17

I.—7b

them as to the effect: " The two transactions in March last—one purporting the sale of property by the Department of Working Eailways to the Public Works Department for £15,000 paid at the time, and the other purporting the sale a few days afterwards of the same property by the Public Works Department back'to the Department of Working Railways for £15,000, not yet paid—have clearly resulted in making the expenditure of the Department of Working Railways, to the amount of £15,000 during last financial year, a charge of £12,000 on the Public-works Vote for Midland Railway, and of £3,000 on the Public-works Vote for Permanent-way." You are still of that opinion?—l am still of opinion that that is the practical result. 11. In the next sentence you say, " The Working Railways Department transferred the property for money—money which was required, appropriated, and spent during the financial year for the working-expenses of the railways —and then took back the property immediately afterwards without paying for it, or having yet paid for it " ? —Yes. 12. Then, also, in the next paragraph but one in the same page, you say, "The Audit Office would have declined to pass the transfer on the ground that the transaction was to be not really a sale, but an arrangement by which the Department of Working Railways might, by depositing the property without actually parting with it, or without any intention of parting with it, obtain an advance of £15,000 out of the Public-works Votes " ? —Yes, I would have declined to pass the transfer on account of its not being really a sale. 13. Then you say, on page 8, "That the operation then effected was merely a book-entry, the first result of which was to reduce the expenditure charged upon the vote for Working Railways, and the second to swell the credit balance of the Consolidated Fund at the 31st March, 1898 " ?—Yes, that is so; that is in the memorandum of Mr. Gavin's, which I adopt. 14. I want to ask you how you can reconcile that with an answer you gave to Mr. Seddon. Mr. Seddon asked you in the printed list of questions on the 21st October—question 81—" There is an impression abroad—in fact, it has been stated—that this transaction had an effect upon the finances of the colony by increasing the surplus. Had it such an effect, or did it affect the surplus one way or the other?" Yo.. _eplied, "The only question for me to consider was whether the transaction was one that I could help reporting to Parliament. I do not think, really speaking, a transfer of money in one direction or another could affect the Profit and Loss Account of the colony." Does the Profit and Loss Account of the colony have anything to do with the surplus in the Consolidated Fund ?—There is no such account as a Profit and Loss Account. 15. Then, why did you put it in?— Because I wanted to explain what practically would be the case if there was a Profit and Loss Account. I said, later on, it depends upon what you call a surplus. 16. Would the words " Profit and Loss Account of the colony " convey any correct impression of the accounts submitted to the colony ? Is it a Profit and Loss Account ?—My words were intended to convey that a surplus would be the balance of profit in a Profit and Loss Account of the colony—that the transfer of money from one account to another would not affect that balance. The transfer would certainly affect the surplus, which consists of the balance in the Consolidated Fund at the time. 17. I want to give you an opportunity of explaining what your real meaning was in regard to it?—l was speaking there of an account which did not exist. 18. But had there been a Profit and Loss Account kept, then it would not have affected it; that is all you meant ?—Yes. 19. That answer was not intended to convey the impression that the transaction did not in any way affect the surplus ; I mean as declared in the Consolidated Fund ?—Yes, that is so. 20. Has the transaction affected the surplus—what is called the surplus—that is, the balance in the Consolidated Fund ?—lt has affected that balance in this way : I should explain the two positions. If the Railways Department had not expended the £15,000 —that is, if the Railway Department's expenditure had been £15,000 less than it was and this transfer had not taken place, then the balance in the Consolidated Fund would have been unaffected. But if the Railway Department had spent this £15,000 before the end of the year, then the transfer of the £15,000 to the Consolidated Fund must have resulted in increasing the surplus. 21. I will put the question in another way : Suppose the Railway Department could have got the money from the " Unauthorised " vote, would the result on the surplus of the Consolidated Fund be the same as it is to-day, when the money had to be obtained by the sale of stores, or the advance of money on stores ? —lf the transfer had not taken place, and up to the 31st March the amount of that transfer had been spent and charged to the Unauthorised Expenditure Account, then the net expenditure of the Railways would have appeared in the Public Accounts as £15,000 more than it now appears. 22. And, therefore, the surplus would have been £15,000 less?— The surplus would have been £15,000 less. 23. You are quite clear on that point ? —I am quite clear on that point. 24. And when the two transactions appeared, would it have been £15,000 or £30,000 ?—There are two transactions of £15,000 each —two transfers. One was passed on the 2nd March, and the other on the sth March. 25. Then, do I gather from you that these two transactions have both affected the surplus ?— They have in this way, that the expenditure 26. They either have or have not. Either the surplus is £30,000 more than it would have been had the" expenditure come out of the " Unauthorised " vote or, it is not?—l must answer on the assumption that the expenditure on railways would have been as it is stated. 27. Yes?— Then the surplus has been increased by the two transactions of £15,000 each. 28. There was an item of £13,000 on a sale of stock ? Yes. 29. Would yon consider that was in the same category ? —That has been passed by the Audit Office. It is a transfer of stores, certainly. 3—l. 7b.