PUBLIC FINANCES.

Nelson Examiner and New Zealand Chronicle, Volume XIV, Issue 59, 20 October 1855, Page 3

PUBLIC FINANCES.

Report op the Committee appointed bt this

House of Representatives to conbidee the State and Management op the Public Finances.

The Committee appointed to consider the state and management of the public finances of the colony report as follows : —

The voluminous accounts laid before them, and the probable short duration of the session, have compelled your committee to limit their attention to the leading principles which should govern the finance of the colony, and to some of the more prominent facts brought before their notice. They have not ventured to test the accuracy of the accounts in detail. That examination, and their final adjustment, must be left to a future session, and will probably form the first work of a Eesponsible Government. Many of the questions which have presented themselves, so deeply concern the colony and the provinces, in their mutual relations, that it would be improper to decide them in a house so reduced in numbers, and so unequally representing provincial interests.

But it may be useful to bring them under your notice ; and our conclusions may serve as suggestions for the consideration of a future session.

The object of inquiry submitted to us is to ascertain the financial position of the colony, the knowledge of which is a necessary preliminary to any careful or prudent appropriation of the public revenue. We are unable to present to the house any complete result ; the accounts submitted to us are not in a shape which enables us to do so — they only extend to the 3lßt December, 1854. The Sub-Treasurers' accounts for the Southern Provinces since that date have not been received by tho Government at Auckland, and we have been therefore compelled to proceed partially upon estimates.

Our first object being (without pretending to minute exactness) to arrive at an approximate view of our assets and liabilities (exclusive of fixed charges, such as tho Company's debt and debentures) ; we commenced by ascertaining that the cash balance in the hands of tho Colonial Treasurer, on the 18th August instant, the day of our inquiry, was £20,717 ss. 9d. The Auditor-General states, that on the 30th June, 1855, the cash balance in the treasury and sub-trea-suries was £37,608 ; but this was subject to current charges and payments to provinces. The AuditorGeneral estimates the current charges at about £6,000. For practical purposes we may assume the above sum of £20,717 ss. 9d. as the amount available to meet our current liabilities accrued up to the 30th June last.

We next proceeded to ascertain the amount of such liabilities. In the course of that inquiry, involving a 9 it did tho amounts due to the provinces and the principles which ought to govern the accounts with the provinces, we have been led incidentally to touch upon the main questions affecting the finance of the colony.

1. The Colonial Treasury holds the sum of £5,860, due to sundry accounts, such as Intestates' Estates, Hospital Trust, English Post Office, Income Tax, &c. For these the colony is responsible. We may remark, incidentally, that as to the amount due to intestates' estates, in the opinion of your committee it ought to be removed from the general account, and set apart as a special fund for its proper object. The question whether the Colonial Treasurer is the proper custodier of this fund, appears to your committee doubtful. The Supreme Court, which is responsible to the claimants on the fund, ought to provide for its proper custody. The regulation of this, and funds of a like nature, appears to be fit matter for the consideration of the Legislature.

2. The Colonial Treasury received in the year 1854 —55 the sum of £32,896 on account of land purchases, but which sum, according to the statement of the Auditor-General, is held in suspense, to be carried over to the next year's account. This is a liability for which provision must be made; we shall presently have to remark upon the proper mode of treating the fund. 3. There are due, according to the Auditor-General's statements, to sundry provinces various sums, up to the 30th June last. The balances on that day are stated by the Auditor-General proximately as follows :—: — i

The balances stated to be duo from Canterbury and Nelson are said to be in course of liquidation from \ re-fund of accruing revenue, but are not immediately , available. Those provinces to which balances are admitted to be due are clamorously requiring payment. 4. There is due to the New Zealand Company, balance of fourths of the land fund, to the 30th June last, about £4,270. 5. Besides these sums, which appear on the AuditorGeneral's accounts, Mr. Commissioner M'Lean states that there are still due, ascertained balances amounting to about £12,700, on former purchases of native lands, payable in the current financial year, exclusive of about £-100, payable hi 1857 and 1858, of the sum required for completing purchases at Hawke's Bay, hereafter referred to, amounting to £8,500; and cxelusive of other amounts, apparently of considerable extent, in cases not yet defined. These are debts due from the land fund ; and although some of them do not require prompt payment, yet, for the purpose of ascertaining our present financial position, and particularly for reasons which we shall hereafter advert to, we treat them as present liabilities, to be brought into charge, and provided for.

