13 June, 1922.]

the total is £194,000,000?-Yes, that is up to the 31st March, 1921.

4694. There will be other payments to add to that besides the £60,000,000?—If you include the £60,000,000 for Great Britain and the £3,000,000 for Ireland, the total payments as nearly as we can tell at the present time will amount to £301,000,000. In considering that figure, you have to bear in mind the value of services the Government received which were not separately charged for in the movement of troops and the movement of material and work performed of various kinds, and the best estimate we can make of that is about £143,000,000.

4695. Taking that, that would leave about £158,000,000 as the net cost of the control of the railways?-That is so.

Sir William Barton.

4696. Was there any sort of contract with them for the work? How do you

[Continued.

get at that approximate figure?-Of the value of the services?

4697. Yes?-Some of the companies kept short time-records of the work they did and some companies kept complete records, and in one way or another you can get one week in four or one month in three or some basis of that kind which enables you to calculate, not as if you were rendering a detailed account, but if you want to make an estimate of the value you are probably within one, two or three per cent of accuracy.

Chairman.

4698. On page 563 there are the details of this sum. For some reason, under the heading IV to XIV, you do not divide the sums up by the years at all, and you simply give the total?-You are not able to do that over the whole of the years.

4699. Last year we had a total of £2,900,000, so that the last twelve months could be given separately?-Yes, it is a relatively small figure to the £194,000,000.

Chairman.

4700. Your certificate on this Vote, Sir Malcolm, on page 565, is qualified; you say that the Account is "correct, subject to the observations contained in my Report." What are the particular matters in your Report which you wish to call attention to?-(Sir Malcolm Ramsay.) I should call attention particularly to the passage in my Report on page XLVII, paragraph 108, which states that £3,300,000 of the expenditure is covered by the certificates of the Government Accountant.

4701. What do you mean by the "Government Accountant "? (Sir George Beharrell.) That is Sir Albert Wyon.

4702. In what capacity does he act? Is he Accountant for the Treasury or for your Department? He is not part of the Comptroller and Auditor General's Department?—(Sir Malcolm Ramsay.) No; that is why I have called attention to it.

4703. To what Department is he attached? (Sir George Beharrell.) He was

appointed by the Treasury in the early days of control both of railways and, subsequently, of canals to audit the accounts of the controlled undertakings on behalf of the Government. That was before there was a Ministry of Transport with an accounting staff. The Ministry of Transport has never intervened in the canal control at all, but has relied entirely on the staff Sir Albert Wyon specially set aside to deal with these claims on behalf of the Government.

4704. Is he a permanent Government official? No, he is senior partner in the firm of Price, Waterhouse & Co.

4705. Is he still in Government employment or does he act on behalf of his firm? -He is acting on behalf of the Government but through his firm.

4706. In other words, the Government employ Messrs. Price, Waterhouse & Co. to do this audit? Yes.-(Sir Malcolm Ramsay.) The position was fully set out in the Comptroller and Auditor General's Report last year in connection with the

Chairman.

66

4710. There is a special Report by the Comptroller and Auditor General on page 5 of this White Paper, and in the first paragraph it is stated: All moneys and investments standing to the credit of the former fund," that is the Road Improvement Fund, were transferred to the Road Fund or held for the purposes of that fund." The second paragraph deals with "Receipts," and here again the net proceeds of carriage licences, and SO oll, are not checked by you, Sir Malcolm; you do not certify them?-(Sir Malcolm Ramsay.) We make a test check of them as we do of the other things, but for the examination of these receipts we depend primarily on the District Auditors; it is left to them in the first place to satisfy themselves that there are checks. We examine their reports, of

course.

4711. But you do not make your Department responsible; there are gross receipts and there are expenses deducted bringing out the net receipts. Does your Department make itself responsible for these? I am responsible for seeing that the machinery for the collection of the revenue is adequate and that there are checks in existence to safeguard the revenue. I conceive that to be my duty. (Sir George Beharrell.) Yes, and you have exercised that duty and made test checks. (Sir Malcolm Ramsay.) The work of examining the accounts of the collection of the duties is done by the District Auditors. They report to the Ministry of Transport, and all their reports are submitted to us, and we scrutinise them and pick out any points, as I think Sir George would do.

4712. But are you responsible for the whole thing in the same sense as when it is done by your own officers? Yes, 1 am responsible for seeing that adequate checks on collection are in force, although my own officers look at the result of other people's work. They do not go down there; the procedure is not the same, but I think my responsibility is the same as it is in regard to revenue generally. (Sir George Beharrell.) I think, if I may say so, we all try as far as we can to make use of the machinery of the District Auditors, which is necessary in the case of the Ministry of Health; we all try to use that machinery as far as possible so as to avoid any duplication of outside audit staff throughout the country.

