REPORTS OF THE PROVINCIAL AUDITOR.

New Zealand Times, Volume XXX, Issue 4414, 13 May 1875, Page 3

REPORTS OF THE PROVINCIAL AUDITOR.

Provincial Audit Office, Wellington, 31st August, 1874. gm I have the honor to forward to you .herewith a copy of the report required by law to be furnished to his Excellency the Governor and to the Speaker of the Provincial Council, on the accounts of the Provincial Treasurer, Wellington, for the quarter ended 31st March, 1874; and to state that owing, to errors appearing in the accounts referred to, which the Provincial Treasury has up to the present date been unable to adjust, the “ abstracts” of receipts and expenditure required by the Provincial Audit Acts to he furnished to you with this report, cannot bo suppliedthese documents have not yet been received from the Treasury in a corrected form.—l have, &c., R. Macalistee, Provincial Auditor. ; W. W. Taylor, Esq., Speaker of the Provincial Council, Wellington. . REPORT POE HIS EXCELLENCY SIE JAMES FEEGUSSON, BAET. The Provincial Auditor has the honor, in accordance with the requirements of the Provincial Audit Acts, to report, for the information of his Excellency, that the accounts of the Provincial Treasurer, Wellington, for the quarter ended 31st March, 1874, have been examined. The following observations upon these accounts are submitted for consideration :—: The account current for February and March shows that a sum of one thousand nine hundred and eighty-seven pounds six shillings and threepence sterling (£1987 Gs. 3d.) had been withdrawn from the Wellington Trust and Loan Company on the 13th February last, and paid into the provincial account at the Bank of. New Zealand. Upon inquiry, the sum was found to be the balance of an amount of nineteen thousand nine hundred and eightyseven pounds six shillings and threepence (£19,987 6s. 3d.), which was paid to the Provincial Government on account of the Wanganui bridge and wharf, on the undermentioned dates, viz.:—On the 13th December, 1872, eighteen thousand pounds sterling (£18,000) ; and on the 20th June, 1873, one thousand nine hundred and eighty-seven pounds six shillings and threepence sterling (£1987 6s. 3d). These amoimts were not paid into the provincial account as required by law; they were “deposited” with the Wellington Trust and Loan Company, and were withdrawn from that company iu instalments between the 12th February, 1873, and the 12th January, 1874. These instalments were, when withdrawn from deposit, paid into the provincial account. In reply to audit observations on this subject, the Provincial Treasury explains that “ the sum was placed to the credit of the Superintendent at the Bank of New South Wales, Wellington, and the Provincial Government not requiring the whole sum for disbursement at once, deemed it advisable to lodge it with the Wellington Trust and Loan Company at interest, being more profitable than paying it at once to the provincial account, whence it could only be drawn for payment on account of works specified in abovenamed Act" (i.e., the Wanganui Bridge and Wharf Act.) “It was withdrawn from deposit in sums of three thousand pounds at intervals as required.” It was also found that a sum of twenty-five thousand pounds sterling (£25,000), raised under the authority of the Wellington Harbor Reserves Mortgage Release Act, 1873, had been expended by the Provincial Government in payment of a mortgage due to the Crown, without ever having been paid in to the provincial account; this amount is part of a loan of one hundred thousand pounds sterling (£100,000), which his Honor the Superintendent raised from the Wellington Trust Loan and Investment Society some time ago (vide the Superintendent’s speech in opening the Provincial Council session. No. 25), but no part of which has ever been paid into the provincial account. The Provincial Treasury' states in reply to an audit query upon the subject, “that the loan of twenty-live thousand pounds sterling referred to was not paid into the provincial account, but handed over to the Wellington Trust and Loan Company direct to the Colonial Treasury.”

