Commons in 1921, and not proceeded with, clauses were introduced to give effect to the recommendations of the Commissioners, contained in paragraph 390 of their Report, which would have brought about this particular, and as it seems, desirable, reform. Your Committee suggest that this matter might again be considered with a view to the introduction of fresh legislation.

TRADING ACCOUNTS.

STATE MANAGEMENT DISTRICTS.

38. Audit of Accounts.-The accounts of the State Management Districts have, since the inception of the undertaking, been audited by an eminent firm of chartered accountants so far as concerns the district expenditure. Up till the year 1922 the Comptroller and Auditor General was in a position to accept the certificate of these auditors in respect of those districts accounts, and his examination was confined to the charges contained in the Parliamentary Vote, which covered only the comparatively small expenses of Headquarters administration and the provision for fresh capital purchases. As from April 1st, 1922, the Parliamentary Vote was extended so as to provide for the whole operations of the State Management Districts, and it then became necessary for the Comptroller and Auditor General, with

a view to certifying the Appropriation Account, to institute an Q. 4680. independent test audit of the district accounts in addition to the Q. 4681. audit conducted by the chartered accountants. In doing so he has utilised the results arrived at by the chartered accountants, but nevertheless there is a certain duplication which adds appreciably to the cost of the audit.

39. Your Committee were informed, and gladly recognise, that the chartered accountants have rendered very valuable assistance on the accounting side to the Central Control Board, particularly in the early days of the undertaking. They suggest, however, that consideration should be now given to the question whether the additional expense of the dual system of audit is justified by its results.

STATIONERY OFFICE.

40. Sale Offices.-The accounts show that the year's working of the offices at Manchester, Cardiff, Abingdon Street, and Edinburgh resulted in losses aggregating £2,367 6s. 7d. offset by profit on other sale offices in London of £2,950 19s. 4d., making a net profit of £583 12s. 9d. on a total turnover of £140,498. Your Committee are informed that it has been Q. 5751. decided to close the office at Abingdon Street. They suggest that consideration be given to the possibility of effecting economy as regards other offices, whether by closing down or otherwise.

Q. 150.

Qs. 1487 et seq.

POST OFFICE.

41. Commercial Accounts; Interest Charges.-The capital required by the Post Office for the development of the Telegraph and Telephone undertakings-of which the bulk has been required for the Telephone Service-has been raised in one or other of three ways:

1. Loans under the Telegraph Acts.

2. Exchequer Bonds.

3. Advances provided by the Exchequer out of Voted moneys.

In the Commercial Accounts the respective undertakings are debited with interest on the whole of the capital so raised. No difficulty arises as regards classes (1) and (2), where the Services are debited with the interest actually paid to the lenders.

42. But as regards the third class, interest is not paid in cash, and the charge debited in the account is a hypothetical one. In previous accounts the charge for such advances subsequent te April 1st, 1912, has been calculated at the average bank rate for the year in which the advances were made; in some cases as high as 7 per cent. It was, however, felt that this arrangement was unduly onerous, inasmuch as the capital in question had been invested in more or less permanent assets, and might appropriately have been borrowed on annuities for terms of years at a lower rate.

43. Accordingly, in August, 1924, the Treasury agreed to the balance of the advances made between April 1st, 1912, and March 31st, 1924, being charged, as from April 1st, 1924, at 43 per cent., the minimum rate ruling for loans from the local Loans Fund on March 31st, 1924. The Post Office Commercial Accounts are thus relieved of the heavy interest charges consequent on the high Bank rates prevailing between 1920 and 1922.

Your Committee see no objection to the course adopted.

44. The Secretary to the Post Office has been good enough to give evidence to Your Committee in regard to the position of the Telegraph Service, a question which has engaged the attention of the Committees of previous years (see e.g., Report, 1923, Appendix No. 20; Evidence, 1925, Questions 520 et seq; Evidence, 1926, Questions 1487-1609). The Telegraph Service has rarely, if ever, paid and on the basis of the Post Office commercial accounts the losses in the last three years have been :

The loss is attributed in part to the competition, and the growing competition, of the Telephone Service, especially for short-distance traffic.

But an appreciable proportion is undoubtedly due to the loss on Press telegrams. The annual loss on Press telegraphy was estimated in June, 1907, apart from interest on capital, at about £250,000. On the same basis, the loss for the year 1922-23 was estimated at about £360,000. Since then it has fallen, partly because the Press have adopted the policy of leasing their Q. 1593. own telegraph lines, and is now put at about £230,000 a year. Q. 1571. Your Committee call attention to these figures and are of opinion that this position should not be allowed to continue.

NAVY.

45. Sale and Re-purchase of Surplus Stocks of Explosives. Your Committee have investigated carefully two cases brought to their notice by the Comptroller and Auditor General, in which the Admiralty have repurchased from contractors large quantities of T.N.T. and picric acid which had been sold to those contractors in 1923 by the Disposal and Liquidation Commission at prices much lower than those which the Admiralty were called on to pay on re-purchase. In both cases the stocks had been stored, under the terms of the original sale contracts, in the magazines of the Commission, without additional cost to the purchasers. Your Committee have taken evidence on the subject both from the Admiralty and from the Commission.

