I.—llb.

8

.[P. HEYES.

There rrlay be two of three accounts so long as they show these' statutory items. The management expenses and Interest Account should be shown separately. Further, to show that it was intended that the Interest Account should be shown separately, I would point out that section 54 deals specially with the matter. Section 54 says, " With respect to interest, all interest received from mortgagors shall be applied— (a) First, in satisfaction of the interest payable in respect of the loans raised under Part 11. of this Act; (b) secondly, as to one-tenth thereof, in the establishment of the Assurance Fund mentioned in section 53 of this Act; (c) and the residue shall be available for the general expenses of the Advances to Settlers Office." Ido not know how that is to be shown unless there is a separate Interest Account created to show it. Then, further, take the balance-sheet. Section 50 says, " The Superintendent shall within sixty days after the close of each financial year as aforesaid prepare and lay before Parliament, if sitting, if not, within fourteen days after the commencement of the next session, a balance-sheet, showing: (1.) The whole receipts and expenditure of the Advances to Settlers Office Account during each year " (they are contained in page 3 of my statement —that is an exactly true account of all receipts and expenditure). " (2.) The whole receipts and expenditure of the Management Account, also the advances from and repayments to the Consolidated Fund, and the balance outstanding due to that fund." Now, it is an utter impossibility to show all those things in one account. How could you show a balance of money advanced by the Consolidated Fund and show all the receipts and expenditure of that fund and management expenses in one account? It is clear that the section intends that these are simply headings under which the various items must be shown in the accounts, and that this information must be given in the balance-sheet. Further, what is a Management Account for? What is the object of a Management Account ? It is surely to show the cost of management. Is a Management Account simply to be an unmeaning collection of figures, and to show nothing? I contend it would be perfectly absurd to attempt to keep such a Management Account as has been suggested. I say that the whole receipts and expenditure of the Management Account are shown by me on page 2 as provided by the section. The third account provided for I have also complied with, viz.: "3. The whole receipts and expenditure of the Investment Account, showing the moneys invested under this Act." All these are contained in the balance-sheet submitted by me. The Investment Account as provided for in subsection (2) of section 48 is also shown in my balance-sheet, and the section is fully complied with ; also the temporary investments provided for in the Act of 1895. I would like to point out that the Auditor-General does not seem to distinguish between the Assurance Fund and the Assurance Fund investment. The "Assurance Fund" is a liability, as all accountants know, but an " Investment Fund "is an asset. Surely, if it is anything, it is an asset of the Advances to Settlers Office. I contend that these accounts form part of the general accounts of the colony; that they are nothing apart from the general accounts of the colony, and that they should be shown in their true relation to the general accounts of the colony. And I contend that the form in which the balance-sheet is submitted by me is the only form compatible with the true principles of accountancy, and it is based on a true system of accounts, and complies with all the requirements of the Act. To show that the Act does provide for something more than simply a statement of receipts and expenditure, the Act says— vide subsection (4) —that these shall form part of the balance-sheet: "The amounts in arrear in respect of principal and interest respectively." As I understand the requirements of the Audit Office, we are to show those in the form of abstract memos. That is incorrect practice, and not true account-keeping. I contend that a balance-sheet should be comprehensive; the whole of the statutory items are and ought to be comprised in one complete system of accounts. The balance-sheet presented shows every account in connection with the office, and sets forth the actual financial position of the office at that date and every detail required by the Act. It is a complete balance-sheet in the form adopted universally in the commercial world, and shows all the items in their true relation—the assets on the one side and the liabilities on the other. 1 contend that the Advances to Settlers Office is liable for the whole amount of the money borrowed, and not merely for the net cash received on account of loans after deducting cost of loan-flotations. The loan-flotation charges are an expense to be provided for by the office, and they are provided for, as the Solicitor-General says, by clause (a) of subsection (1) of section 48. They are correctly placed under the head of " assets." The loan-flotation charges must be shown in that form, as they are assets of that year against future years. A large expense like that of the cost of loan-flotation may correctly be spread over the whole term of the loans; but it is the practice of accountants to endeavour to dispose of and write off this nominal asset as soon as possible. It is an asset of this year against future years' profits, and it has been shown in the only way in which it can be correctly shown. It is, moreover, correct according to the orthodox form of accountancy. I understand that the Auditor-General maintains that these investment funds in the hands of the Public Trustee have nothing to do with the office—that they are the funds of the colony; that they do not belong to the office notwithstanding that they are. held at our disposal and we are now actually drawing upon these funds' every month. With regard to the Debenture Sinking Fund, which is paid over as an investment to the Public Trustee, section 55 provides—" 3. The Colonial Treasurer may, however, from time to time direct the Public Trustee to pay over such sicking fund, or any part thereof, to the Superintendent for reinvestment on mortgages under this Act as part of the Debenture Fund, and the Public Trustee, shall obey such direction." It is quite clear that those funds invested belong to the Advances to Settlers Office, and that the Public Trustee must hold them available at the disposal of this office. The reason why the accounts submitted by me this year are different from those of the_ last, three years is this : you can only rely upon a balance-sheet which has been audited, and the only person who can give an audit certificate is the Auditor-General in this case. My balance-sheet ought to have the Auditor's General's certificate. And the very position pointed out by the Auditor-General in regard to that item of accrued interest payable, which was inadvertently omitted, shows the necessity of the accounts being audited. That omission was. quite inadvertent. It occurred in this way: .While we had the million-and-a-half loan the interest on it was payable