Q. 2707. Qns. 25682580. Q. 2594. Your Committee think it right to point out that to a large extent the losses shown in the Statement are due to the default of persons who were not Post Office servants at all and that their amount is insignificant in relation to the total turnover. The charge for losses under Sub-head H is, as already stated, £57,390. The total Parcel Post revenue for 1922-23 was over £6,000,000 and the total cash receipts of Postmasters amounted to £337,000,000 while their disbursements totalled £354,000,000. TELEPHONE CAPITAL ACCOUNT. 24. The Committee have inquired into the circumstances in which the Post Office entered into an agreement to pay in Local Loans stock for the site of a telephone exchange. The purchase price of this site was agreed between the Post Office and the Vendors (a City Company) at £7,000, but before any binding agreement had been concluded the Company stipulated that the payment of the purchase money should take the form of a transfer of Local Loans stock sufficient to secure them the income which they were then obtaining from the property. The stock so required was of a nominal value of £13,500. As the site was essential for the purposes of the Post Office, the PostmasterGeneral accepted this condition. The legal negotiations in regard to the transfer were, however, unavoidably protracted and the purchase was not completed until two years later. By that time the cost of the Local Loans stock in question had risen to £8,893 2s. 6d., being £1,893 2s. 6d. in excess of the value of the stock at the time when the original stipulation was made. The Committee were informed that the Post Office completed this arrangement with extreme reluctance in the belief that no alternative course was open to the Department. Both the Treasury and the Post Office agree with the Committee that this form of transaction is undesirable as being no more than a speculation, and the Committee are assured that any transaction of this kind will not be repeated except in circumstances of extreme necessity, and then only with the express concurrence of the Treasury. BROADCASTING. 25. A separate account is kept by the Post Office of the receipts and expenditure in connection with broadcasting. Your Committee recommend that this account should be published either as a separate Parliamentary Paper or as a separate section of the Post Office Commercial Accounts. ARMY. 26. Form of Account.-The Public Accounts Committee of 1923 in paragraph 65 of its Report referred to the appointment of a Departmental Committee under the Presidency of General the Hon. Sir Herbert Lawrence. Its terms of reference were: "To enquire into the system of administration of, and accounting for, Army expenditure, and into the use of Accounts for the purpose of control, and to report what changes, if any, consistent with the requirements of Parliamentary accounting, are desirable in the interests of economy and efficiency." The report of this Committee has now been presented to Parliament, and on the 17th June last the Secretary of State for War announced in the House of Commons that: "The Army Council have decided, with the concurrence of the Treasury, to Q. 6592. adopt the two principal recommendations on which General Lawrence's Committee were unanimous, namely, the amalgamation of the Royal Army Pay Corps and the Corps of Military Accountants, and the continuance of the new scheme of cost accounting, subject to an investigation as to the possibility of improvements and simplification with a view to economy in its working." To give effect to this decision the Army Council propose to appoint one or two (Q. 6592) further Committees whose task it will be to go into practical details as to the scope of cost accounting and the question of its practical application. 27. Your Committee do not wish in any way to anticipate the Q. 6544. result of these investigations. We think, however, that it is permissible for us to indicate how far it may be possible for the Public Accounts Committee, with the assistance of the Comptroller and Auditor General, to scrutinise the results disclosed by the accounts. 28. During the last two years the working of the new system as an instrument of economy has been obscured by general reductions made in pursuance of Government policy as the result of the recommendations of the Geddes Committee, but even apart from this, it must always be very difficult to earmark in £ s. d. the savings which have been effected by the change and can be set off against its cost. We are, however, informed that in an increasing number of instances questions have been raised and economies have been effected under the new system of accounts which probably would not have been made under the old. Q.6544. 29. As it appears to us, the general advantages of this system of account must be looked for in, and its continuance must be justified mainly by, the prompt and effective use made within the Department of the results which it discloses. The Comptroller and Auditor General informs us that his cash audit is in no way affected by the new system and continues exactly as before He has added a running test of the cost accounts as the result of Q. 6538. which he has been able to raise certain criticisms, which we are Q. 6533. glad to hear from the Accounting Officer have been constructive. Q. 6543. But it is clear from the Report of the Comptroller and Auditor General and from evidence given before us that he is in this difficulty, that the answer to many of the questions which may Q. 6559. Q. 6579. Q. 6562. Q.6564. Q.6521. be raised by the cost accounts (and these, to our mind, the most important involving the largest expenditure) must depend, not on considerations which can be measured in terms of money or by financial units, but on general considerations of military necessity to which accounting must be subordinate. Your Committee experience precisely the same difficulty in considering this Account we proceed to give a few illustrations. 30. The Account of the Mechanical Transport Companies gives their gross cost in the year 1922-23 as £950,000. Of this sum £400,000 has been charged off as "services rendered to units and establishments," leaving some £550,000 unallocated. These figures suggest that for less than half their time, Mechanical Transport Companies were employed in rendering services to individual units to which a commercial value may be attributed. The balance of £550,000 represents the cost of maintaining these companies as military units ready for military emergencies. Incidentally we asked in connection with these companies, whether any comparison had been instituted between the cost of motor transport in the Army and the cost of the fleets maintained by big commercial firms, of which detailed statistics have been published in the Press. We are informed that, while such items as consumption of fuel and so forth are closely scrutinised, any general comparison between the cost of maintaining, say, 3-ton lorries for military requirements and the commercial user of the vehicles maintained and run by private firms completely breaks down. 31. Similar