H.—l9

The system of accounting for stores remains satibfactory, and losses are reduced to a minimum. The periodical inspections by officials of the Audit Department have shown in every instance that the accounts are being well kept and the stores are properly safeguarded. The sale of surplus stores by the Disposal Depot is still continuing, the sales in country centres in particular proving very satisfactory. The retention of the Disposal Depot enables uniform clothing which each year becomes unsuitable for issue to the Forces to be dry-cleaned, renovated, dyed, and sold at reasonable prices to the general public. Although the receipts are less than previous years, the business done is still considerable, and, as stated in last year's report, the prices realized are so much higher than those obtainable by other methods of sale that the retention of the present method is warranted in the public interest. The further exhaustion of war-time stocks of clothing necessitates an increasing annual expenditure to provide requirements for the Territorial Force and Cadets, and the clothing item on the estimates shows a corresponding increase. 9. Finance. The net expenditure out of Consolidated Fund for Defence purposes, including aviation and assistance to Rifle Clubs, for the year ending 31st March, 1926, amounted to £459,293. This includes approximately £5,000 of expenditure on activities previously paid from War Expenses Account. The expenditure for the year out of Public Works Fund (vote " Contingent Defence ") for construction of training-bases, new drill-halls, &c., was £89,763, which included the sum of £26,028 for purchase of site for the Aviation Base at Auckland. 10. War Accounts, Records, and Battle Honours. (a.) War Expenditure. The War Expenses Account was closed by legislation contained in the Finance Act of last year, and recurring liabilities were provided for in appropriate votes of the Consolidated Fund. Since the closing of the account, finality was reached in the settlement of outstanding war transactions between the N.Z. Expeditionary Forces and the Australian Imperial Forces in Egypt, the Commonwealth Government agreeing to pay to the New Zealand Government the sum of £45,000 in final settlement. (b.) Battle Honours. As stated in last year's report, the claims of New Zealand regiments for battle honours for service in the Great War were submitted to the Army Council for approval. From correspondence received it seems likely that with one or two minor exceptions our recommendations will be approved, and it is hoped to make an early announcement to this effect. 11. New Zealand and South Seas Exhibition, Dunedin : Court of the N.Z. Military Forces. This court in the Government pavilion proved a considerable attraction to the public. It was designed to show some of the modern equipment with which the Forces are armed, and the progress made in the manufacture of small-arms of all nations over a period of fifty years. Included in the exhibits were examples of modern artillery, machine guns and light automatic weapons, rifles and revolvers, ammunition, war decorations and medals, Chinese decorations and medals, examples of workmanship in small-arms and ammunition from the Chinese Government Arsenal at Shanghai, and a representative collection of war trophies. A feature of the court was the complete collection of war photographs, arranged as a continuous panel on the walls, the opportunity to place orders for copies being taken considerable advantage of by the general public. Two aeroplanes from the Wigram Aerodrome, Sockburn, were flown to the Exhibition, one being exhibited on the floor of the court, and the other being suspended from the roof of the pavilion. Attendants in charge of the court were furnished by the N.Z. Permanent Staff and Royal N.Z. Artillery. 12. New Equipment. In concluding this report I wish to direct attention to certain measures which are essential if the fighting efficiency and readiness for war of the land Forces are to be maintained. The present mobilization equipment and armament is, generally speaking, complete and in good order. It was inevitable, however, that after the experience of the recent Great War very considerable changes and development would be necessitated in the design, nature, and power of modern equipment. The present is a very important and also a difficult period, in that, after exhaustive experiments and trials, certain new armament and equipment have to be adopted in order that the equipment of our Military Forces may be brought fully up to date and uniform with that of the other land Forces throughout the Empire. These several additions and changes have been very carefully considered, and schemes drawn up and provision is being made for acquiring war reserves of gun ammunition and certain chemical warfare and anti-gas equipment. A scheme, based on recommendations recently received from the Committee of Imperial Defence, is being drawn up, and will shortly be submitted, embodying certain alterations and additions to our existing coast defences, and defining the total period and successive stages by which these essential requirements will be effected. I have the honour to be, Sir, Your obedient servant, R. Young, Major-General, D. 39/19/26.] Commanding N.Z. Military Forces.

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