B.—l [Pt. ll].

6

forward for audit. Too often it seems to have been forgotten by departmental officers that the same business precautions should be observed when dealing with public monoys or stores as is the case when dealing with private property. I might cite as an instance the case of i a loan of between £7,000 and £8,000 which was made by a Department with practically no security, and in spite of the fact that the borrowing institution was known to be already mortgaged to the fullest extent. The amount was, of course, a total loss. Other similar instances could be cited. The instances in which breaches of the Stamp Act have occurred in regard to placing duty stamps on receipts and on agreements to build, &c, have been particularly numerous, and the reference of irregular vouchers to the Stamp Department for suitable action has led to the infliction of fines aggregating a substantial amount. From the number of these cases that have come to the notice of the Audit Department it is fair to assume that failure to observe the requirements of the Stamp Act results in a not inconsiderable loss to the State every year. Authorization op Unsupported Claims. The Minister of Finance, acting under powers bestowed upon him by section 69 of the Public Revenues Act, 1910, authorized the passing of certain claims without the production of supporting vouchers, on the grounds (1) that the receipts were not obtained, (2) that it was not possible to obtain them, or (3) that they were lost and could not bo replaced. The details of the claims so passed appear in a schedule hereto, as required by section 84 (d) of the above Act. Audit of the Accounts op Local Authorities. The above heading comprises not only the audit of local governing bodies such as Counties, Boroughs, Town Districts, and Road Boards, but it includes Harbour Boards, Education, Hospital, Electric-power, Drainage, Firo, and River Boards, and numerous minor Boards and Trusts which are by statute made subject to Government Audit inspection, such as Cemetery and Domain Boards. The work has so enormously increased of late that the inspectional staff was found insufficient, and additional Inspectors have in consequence been appointed. It is found that the work of local-body audit is greatly hampered by want of familiarity with statutory requirements on the part of members, and also of the administrative staffs, of many of the local bodies whose accounts come under Audit supervision. In many cases the Audit Inspector is relied on by the local-body clerk for assistance in the compilation of the annual accounts, which leads to delays, and casts upon the inspectional staff duties other than those which strictly pertain to the actual auditing of the accounts. Attention must be called to what is, in the opinion of Audit, a loose method frequently followed in writing off hospital patients' fees. In one instance brought under Audit notice the fees due in respect of relatives of the Chairman and of a member of the Board were so remitted. The tax on the community for maintaining these institutions is so groat that a more thorough investigation should be made as to the capacity of patients to pay before writings-off are allowed. If this is not done a sinister form of patronage may easily develop in favour of friends or acquaintances of Board members. The matter has been brought under the notice of the Public Health Department, and the DirectorGeneral has promptly taken steps to see that every endeavour is made to recover fees before any applications for writing off are submitted in the future. The requirements of a uniform provision regarding disqualifications, and more clearly defined conditions than now exist for the payment of travelling-expenses of members of Boards, are yearly becoming more urgent, and legislation in this direction would be welcomed by all concerned. A further matter calling for legislative action is in respect of the sections in the Municipal Corporations Act, 1920, dealing with the preparation of trading accounts. The present state of the law makes it practically impossible to construct accounts and balance-sheets so that they will be in commercial form and at the same time accord with the statutory provisions as now enacted. It is suggested that the simplest way of dealing with the difficulty would be to make it obligatory on the Audit Office to prescribe a form of trading accounts, instead of the permissive right now conferred by section 111, Municipal Corporations Act, 1920. Provision also still requires to be made to simplify the matter of apportionment of Harbour Board election expenses, allusion to which was made on page 10 of my last report. Audit has, during the past year, been called upon to take action against local authorities in respect of the matters tabulated below :— Excess and/or illegal travelling-expenses .. .. .. .. 11 Illegal payments and expenditure .. .. .. 19 Illegal use of loan-moneys .. .. .. . . 25 Illegal remission of rates .. .. .. .. .. 3 Illegal remission of harbour dues.. .. . . .. .. 2 Illegal borrowing .. .. .. .. .. ..13 Illegal commission .. . . .. .. .. .. 2 Illegal transport .. .. .. .. .. 2 Illegal contract • .. . . . . .. .. .. 1 Excess " unauthorized " expenditure .. .. .. ..11 Broaches of trust law .. .. .. .. .. .. 9 Contraventions of by-law . . . . .. .. .. 2 Recovery of subsidy wrongly claimed . . .. .. .. 1 Offences under Public Contracts, &c, Act .. .. .. 5 Antecedent liability loans excess and charges .. .. .. 6 Disqualifications .. .. . . .. .. .. 2 Defalcations .. .. . . .. .. .. .. 5