difficulties arise in the case of Army Hospitals, where reasons of general policy may require that separate hospital treatment should be provided for different ranks, or that a large reserve of equipped beds be maintained, as at the Royal Herbert Hospital at Woolwich where 502 beds were equipped, although the highest number occupied at any one time in the year was only 309 32. Again, the working expenses of the various Army Depots, analysed in detail under Head III of the Account, show wide variations as between the several services in the ratio of direct labour to supervision and administration. Thus, in the Ordnance Depots the Administrative and Supervisory Staff represents 18:07 per cent. of the total cost, and direct labour 36 68 per cent For the Engineer Store Depots the corresponding figures are 46 73 per cent. and 29.09 per cent. On inquiry, however, these variations do not readily lend themselves to criticism, except within the War Department, owing to the different circumstances of the depots, e.g., at one depot clerical and accounting work may be concentrated, but the depot may not handle all the stores for which it accounts. 33. These, and other illustrations brought before us lead us to the conclusion that while the new form of account does direct attention to a number of points which would otherwise escape notice it does not lend itself to effective criticism except by those who are in intimate touch with military administration and military policy. So far then as this Committee is concerned we should not object to a simplification either of the account itself, or of the processes by which it is constructed. 34. Your Committee learn that during 1922-23 further progress C. & A. G.'s was made in the development and standardisation of the detailed Report. accounts and that speaking generally the accounting has been Para. 11. a great deal better than before. Still, the account is by no means Q.6533. perfect yet. Thus: The accounts of the Armies of the Rhine and Constantinople which involved approximately 13 per cent. of the total net expenditure were not costed locally and the charges for these areas have been arrived at by the method of proportional allocation the accounts suffer from the difficulty of securing adequate valuations on which to base charges in respect of depreciation and C. & A. G.'s the absence of published prices for certain classes of stores con- Report. sumed and the examination of the Comptroller and Auditor Para. 13. General revealed a number of instances of incompleteness and Q.6543 inaccuracy. 38-9. Q.6611. The valuations of fixed assets and of rental values are still very Report para. approximate and as will be seen from the table on pp. 124-5 of the account by far the greatest portion of the stocks in hand at 31st March, 1923, was still unvalued. The value there assigned to classes of commodities for which the initial pricing has been completed is just over £4,000,000, while the uncompleted classes appear at a round sum of £100,000,000. It is difficult to establish from this particular table any relation between the total stock held and the consumption, etc., of Army stores, and this difficulty is increased by the circumstance that Q. 6608. the Army Council have not yet decided the final standard of War Reserves. Your Committee trust that an early decision will be reached on this very important question. 35. The net expenditure on the Army in 1922-23, as shown. in the General Abstract Account, was £48,925,929, but this figure does not represent the total cost of maintaining the Army in the year, which, as revealed by the General Balance Sheet, was £57,870,791. The difference is explained mainly by the fact that the Army was utilising surplus stocks to a considerable extent. and it was unnecessary to replace immediately all the stores. consumed. Your Committee note that stocks are said to be now approaching a normal level and that replacement will shortly have to begin. 36. Unemployment Insurance of Soldiers.-The Comptroller and Auditor General has called attention to certain cases not covered by statutory authority, in which contributions were paid Q. 6505. Qns. 665963. Q. 6669. Q. 6673. Q. 6676. Qns. 66916700. Qns. 670619. out of Army funds to the Unemployment Fund, for the purpose of qualifying soldiers to receive unemployment benefit on their return to civil life. Legislation has now been introduced to authorise payment of these contributions in the case of certain classes of soldiers not previously covered by the Statute, and in these circumstances your Committee raise no objection to the past payments which have been charged in the Army Accounts. 37. Army Agents.-The Account records payments amounting to £309,540 out of the grant voted by Parliament for the relief of sufferers by the failure of Sir C. R. McGrigor, Bart., & Company: further payments amounting approximately to £15,000 will appear in the Account for 1923/4. It will be remembered that this grant (which provided a dividend of 10s. in the £ over and above the 5s. in the £ paid by the liquidator of the estate) was made ex gratia, notwithstanding the fact that no liability rests upon the Exchequer for the banking business of Army Agents, on the ground that the officers concerned were largely temporary officers who did not appreciate the position of Army Agents. To guard against any possible misconception in the future a paragraph has been inserted in the King's Regulations pointing out that the Army Council exercise no control over and accept no responsibility for banking business conducted by firms (of which two remain) appointed to be Army Agents, and every officer is now informed that he is under no obligation to draw his pay through the Army Agents, but can have it paid through his own bank. We are informed that the Treasury has raised the general question whether on balance it is desirable to continue the agency system, and propose to discuss it before the existing contracts expire in December, 1931. 38. Navy, Army and Air Force Institutes.-Your Committee trust that a speedy settlement will be arrived at on the questions outstanding with the Navy, Army and Air Force Institutes in regard to the rents due in respect of cinemas and theatres conducted at Army stations, and services rendered to the Institutes by the Army in Iraq. 39. Palestine deficit.-The administration of Palestine was transferred on 30th June, 1920, from military to civil control, and at that date there was a deficit on the accounts, since ascertained as £273,727, which had been financed from Army funds. The deficit was arrived at after setting aside a sum of approximately £300,000 to meet certain obligations in connection with the Ottoman pre-war debt which, at the time, it appeared likely that the Palestine administration would have to discharge. The effect, however, of the Treaty of Lausanne was to relieve Palestine altogether of the liability against which this sum was held in reserve, and the money was then appropriated by the Palestine Government as a temporary measure to defray capital expenditure on works services, which are ultimately to be provided |