6. There is a sum due to the natives for per centage* on land sales, the exact amount of which cannot be ascertained, but estimated at not less than £1,000. The excess of expenditui'e for the past year, for which provision is asked in the present Appropriation Bill, amounts to £6,073.

7. Thus far the calculations on which we have proceeded do not substantially differ from those of the Government accountants. It will be seen that the above is merely an approximate view of the state of our finances. No credit is takon for sums in tho hands of the Sub-Treasurers. On the other hand, nothing ia debited for current outstanding ordinary liabilities or current payments to provinces. As regards the sum of £32,896, due to the land account, questions have arisen. The mode in which the fund arises ia as follows : — Parties applying to purchase land are, in general, obliged by the regulations to pay, at the time of application, the full amount of their purchase moneys ; but a delay necessarily takes place in completing the surveys of the land applied for. Till this ia done, it is not absolutely certain that the landa will be found available, and the purchases finally completed. It is estimated that a per centage of from 10 to IS per cent, of the money so paid is refunded on account of deficiencies of survey. Besides this, the charges for surveys must be provided for in the service of the year when the work is performed. For these reasons, it is said that these land payments should be held in suspense, to be finally brought to account when the surveys are completed, and not before. On the other hand, it is urged, that in point of fact tho purchases are considered as complete from the time of payment, and purchasers, in many instances, and generally throughout the Southern Provinces, assume possession. The suspension of a large fund practically available for the public service is simply miscliievous. The per centage of probable refunds may be calculated with sufficient exactness ; if needful, an allowance may be made for the estimated cost of surreys to be carried over to the service of the next year ; the New Zealand Company's fourtlw may be retained in account ; and the balance distributed according to the provisions of the Constitution Act.

A majority of your Committee concur in the latter view ; and it may be observed, that in the correspondence between the Superintendent of Canterbury and the Government, respecting the diitribution of the Land Fund, thi9 point appears to have been con* ceded by the Government.

It is right to state, that tho Auditor-General adopts a view different from either of the above. He conaiders these land payments as deposits, to bo held in suspense, but available, and which may be drawn upon for tho purchase of native lands. Your Comraitleo cannot concur in this view. Either it is a fund, held in deposit only, upon incomplete transactions, and which therefore cannot properly, under any circumstances, be touched for any purpose whatever; or it is available (subject to the deductions mentioned), and in this case, it belongs to the service of the year in which it accrues. Applying this principle retrospectively, the Land Fund treated as deposit on the 30th June, 1854, will have to be dealt with accordingly. But whatever view as to the distribution of the money may bo adopted, it is clear that the amount of this fund, held over on tho 30th June, 1855, iB a liability for which provision must now be made. According to the foregoing statement, there are outstanding liabilities in excess of the available assets amounting to £72,097. The balances said to be duo from Canterbury and Nelson, but which are in dispute, will, if paid, reduce the amount by gradual liquidation, but^the circumstance that one province has been allowed to receive moneys in excess of its proper distributive share, appears to your Committee no ground for deferring payment to thoaeprovinces to which balances are admitted to be due. How it happens that such liabilities exist is a question which can only be solved by examination of the accounts in detail, and the circumstances of the expenditure.

But the balances duo to tho provinces have been calculated by the Auditor-General upon a principle which appears to your Committee fallacious. He calculates tho distributable surplus available for the provinces as morely the available cash balance remaining at tho ond of each period, without regard to the legality of the charges borne on tho service of such poriod. In order to explain clearly what your Committee believe to bo the true position of the provincial accounts, it will be necessary to recapitulate briefly the provisions of the Constitution Act relating to the oharges on the,revcnue, and tho distribution of the surplus : — (a.) Under the Constitution Act the Governor is ■empowered, out of the Ordinary and Land Eevenue, <o pay the charges of collection and management. (6.) Out of the Land Revenue he is to retain the New Zealand Company's fourths, as well as tho cost of purchasing native lands. (fi.) Out of the Ordinary and Land Eevenue he is to retain the Civil List.

