13 July, 1926.]

natural presumption from the documents is that this was money which ought properly to have come to the Imperial Institute, and the onus is on Sir Wyndham Dunstan to prove the contrary, which he seems to us to have failed to have done. It may be that it was an omission from the Minutes at the time, but, even so, it was his business to ensure that it was properly set out in the Minutes.

7064. Have you anything to say, Sir Malcolm ?-(Sir Malcolm Ramsay.) I do not know if you wish me to express any opinion upon this correspondence, because the Committee are in quite as good a position to form one as I am. There is a direct conflict of evidence, and the point for the Committee to decide is whether they accept the version of Sir Alexander Harris and Sir Alfred Bateman or the version of Sir Wyndham Dunstan, who has certainly, I think, prejudiced his case by carelessness in not obtaining a complete record of the transaction on the files of the Institute. I think that tells very heavily against Sir Wyndham. The practical question for this Committee, if they form a conclusion adverse to Sir Wyndham, is whether they would recommend that any steps should be taken to recover any part of the money which they think should have been paid over to public funds. (Sir William Clark.) To the Institute fund. (Sir Malcolm Ramsay.) I should have said the Institute fund. I am acting as Auditor of the Institute fund, and I am not satisfied that the Institute have got all they ought to have had, so I have not certified the account, and I am waiting for a direction from this Committee as to whether I shall pass this account as it stands, or whether there is to be a recovery.

7065. Taking the agreement as improper, reviewing all the evidence, would it be fair to ask you Sir William, in the light of the way you have gone into it, whether you think the blame should lie on Sir Wyndham Dunstan or on the Managing Committee?-(Sir William Clark.) I feel that the major blame must rest on Sir Wyndham Dunstan. One does not like to impute motives, but it does look as if he did not intend the Managing Committee to know what was being done in this particular. Taking the cumulative evidence, it is rather difficult to think that it all happened by accident, that there was no reference,

[Continued.

apparently, to these terms of remuneration that were proposed. Whether or not the Managing Committee might have exercised more vigilance in order to detect these arrangements is open to opinion, too, no doubt; but the major blame must rest with the man who made the agreement, if we are all agreed that that agreement was an improper one.

7066. And whose duty, of course, it was to disclose everything to the Members of his Committee?—Yes.

Major Salmon.

7067. Have we been legally advised that we can claim for the money he has received? Have we taken legal opinion as to asking Sir Wyndham Dunstan to refund money that should have gone to the funds of the Imperial Institute?--I have consulted the Board of Trade Solicitor; I have not had a formal opinion from him, but I have put the whole case before him at different stages, and there is some doubt whether we could successfully sue Sir Wyndham for that money. It would be a very unpleasant type of case, because it would involve a charge, I presume, of fraud or something of that kind. If the Committee decide that the share of profit which went to Sir Wyndham instead of the Institute ought to be recovered from him, the simplest method would be to consider with our lawyers whether we could properly stop it out of the pension payments, which we control, of course: deduct the £160 from the quarterly payments of pensions which are made to him.

7068. The pension is an ex gratia payment. It is an ex gratia payment. I have not had a formal legal opinion as to whether we should be liable to be sued if we were to take such action, but it is a little improbable that Sir Wyndham would think it desirable to sue, but one does not know. I could get a formal opinion, of course.

Mr. Briggs.] Then really we are coming to this: that we are now sitting in the form of a judicial Committee.

Chairman.] Our immediate object is to get all the facts on paper; later we will deliberate as to our decision.

Mr. Briggs.] But our decision, if I understand the question rightly which you put to Sir William, is to be a judicial one, on which possible action may be taken.

Chairman.

7070. We begin to-day at paragraph 10, on page vi. of the Comptroller and Auditor General's Report; this deals, I think Sir Malcolm, with claims for the berthing of private vessels at Gibraltar? -(Sir Malcolm Ramsay.) Yes sir; we noticed that no charges were being raised at Gibraltar for wharfage on private vessels undergoing repairs. As soon as we called the attention of the Admiralty to this the instruction, which was perhaps a little ambiguous, was made clear, and revised instructions have now been issued, and a charge will be made for a service of this kind.

7071. Have you any comment to make to the Committee, Sir Oswyn?-(Sir

Oswyn Murray.) The circumstances at Gibraltar were rather exceptional, that being a Yard which it is not possible to keep fully employed with naval work throughout the year, and therefore it is very desirable, at times when they have not sufficient naval work in hand, to attract mercantile work which would otherwise go to Cadiz and other Spanish repair ports. That is, I think, the reason why the Admiralty Superintendent had not included a charge for that particular item. Of course, charges were made, for mercantile work, and for the use of the docks and charge made for this particular item as such. We have now agreed, as the Comptroller and Auditor General states,

15 July, 1926.]

[Continued.

to make a charge; but the first result of that intimation has been that there seems to be a disposition for private work to go away from Gibraltar again, and we are looking into the whole question of our charges there, being anxious, if possible, to keep work that would be useful to the Yard, when there is no naval work in hand, or not sufficient naval work in hand. The First Lord himself went into this question when he went to Gibraltar in the spring.

un

7072. Paragraph 11 deals with vouched expenditure, does it not, Sir Malcolm? (Sir Malcolm Ramsay.) That is the stock paragraph relating to certain charges which are not supported by detailed receipts. The items are all supported by collateral evidence and are covered by general Treasury authority.