4713. The third paragraph is "Administrative Expenses "; the fourth paragraph is "Licence Duties Refunds"; the fifth paragraph is "Unemployment Special Road Works," and the sixth, "Balance Sheet." There is a question there about transferring advances to loans, but I will take that on the figures. If you go to the figures on page 2, there is the Road Fund itself, and there is one question there. The note marked with an asterisk is, "Part of this sum will be transferred to loans when the undertakings to repay are received." Your authority in this case is to make loans, I suppose? That is so.

4714. But it is down here as grants?At that time, I am reminded, we had authority to make grants and loans.

4715. And some of those were the one and some were the other? That is so.

4716. That is the matter referred to in the Comptroller and Auditor General's Report, I suppose, in paragraph 5?(Sir Malcolm Ramsay.) That is so, Sir.

13 June, 1922.]

[Continued.

4717. Have you any criticism to make on that, Sir Malcolm? Are you satisfied about it? Yes, I have no criticism to make.

4718. On the next Account on page 3, how do you come to have such a lot of money to invest?-(Sir George Beharrell.) Of course, this figure of investments of £34,000,000 is a grossly inflated figure because the whole of the investments are in Treasury Bills which keep maturing and it is a question of re-investment in many cases. The total income of the Fund is only some £10,000,000 a year, and it is re-invested several times over and that is why the figures of cash proceeds and cash invested appear so large. At the present time the Treasury Bills we hold amount to £14,000,000.

4719. That is a comfortable little sum. You began the year with £8,000,000 invested and you ended the year with 12} million pounds? That is so.

4720. And you say you now have £14,000,000?—Yes.

4721. You are getting on: How do you manage to accumulate all this money?They are unpaid portions of grants which have been formerly made; we wait until we get proper certificates and wait until we see the money is properly spent. We may start by lending, say, 4 million pounds, but before we make all the payments there are other grants promised and we actually lend another million pounds, so that your real surplus available in the current year for new work is cut down to about £6,000,000.

4722. Why do you not surrender that to the Treasury at the end of the year?Because it is required; you are committed to it; you must have your continuing programme.

4723. What is your Parliamentary authority for holding the money?—It is part of the Act.

4724. Part of the Roads Act?-Yes. (Sir Malcolm Ramsay.) The Road Fund is not fed from Votes at all; Parliament decided that all the net proceeds of certain duties, the carriage licences and the motor spirit duties, should be paid over to the Road Fund and used for the purpose of developing the roads and so forth; there is no annual Vote, and in the early days naturally the income accumulated while the schemes for utilising it were being developed.

4725. It is like a Grant in Aid, really? -Yes, the balance is accumulated; you will find on page 5 a statement showing what the liabilities are.

4726. The only other thing is as to this note on page xliv, which we were to deal with under this heading. In the last paragraph but one there the Comptroller and Auditor General gays: "I have scrutinised these Auditors' reports and certificates so far as they are at present available, but it is not anticipated that the audit of all the accounts covering the period to 31st March, 1921, will be completed before the 31st March, 1922." Have you got all these accounts up to 31st March, 1921, yet?-Yes, I have now got practically all,

4727. But not quite all?-I will not say that I have got every single one; there may be one or two still outstanding.

go

4728. Is it not rather undesirable that there should be this long delay?-I have made inquiry about that, and I should like to get it done quicker, but the difficulty is this, that the District Auditors of the Ministry of Health have to examine these accounts as they round as part of their regular tour of audit and they cannot be everywhere simultaneously, so they have a programme and work round the audit in the course of the twelve months. Unless you had a very much larger staff of District Auditors, I do not know that you could get the accounts in any earlier, and if you did increase your staff probably there would be some periods of the year when they were comparatively idle. (Sir George Beharrell.) And there is another point, that probably when it is possible the accounts of the local authority may not be complete and you get a lag again until the next round of the District Auditor to that particular part of the country.

accounts

4729. You both realise, of course, the importance of getting these audited as promptly as possible. What do the Treasury say about this? (Mr. Hurst.) In these matters there are three audits, one behind the other in many cases. You have the local authority (often with an auditor of its own) which has to prepare its accounts which may take a month or two after the year is over. Then the Ministry of Health comes along in due course to complete their audit, and the third step is that the report is submitted to Sir Malcolm. is not like the audit of a Department's account in which the audit is going on during the year while the Department is working.

It

4730. I see that the very next paragraph really touches on that point, because Sir Malcolm says: "In reply to

13 June, 1922.]

my inquiry whether the Ministry had any means of ascertaining whether effective checks upon the transactions are applied currently." If that could be done it would help to bring the audit up to date much more promptly, would it not?Yes.

4731. Is that being further considered, or has that suggestion been dropped now? --(Sir Malcolm Ramsay.) I understood from the Ministry of Transport that they did not think it practicable to apply current tests independently of the reports of the District Auditors. (Mr. Watson.) The position is that under the Statute they have to give notice of their audit and to receive the representations of ratepayers and so on at the time of the audit if the ratepayer feels inclined to raise difficulties. Legislation was contemplated which might speed the thing up, but it has been a little set on one side lately, I think.