(d.) After and subject to the above deductions, the Gencr.il Assembly may make such appropriations as it may deem right. (c.) "Tho surplus of such revenue which shall not be appropriated as aforesaid steill be divided among the several provinces for the time being established in New Zealand, under or by virtue of this act, in the liko proportions as the gross proceeds of the said revenue shali have arißen therein respectively, und shall be paid over to the respective Treasurers of such provinces for the public uses thereof, and shall bo

subject to the appropriation of tho respective Provincial Councils of such Provinces." These are the terms of tho Constitution Act (section 66). The Appropriation Acfc of the last session follows the samo rule.

It would be superfluous to add arguments to enforca •the reasonablonesß and justice of this provision. The Provincial Governments nro in like case with the

General Government as to their financial necessities. They have establishments to maintain, and the whole local service to provide for, tho maintenance of which is of equal importance to the interests o£ the colony with the services of tho General Government. This provision was obviously intended to place them, as far as passible, in a position independent of the General Assembly. Their right to the surplus revenue must then be viewed as a legal vested indefeasible right, governed by strict law, and which cannot be infringed upon any any- more than tho Civil List or the Company's fourths. , The principlo, then, on winch tho accounts with the provinces should be framed, aro clearly these : — Year 3>y year (or §fr each financial period) to bring to account the revenue accruing during that period j thereout to make the deductions authorized by the Constitution Act*. Then to. deduct the appropriations of the General Assembly, and to carry over tho surplus to •the provincial account, for distribution, according to •the ratio prescribed by. the Constitution Act. But savings aro sometimes made out of the sums -appropriated for particular services. How are such savings to ba treated ? Ought they to be retained on account of the General Government, and carried forward as balances and made available towards excess of expenditure during tho same period on other services ? Or ought they to bo considered as diminutions of appropriation, and go to augment the distributable surplus i» the provinces. In all Appropriation Acts provision is made, not for absolute and final sums for

particular services, but only for amounts not exceeding the particular suras specified. Whatever, therefore, may not be expended on tho specified services, must be regarded as unappropriated, and go to augment tho >diitribu(*ble surplus. How, then, is provision to bo made for excesses of expenditure, which in the nature of things must happen in carrying on Government ? No other mode v open but to treat them as liabilities, for which provision must be mado out of future revenue, either by loan or current appropriation. The peculiar constitution of New Zealand necessitates a strict adherence to this rule. There can be no doubt that the Legislature will at all times be ready to indemnify the Executive Government against liabilities for expenditure bonafida incurred for the service of the colony, in reasonable discretion, under unforeseen contingencies ; though it must be observed that a mutual confidence between the Executive and the Legislature is an indispensable condition for the safe application •of this rule. This, indeed, is the only check which the Lcgislatuie can impose upon any degree of improvidence in tho expenditure of public money. But in construing the provisions of the Constitution Ac*, a question has been raised, whether the Ordinary Revenue raised under acts of the old Legislature falls <under the provisions of the Constitution Act ; the 64th ' clause of which refers only to revenue raised under acts of the General Assembly. Without entering into minute discussions on the precise effect of these words, your Committee are of -opinion that on all accounts the revenue of the colony, whether raised under Acts of tho Assembly, or of the old Legislature, should be governed by the rules laid down by the Constitution Act, and be subj*s*fodeductioiMijmd distributed accordingly. Viewing the rights of tho provinces as thuß far settled, the advances made to them during the currency ( of the respective financial periods will of course be Adjusted on this principle. We come now to the practical application of these The Constitution Act came into force on the 17th .of January, 1853. For convenience, we may assume ihe beginning of the year as the commencement of the first finance period: Up to the 30th September, 18S», the Appropriation Act of 1852 was in force, modified by tho provisions of the Constitution Act. Tho land revenue was governed by the regulations of the 4th March, 1853. This will form the first financial period. From that date to the 30th June, 1854, both ordinary and land revenue were administered in conformity with Sir Georgo Grey's regulations of the Bth August, 1853. This will form the second financial period. From the Ist July, 1854, to the 30th Jane, 1855, the revenue was appropriated by the act of last session. This will form the third financial period. ' As regards the last period, viz., from the Ist of Jury, 1864, to the 30th of June, 1855, there is no diffieuhy in applying the rules laid down by your committee. I

But there is & difficulty in applying the samo rules to the previous periods, viz., from the Ist January, 1853, to the 30th June, 185*. As regards the first period, viz., from the Ist of January, 1853, to the 30th September, 1853, it is urged on the one side that, treating the Appropriation Act of 1852 as pro tauto a vali* appropriation of the revenue, tho »ulo must be appbt 1 of considering the •urplua m unappropriated and distributable amongst) the provinces. The amount covered by the Appropriation Act is £41,401 3s. 6d., out of which there were savings on particnlar services of £7,325 os. 9d.

