The Press FRIDAY, AUGUST 21, 1933. Exchange and the Public Accounts

Press, Volume LXXII, Issue 21867, 21 August 1936, Page 10

The Press FRIDAY, AUGUST 21, 1933. Exchange and the Public Accounts

In his annual report to Parliament the Controller and Auditor-General renews the protest he' made last year against the method of treating exchange in the public accounts. The Treasury’s present practice, where remittances to London are concerned, is to treat the difference between the New Zealand pound and the pound sterling as a special and abnormal charge and to debit it, not to the accounts incurring the exchange, but to the consolidated fund. There are two serious objections to this. The first is that the departmental commercial accounts are rendered inaccurate. For instance, the Printing and Stationery Department’s profit and loss account for the financial year 1934-35 shows a net profit of £. 12,055, whereas, if exchange costs had been shown, the profit would have been only £547. In the case cf the working railways account, the expenditure side is £500,000 less than it would be with the addition of exchange costs. The second objection is that to show in the public accounts a separate item labelled “cost of exchange,” this being computed as the difference between remitting money to London at parity and at 125, is misleading. It gives the public the impression that this item represents the effect of the higher exchange rate on the public accounts. Clearly, however, the raising of the exchange rate increased the yield from all forms of taxation. Last year the Secretary of the Treasury urged in extenuation of the practice of treating exchange costs as a separate item that “ there would probably be widespread protests “if the accounts did not disclose the amount “ spent on exchange.” It would surely be more honest to tell the public that the effect of raising the exchange on the public accounts is impossible to calculate. The further point arises that to regal'd the cost of the exchange as the difference between remitting at parity and at 125 is to select a purely arbitrary figure. It would be just as reasonable to regard the difference between 110 and 125 as the cost of exchange. This year the Treasury has made a small concession to the Auditor-General by deciding to charge against the appropriate accounts. instead of against the consolidated fund, exchange on moneys remitted overseas for the purchase of stores and material. The amount involved is only about £22,000 out of a total of £ 2,300,000. By its action the Treasury has virtually admitted the force of the AuditorGeneral’s criticisms; there is no reason at all why loan remittances should be treated differently from remittances for the purchase of stores and materials.