It was further observed that a sum of nine thousand two hundred and sixty-three pounds thirteen shfllinga and threepence (£9263 13s. 3d.) had been advanced by the Bank of New South Wales, in various sums, between the 10th May, 1873, and 2nd March, 1871; these sums, with the exception of one thousand four hundred and forty-six pounds six shillings and twopence sterling (1146 6s. 2d.), which the Superintendent directed by “ Special Order ” to bo repaid out of provincial funds, are stated to have been expended in the purchase of native lands for the province. Upon enquiry, it was learned from the Assistant Provincial Treasurer that the moneys advanced had not been paid into the provincial account, and that they were issued without “ Warrant" of the Superintendent. The account showing these advances and repayments, was opened at the Bank of New South Wales in the names of “ Messrs. William Pitzherbert and Henry Bunny.” It may possibly be argued that this account was a private one, and that, therefore, the moneys advanced ought not to have been paid into the provincial account; but the Auditor fails to see how such argument, if advanced, could be reconciled with the fact that the Superintendent directed the Provincial Auditor by “ Special Order ” (which Special Order the Auditor was bound to obey) to certify a warrant for the issue of provincial funds, if these funds were to be applied in repayment of private advances. It is quite clear that the practice followed by the Superintendent and Provincial Treasurer of receiving and issuing moneys without paying them into the provincial account is highly objectionable. It destroys- most effectually all control over provincial funds, and it would be likely to lead to confusion and complication of accounts if allowed to continue. Moneys paid into the provincial account can only be withdrawn under warrants certified by the Provincial Auditor,_ signed by the Superintendent, and countersigned by the Provincial Treasurer; whereas moneys received and issued without being paid into this account could be used for any purpose without the knowledge of the Auditor. The Provincial Audit Acts require that moneys payable on account of provincial revenues, and sums raised as loans for special provincial purposes, should bo paid into the provincial account, and heavy penalties are imposed for omission or neglect to pay in such moneys. {Vide sections 8 and 9 Provincial Audit Act, 1866.) , ’ The Treasury accounts show that it has been customary for the Provincial Treasurer to receive moneys from natives and others as “deposits;” these so-called “deposits” were included with ordinary revenues, and used as such—they were withdrawn in some instances at the will of the depositor at short and irregular intervals, interest being allowed by the Provincial Treasury at the rate of six, eight, and ten per cent., rates which are considered to be altogether disproportioned and in excess of those generally allowed for sums deposited for short periods. The Auditor is of opinion that the course followed by the Treasury in respect to these deposits was illegal, and that the sums deposited should have either been invested by the Provincial Treasury at a rate of interest corresponding to that charged against the province for them, or placed to a loan fund account as required by law, otherwise, principal would be indirectly used to pay interest on loans, a practice which it is submitted would be very irregular. The attention of his Honor the Superintendent has been drawn to this subject, and it is understood that all sums lying in deposit at interest with the Provincial Government will bo transferred from the ordinary provincial revenues to a “Loan Fund Account,” and that the practice of receiving such amounts, except as loans, will bo discontinued for the future. , Upon further examination of the accounts it was found that several sums, amounting altogether to two thousand three hundred and eighty-nine pounds eighteen shillings and one penny (£2389 18s. Id.) charged against the Ordinary Appropriation Act, 1873-4, and issued

and expended under the authority of warrants certified under that Act, had been subsequently charged against the Bridges Hoads and other Works Appropriation Act, 187-1, and transferred back to the Ordinary Appropriation Act, 1873-4. These transfer's were illegal—the amounts are finally charged against an Act which was not in existence when the sums were expended, and which was found to have been void after it had been passed by the Provincial Legislature the warrant under the apparent authority of which the transfers were made was also found to be bad. The revenues appropriated under the Ordinary Appropriation Act, 1873-4, having been exceeded, the effect of the transfer is that instead of the unauthorised expenditure for the financial period ended the Slat March, 1874, having been shown as five thousand six hundred and nine pounds and tenpence (£5609 Os. 10d.), (as it must have been had the transfer not been made), it is only shown as three thousand two hundred and nineteen pounds two shillings and ninepence sterling (£3219 2s, 9d.) A vote of the Pr ovincial Council having been taken for the latter amount only, there still remains unauthorised expenditure to the extent of two thousand three hundred. and eighty-nine pounds eighteen shillings and one penny sterling (£2389 18s. Id.) The amount of unauthorised expenditure allowed by law to be incurred in any year being one-twentieth part of the ordinary provincial revenue received during the previous year (exclusive of loans), and the ordinary revenues.of the financial year 1872-3 having amounted to- forty-one thousand eight hundred and eighty-nine pounds three shillings and eightpeuce sterling (£41,889 3s. Bd.), onetwentieth of which would compute to two thousand and ninety-four pounds nine sliillings and twopence sterling (£2094 9s. 2d.), it is apparent that the amount legally authorised to have been provisionally issued in excess of appropriation was exceeded. Keeping in view all these circumstances, and the fact that the examination of the accounts for March quarter had not been completed when the Provincial Council was in session, and assuming the Superintendent to have been unaware that the transfer was illegal, and that it would not be admitted by the Audit Office, it is respectfully submitted for the consideration of his Excellency whether or not it is expedient for the Auditor to waive talcing such action as under other circumstances the Provincial Audit Acts might have rendered it incumbent on him to pursue, until such time as a vote of the Provincial Legislature may be obtained for the amount.

