AUDITOR-GENERAL AND CITY COUNCIL.

New Zealand Times, Volume XXVIII, Issue 5803, 22 January 1906, Page 5

AUDITOR-GENERAL AND CITY COUNCIL.

J II E " TAGS” TO THE ACCOUNTS.! QUESTIONS OF LAW AND ACCOUNTANCY. The recent financial operations and book-keeping methods of the Wellington City Council, and the Council s neglect to conform to the direr;ions of tho officers of the Audit Department, must hare created in the minds of tho ratepayers a suspicion that tho Council and its officers arc cither incapahlo of grappling efficiently with the financial problems and important undertakings incidental to modern city life, or that they bare, with their eyes wide open, wilfully determine! to set the ratepayers' guardian, the Auditor-General, at defiance. With a view to enabling tho city ratepayers to judge of the merits of the. dispute between the Auditor-Genera! and the City Council, we requested an expert accountant to supply us with his views i on tho subject, ills article, which is that of a thoroughly competent and unbiassed man, is as follows; The Audit Department has examined the city accounts, and tho balanoerheet of tho city, compiled up to the 31st -March, HXJ.j, with tho result that at tho conclusion of the investigation •two gravo charges have been levelled at the City Council. The audit officcis in their tags in clfcct say this;— First. That in keeping tho city accounts the Council and its officers have disobeyed tho instructions given by tho Audit Department. Second. That in managing the funds entrusted to its caro by tho ratepayers the Council has deliberately disobeyed tho law. to far as tho first charge is concerned. it is quite clear that it is the Council’s duty to obey tho directions of tho Comptroller and Auditor-General. Section 1(U of tho Municipal Corporations Act, ISXJO. provides that ‘Tho Council shall keep such accounts, and keep them in such manner as aro proscribed by tho Auditor,” etc. In matters of accountancy, then, subject to tho provisions of tho act, the Auditor-General is the supremo authority. His word is law, snd his commands must bo obeyed. Dealing with tho Auditor’s second accusation, wo approach something more serious. In this branch of his charge the Auditor suggests a breach of trust. Omitting tho tag relating to tho refund on account of wholesale license foes, tho following is a brief summary of tho indictment of tho Audit Office. Tho Auditor-General asserts:—

1. That separata acoounti Lave been debited with moro Ilian the amount* of tho moneys appropriated for them. -. '-Hint tho Council has exceeded tho statutory overdraft limit at tlio bank by £32,074 1& 3d. 3. That moneys received in tho shape of special rates havo been unlawfully used for purposes other than those for which tho special rates were raised. 4. That loan moneys amounting to £IB,BIB Is Gd have been unlawfully •mod for purposes other than those for which the loans were raised. Anyone of tho charges is serious; and as tho conclusion is inevitable that the position taken up by tho Audit Department is, on tho whole, sound, the revelations made by tho department demand a much moro explicit and convincing explanation than that which has been vouchsafed by tho Council's mouthpiece, the Town Clerk. I do not propose at this stage to indulge in. an exhaustive analysis of tho defence made by Mr Palmer. For the purposes of exposing its hollowness, I will content myself with instituting a comparison between Hr Palmer’s view of tbo lawrelating to tho expenditure of loan moneys, amunting to £IB,BIB 4s 6d, and tho statute law itself. The Auditor-General contends that tills sum should have been applied towards extinguishing loans. Air Palmer, on the other hand, holds that the Council was justified in crediting portion of it, namely, the sum of £12,112 10s lOd, to general account—tho account to which ordinary expenditure, such as wages, salaries, expenses, connected with the management, etc., are charged. The Auditor-General affirms that this is loan money; tho ratepayers voted for tho loan and approved of tho loan, on tho clear understanding that certain moneys which were to como into tho Council’s hands wero to ho used in a specific way. Tho Council, on tlio other hand, is quite convinced that it can disregard the trusts by which tho money, as soon as it came into its hands, was affected. Hero is the Town Clerk's statement. Deferring to tile Auditor’s complaint about tho illegal use to which £IB,BIB 4s Gd of loan moneys was put, ho says: —‘ The sum of £12,112 KM 10d of this amount is money received from sale of land on street-widening account, and is a legitimate sot off against the debit balance on street-widening account.” IVhnt does the statute law say? (1) Subsection 3 of section 7 of the Wellington City Empowering Act, 1807, provides that, for tho purpose of widening any street in tbo city, the Council shall have power to borrow moneys by "Way of special loan for tho purpose of widening a street. (2) Subsection 4 of section 7 empower*s the Council to sell any surplus land left after effecting any such widening. (3) In subsection 2 of section 8 lucre follows tho specific direction that "The net sale moneys of any land sold shall he applied exclusively towards mooting the principal moneys so raised.” Iho Bale moneys amounted to £12,112 10a lOd: they were not applied towards meeting "tlio principal moneys so rawed,” but, in defiance of tho law, tiiey wore credited to tho general account, and no doubt ultimately disappeared into tho pockets of the wages-men, servants. officers, and general creditors of tho Council. To anyone who cares to examino tho statute quoted above, it must be clear that tbo Auditor-General is in tbo right, and that thejCity Council is seriously in tho wrong. Tho local body may bo sufficiently unsophisticated to believe that, when it expands £IB.BIB worth of public money, received for a specific purpose. upon objects other than those for which it was received, it is acting from a high sense of duty. In its innocence, it may even believe that to exceed its legal overdraft limit by £32.000 is an insignificant detail which an Auditor who knows anything about bis business should ignore. Xcxt I como to the question of whether the Auditor-General lies done dl in his power to enforce compliance •with the law. This is not the find. oc. casion, apparently, upon which irregularities have occurred, and the public are entitled to know whether the Government official charged with the duty of safeguarding their interests in the matter of municipal accounts has taken stops to secure proper accountancy. 1 have endeavoured to discover in iho Municipal Corporations Act of