The difference, £34,076 23. 9d., i 3 a legal charge on the revenue. The unappropriated revenue, subject to the deductions fixed by the Constitution Act, goes to tho pjwryinces. During that period there was an excess of expenditure, for which no provision is made, amounting to £17,655 69. Bd., the particulars of which will be seen on reference to the accounts, and which must form a subject for tha consideration of the Legislature.

A contrary view has been taken. It is said the surplus revenue of this first financial period, over actual authorized expenditure of the same period, is properly chargeable with such actual, though unauthorized expenditure, as the General Assembly shall think proper to sanction as reasonable. As regards the 6econd period, viz., from Ist October, 1853, to 30th of June, 1854, a difference of opinion also exists in your committee. On the one side, it is contended that equity and good faith with the provinces require that Sir George Grey's regulations of the revenue, without regard to strict legality, ought to bo treated as final, and, if necessary, confirmed and effectuated by the General Assembly. According to these regulations, the charges to be deducted from the revenue were — the charges of collection and management, the civil list, the New Zealand Company's fourths, the sums payable for native land purchases, and such charges as were established by local ordinances, such aa interest on debentures, &c.

It is to be obsorved that the Provincial Councils mado their appropriations on this basis. Accepting these regulations as final, it is contended that the surplus ought to be treated as unappropriated, and distributable amongst the provinces. On the other hand, it is contended tliat Sir* George Grey's regulations were illegal, and cannot now be acted on; that the General Assembly still has the legal right of appropriating the revenue of that period, and tho Government asks them to exeroiso that right by appropriating the same in discharge of payments in excess made during that period, and for which otherwise no provision is made. The amount of such payments in excess is £15,788 17s. Id. The particulars will be seen on reference to the accounts. It is urged that it would bo unjust to throw upon the revenue of future years a charge bona fide incurred during that period for the public service of the colony, the effect of which must be to burden the colony with a debt. On tho other hand, it is argued that wrong will bo done by the General Assembly now disturbing arrangements made and acted upon by Sir Georgo Grey with the Provincial Governments, upon the strength of which their whole financial operations have been carried on. It is urged that, aa to incurring debt, tho only question is whether debt shall be incurred by the General or Provincial Governments, the necessities of the one being at least equal to those of the other; whilst it is suggested that the General Government may borrow with greater facility than the Provincial Governments.

In reply to the appeal to good faith, it is said that Sir George Grey' 3 circulars of the Bth August, 1853, distinctly point to a future adjustment. That is admitted, but not — as on the other hand is contended — in the sense of admitting new charges or opening the door to new appropriations, but only to determine the exact quota of the provinces upon ascertaining finally the amount of their respective revenues. Then it is pointed out that great inequalities exist in the proportions of revenue accruing in tho respective provinces in different years; Canterbury in particular, during tho period under consideration, had a revenue of about £40,000, whereas in other years it has not amounted to more than from £15,000 to £20,000. To relieve the revenue of that period from the charges in question, and throw them upon future years, will have the effect of easing that province from its due proportion of contribution. It is impossible wholly to overlook tho praotical results of whatever rule may bo adopted, but whatever that rule may be, it is tho opinion of your committee that it should, as far as possible, bo governed, bjr rules of justice, irrespective of consequences as affecting one province or another. The foregoing remarks are founded on calculations submitted by the Auditor-General, in wlu'ch throughout it is assumed that the sums required for the purchase of native lands are deducted from the General Territorial Revenue. The total amount so expended from tho Ist January, 1853, to 30th Juno, 1855, inoluding ascertained outstanding liabilities, exceeds £100,000. Of tho extent and particulars of this expenditure, the Legislature, until tho present session, has known little beyond tho fact, vaguely stated, that, from some source or another, large sums of varying amounts were required to be, and were being, expended in the purchase of native lands ; indeed, it is only by the inquiries of your committee that any certain information on this head has now been obtained.