4732. You mentioned that you deferred further comment on the working of these

[Continued.

new accounts until your next Report?(Sir Malcolm Ramsay.) Yes.

4733. Perhaps you will consider before your next Report, Sir Malcolm, whether it is possible to expedite this matter up and do anything in the way of what you might call a current check?-(Mr. Watson.) A current audit, I think, is really impossible because they have to wait for the accounts of the local authority to be made up. (Sir Malcolm Ramsay.) They are collection accounts, really.

4734. I have no further question on that Have you anything more to say, Sir Malcolm?-No, I was only going to say that on these Revenue Accounts the main object of our audit is to see that the system is right and that there are proper checks. The Revenue Accounts are always rather peculiarly insusceptible of detailed audit. It is the system one has got to look at, and for that reason I am less intolerant of delay on that side than on the expenditure side.

AIR

SERVICES

(Mr. Bland): I am sorry, Sir, but I have rather forgotten what my points were then.

4736. Your letter begins: "There are two points to which I should like to draw your attention. First, I am stated in paragraph 5 to have admitted that the expenditure on the Indian Force should properly have formed the subject of a Supplementary Grant. As a matter of

15 June 1922]

my

answer

fact, to Question 3105 assented to the proposition that £193,000 was a very large sum to divert from one Subhead to another, but I thought that my subsequent evidence, and especially the footnote to Question 3113, had made it clear that the diversion, if it might be so called, was due to the Treasury authorisation of the new Subhead being received too late to be acted on in presenting the Estimates." I do not wish to go into these matters as we dealt with them last year, unless you wish to take them up? I do not think that point is of sufficient importance really to pursue.

4737. Then the other

one is: "As regards Questions 3235 and 3236, I notice that you have not printed the note I sent you on the 29th June last. Mr. Wilkins' remarks conveyed a false impression that there had been unconscionable delay on the part of the Air Ministry, and I think my note effectually cleared away this aspersion." I do not know whether you wanted to deal with that at all? I think that is also rather a matter belonging to the dead past, and I am quite willing to leave it at that.

4738. I thought I ought to give you the opportunity.-Thank you very much.

4739. I think we will begin with the Report of the Comptroller and Auditor General, on page 99, if you please, but before going into the details of that Report, my impression is that these figures of yours are presented in a difficult form; partly owing to the paper being smaller than last year it makes them more difficult to follow, but I think the form of them is by no means as clear as it might be made. One thing I would like to point out is that the explanations do not come on the same pages as the figures, and that makes a very great difference. If you turn to Vote 4, for instance, on page 25, there is a whole page of figures, and the notes explaining i do not come until page 27. It would be quite easy to print so many of the figures and then to print the notes explaining them at the bottom? That is so, and I have already, as a matter of fact, had that suggested by a member of the Exchequer and Audit Department, and we thought of trying to put it in that form next year.

4740. Another thing is that the notes and explanations are divided up into two parts. On page 24 there is a note referring to Subhead N, which instead of following immediately after Subhead N,

[Continued

comes after Subhead O. I do not understand quite why that is so, and there are other similar examples which I have seen and which, I think, you will easily find, where the explanations and the notes might come together with very great advantage?--I will certainly make it my business to look into the form of the Account next year.

4741. Thank you. Now we come to the Comptroller and Auditor General's Report, and in paragraph 1 it is stated that the amount to be surrendered is £2,292,000, and then it is shown how that is made up. The surplus on the expenditure we shall come to in detail, but, as stated at the end of the paragraph, "The surplus on Appropriations in Aid is due chiefly to an insufficient estimate for receipts from Allied, etc., Governments under Vote 3." Is there any general explanation to be given of why there was an under-estimate of those receipts? Can you tell us at all?-On page 24 there are some notes which help.

4742. That is under heading 4; it begins: Towards the end of the year a lump sum settlement"?—Yes, a lump sum settlement of all outstanding claims.

4743. There is no more general explana tion of the difference between the estimate and the actual receipts, because there is a very large difference, of course, between £2,200,000 and £3,200,000?— That is so. I do not know whether I carry in my memory just now what caused that very large sum of £652,000 from Allied and other Governments.

4744. Where is that £652,000 ?-On page 24, the first note to the Appropriations in Aid.

4745. That is the surplus on that par

ticular Vote?—Yes.

4746. But this surplus on

page 99 is the surplus of all the Appropriations on all the Votes ?-That is so.

4747. If there is no general explanation, we will take them on the individual Votes when we come to them, one by one.

Sir William Barton.

4748. On Vote 3, "Technical and Warlike Stores, £1,434,000," does that mean that that has been realised more than had been anticipated, or what?-No, this was an under-spending on Vote 3. Those are not Appropriations in Aid; those are the actual charge Subheads, where we spent less than Parliament voted, for a variety of reasons, all of which are given in Paper No. 4, page 22.