19TI some provision which places in the ham!' of the Auditor am! Comp-trollor-Genoral a weapon which ho roukl use with advantage in the ratepayers’ interest, but the search has in ,t measure proved barren. There is a provision which makes an officer, wiio does not render accounts required by the act. liable to sis months’ imprisonment. Then section 170 reiuhas the Treasurer or any other officer who refuses or neglects to do any art which he is required to do by any act or regulation dealing with accounts, liable to a penalty of not more than £SO. Hut none of these provisions appear to meet tbo special case under review. There is still another section defining the powers of the Auditor and Comptroller-General which is moro in point; and as the modern City Councillor has certainly got a somewhat nebulous conception of ins responsibilities. lie may bo recommended to carefully ponue it. Subsection 1 of section 171 of the Municipal Corporations Act, 1900, reads as follows:—'Tf any auditor authorised to make an audit of accounts under any act of tho General Assembly or under this act. or any regulations thereunder, finds that any moneys have been expended, or any liability has been incurred by any Council without the .sanction of law, unless such Council has acted bona fide and under legal advice, the auditor may surcharge the amount thereof jointly and severally upon she members ot the Council who were present at the meeting at which the expenditure or tho incurring of the liability was sanctioned and did not object thereto, and shall take all necessary steps to recover the amoynt of such expenditure or liability in any Court of competent jurisdiction as a debt duo to the Corporation.” I gather from the statement of the Auditor-General in tag No. 5 that .CIS,SIS is (Id has been paid into and expended through the general account without tlie sanction of law; and the construction which 1 place upon tag No. 3 is that when tho legal ovcrdralt limit at the hank was exceeded by £3:2,07-1 Ids 3d, a legal liability was incurred without the sanction of law. 'Whether tho Council was acting bona fide when it mode these two blunders, X am unable to say; but 1 refuse to believe that it acted under legal advice. On the contrary, I am disposed to believe that the opin<ou given by the City Solicitor, quoted in answer to tag Xo. 3, was fnrmshed after the Council, fully aware of its position* had plunged into tho mire—it was intended merely to suggest to the Council a way of escape from its entanglement. Tho City Solicitor, had ho been consulted before tho Council determined to overdraw its account upon a new principle, would surely have advised that the proposed departure from an existing custom involved a risk which it would bo unwise to take.