The Government itself seems apparently unaware of the extent and magnitude of its liabilities. The Colonial Treasurer infprms us that he knows nothing of Mr. M'Lean'e accounts or transactions. The Auditor-General returns Mr. M'Lean's and Mr. Kemp's accounts, so stated as to make it appear that the sum of £41,000 remains open as " Balances unaccounted for." Nor does he seem to have been aware, until informed by your committee, that upwards of £13,000 was still outstanding as liabilities on this account. It is due to the Auditor-General to state, that he appears to have warned the Government not to exceed, in tho purchase of native lands, certain specified limits. There is ground for complaint that an expenditure, which, up to the 30th June, 1854, had reached no less a sum than about £53,000, should not have been expressly brought under the notice of the Assembly during the first and second sessions ; and that an expenditure of not less than £50,000, including outstanding liabilities, should have been incurred during tho year last past, in contravention of the obvious meaning of his Excellency's Message, No. 5, which clearly intimates that "no active negotiation for the purchase of native lands " would be earned on, — leading the house, by natural inference, to believe that no extensive or costly purchases would bo made. The question how to provide for and apportion the cost of purchasing native lands, is one of the great political as well as financial difficulties of the colony. It is tho bone of contention between the Northern and Middle Island. • The great bulk of tho Northern Island still remains unpurchased from the natives. The native title, with trifling exceptions, is extinguished throughout tho whole of the available lands of the Middle Island. Treating the cost of native land purchases as a charge on the General revenue, the interests of the two>ialands become antagonistic. The Constitution Act places in the hands of the Governor the delicate task of expending, in the purchase of native lands, such portion of the whole land revenue of the colony as he may deem it right. With a power of this kind, subject to no limits, he holds in his hands the interests of the two islands ; for the land revenue is the only source to which the provinces can look for local improvements. It will be impossible to conciliate the conflicting interests of the two islands except by the utmost moderation in the exercise of such a power, the greatest prudence of administration, the utmost explicitness and open dealing with the Legislature, and a careful observance of whatever may be specified as the intended limits of expenditure. At the present rate, the state k of the land fund account appears to be this — Estimated Receipts .... £100,000 Cost of Survey and Management . . £17,000 New Zealand Company'B Fourths . 25,000 Proportion of Charge for General Government, say 20,000 Average expenditure on Purchase of Native Lands, for the last 2 £ years, say £100,000, average £40,000 per annum 40,000 Balance m'visable amongst the Provinces less than Nil. £102,000 The provincea of the Middle Island complain that they are deeply aggrieved in this matter. Canterbury and Nelson are represented in the public accounts as debtors ; and their land fund is withheld from them. They insist that so far from being public debtors, on a trao view of the accounts, money is due to them ; and they complain of the sudden impounding of their land fund, without accounts rendered, upon the mere suggestion that they have been overpaid. When they are told that their money is required to defray the cost of purchasing native lands, they exclaim loudly

against this unforeseen charge — its amount, its nature, and the circumstance? under which it has arisen.

They point to Sir G-eorge Grey's regulations and to the official documents issued under the authority of his present Excellency, as containing professions of an intention to charge the sums required for the purchase of native lands on the provinces where the lands are purchased, and not on the general territorial revenue. In the circular to the Superintendents of New Plymouth, Wellington, and Auckland, of 24th December, 1855, is the following memorandum : — " One-fourth of the gross proceeds of land sales in the Province of , is to be paid into the Colonial Chest, to the credit of the Land Purchase Deposit Account. A separate Land Purchase Deposit Account will be open for the province. Moneys issued from the Colonial Treasury for tho purchase of lands are to be repaid from the Provincial Deposit Account. If the advances are issued from the Land Fund Deposit Account of oilier provinces, you will be required, after defraying the first charges on the Land Fund, to remit the monthly balance of the proceeds of land sales to the Colonial Treasury at Auckland, or Sab-Treasury at Wellington, as tlie case may be, until the whole of the advance from the Land Purchase Deposits of the other provinces has been repaid, making in the interim no payments to the Provincial Treasury, nor making any apportionment eithei' on account of the province or immigration." Apparently in conformity with these regulations, his present Excellency, in Message No. 6, Session 11., after laying before the house reasons for abstaining altogether from active negotiations for the purchase of native lands, states Ins intention to adjust a payment on that account made from the Land JTund of the Province of Nelson, by a contributary deduction from the Land Fund of Canterbury : he also states, in a financial estimate appended to Message No. 5, that the sum of £7,200, borrowed from the Commi3siarat Chest (and which your committee understand was applied for the purchase of native lands at Wellington), is a loan to bo repaid out of the first receipts of Land Fund of Wellington.

