150,310., and excesses of 938,9491., or a net expenditure of 1,211,361. less than the estimate, i.e. 2.64 per cent. The surpluses are distributed as follows:

"

VI. Net credit more" than realized by 406,203
owing mainly to sums receivable.

exceeding estimate by 928,0261.,

offset by an excess of gross expen

ture of 481,6521.

18.58

9.76

The excesses arise mainly on the following Heads :—

The accuracy of the actual surpluses and deficits shown is dependent on the correct assessment of amounts, partly estimated, due to and by the War Department; and their distribution between the Heads of the Account is in a measure arbitrary, Head I, for instance, showing a saving of 90,2177. on Travelling and Carriage of Stores, which is offset by an excess of 112,7351. on Head VI.B.3.a, Land Transport. As in earlier years, also, the Account figures are not altogether comprehensive, and the progress towards uniformity in their compilation has been largely achieved by extending the system of adopting schedule and flat rate charges throughout the accounts, covering such varied services as military labour, rents, rates, travelling and carriage of stores, marriage allowance, and sums receivable for rent of quarters.

The use of these and certain other arbitrary bases for charges or credits in the accounts of individual units and establishments was intended to solve the problem of compiling accounts suitable for administrative criticism, without incurring the expense entailed in arriving at precise figures of cost. Adjustments have been necessary to agree the co-ordinated sectional totals, based on these schedule rates, with the totals of actual expenditure for inclusion in the final Accounts; and these and certain other adjustments consequent on inadequate information. as to exact incidence of charge have been made at the War Office, usually by charge in total to Head I, where the amounts have been spread over Arms of the Service in proportion to numerical strengths.

The War Office explanations of the variations from Estimates, and the Treasury authority for the application of surpluses to meet deficits, are contained in the correspondence printed on pages 180 to 183.

The following statement compares the total net expenditure with the total net estimate for the last three years :

VARIATIONS FROM ESTIMATES.

4. In certain schools the cost per student is considerably higher than the estimate.

In other cases a substantial reduction on estimated costs is shown.

These variations are due mainly to decrease or increase in the number of students as compared with estimate, and, in a lesser degree, to imperfect estimates of expenditure, or to change in basis of computation of cost. One of the principal variations from Estimate occurs on Ordnance Depots (page 64), which show a gross saving of 320,000l., ascribed by the War Office to over-estimates of both military and civilian labour owing to insufficient data.

E COMPARISON OF ADMINISTRATIVE AND OPERATING CHARGES.

5. In paragraph 10 of my Report for 1923-24 I drew attention to certain accounts which showed high administrative costs in comparison with operating charges. The following table shows the percentage of

administrative and operating charges to total costs in 1924-25, compared with 1923-24, for these or similar cases :

Percentage of Total Cost.

as

The reduction in administrative costs so displayed is due, however, to a change in the method of accounting, certain storehouse clerks and others, previously classified as administrative, being now included under operating staff.

VOCATIONAL TRAINING CENTRES (PAGE 43).

6. The accounts of these Centres for the first two completed years of operation furnish the following details of cost:

As explained in the footnote, the progress during 1924-25 in the scheme for vocational training, which has not yet reached its full development, has resulted in an increased number of students, and a lower cost per head.

MECHANICAL TRANSPORT COMPANIES (PAGE 69).

7. The statement printed in previous years showing the annual total cost per vehicle has been replaced by one showing what are regarded as the direct running costs only. From this particular table actual drivers' wages, and the cost of drivers and others not employed in connexion with operating but required for military reasons, together with overheads,

are now excluded. The following statement shows the approximate annual total cost per vehicle in 1924-25 as compared with 1923-24 :

These reductions, despite a general increase in mileage, whilst due in part to actual reductions in expenditure on petrol, oil, &c., arise also from a reduction in the charges raised for depreciation, and a decreased charge under repairs, due to a change in practice in dealing with the balance on Mechanical Transport Workshops (page 70), formerly charged out to the Companies, but in 1924-25 left on the Workshop account.

The earnings, consisting mainly of charges to units, &c., are shown as approximating to the total costs, excluding cost of drivers and others. not employed in connexion with operating; whilst stated to be based on current commercial rates, they considerably exceed the proceeds of the flat mileage rate, owing to the operation of minimum and stand-by charges in a high percentage of cases.

HOSPITALS.

8. The account on page 60 shows, as regards hospitals abroad, that whilst the average number of occupied beds has slightly increased, there has been during the year a reduction of over 10 per cent. in the average number of equipped beds, and this is reflected in the reduction of the gross cost from 17s. 9d. to 14s. 4d. per day for each occupied bed in these hospitals.

Of the total expenditure of 935,106/. on all hospitals, the costed expenditure on unoccupied beds amounted to no less than 250,000l. at Home, and 100,000l. Abroad. I have no cause to suppose, however, that there has been any material change in the conditions referred to in paragraph 21 of my Report for 1922-23. I was then informed that the War Office considered that the maintenance of a large proportion of vacant beds at certain central hospitals was necessary, together with a proportion in the case of other hospitals according to their liability to receive a sudden influx.

TRANSPORT.

9. Attention was drawn to cases where hired vehicles were employed in districts in which there appeared to be idle War Department transport. It was explained that, in the peculiar circumstances of one district, the