THE PUBLIC TRUST OFFICE.

Otago Witness, Issue 2106, 5 July 1894, Page 35

THE PUBLIC TRUST OFFICE.

THE AUDITOR-GENERAL AND TH@ PUBLIC TRUSTEE.

ANIMATED CORRESPONDENCE.

(Fbom Our Own Correspondent.) Wellington, July 2.

The report upon the accounts of the Public Trustee this year is a very interesting and important document. It contains a vigorous attack by the Auditor-general upon the method of keeping the accounts, and a sharp reply from Mr J. K. Warburton, the Public Trustee. Mr Fitzgerald states at the outset that he regrets that owing to the unsatisfactory manner in which the Public Trust Office accounts are kept he is unable to certify to the accuracy of the balance sheet without taking exception to the errors it still contains. " Notwithstanding the correction of the numerous mistakes in the accounts to which attention has been called by the Audit Office during the course of the last year, out of 347 audit queries on the past year's account, a considerable number affee'ed the figures in the balance sheet. In 320 instances the errors have been admitted and corrected. Of the remaining 27, 11 are still unanswered. Of the errors in the balance sheet pointed out in my report last year, the whole have been adjusted in the accounts of the present year. It cannot, therefore, be said that the objections raised by the Audit Office have been idle or unnecessary." Mr Fitzgerald then proceeds to take objection to several items in the balance sheet and the expenses and investment accounts, and other alleged irregularities are pointed out. Mr Fitzgerald, in reply to a statement by the trustee that "the system of accounts now entails on the Public Trust Office examiner and officials only a fraction of the labour of old methods, and that the saving of work and expense in accounting is too obvious for discu«sion," has prepared a table to show " how little these statements can be relied upon." This table shows the ratio of expenses to the total as follows :—IBBB,: — 1888, 2 - 3 per cent. ; 1889, 2 per cent. ; 1890, 1-77 per cent. ; 1891, 176 per cent. ; 1892. 1-84 per cent. ; 1893, 218 per cent. "Thus," Mr Fitzgerald says, "it appears that the cast of the office and the number of hands employed have increased, notwithstanding that the labour imposed on the officials is ' ouly a fraction of the labour of old methods, 7 and that the ' savicg of work and expense in accounting is too obvious for discussion.' " Mr Fitzgerald then details his objection to the balance sheet under review, and goea on to-say that a new feature is disclosed in the management of the Public Trust Office which deserves the consideration of tho Government. The office when formed was to have no personal interest in the property entrusted to ib further than such charges as would cover tL« cost of management. However, an idea seems to be springing up that one, if not the principal, object should be to make the institution a financial success, and to consider the interests of the office as a financial institution

instead of exclusively in tie interests of its clients. This has displayed itself in the mode of dealing with mortgages iq which the ciioneys of certain estates had been invested by arbitrarily changing them from individual investments to investments of the common fund. g< The common fund "is required by the the act to pay 5 per dent, iniereat. It is, therefore, an object with tha office to invest in securities paying a higher interest than that paid by the Government or other public securities, such as mortgages paying from 6£ to 8 or 9 per cent. Mr Fitzgerald also complains that by tho Act of 1891 the independent control imposed upon every other department dealing Vrith the taxpayers' money was removed ffom the Public '''rust Offices, and that he io therefore powerless to insist upon the accounts of a public institution being kept in the form or on the principle settled by all scientific accountants to be the nJioßtn J ioßt likely to secure the stability of a substantial institution.

Mr Warburton replies at great length, and says : " When Mr Fitzgerald was by the legislation (which he deplores) of 1891 deprived of the power to control the Public Trustee, and it became practicable for me to make simple and efficient arrangements as well for keeping the accounts of the Public Trust Office as for its general administration, I came to the conclusion that, as the necessary consequence, the withdrawal should have followed of his authority to audit and repot 1 1 on the subsequent administra* tioh of the offido ; for it wan not iv human nature to be expectpd that Mr tfitdgerald wotild furnish, as to the result of an arrangement which implied at ieaflt a condemnation of the administration o£ his . ort'fl department, A report which should justify that Condemnation. In his report, or, as it may be called, annual attack by Mr Fitzgerald on my administration of the Public Trust Office and of the legislation by which his power of control oVer the office has been withdrawn, his confession that in tho books and accounts of the office— books in which so large a volume of pecuniary transactions is daily recorded, and in which the entries are made in the continual doubt as to what the law may authorise, and accounts of every variety of commercial or official transactions — he, the director of a fault-finding department, and with the strongest possible Motive to establish a case against the Public Trust Office, should lie unable to maltau'p for ttt@ whole year a list of more than 320 errors, can only be regarded as a very fhtcering testimony to the general accuracy and efficiency with which the books and accounts are kept. He has doubtless studied the list anxiously, and though I shall make clear that — to speak tenderly — he has in many of the statements which he has made exaggerated, or garbled the facts, or been inexcusably careless. His assertion that he has been unable to discover more than one error a day, involving not the loss of a penny, would, even if correct, be consistent only with the rarest accuracy in the accounts." Mr Warburton then replies to the detailed objections urged by Mr Fitzgerald, and says that the Audit department under Mr Fitzgerald appears to ignore the truth that the audit of a business of .:t' kind is really a matter of profit and loss, audit can be defended of which the benefit may not be worth the expense. No check should cost more than it is expected to save. No commercial man however philanthropic would in his senses ever dream of setting up; at an expense of £200, a check on pilfering by which he might lose £50. If a system which would entirely prevent fraud were possible its cost would be sure to preclude its adoption. " From the blighting effects of the audit despotism," says Mr Warburton, " the Post Office has escaped, and a Post Office account has become possible and been introduced which is distinguished by tbe absence of all superfluous bookkeeping, and extorts universal admiration " Mr Warburton says that after the passing of the act of 1891 the Public Trust Office made good to the estates the capital which they had lost by investments under the arrangement which Mr Fitzgerald would return to, and left them benefited by what the law did not particularly authorise — viz., the investments which had wholly or partially been allotted to such estates at the time. When, however, the investments have expired, the relative capital must fall into the common fund and bear the common rato of interest. It is difficult to imagine how there can be in the investment of capital on this principle a conflict of the interest of the estate with the interest of the Public Trust Office. The estate is allowed a guaranteed rate of interest for its funds, and cannot be concerned in the investment. Regarding the question of control, Mr Warburton says the Auditorgeneral has already enough over the Public Trust Office in the authority to audit aud report, and if that is done in a spirit faithfully representing the result there need be no fear of failure.