Exceed Set Profit Oh War Contracts

Northern Advocate, 14 September 1944, Page 2

Exceed Set Profit Oh War Contracts

(Spec.) WELLINGTON. This Day. The Audit Office had, so far as staff was available, inquired into profits made on war contracts in the Dominion. stated the Controller and AuditorGeneral in his annual report presented in the House of Representatives. A figure of (5 per cent return on capital, after reducing income tax at basic rates, had been given by the Minister of Finance as a profit guide to departments concerned in contracts. In some cases noticed by the Audit Office the rate had been far exceeded, and in others profits earned had been in excess of the rate fixed by the terms of the contract. In only a few cases, however, had an endeavour been made to effect re-negotiation.

“When the Audit Office was of opinion that too high a rate of profit had been returned to contractors it was unable to take action beyond placing its views before the department concerned and tim Treasury." says the AuditorGeneral "In this connection I am constrained to comment that the Treasury itself was concerned in the negotiation of certain contracts and was thus placed in the position where ii may not have been able to consider anv audit submissions concerning those contracts with the same detachment as it otherwise would."

No Action Taken The Auditor-Genera] states that in his previous report he had mentioned the desirability of testing the fairness of prices paid under master schedule contracts by reference to the actual profits earned by contractors as shown by their own records. Examination made through the Works Department shewed that on the results of over 80 contracts a total value of well over .£ 1,000,000 was obtained. Further, the investigation showed that contractors were earning profits far beyond the 5 per cent on profit-bearing costs contemplated by the master schedule, and representations were made to the department that it should endeavour to recover from contractors sums considered to be in excess of fair and reasonable profit. In conjunction with the Federated Builders’ Association of Employers a contracts adjustment committee was set up to review the accounts of those contractors-who were agreeable to adjustment, but to date no determination of any contracts had been made by the committee. In fact, states the report, the latest information to reach the Audit Office was that this association had withdrawn its member and had suggested that the committee be disbanded. The total value of contracts let under the master schedule system was estimated by the Works Department to be in excess of L 15,000,000. and the totals of tire contracts let to individual contractors varied from less than £IOOO to £1.500,000.