Some confusion arose from the action taken by the Provincial Treasurer in opening an account at the Bank of New Zealand called “ Provincial Account, No. 2.” The Provincial Account at the bank showed that the actual amount transferred from it to “Provincial Account, No. 2,” was twenty thousand pounds sterling (£20,000), whereas the Treasury Account current showed a transference of twenty thousand five hundred andtwenty-seven pounds four shillings and sixpence sterling (£20,527 4s. fid.) leaving a discrepancy of five hundred and twenty-seven pounds four shillings and sixpence (£527 4a, fid.) There was also some discrepancy between sums entered in the account ; current as expended out of “ Account, No. 2,” and the actual amount shown by the bank to have been drawn on the latter account. The Provincial Treasury explains that “ the discrepancy referred to by the auditor arose partly from an error in twice including an amount of two hundred and eighteen pounds sterling .(£218), and partly from a transfer of three hundred and nine pounds four shillings and sixpence sterling (309 4s. 6d.), which was rendered necessary by certain cheques to that amount having been drawn without the words “ Provincial Account, No. 2,” and therefore having been cashed on the Provincial Account.

The accounts were returned to the Treasury to be adjusted. They were again presented at the Audit Office on the 25th July last, together with replies to .various audit queries and observations. It Was found, however, that the unauthorised expenditure shown in-these accounts did not correspond with the amount of such expenditure actually incurred and admitted by the Superintendent. The total of such expenditure, as shown by the late Provincial Auditor (exclusive of the “ transfer ” quoted in folio No. 14 of this report) and by clause 3 of the Appropriation Act, 1874-5, supported by “ Special Orders,” amounted to three thousand two hundred and nineteen pounds two shillings and ninepenco sterling (£3219 2s. 9d.), whereas the sum shown in the Treasury accounts amounted only to one thousand eight hundred and eighty-seven pounds one shilling and fivepence sterling (£IBB7 Is. 5d.) The Auditor had therefore again to return the accounts to the Treasury to be adjusted, and they have not yet been received in the Audit Office in a corrected form. The errors appearing in the Treasury accounts explain the cause of the delay observed in furnishing this report and the “abstracts of receipts and expenditure ” required by law to be transmitted to his Excellency and to the Speaker of the Provincial Council. The latter documents will, however, be furnished as soon as the Treasury is able to make a satisfactory adjustment of accounts.

, Upon examination o£ the general account of Ways and Means, kept by the Treasury (that is, an account showing the totals of sums received and expended during each quarter), it was observed that the receipts for the financial year ended 31st March, 1874, were shown as ninety-two thousand and twenty-six pounds eight shillings and.uinepence sterling (£92,026 Bs. 9d.), and the expenditure eighty-seven thousand six hundred and forty-seven pounds sixteen shillings and one penny sterling (£87,647 16s. Id.) This, according to the Treasury books, would leave an excess of receipts over expenditure of four thousand three hundred and seventy-eight pounds twelve shillings and eightpence sterling (£4378 12s. Bd.) But the actual balances on hand at the bank and other places, at the close of the financial year 1873-74, amounted only to two thousand one hundred and sixty-five pounds sixteen shillings and twopence sterling (£2135 16s. 2d.) This displays a difference of two thousand ■ two hundred and forty-two pounds sixteen shillings and sixpence sterling (£2242 16s. fid.) less than the balance which the receipts and disbursements shown above sot forth. ■'

' The balance shown in the Treasury books, however, is ono o£ expenditure in excess of receipts ; it amounts to four thousand four hundred and one pound five shillings and fivepence sterling (£4lOl sa. 6d.) to which add the balance of receipts over expenditure which the Treasury books show ought to have been on hand, four thousand three hundred and seventyeight pounds twelve shillings and. eightpence sterling (£4378 12s. Bd.) The total deficiency shown by the Treasury books would thus amount to eight thousand seven hundred and seventy-nine pounds eighteen shillings and one penny sterling (£8779 XBs. Id.) and the Total discrepancy between the actual balance on band .. £2133 10 2 Cr. And the balance shown in Treasury books .. .. •• 4401 5 5 Dr. Would be .. £0037 I~T It is stated by tho Treasury that “ the discrepancies referred to by the Auditor, cannot bo explained by the Provincial Treasurer. Tho revenue account has been carried on from year to year, and the Assistant Provincial Treasurer has never been able to explain the balance of that account. It was brought forward from an old ledger, and it has been carried on merely for the purpose of balancing the entries in the ledger. The old balance occurred prior to the Assistant Treasurer’s coming into the office.’’ It was also observed that a sum of one hundred and fourteen pounds two shillings and five pence sterling (£ll4 2s. 5d.), the unexpended balance of an amount apparently advanced to the Provincial Treasurer, it is stated, some years ago, had been carried forward in tho Treasury accounts up to the latest date of examination (31st March, 1874). The books do not show that tho amount has ever been accounted for or what became of it. The Treasury explains that this amount has also “ been carried on from a period prior to tho accession to office of the Provincial Treasurer, and he is unable to explain it.” A sum of ono thousand one hundred and sixty-tliroc pounds eight shillings and eight