46. With one exception the magazines of the Commission. were held under the Defence of the Realm Acts, and it was necessary that they should be evacuated by June 30th, 1923, in order that the buildings might be disposed of and the land surrendered by August 31st, 1923. To secure this end the Commission, on January 30th, 1923, requested the Admiralty, the War Office and the Air Ministry to decide finally what explosives held by the Commission they desired to retain, and to give an assurance that such explosives would be removed to service magazines not later than June 30th, 1923. The Admiralty complied with this request by taking all the explosives that they could store in their magazines.

47. In the course of negotiations for the sale of the ultimate surplus of explosives, the Commission found that it would be necessary to retain some of their magazines in order to store the explosives for the purchasers, the magazine accommodation in private hands being quite inadequate for such quantities. It appears that the War Office and the Air Ministry were aware of this necessity, and made arrangements for the Commission to hold stocks for them in the retained magazines. The Commission suggest that their officers were in constant touch with Admiralty officers over these matters, but it is not disputed that

Para. 5 of Navy Report and Qs. 6771-6924.

C. & A.G's.

Qs. 79087921.

Qs. 7280

et seq.

Q. 8036.

Q. 8038

Q. 6575.

no further official communication was made to the Admiralty as to the possible retention of stocks for the Navy after June 30th, 1923.

48. So far as picric acid is concerned, the subsequent repurchase by the Admiralty is stated to be principally due to further demands consequent on unexpected delays in the adoption of a new type of filling. But the re-purchases of T.N.T. at prices 50 to 60 per cent. above the cost to the contractor could apparently have been avoided if the position had been adequately explained to the Admiralty, and Your Committee regret that this was not done officially by the Commission, and that coordination between the Departments should consequently have failed at this stage.

ARMY.

49. Annual Valuation of Stocks.-In their Report of last year, the Public Accounts Committee recommended, amongst other things (paragraph 68), that a complete annual valuation should be taken of the stocks held by the Army. Such a valuation, as it seems to Your Committee, would be of importance with a view to the control over and economical use of stocks, and, particularly, would afford a ready means of ascertaining whether the stocks were or were not excessive in regard to consumption. The value assigned to Army Stocks in the Accounts of recent years is admittedly conjectural, and on the evidence laid before Your Committee altogether excessive.

50. Your Committee have been informed that this matter has been under the careful consideration of the Army Council, and the Accounting Officer handed in a memorandum on the subject, which forms an Appendix to this Report. The Treasury, on learning the views expressed in this memorandum, suggested that the whole question should be further considered by a Committee containing representatives of the War Office, Admiralty and Air Ministry, together with a member who had experience of commercial methods of store-keeping. Your Committee learn, with satisfaction, that this body has now been appointed, and they will defer further consideration of the questions involved until the Report of this body is before them.

51. Recreation facilities for Officers.-The attention of Your Committee has been called to certain cases in which public property has been leased to Officers' Clubs, &c., at rentals which appear to be considerably below the fair rental value of the property. They are informed that the whole question of the granting to officers of facilities for recreation is being considered by a joint Committee of the three Fighting Services. They will be glad to learn, in due course, the conclusions arrived at.

52. Write-off Losses.-A question has arisen, which is at present under discussion between the Fighting Services and the Treasury, concerning the write-off of losses which have occurred

as the result of frauds, &c., involving negligence on the part of Commissioned Officers, especially Superior Officers.

53. It rests with the Service Department to decide upon and take the disciplinary action appropriate to the case. On the other hand, it is the function of the Treasury to sanction the write-off of losses of public money, and the Treasury cannot adequately exercise this function without being satisfied that due consideration has been given to the financial aspects of the case. It appears as regards one such case, at any rate, that was Q. 6580. brought to the notice of Your Committee that the Treasury was not even informed what disciplinary steps had, in fact, been taken. In two other cases mentioned in paragraph 36 of the Q. 8064. Comptroller and Auditor General's Report on the Army Account, the Treasury, which was informed of the relative facts, held that some pecuniary penalty should have been imposed by the Army Council upon the officer concerned, and refused, on this ground, to sanction the write-off. In these two particular cases there were compassionate grounds for waiving the pecuniary penalty, and, without prejudice to the general principle, Your Committee suggest that no further action need be taken vis-à-vis these officers.

54. As regards the general question, Your Committee hope to learn next year that a satisfactory arrangement has been arrived at between the Departments concerned, and they cannot but think that on discussion the difficulties of the situation will be found in practice less serious than in theory they appear. They feel, however, that the Treasury cannot adequately discharge its duties to this Committee and the House unless it is fully informed on all occasions of the disciplinary action taken by the Executive Authorities, and can thus satisfy itself that the measures taken are sufficient to emphasise the pecuniary responsibility of officers in control of public funds.

AIR.

55. Air Estimates; Statistical Information.-In the course of Qs. 6027-9. their examination of the Appropriation Account for Air Services Your Committee found themselves handicapped by the absence from the Air Estimates of interleaved sheets of statistical and other information such as are printed with the Estimates for the Navy and Army. They hope that in future the Air Ministry will publish such information, which will be of considerable value not only to Your Committee, but to Parliament as a whole. 56. Special Advances to Contractors.-The War Office, the Admiralty, and the Air Force are in certain cases allowed to make by the Public Accounts Committee and were summarized in special advances to contractors at the end of the financial year, which are not claimable under the specific conditions of their contracts, in virtue of arrangements, which have been approved paragraph 24 of the Third Report, 1922.

Para. 5 of C. & A.G.'s Air Report and Qs. 5694 et seq.