6 July 1922]

6175. But in this case of the £38,000, are you not asking whether it is one sum which has been written off or many sums? -We know that it is the total of many sums. Sir Malcolm Ramsay.) It is sundry charges. (Sir Charles Harris.) It is practically what corresponds to our own pages 123 to 167.

6176. Only you have not details of it? -No.

6177. What does the Treasury say to that? You have given your sanction?(Mr. Millar.) It flowed from the general arrangement with the Indian Government that their audit should be accepted as final.

6178. Surely the Indian Government would not object to giving details instead of saying "Sundry Charges "?--I am afraid we do not know what are the charges written off under the powers delegated to them in connection with the financial administration of these Forces. We have not the information as to the exact nature of that delegation.

6179. And you have not asked for other details? (Sir Charles Harris.) It is all dead expenditure, and we can do nothing useful by questioning the details.

6180. The next paragraph says that 166 £900,000 has been credited as India's contribution for the cost of sea transport of the normal Indian Garrison and earnings on the carriage of non-military passengers and cargo." I do not quite understand that; I do not know whether it is important, Sir Malcolm What do you say? (Sir Charles Harris.) I can

[Continued.

explain how that arrangement comes in. Normally the cost of the transport service between this country and India is a liability of India-India pays for it, but at the end of the war the whole Army was being brought home and sent out again, and the amount of sea transport was totally abnormal for all sorts of reasons with which India was not concerned, so we said to India, "The fair thing wil be this: we will take the expenditure on Indian transport in 1913-14 as the standard, and we will say that that represents the normal number of troops to be sent to India and the normal number to he brought back, and so on, and you will have to pay us that figure as affected by a multiplying factor factor dependent upon the enormous increase in the cost of transports and cost of freight." At this time the freight market was at its very top, and in this particular year the £300,000 or so, which was the standard expenditure of 1913-14, grew not because of the volume of traffic, but because of the increased freight rate, to £900,000. Incidentally, when a transport going to India was not absolutely full, we took private passengers and shipped private goods where we could, and those are the "Earnings on the carriage of non-military passengers and cargo. They amounted, as a matter of fact, to £16,000, so they are a small item.

6181. The next point is just the gifts by the Native Princes; those are gifts towards the cost of the war, I take it ?They are.

Chairman.

6182. We had finished paragraph 13, on page 198. On paragraph 14, "War Stores Suspense Account," the only question which occurs to me is why did not the War Office know much earlier that the India Office was adopting this procedure and that as a result when the time came to close the Suspense Account there would be large quantities of stores not yet allocated? (Sir Charles Harris). That was due to the system by which, I think necessarily as a matter of practical possibility, we placed ourselves entirely in the hands of India for all the expenditure which was conducted in India in connection with the Indian troops which took such a large part in the war. All that the War Office knew was that it got a monthly string of figures or classified statement of expenditure, being the cash transactions brought to account by India against us in the particular month. We gave a sort of general look to that statement and then posted it into our accounts, but we had no conception whatever as to what our liabilities were, and what lies at the back of this story is that the Indian Government incurred liabilities on our account, and for reasons that appeared to them very sound, instead of booking those liabilities immediately against us, held them in suspense and did not inform us that there was a substantial liability of this sort in suspense which sooner or later might come against us.

6183. That I understand, but what I wanted to know was this: You say that you gave them a general look and then entered them in your accounts, but if

they had been more carefully examined in this country would it not have become evident that the Indian Government were not proceeding on the principle which you had asked them to follow, which was that the disbursements made on behalf of the War Office should be financed currently by means of monthly payments on account so that there should be no considerable balance owing when the final settlement was reached?-I do not think from the accounts anything of the sort could have been gleaned at all. The position as regards our actual cash payments was that. the Financial Secretary to the India Office informed me from time to time that for next month's or next quarter's expenses he required so many millions and I advanced him whatever he asked for. Then the charges which came from India, very long afterwards, in those monthly schedules were cleared against that advance, but it was not possible for me in any way to question what the Financial Secretary to the India Office said as to the cash he wanted, and as a matter of fact in this case the Financial Secretary to the India Office himself did not know that this liability was hanging over our heads -nobody in Europe knew it at all.

Mr. Stewart.

6184. Did he not mention anything of the kind, to the effect that we were going to be landed with an enormous debit like this?-No; and I do not think, without a very great deal of complicated accountancy, it would have been possible for us to foresee it. The only step we could take when it was sprung upon us at this late

11 July 19221

date was to make a very careful examination of it to see that it was not, so to speak, an afterthought charge by the Indian Government. I sent out an officer of my own accompanied by a military officer to India and they looked into the matte and came back satisfied.

Chairman.

