strength of a telegram from the Foreign Office, which As regards the first payment, while we consider it unsatisfactory that instructions from home should be ignored, we do not wish to comment adversely on the action of the British Minister to Persia in the local circumstances then prevailing, particularly as he had reason to believe that the payment could be refunded out of a loan to Persia then in contemplation. In the second case, however, we cannot help feeling that the instructions issued by the Foreign Office were not sufficiently clear. POST OFFICE. Q. 1414. 51. Certain general changes affecting the financial arrangements Q. 3100. of the Post Office have been brought into effect during the year. They are in the main directed towards securing economy in labour and staff and we do not feel it necessary to refer to them in detail. One of these changes however has a reaction on the account of Q. 3108. the Post Office which deserves mention. In regard to the accounting for Engineering Services new arrangements have been made, of which the general effect is that for economy in administration the Post Office will rely, not so much on the Estimates for specific works, as on the cost accounting by means of standard units. Consequently, in the case of minor works, the labour and materials used will not be recorded against the individual jobs; this necessitates an alteration in the method of allocating expenditure between the Post Office Vote and the Telephone Capital Account. Hitherto expenditure on Renewal Works, involving charges both to the Vote and to the Capital Account, has been allocated as the work proceeded. The partial disappearance of the individual accounts makes such concurrent allocation impossible; under the new system the whole of the expenditure will be charged against Capital in the first place and the necessary adjustments with the Vote will be deferred, broadly speaking, until the work has been finished. This change therefore involves a certain disturbance in the Post Office Accounts for 1920-21, the year of transition from the old system to the new, inasmuch as the Vote Account for the year has been relieved by a sum of £417,000 in respect of expenditure on Q. 3111. Works which were commenced before 31st March 1921 but were then unfinished. This expenditure had been allowed for in the Estimate for 1920-21, but, under the procedure described above, it has been debited temporarily to Capital and will be charged against the Vote for 1921-22. 52. In future years there will again be a carry-over of the same kind into the succeeding year, but this will be balanced more or less by the sum carried over from the previous year. We mention this in order that the facts may be on record, and we shall hope to learn that the system of controlling expenditure by means of standard units has justified expectations. 04. Q. 3171. Q. 6005, etc. Q. 6021 53. In the Commercial Accounts relating to the Post Office, the total expenditure is apportioned in detail between postal services, telegraph services and telephone services; and, appended to the Appropriation Account of the Post Office Vote, is a statement (Appendix No. i) showing the actual distribution of the expenditure between these three heads. This statement is, however, somewhat misleading, as it suggests that the apportionment is based on estimate to a much larger extent than is really the case. Thus the Appendix suggests that out of the gross expenditure of £63,000,000 only £16,000,000 is definitely allocated on a basis of ascertained facts against the three services, while the remaining £47,000,000 is distributed on a percentage basis. We are, however, informed that out of this £47,000,000 a large percentage, probably 70 per cent., can be allocated as ear-marked to a particular service. We suggest that the form of the Appendix should be revised, with a view to setting out more clearly the actual facts. 54. Appendix No. iii to the Appropriation Account exhibits a reconciliation of the expenditure under the engineering subheads of the Post Office Votes with the expenditure connected with the engineering programme. This statement appears to us unnecessarily complicated, and we are glad to learn that the Post Office proposes to simplify it in a future year. ARMY. 55. An excess vote has been taken with our assent authorising the application of a surplus on the Appropriations-inAid to meet an excess of gross payments over the gross estimates. 56. The Army Accounts for 1920-21, though still far from perfect, represent a distinct advance on those for 1919-20, which were the first to be presented in the new form adopted on the recommendation of the Select Committee on National Expenditure, 1918. Thus the accounts of the several units and establishments at home, in the Crown Colonies and in Egypt are, generally speaking, complete on the new basis -except for interferences attributable to the special conditions in Ireland. A beginning was made as regards other territories (except at Constantinople and on the Rhine), though the disturbed state of Mesopotamia prevented the preparation of any complete accounts there. Where the new system was not effectively introduced, the cash records were incorporated into the income and expenditure account, on the best arrangement feasible. In these circumstances, and as a consequence of other difficulties inevitable in the early stages of a development of this character, complete correspondence of arrangement in estimates and accounts has not been obtained. 57. During the year 1920-21 it would appear that the main energies of the Corps of Military Accountants were directed to improving and consolidating the form of account. For this reason, and also because the accounts of the previous year were only a beginning, it was not possible to make full administrative use of the new form. Recently also the operation of the system has been obscured by the sweeping reductions of expenditure effected on the recommendation of the Geddes Committee. 58. Such being the position, we feel that it is not yet possible for this Committee to express a final opinion as to the advantages secured by the change. We do, however, think that in many departments of Army expenditure the new form will, if properly and promptly utilised, prove a valuable and indeed essential instrument for control and economy. We would point out, for instance, that it is only by means of the new accounts that we are able to learn that Army expenditure in Mesopotamia in 1920-21 cost £37,000,000; that recruiting cost much more per recruit than in the year before; that regimental tailoring and boot repairing shops were in certain cases much too expensive for the work done; that a student officer at the Staff College, Camberley, costs the country £1,393, including his pay and allowances, and so on, not forgetting the economies shown to have been made in other directions. It is, moreover, only by means of the new accounts that we are able to criticise intelligently the items that make up these figures. Until more complete experience has been gained, there can be no question of departing from the main principles on which the new system is based. Q. 6122. We understand that the Army Council are considering the possibility of simplifying the account in certain directions, and Q. 6710. that the Secretary