Mr. Gillett.] I should like to know how it comes about that accounts to the extent, in one case, of £12,000, have been temporarily mislaid, and in another case it simply states that the accounts have been lost. I think we might have a little more explanation of why these accounts are missing.

Chairman.

7073. I ought to have referred members to page 107, on which they will find set forth the details to which Mr. Gillett has just called attention.-If you take the smaller case first, the £660, where the vouchers were lost, the charges in that particular case had been examined by the Expense Accounts Officers at the Dockyard, and had been passed by them; the account was subsequently sent up to the Admiralty for final clearance, but there the detailed vouchers which supported the expenditure disappeared. I think that is so, Sir Oswyn? -(Sir Oswyn Murray.) Yes, that is so.

Major Salmon.

7074. May I ask a question on that point; when you speak about the Expense Accounts Officers, are those Officers merely dealing with expenses generally of the Dockyard, or have they anything to do with the actual expenditure? (Sir Malcolm Ramsay.) They are really accountant people; they analyse and dissect all the charges with a view of costing particular services. They are

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definitely financial people, not executive. They have their cwn recorders in all the shops to check the time-keeping and so forth. The larger item, perhaps, Sir Oswyn would like to say a word about, though the principle is the same there.

Chairman.

7075. That is the item of £12,605?— (Sir Oswyn Murray.) That was a large set of accounts connected with the proceedings of the President of the Naval Inter-Allied Commission of Control which looked after the carrying out of the Naval part of the Treaty of Versailles by Germany. This large pile of accounts was being examined in the Admiralty by a particular member of the Accountant General's staff, making a preliminary examination. He was a very capable man, who, unfortunately, died suddenly. Nobody could trace where this large bundle of vouchers had gone to; it was thought that he had been working on them out of office hours at home, but we could not trace them at all. On the other hand, it is quite possible, and we have proceeded to do so, to build up the account again from the records of the officers on the Commission of Control, and we shall eventually have the whole available for proper examination. As to the causes of these losses, the circumstances are different in almost every case. In some cases papers go astray coming from a foreign depot and never reach us; in other cases in the course of referring vouchers about between the Admiralty Departments, to see that a claim is accepted as a charge on the particular Vote concerned, owing either to carelessness on the part of the messenger. or some other reason which we cannot trace, a voucher that has been stated to be sent from one branch to another, never reaches the branch to which it was addressed. The Admiralty, as you probably know, is not all situated in one building, but is scattered over London in 15 or 16 buildings.

Sir Fredric Wise.

7076. In 15 or 16 buildings?—Yes, I believe that is so still. We have numbers of small sections down in Victoria Street, we are up in Kingsway, and we are over Waterloo Bridge, and scattered about in various places.

S

15 July, 1926.]

[Continued.

-Major Salmon.

7077. That has only arisen since the war? We always had certain outlying Departments down in Victoria Street. We have never, in my experience, been all under one roof at the Admiralty, but the position has become worse since the

war.

7078. Owing to the increased staff?— Yes.

7079. So that it is within the power of the Department to get things easier by reducing the staff?-If work permits it, certainly.

Sir Fredric Wise.

7080. Your staff is terrific, but we have taken that up.-(Sir Malcolm Ramsay.) I might perhaps add, with regard to page 107, that nearly all, if not all, of those items relate to the period of the war, or the period immediately succeeding it. (Sir Oswyn Murray.) Yes, I meant to mention that.

Major Salmon.

7081. On page 66 there is an amount of £1,039 1s. 5d., does it apply to that?(Sir Malcolm Ramsay.) That related to August 1917.

7082. In normal times would you lose vouchers? (Sir Oswyn Murray.) No, there is very little of that sort of thing, I am glad to say.

Chairman.

7083. Paragraph 12 deals with Store Accounts?-(Sir Malcolm Ramsay.) There were a few outstanding Store Accounts for last year which had not come in; they have now come in, and I have got all the Store Accounts for 1924-25 with a very few minor exceptions, the chief of them being some naval armament and torpedo store accounts at Yards abroad, which take some time to come through.

Major Salmon.

7084. With reference to the Store Accounts in the Dockyard Expense Accounts which we have before us to-day, do they refer to similar Store Accounts to those which are referred to in paragraph 12 of the Report on the Navy Appropriation Account, and are the details to be found in the Dockyard Expense Account?-(Mr. Oliver.) The

Dockyard Expenses Account will bring to account all the stores consumed; they will not give you figures as to stocks; the Stores Account is a quantity Account.