6185. There is a reference at the end of paragraph 14 to paragraph 81 of the Comptroller and Auditor General's Report on the Civil Services Appropriation Accounts. When we had that paragraph before us, there was a matter of £140,000 worth of bamboo at Rangoon which apparently fetched nothing at all although it stood on the books at that figure, and we were told that was a War Office question: Do you know about that?-No, I am afraid my attention has not been drawn to that at all. (The paragraph was handed to the witness and read by him.) I think one can easily understand how something of that sort should happen. Bamboo would be rather in the nature of a drug in the market at Rangoon, although it would be of the utmost value up country in Mesopotamia. It was no doubt bought for use in Mesopotamia, but when it was lying at Rangoon and had to be sold there nobody would look at it, but I have not heard anything about that and I have seen no papers about it. Of course in the case of anything that we do not want for the Army, what it realises is entirely a question for the Disposal Commission with which the War Office is not concerned at all.

6186. Then I do not quite know why we were told that was a War Office question. Sir Malcolm, I think I am right that we were so told, were we not?-(Sir Malcolm Ramsay.) Yes, that is my recollection too.

6187. Perhaps you would kindly look into that. (Sir Charles Harris.) Yes, I will make inquiry about it and see if anything is known. (Sir Malcolm Ramsay.) My recollection is that the bamboo was handed over for disposal to the Disposal Board with a book value of 21 lakhs and when they came to look into it they found either that the bamboo was not there or it did not fetch anything. (Sir Charles Harris.) The War Office had no control over the purchase and piling up of bamboo at Rangoon and they had no control over the disposal of it, but I will look into it and see if there is any War Office question arising.

6188. Thank you. We should find out who ought to give us an explanation about

[Continued

it. The Disposal Board apparently was not able to and their witnesses said that it was a War Office question?—I will inquire into it.

6189. On paragraph 15, "War Expenditure by the African Colonies and Protectorates," the question here is that rupees were converted into sterling at the rate of one rupee equalling 16d. Can you tell us what the real rate ought to have been approximately-what it fluctuated between? The average for that period should have been 1s. 118d., just under 2s.

6190. By converting it at the rate they did, the War Office must have profited a good deal? They undercharged us very considerably.

6191. Did you call their attention to that? We did, knowing that the day of reckoning would come sooner or later and the sooner we faced our liabilities the better. We made a rough estimate and charged about £460,000 in our account for the difference in valuation. That was only the first approximation and it would be worked out completely afterwards, but one may say that we have faced our liability at that point.

6192. The matter is not yet settled?Well, the exact adjustment has not yet been worked out, but the £460,000 is a roughly approximate adjustment which puts it right. The sum provisionally included in the account for 1919-20 was the £460,000. The exact adjustment of that is not yet complete.

6193. What is the statement here about the expenditure of the year 1920-21 amounting to £110,000.-(Sir Malcolm Ramsay.) That is another matter. (Sir Charles Harris.) That is another year.

6194. As to the £460,000, that figure is not given in the printed Report, is it? -No, it is not; the Kenya Government have asked us to excuse them from working out the sum exactly. They are prepared, as I understand it, to accept our £460,000 as a final settlement.

6195. I was going to suggest that as between two Departments it was not worth while spending a great deal of time over it? Quite so.

Mr. Stewart.

6196. If they were out-of-pocket rupees, the rupee has adjusted itself now; it is about 1s. 4d.?-If the transactions were going on in future, that might be of importance.

6197. They make an extra profit out of the home taxpayer of so much, do they not?-Quite so, but the whole transaction

[Continued

11 July 1922]

relates to a past time, and we have no further transactions with the Kenya Government.

Sir William Barton.

6198. When was this £464,000 due for payment?-The £460,000 is approximately the difference between the rupee at 1s. 4d. and the rupee at just under 2s.

6199. When would that money actually be paid? That is a difficult question to answer. The expenditure took place in Kenya and in rupees, years, I might almost say, many years ago. It is merely a question of squaring up the accounts for that expenditure.

Mr. Stewart.

6200. But they made that profit on the exchange out of the British taxpayer, did they not? No, Kenya does not make a profit at all; Kenya rendered its accounts so foolishly as to make a heavy loss on the accounts.

were

6201. But you have paid £460,000 to meet that sum?-Yes, Kenya spent on our account rupees when they practically worth 2s. apiece, and charged us with them at 1s. 4d. We have honestly said: "Oh no, your rupees are worth 2s.; take back £460,000 to square the account."

6202. They got that money?—Yes, but they had already spent it; there is no question of profit.

6203. If they had got an account as a debit balance against us in rupees, it has adjusted itself now, and they make that profit as far as I can see?-They have not made a profit, because the rupees were worth 2s. at the time they were raising them and spending them.