of State is about to institute an inquiry of which the principal object will be to consider the way in which the accounts can be used for administrative control. We are glad to hear that now so much of the initial work has been done it has been found possible to reduce the cost of the Corps of Military Accountants to £260,000 for the year 1922-23, Q. 6123. and that further substantial reductions will be made next year. 59. Mainly through the new cost accounts it was revealed, as above mentioned, that regimental tailors' and shoemakers' shops were as a rule uneconomical. It is satisfactory to learn that a Q. 6417. Committee appointed to consider the re-organisation of these shops has formulated a scheme which it is hoped will result in a saving of £60,000 a year. 60 Very great difficulty has been experienced in arriving at Qns. 6064 et satisfactory valuations of buildings, stocks, &c., for the purpose seq. of the new system of accounts, with the result that the figures at present recorded are quite incomplete and to that extent misleading. We recognise that in the transitional period this is inevitable, but the effect is to make complete comparisons difficult. We hope that every effort will be made, with the means actually available, to obtain reliable figures as speedily as possible. Q. 6708. Q. 6709. Q. 6423. Q. 6433. Q. 6434. Q. 6440. 61. Army, Vote A.-The only information given this year as to the number of men on the strength of the Army compared with the numbers voted by Parliament is contained in an Appendix almost hidden away towards the end of the volume. In view of the great constitutional importance of Vote A we have expressed a wish that in future greater prominence and completeness should be given to this statement. In the year 1920-21 the expectation held out in the Estimates of reducing the Army to about 280,000 men was not realised, the actual minimum being 335,741, which was, however, 178,661 less than the number voted. 62. Certificate as to authorised reserves.-It had been hoped that the account for 1920-21 would be accompanied, as was the case before the war, by a certificate that the authorised war reserves were in all respects complete. No such certificate has been furnished. for the reason that, in view of changes likely to result from the recommendations of the Committee on National Expenditure, the amount of the reserves cannot be regarded as settled in any item. We are told, however, that there are more stocks in hand than it is intended to keep as war reserves. 63. The Accounting Officer has qualified his certificate, that no part of the expenditure had been incurred without superior authority, where such authority was necessary, by reference to two matters which had been reported to the Treasury. 64. The first of these related to the appointment of certain Territorial officers to staff posts, at full Army rates of pay, after the Treasury had sent a letter which intended to convey that part-time Territorial officers holding such posts should be paid on a lower scale. We are informed that the Treasury has now agreed that those officers who were appointed before the temporary misunderstanding of the Treasury directions was finally cleared up must continue to receive the rate of pay at which they were appointed. In the circumstances no objection to the charge in the account remains. 65. In the second case, after a pledge had been given by the War Office to the Treasury that vocational training of soldiers would be limited to the regimental facilities existing, two trade schools were opened and carried on in the Northern and Eastern Commands. It was apparently considered for some time that these schools involved no extra expenditure of public funds, and that there was therefore no violation of the pledge. But in the course of 1920-21 the cost accounts, prepared under the new system, revealed that extra expenditure was being incurred; the practice had grown up of sending soldiers to spend the last six months of their service at these schools, the men thus being released from military duty. We learn that the schools have not yet been closed, and that the War Office is in correspondence with the Treasury on the nature of the educational training to be given to soldiers during service. Pending the settlement of this question, we do not see sufficient reason to recommend the removal of the charges from the account; but we consider that the position should have been reported to the Treasury, as soon as it became clear to the War Office that the pledge, given by them, had been violated by action in the Commands. 66. Accounts of the Forces in Mesopotamia.-We regret to Q. 6245. learn that, in the words of the Accounting Officer, the history of accountancy in Mesopotamia is a very black chapter indeed." The Comptroller and Auditor General reported adversely on the accounts from various points of view, and his criticisms have not been contested. The War Office took over accounting control from the Indian Government in 1920, and this in itself involved a complete change of accounting system. The Arab rebellion in 1920 and the subsequent continual reduction of the forces in the country, and of the stores required for them, have increased greatly the difficulty of putting the accounts on a satisfactory footing. We understand that on 1st October next the Air Force will assume the whole responsibility for military finance in Iraq, and we trust that every effort will be made to ensure that that Department has a firm accounting foundation to work upon. 67. In view of the general admission of unsatisfactory accounting in this area it is unnecessary to elaborate particular defects, but reference may be made to the very heavy losses of stores, to fraudulent sales of oil, and to the vast accumulation of Inland Water Transport stores. We are informed that Qns. 6271-2. disciplinary action is taken in appropriate cases and stoppage of pay frequently effected. We regard such enforcements of responsibility for the control and custody of public funds and stores as of the highest importance. The fraudulent sales of oil above referred to were facilitated by Q. 6310. the practice which had grown up of signing inaccurate certificates" pro forma." We are glad to know such an abuse has now been stopped. Laxity in giving certificates in Egypt was brought to our notice last year. 68. Egypt.-In Egypt again, where, as in Mesopotamia, there have been special disturbing influences, no great improvement in accountancy was noticeable during the year. This matter was also before us last year. We are glad to learn that the Army Council have called the special attention of the General Officer Commanding to various unsatisfactory features. 69. Advances for Civil Works out of Army Funds.-Our Q. 6338. attention has been called to large expenditure from Army Funds in connection with the purchase and adaptation of a Residence for the High Commissioner at Bagdad. Until the work was far advanced neither the War Office, nor, indeed, any Home Department, was aware of this project, which has involved an expenditure of £135,000. We understand that it has been Q. 6343. agreed between the Colonial Office and the War Office that the expenditure is not a proper charge to Army Funds; but we have Q. 6370. not yet learned how it is proposed to provide for it. We must |