It is contended from these documents, that it appears to have been the clear intention of the Government at that time to make the purchase of native lands a provincial, and not a general, charge; and that such principle was not abandoned until a change was introduced, suddenly and with a retrospective effect, in the course of the last financial year. Upon the faith of these existing regulations, the provinces allege that all their financial arrangements have been based. They complain of hardship and wrong in the Budden and retrospective reversal of these arrangements, the effect oT which is, to mortgage their future revonue for a debt not created by their own act.

The answer of tho Northern provinces is, that the Constitution Act makes tho cost of purchasing native lands a general, and not a provincial charge ; that the Provinces of Canterbury and Nelson have received an undue share of the public revenue ; and that it is only just to the other provinces that they should be made to refund : that no surprise is practised upon them, as it must have been known to them that the territorial revenue \vas liable to contribute with other provinces to tho purchase of native lands: and it is alleged (with what preciso accuracy your committee have not deemed it worth while to inquire), that as regards Canterbury, tho financial arrangements of Sir George Grey were accepted by that province under protest. Two members contend that tho memorandum of tho 24th of December, 1853, is to bo understood merely as embodying an arrangement made in order to facilitate the acquisition of Buch tracts of land as might be deemed desirable, by placing funds for such purchases in the hands of local authorities ; and that where so understood, they by no means warrant the belief that the purcluvse of land was to be considered as provincial, and not a general question, or in any way disturbing tho principles hud down by the Constitution Act and the regulations of the 4th March.

The majority of your committee do not concur in this view. It appears to them to have been tho natural effect of the document, to convey to tho provinces the impression that the Government intended to make the expenditure on native land purchases a strictly provincial charge. At tho samo time, the Government regulations cannot, in the opinion of your committee, be held to supersede the strict rule of the Constitution Aot.

Whatever may bo the view taken as to these questions between the General Government and the Provinces of Canterbury and Nelson, assuming the position to be correct that tho Constitution Act makes the charge in question a general, not a provincial one, they do not appear to your committee otherwise material than as they may affect the spirit in which the dissatisfied provinces are likely to meet the case, and the attitude they may possibly assume in questioning the Government expenditure. We have mentioned the total amount spent in native land purchases, including outstanding liabilities, as exceeding £100,000 ; of this, the Government accounts rendered only show the manner in whioh a part of this money has been expended. The sum of about £41,000 is stated to be remaining open in Mr. Commissioner Maclean's and Mr. Kemp's accounts, as 11 unaccounted-for balances." In making advances for this service, the practice is this : — Tho Government, by a letter from the Colonial Secretary to some receiver of public revenues (either a Commissioner of Crown Lands or a Collector of Customs), or sometimes by draft on the Commissariat), authorizes the commissioner to draw to the amount which he requires. These advances are treated as imprests. When the commissioners render their accounts, warrants under the hand of the Governor are issued for such disbursements as appear to the Auditor-General properly vouched, and the amounts, when thus placed on warrant, are carried to final account. All sums not so accounted for stand over against the commissioners as unaccounted-for balances, and appear in the public accounts as imprests. It is not supposed that tho sums placed at the disposal of the commissioners are not duly expended, and will not be finally accounted for. It is duo to Mr. Commissioner Maclean to state, that he informs us that he has rendered accounts to G&vernment, showing discharges to the greater part of the assumed balance in his hands, and that in point of fact he holds only about £2,000 for current purposes ; but the financial system cannot be satisfactory to tho colony, which exhibits a sum of no less than £41,000 in the hands of public accountants, as unaccounted-for balances. The following general remarks occur to your commmittee: —

The system of making large advances from the Treasury, in the way of imprest, appears to your committee liable to great abuse, and ought to be put under strict control, or altogether stopped. In furtherance of this suggestion, your committee observe that, in the neighbouring colony of Victoria, a state of the public finances similar to our own has been brought about. The Governor of that colony has recently appointed a commission to revise the public expenditure, in tho first paragraph of which commission his Excellency complains "of the system of imprests, by v? hich a very large proportion of the moneys entrusted to the heads of departments was unaccounted for."