Chairman.

6204. On the next sub-paragraph, have those audited statements now been received for the £110,000?-(Sir Malcolm Ramsay.) Our Department has not seen them. (Sir Charles Harris.) I am not able to say whether the audited statements have been actually received; I do not know whether the Comptroller and Auditor General has got a note of that. (Sir Malcolm Ramsay.) I have not got them. (Sir Charles Harris.) I forgot to inquire; I will inquire and complete my evidence on that.

6205. It is rather a long time if they have not yet been received. Then on

paragraph 16, the King's African Rifles, it is stated that the reconstruction of the accounts has not yet been completed. Can you tell us why?-I am afraid not, because this account is being reconstructed out in Africa by Colonial accountants. My only concern in the matter is that when they have quite finished reconstructing their accounts, they tell me I owe them so much more. The accounting is done by them, and the auditing of the accounts is done by the Colonial auditors. We have made the proposition to them that, if they will agree, we should close this account without further elaborate reconstruction, because we doubt very much whether any further reconstruction is worth the clerical labour which it is causing. It is time the account was closed, but we are perfectly powerless in the matter.

6206. This account refers to the year ending 31st March, 1920, does it not?The accounts of the King's African Rifles refer to practically the whole period of the war.

6207. I certainly know that we had something later than March, 1920, because it was referred to last year.-It has been going on for a long time.

6208. When did it close?—(Sir Malcolm Ramsay.) In 1920 it ceased.

6209. Really it has been dragging on a long time.-(Sir Charles Harris.) Yes, we are very anxious to close it, but neither the original accounting nor the reconstruction nor the audit has been touched by anybody under War Office control at all. We have simply been obliged to wait until this Colonial Government got its accounts straight and told us what we owed them.

6210. You are pressing them for a settlement?-We are pressing them to settle on broad lines.

Sir William Barton.

6211. You say that they prepare and audit the accounts entirely; you have nothing to do with them?—Yes.

6212. And at the end of all they have just to tell you what you have got to pay? -Yes.

6213. Where is the check then on behalf of the Home Government?-A special officer has been appointed to take the most important case, which is in India, as auditor on behalf of the Home Government, but he is not an officer of the Home Government. He acts in a sort of judicial capacity, examining all the

11 July 1922]

accounts in detail to see that charges are not improperly thrown on the Home Government, and we accept him as our representative.

6214. Do you think that is an adequate check? It is not, of course, as adequate as I would like. If circumstances admitted I would rather check my own bills before paying them, but circumstances really did not admit in the confusion of the war, when our staff in the War Office was so terribly overstrained as it was, of our sending expeditions of our own people to check all the expenditure in India, which is a vast job, and to check expenditure all over the Colonies, such as in East Africa, where the fighting was. We simply had not the personnel to do it, and a man in whom we had confidence was appointed as our representative.

6215. In whose pay?-He is paid by the Indian or the Colonial Government.

6216. Who are the claimants? It does not seem to me quite satisfactory, Sir Charles?-It is not a business-like arrangement, but inasmuch as it is a question of Government officials, I am glad to think that the Government rates the integrity of a Government official high enough to say that he can be trusted in a judicial matter like that to be fair to his own Government without being unfair to another Government.

6217. Still, it is a bad principle that the persons who will make the claims pay the auditor?-I entirely agree, and it is enly defensible on the score of necessity.

6218. I do not think it is defensible at all; I think it ought to have been overcome. I can only say that at that period of the war I am personally convinced that it was absolutely impossible for us to send out a staff strong enough to audit the whole of the war expenditure of the Indian Government. This African account is only a small matter; the big thing is the Indian thing. I have myself seen the official appointed

by the Indian Government to audit the Indian expenditure on our behalf. He is a distinguished member of the Indian Civil Service, although he is an Indian member of it, and I tested his work very severely in connection with this £10,000,000 in paragraph 14 by sending out one of my own officers to inquire into the whole thing. My officer brought back the most satisfactory report of the way in which this gentleman had done his. work. He has since been in Europe and has explained the principles upon which he acted to me, and although in theory I agree that it is not satisfactory and is

[Continued

Colonel Sir Robert Williams.

6224. May I ask what the Treasury think of this? It was done with Treasury sanction? (Mr. Millar.) I was going to say that I think I am right in saying the Kenya expenditure would be audited by a member of the Colonial Audit Staff, which is a general establishment for auditing the accounts of all the Crown Colonies. He would not, I think, be in the ordinary sense a servant of the Kenya Colony, and I think the Comptroller and Auditor General would confirm that. (Sir Malcolm Ramsay.) That is so; it is done by and under the responsibility of the Director of Colonial Audit. Formerly the Colonial Audit Branch was a branch of my own Department. Then