7085. What do the Store Accounts in the Dockyard Expense Account refer to? -They refer to the same stores, the stores they use in the repair and maintenance of the ships, but they show the result in money. (Mr. Watson.) They are really Cost Accounts of ship building, repairs and so on in the Yards.

7086. In the Dockyard Expense Account they are not consumable stores? (Mr. Oliver.) There are consumable stores in the Dockyard Expense Account, but you get it in money.

7087. I notice that in some of the accounts you appreciate the value of stores; perhaps we could have an of explanation why we have an appreciation of stores in money value? -(Sir Oswyn Murray.) We alter the value according to the current cost of the stores. (Mr. Watson.) There is a concrete case to be found on pages 6 and 7 of the Dockyard Expense Account.

Chairman.

7088. I think you mean at the top part of pages 6 and 7?-Yes; that I think is the point.

7089. It is the Stock Appreciation and Depreciation Account.-Yes

Major Salmon.

7090. I will take that definite point as an example.-(Mr. Oliver.) Take the value of steel for example, if steel goes up in value and we hold stocks of steel, our pricelist, vocabulary or whatever you like to call it, has all those prices increased in accordance with the rise in market value, and that raises the value of our stock.

7091. At what period of the year do you alter the prices?-That is going on continuously, generally once a quarter.

7092. As a matter of fact it is within your knowledge and experience that there is a great fluctuation, at times, in most markets?—Yes.

7093. Therefore, the book must be altered very often?—Yes.

7094. Because no prices are really stabilised at the present time? That is

So.

7095. So that you either debit or credit it regularly?-From time to time,

yes.

15 July, 1926.]

[Continued.

7096. You may strike a good patch or a bad patch?-It all depends what you mean by a good patch or a bad patch.

7097. That is to say, there may be a scarcity of spot stuff, if you like, and if you want it, you would find the market price is high, but a couple of months later, because there is a surplus to demand, the market price is lower; therefore, I consider it to be a good patch when you have got a stock which, if you put it on the market, you would get a higher price for, whereas, on the other hand, you might strike a time when the prices on the market might be much cheaper than the stock in hand. What benefit is it, if any, to the Admiralty, to have this up and down arrangement?-The only benefit you have got is that you are charging your goods at the price that you would have to pay if you bought those goods at the time.

7098. Does not it involve an awful lot of accounting to alter these prices from time to time? No, not a great deal. As a matter of fact it comes along, in practice, about once a quarter. Of course, the first figure you have got there, the one you were looking at is the annual revaluation.

7099. But you have a central store, and a number of subsidiary stores. Your subsidiary stores, then, may have some goods in stock at a different figure to what they would be if they were sending them out afresh from the main store?No.

7100. Would they all automatically go up? Yes, it is all centralised in that

way.

7101. Of course, the danger one sees about that is how very difficult it is in taking stock, unless you take it for both price and quantity, to really check your stores thoroughly?-No, I think we have a very good system under which we can check our stores; we have an annual valuation and value everything at the end of the year.

7102. But do you value them at the value of the date at which you take the stock? We value them on the 31st March each year. We do not test the stock at the same time.

7103. You do not? It is too big a job altogether. We actually check our stock within a period of three years.

7104. For quantity?-For quantity and everything.

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of 7105. Irrespective price?-Irrespective of price; the object being to ensure that the stock is in agreement with the book record, or the book record is in accordance with the stock.

7106. For quantities?-For quantities. 7107. When you say that you have a surplus on stocktaking that might be accounted for by the variation in prices? -No, what I should understand by a surplus on stocktaking, would be a surplus in quantity, which would be due to a storekeeping error of some description or another.

7108. I suppose your experience has shown you that when you have a surplus you generally find on the next occasion you have a deficit?-Not necessarily; I do not say we can work the thing with absolute accuracy right the way through; that would be impossible; you are bound to get differences.

7109. Take gun-mounting as an item; I am not quite sure of the page on which it is, but it did strike me that you anticipated that certain gun mountings were worth £X, and when you sent them out to a contract depot to be resurveyed, it cost many hundreds of pounds more than you anticipated; and the answer. I understand, that you give to that is that it was because they had been out in the open for a long period, and you were not in a position to know what the cost of the reconditioning would be. How do you arrive at that? It struck me as being rather a difficult arrangement. On what price do you base those stores. I daresay you do put a price on them? -There is a price put on them, but this is rather outside my scope; I do not deal with gun-mountings. Perhaps Sir Oswyn could answer that.

7110. Take steel; do you deal with steel? Yes.

7111. You deal with all stores other than gun-mountings?-I do not deal with gun-mountings or armaments; I deal with all ship's stores.

7112. And it has always been the practice in the Navy to alter the value of your stock according to the market value?—Yes, right through my experience.

7113. After the war, did you have to decrease tremendously the price of your stores? Yes, as time went on, very considerably.

7114. Has that been done every quarter since the War? Yes. That S 2