pence .sterling. (£1163 Bs, Bd.) has also been carried forward in the Treasury accounts, but the books do not show that the amount has ever been expended, or how it was disposed of. This amount would appear to be the balance of a sum paid over to the province by the Colonial Legislature for expenditure on the Waitotara road.

The Treasury accounts of “ ordinary deposits” (that is, an account of sums received by way of security for the due completion of ; works from contractors and others, and held on ■trust by the Provincial Government, pending the fulfilment of obligations), shows that a balance of one thousand six hundred and sixtyeight pounds two shillings and five pence sterling (£1668 2s. 5d.) should have been on hand to the close of the financial year 1873-4 ; the actual amount in hand, however, at that period is stated to have been three pounds two shillings and sixpence sterling (£3 2s. 6d.) There is nothing to show what became of these deposits. The Treasury explains “ that the amounts in question having been earned on for a series of years, it seems impossible to arrive at any solution of them.” It is considered undesirable that these errors should be perpetuated throughout future accounts. His Honor the Superintendent will therefore be advised accordingly, with a view to have the amounts in question carried to a “ suspense account, until such time as ■ authority may be obtained from the provincial Legislature to finally dispose of them. The Auditor is of opinion that ordinary deposits ought not to be included with provincial revenues, and used as such. - They are trust moneys, and should be placed to a deposit .account at the bank, until they, or any portion of them, would become the property of the province ; they could then be transferred from the deposit to the “ Provincial Account,” and treated as ordinary revenue. Liabilities amounting to many hundreds of pounds sterling were outstanding at the close of the financial year ended 31st March, 1874, for which no vote of the Provincial Legislature has yet been obtained; these liabilities are, when satisfied, shown as unauthorised expenditure for the current financial year. It has been the practice hitherto to charge old liabilities against current appropriations, but this would evidently be contrary to the requirements of the Provincial Audit Acts, and cannot be allowed. The Superintendent will be advised for the future to call upon all provincial departments to furnish an estimate of liabilities at the close of each financial year, so that a vote of the Provincial Legislature may be obtained to meet these amounts. With regard to the collection of revenues it is observed that there is no system of check receivers ; these officers simply pay in certain sums to the Provincial Treasury without furnishing detailed accounts showing how amounts are collected. It is understood that for the future the Provincial Treasury will require receivers to furnish proper accounts for ‘examination.

With regard to the Provincial Account at the bank it is observed that the amount of overdraft at the close of any quarterly period cannot be determined upon, owing to the practice which has hitherto obtained and which still exists, of keeping the accounts in the form of an ordinary account of receipts and disbux'sements, the bank being thus creditor at one period and the debtor at another, it virtually repays itself out of Provincial funds, for advances previously made, a practice which is considered to be illegal. The total amounts overdrawn from time to time might thus exceed the sum allowed by law to be provisionally lorrowed without the account showing it, and the Auditor would be unable to point out such a circumstance should it occur. The balance shown in the printed form of bank certificate furnished with the Quarterly “Abstracts” is the balance of receipts placed against expenditure, and vice ■versa at the close of the quarter. The Provincial Treasurer is enabled by the px-esent system to overdraw the Provincial Account as often as he pleases, provided the balance of expenditure shown in the account when placed against the balance of receipts does not at any particular date exceed one-fifth of the ordinary revenue during the previous financial year. In fact, the Provincial Account can be repeatedly overdrawn during any quarterly period without any overdraft being shown for such period, provided the revenues received equal or exceed the disbursements at the close of the quarter. In conclusion, the Auditor would observe that the Provincial Audit Acts, although implying proper control over provincial funds, do not sufficiently provide for it, and as no such provision is made in the Local Appropriation Acts of the Provincial Legislature, it is considered that many of the provisions contained in the Colonial Acts of Audit and Control might be beneficially introduced into the Provincial Audit Acts. His Honor the Superintendent has been furnished with a copy of this report. 11. Macalisteb,

Provincial Auditor.