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P. HEYES.

each year on the lst April. The interest payments being made at the end. of March left no accrued interest payable; but recently we have been receiving short-dated loans, the interest on which was payable at different dates. I was not aware of that; I thought we were still receiving instalments of the original debenture loans as usual, and I signed the balance-sheet on the understanding that there was no accrued interest payable on these outstanding, the whole of the interest, as I understood, being payable on the lst April. I may remark that the whole of the interest is paid by the Treasury, and we pay that Department. But since I received the Audit Office tag, which draws attention to that oversight, I find that some of these short-dated loans have an amount of accrued interest unpaid at 31st March. The balance-sheet shows about £3,000 more profits than it should do, because of the omission of this liability for the accrued interest payable; and I say this shows the importance of having the balance-sheet audited. Such things are liable to be overlooked where another Department—namely, the Treasury—is dealing with our loans and paying the interest as it becomes due, and the Audit Department has to see that all liabilities are accounted for. My desire has been to present a balance-sheet in the true form of accountancy, and which would show the true financial position of the office and the financial results of its operations. I have another very important departmental balance-sheet for which I am responsible—the State Coal-mines— which in the same way is refused an Audit certificate. I think it is a deplorable position that these balance-sheets with which I am connected should be refused an Audit certificate, and I contend that these balance-sheets have complied with all the requirements of the Acts. To show that the moneys of the Advances to Settlers Office are not confined simply to cash transactions, there are the moneys owing by the mortgagors referred to, and it is clear that these moneys cannot mean cash transactions, as the Audit Office says. As to accrued interest, which the Audit Office says cannot be brought into account, the accrued interest is capitalised, and is secured under the mortgage as the principal debt, and therefore it is as safe as the original principal sum is, and ought to be brought into account to show the true financial position of the office. The Auditor-General said before the last Committee to which this question was referred that you might have to sell and not be able to realise the accrued interest; but this is as true of the principal as it is of the interest. I contend that the interest, which is accruing day by day, becomes part of the original mortgage debt, and is as secure as the original principal; and if } r ou cannot bring the accrued interest into the accounts you cannot bring in the principal, as the interest becomes principal capitalised. I contend that the Act does not limit us to a statement of cash transactions. The Auditor-General considers his instructions are the maximum of his duties; but no auditor can take his instructions to be the maximum of his duties. The statute requires that at least certain things must be shown, but it does not say that those things are all that shall be shown. I say the whole of the receipts and expenditure of the office account and of the Management Account are truly set out, and the Act does not say the Superintendent shall not put anything more into the balance-sheet: it does not limit the balance-sheet to those specific items. I say the fullest information should be afforded by the balancesheet. The whole point is that the Audit Office wishes to limit the balance-sheet to the matters specified in the Act, and says those are the maximum of its duties, instead of, as I contend, the minimum. I have had large experience with big commercial companies, and I say the instructions to any auditor are to be taken as the minimum, and not as the maximum, of his duties; and no Act that could be drawn could provide for the maximum or fix an inflexible limit to an auditor's duties. Whether you take this Act or the Public Revenues Act, I say the instructions to the Audit Office are of the widest possible character, and are only limited by the Controller and AuditorGeneral's interpretation of his duties. 62. Right Hon. R. J. Seddom.] What is the difference between your statement of last year and the statement of this year, shortly put?—l have dropped out the so-called balance-sheet that the Audit Office required; that is the only difference. It is of no value for anything; it is not a balance-sheet at all; it is simply a statement that the Auditor had found the figures correct and balanced. Something more is required of a balance-sheet than the mere fact that all has been found correct. 63. Take your balance-sheet at page 2: you say there is a difference between you as to the Assurance Fund and the Assurance Fund Investment Account?— The Controller and AuditorGeneral does not appear to see the difference between these. This balance-sheet is exactly the same as last year, but the Audit Department did not certify to it last year. For five years they did. Suddenly we had a dispute over 10s., as to how it should appear in the balance-sheet, and then the Auditor-General said he would not certify to the balance-sheet in this form at all. Since I took charge of the accounts I decided I would not present a so-called balance-sheet, which is not in the correct form of acountancy, as it would not be a true balance-sheet. I claim that no Act that I have seen requires anything but what is in the correct and usual form of accountancy, but it is provided that accounts may be presented in such a form as the advanced functions of the Government and local authorities now require. 64. And you say that this Act requires no alteration to set this matter right between you and the Audit Department?— Yes; I say the Act is sufficient to justify the balance-sheet now submitted and for everything contained in it. It might be put in simpler and better language, but there is no law rendering this balance-sheet illegal or irregular. 65. Mr. W. Fraser.] With whom does it lie to say in what form the balance-sheet shall be: with you or the Audit Office?— There is no statutory regulation to provide in what form it shall be. 66. With whom does it lie to certify to its correctness?— The Audit Office. 67. If the Audit Office declines to certify to an account in a particular form, is it not your duty to supply the account in the particular form they will certify to?—No; and I decline to do it if it is not what I consider a true statement. That point has been settled by the Supreme Court. The Waimate County Council had some difficulty with the Audit Office. The Audit Office would not audit its accounts. The County Council applied for a mandamus to compel the Audit Office to audit the balance-sheet as submitted by the Council, and on the hearing judgment was given

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