There appears to be no public officer whatever, whose duty it is to take account of such imprests. The power of the Governor over the revenue appears absolutely without control. Tho Colonial Treasurer states that he considers himself obliged to pay moneys according to his Excellency's orders, either with or without warrant. Until this power is placed under constitutional check, the Legislature cannot exercise any practical control over the conduct of the Executive.

There is no system of final audit whatever. The so-called Auditor-General appears to be merely an Accountant-General. The public accountants seem never, in fact, to obtain a final discharge. Indeed, the Auditor-General states that it 13 not hie business to audit the Treasurer's accounts. They are, it is 1 said, audited in England. The Colonial Treasurer has no knowledge whatever of tho finances of the colony. He simply receives and pays money, the accounts of which do not go to him, but to the Auditor- General. These accounts are rendered in Auckland monthly, and, from the Sub-Trea-surers, quarterly ; and as the Governor, by the system of imprests, operates on the accounts either of the Treasurer or the Sub-Treasurers, it is utterly impossible, at any time, to ascertain with exactness tho state of the public finances. In reference to his Excellency's Message, No. 21,

transmitted to the house and referred to your committee, they find that his Excellency, aftev calling attention to certain enclosed correspondence from Mr. Commissioner M'Lean, informs the house " that the native chief Te Hapuku, of Hawke'a Bay, had come up to Auckland to receive payment for several valuable blocks of land in the Ahurirj, and that Mr. M'Lean requests that a sum of four thousand five hundred pounds (£4,500) may be sent to the District Commissioner, at Hawke's Bay, as first instalment on account of the various purchases alluded to in his report." His Excellency then states "that the Government finds, upon inquiry, that this advance cannot be made without interfering with the advances to provinces, and thereby inconveniencing the Provincial Governments 5 and that he accordingly submits the subject for the consideration of the house, with a view to obtaining, for his guidance, their advice and recommendation."

Your^ committee have carefully considered his Excellency's request, and the various documents accompanymg his Excellency's message. Whilst admitting the importance of acquiring native lands, your committee are nevertheless of opinion that nothing should be done to disturb or interfere with provincial arrangements resting on rights established by the Constitution Act.

Your committee treat the right of the Provincial Legislatures to the surplus unappropriated revenues arising during each financial period as a vested indefeasible right, which no circumstances would justify the General Government in disturbing. Taking this view, your committee cannot recommend that the moneys required for the particular service referred to in his Excellency's message should be supplied from the funds belonging to the provinces, so as to interfere with the advances mado to them ; nor are your committee prepared to offer for your consideration any suggestion in reply to his Excellency's request. Your committee cannot, however, overlook the fact, that in the case referred to in hi 3 Excellency's message, the circumstances are such as in their judgment amount virtually to a contract with the natives interested in tho lands in question ; and that, although the District Commissioner has, hi the opinion of your committee, acted without sufficient authority, it is highly desirable that the Government should make good the engagements of its agents. In connexion with the matter referred to in his Excellency's message, your committee would call the attention of the house to the system now adopted of making native land purchases. Your committee find that the business of this department of the public service is carried on by a Chief Commissioner and several District Commissioners, stationed in various parts of the country. Your committee have not been able to arrive at any distinct or positive view of the nature or extent of the authority of the Commissioners, or of the rules or instructions by which they are guided in their dealings with the natives.

It appears, however, to be the general practice of the Chief Commissioner (to whom the communications of the District Commissioners are addressed), to report to the Government all offers made by the natives for the disposal of their lands, and at the same time to recommend to what extent purchases shall be made. As a general rule, the recommendations of the Commissioner are adopted by the Government. In making the reports referred to, the Commissioners also state the sum which they will immediately require for the purposes of the proposed contract, and these sums are usually at once placed at then* disposal, by way of imprest, from funds (arising not merely from the land revenue, but from general revenues) in the hands of some public accountant within the province in which the lands aro situated. Your committee, however, find that tho sums thus demanded by the Commissioners do not always represent the total amounts contracted or agreed to bo paid by way of purchase-money, but that in some instances the amount to bo paid is made payable by instalments running over a period of years, whilst in other cases the amount to be ultimately paid actually remains unascertained.

