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REPORT OF THE COMPTROLLER AND AUDITOR GENERAL
ACCOUNTS OF THE ORDNANCE FACTORIES OF THE ARMY.
FOR THE YEAR 1905-6.
[Prepared and submitted in accordance with Act 52 & 53 Vict. c. 31, 8. 1.)
1. In accordance with the modified system of audit referred to in paragraph 3 of my Test Examination Report of last year, the detailed audit has been limited to the examination of one week's of Accounts, 1905-6. labour and one week's material at the Royal Carriage Department, the Building Works Department, and the Royal Small Arms Factory at Birmingham, while a general scrutiny has been given to the Accounts of the other factories. The errors disclosed were of comparatively small importance.
2. I have been in correspondence with the War Office on the question of the com- Comparison of parison of contractors' prices with the cost prices shown in the Production Statement of Trade and Factory the Ordnance Factories. Proposals as to the carrying out of such a comparison by my Department were the subject of correspondence between the War Office, the Treasury, and the Audit Office during the years 1892 to 1895, and were discussed on several occasions by the Committee of Public Accounts. The Treasury regarded an independent comparison by my Department as of great importance, but it was considered by the then Comptroller and Auditor General that compliance with the condition imposed by the War Office of treating as confidential the details of contractors' prices when dealing with them in the published Reports of the Comptroller and Auditor General would greatly impair the value of the information. The proposed comparison therefore was, with the concurrence of the Committee, abandoned for the time being. Recently, however, the question has again come before me in connection with the discussions before the Committees of 1905 and 1906 on the Note now prefixed to the Ordnance Factory Accounts, showing in what respects Trade and Factory prices may be expected to differ, and I have come to the conclusion that it would be possible to carry out a useful comparison, notwithstanding the condition as to secrecy. In reply to my proposals on the subject I am pleased to be able to report that the Army Council have agreed, subject to the understanding that secrecy as to contractors' prices is observed, that the War Office papers dealing with these comparisons shall be passed to my Department, and I have accordingly made the necessary arrangements for an examination of these documents in connection with the Account for 1906-7.
3. The value of the output for the year 1905-6, including semi-manufacture, was Value of Output. £2,961,669 118. 7d., showing a decrease of £379,059 158. 7d., as compared with the output for the year 1904–5. .
CAPITAL ACCOUNT AND BALANCE SHEET. 4. At 31st March, 1906, the net Capital amounted to £3,141,116 178. 4d.
Land, Value of Capital. Buildings, and Machinery stood at £2,272,320 28. 6d. as compared with £2,284,194 18. 8d. on 31st March, 1905. The value of Stores in stock was £795,477 158. ld., a decrease of £29,111 08. 2d. as compared with the preceding year. This decrease is noted on the Statement of Incomings and Outgoings attached to the Ordnance Factories Appropriation Account (page 12) where the excess over the estimated decrease of £10,000 is explained as being due to delay in replacing issues from the reserve stores of gunstocks and cordite materials, owing to the high prices of materials, and anticipated change of pattern of gunstocks.
Capital Account, For the Building Works Department proper, exclusive of Arsenal general services under
its charge, such as Electric Light, Gas, Railways, &c., there has hitherto been no Capital
Account to be taken up. Special plant for In continuation of paragraph 6 of my Report of last year I have to observe that the new Rifle.
sum of £8,939 158. Od., based on 71,518 rifles at 28. 6d. each, has been written-off and recovered through productions of the year in respect of expenditure on special plant for the new Magazine rifle, leaving the sum of £2,095 128. 2d. to be taken up in 1906-7.
In anticipation of the final transactions in connection with the sale of the Royal Small Arms Factory, Birmingham, which took place in June, 1906, the unabsorbed balance of expenditure on special plant at Birmingham was transferred during 1905–6 to the books of the Royal Small Arms Factory, Enfield, in order that it might be taken up in the cost of Enfield productions. As the special plant at Birmingham was included in the sale of the Factory, I have pointed out that by the procedure adopted the outstanding value of the plant will be recovered twice, once in the proceeds of sale, and again in the price of the rifles, and I have suggested that the more correct procedure would have been to write off the value in the same way as the value of the Buildings, Machinery, &c., will presumably have to be written off as soon as the transactions in connection with the sale are completed. The correspondence with the War Office on the subject was still proceeding at the date of this Report.
MACHINERY CHARGES. New System
5. In 1905–6 the new system of distributing machinery charges by means of Torpedo Factory, percentages on the wages of the men working at the machines has been introduced into
the Torpedo Factory, thus completing the extension of the new system to all the Factories at Woolwich. The application of the system to the Royal Small Arms Factory at Enfield and the Royal Gunpowder Factory at Waltham is awaiting a revision of rates which is now under consideration.
Although the balances of machinery charges unabsorbed under the new system showed a reduction as compared with 1904–5, the amount unabsorbed in the Carriage Department was still proportionately large, and the same remark applies to the Torpedo Factory, to which Department, however, as stated above, the new scheme was applied for the first time in 1905–6. In reply to my inquiries on this subject I have been informe that the question of these unabsorbed balances has been under consideration, and that they are mainly due to machinery not in use. Detailed information is stated to be under preparation, and a further communication has been promised.
INDIRECT EXPENDITURE. Percentage
6. A table at the foot of the Statement of Indirect Expenditure on page 8 shows the increased at Enfield, Waltham and percentage of indirect expenditure (exclusive of machinery charges and special indirect Birmingham.
expenditure) calculated on the amount of direct labour expenditure in each Factory. In the following cases the rates are higher than last year :
1905-6. 1904–5. Enfield
95.97 | Ordinary
43:18 The increase appears to be due in each of these cases mainly to a reduction in the amount of wages bearing the percentage. At Enfield and Birmingham the actual indirect charges in 1905–6 include the cost of inspecting the component parts of rifles manufactured by the Factory, an operation which was formerly carried out by the Chief Inspector of Small Arms.