It is right in this place to call the attention of the house to this system of payment by instalments, whioh operates in the nature of a charge upon the future unascertained revenues of the colony, the receipts from which may possibly bo insufficient to defray the charges thus imposed upon them by anticipation. The difficulty is of course greatly magnified in cases where tho amounts of the instalments thus charged are not ascertained. Admitting the commercial and, to some extent, political advantages arising from the system of payment by instalments, your committee are nevertheless of opinion that it is calculated to introduce serious confusion into tho public financial transactions of this colony, and that, in order to place the financial position of this colony, year by year, upon a sound basis, it is essential that the total amount of the funds necessary for native hind purchases should be provided in account with the financial period in which the transactions actually take place. Whilst your committee aro not in a position to suggest any mode by which a correct estimate may be made of the amount which will be required in any financial period for the service under consideration, they are of opinion that any estimate actually made should not be exceeded, but that any surplus required should be provided for in some other manner. If this course be not adopted and rigidly adhered to, the financial arrangements of the Provincial Governments are at all times liable to be thrown into the utmost confusion. Your committee further beg to express their emphatic opinion that, in tho instance referred to by his Excellency's message, and also as a general rule, no payments should be made to natives for lands over which rival tribes or families have claims, the adjustment of which, amongst themselves, have not been previously amicably and definitively arranged. Your committee find that tho other messages referred to them relate to matters which more properly come under the cognizance of the Committee of Supply. Henry Sewell, Chairman. Appendix. Minutes of the Auditor- General on tlte Draft Seport. No. 1. The meaning of the Message No. 5 is, that the Governor did not feel justified in adopting tbe scheme entertained by the first Ministry of increasing considerably the cost of the Land Purchase Department, with a view to unusual exertions on the part of the Government to hasten the extinguishment of aboriginal titles to land. That it was not intended to abstain from land pur 1 chaies is clear from a prior paragraph of the message, which appears to have escaped the notice of the committee, but which informs the house that it would be I necessary to set aside out of the estimated revenue of the. period a considerable sum for land purchases.

His Excellency further stated in the message, that he had not included any sura for land purchases in the estimates, as he wished to take the recommendation of the house as to the amount. The house, however, came to no resolution on the subject.

Immediately after the conclusion of the session, the Government, I believe, informed the Superintendents of its intention to appropriate £20,001) for land purchases. Although this estimate was exceeded by about £15,000, the excess was advanced entirely out of the land deposits at Auckland, lying idle at the time in the Treasury chest, so that the expenditure on this account cannot have interfered with the past financial arrangements of the Provinces, and need not interfere with the present. Charles Knight, Auditor- General. No. 2. The Auditor.General, in making up the accounts of the colony for the information of the house, treated the sums which came in course of payment during each period as payments of the period, without reference to any portion of them being on account of arrears or otherwise. By adopting this course, the balance available at the termination of i any period became the surplus revenues distributable among the provinces. The Auditor General is of opinion that unleis a similar practice be adopted in the preparation of the Appropriation Bill of each year, the settlement of the accounts of any period will be protracted to a most inconvenient degree. Under the present form of the Appropriate i Acts, the accounts of the colony cannot be closed until all

the liabilities of the period are discharged, and the outstanding accounts are got in. If the accounts were closed at the end of six or seven months, there might still be outstanding payments, which had not been foreseen, to disturb the balance, so tbat the accounts wilt be constantly open and unsettled.

The most convenient principle, and the correct one to adopt is, that the votes should be for the appropriation of certain public moneys which shall come in course of payment during the year / not as at present, for defraying expenses incurred on account of the year. The Auditor- General could then, on the termination of the year, close the accounts, after retrenching all payments in excess of the votes. The sums voted for any service would be applied to that service only. No savings in one department would be applied tp the service of another. Balances of votes unappropriated would be placed to the credit of the Surplus Revenue Account, for distribution among the provinces. Charles Knight, Auditor-General.

>ue :o. >ue •om. 3ue to Auckland . „ „ Wellington „ „ New Plymouth . „ „ Otago Due from Canterbury „ „ Nelson . £ 10,000 9,000 1,390 725 £ 6,500 5,500 £21,115 £12,000