EXCHANGE COSTS

Southland Times, Issue 22192, 7 December 1933, Page 8

EXCHANGE COSTS

TREASURY’S METHODS A SEVERE CRITICISM CONTROLLER-GENERAL (From Our Parliamentary Reporter). Wellington, December 6. The methods adopted by the Treasury in dealing with the exchange are severely criticized by the Controller and Auditor General in his annual report which was presented to Parliament to-day. Mr G. F. C. Campbell states that the method lacks uniformity, is unsatisfactory and in many cases causes the Public Accounts to'be misleading and inaccurate. * The Auditor-General submits a table showing that the total amount provided for the purchase of surplus exchange, up to September 30 last was £19,011,543 15/-. The total expenditure incurred under the Banks Indemnity (Exchange) Act to September 30 last was £19,303,427 17/8. The report states that the method of treating the exchange in the Public Accounts lacks uniformity and in the opinion of the audit office is unsatisfactory and in many cases causes the Public Accounts to be misleading and inaccurate. Dealing with the exchange New Zealand to London, the report states: “The increase in the rate from £lOO to £125 on January 20 last has rendered proper treatment of the exchange in the accounts of even greater importance than it was previous to that date. In the case of transactions in which the Government was. agent for private individuals or for bodies or accounts outside the Public Account, the correct principle has been gradually adopted by allowing or changing the exchange .'n favour of or against such individuals, bodies or accounts, at the ruling rate, even though it was not necessary to make the actual remittance of moneys in connection with the particular transaction. With this principle the Audit Office is in full agreement, but these transactions comprise only a comparatively small portion of the London transactions. The majority of the London transactions, however, relate to services of public account. In the case of these transactions, where there has been actual remittance, the exchange in many cases, although taken into account, has not been allocated to the particular account or service in respect of which it was incurred, while in cases where there has been no actual remittance, usually no allowance whatever has been made for exchange, but the receipts and payments have been entered in the New Zealand accounts at their sterling amount, without conversion into New Zealand currency. As a result, the true cost of the various services and the true value of receipts and payments is not shown in the separate accounts comprising the Public Account nor in the various votes and further, the balance sheets and revenue accounts of the various undertakings which are published annually are in many cases rendered misleading. A Serious Position. “With the ruling rate of £125, the understatement of the cost of London payments and the corresponding understatement of the amount of London receipts is, in the opinion of the Audit Office, a serious matter from an accountancy point of view. ’ The Auditor-General stated that at September 30. 1933, the amount of Treasury bills outstanding under the Banks Indemnity (Exchange) Act 1933 had been reduced from £17,881,256 5/to £11.014,597, bills to the amount of £6,866,659 5/- having been redeemed, partlv from the proceeds of other Treasury bills issued under section 41 of the Public Revenues Act 1925 and partly from revenue. The rate of interest paid on Treasury bills issued to provide for the purchase of exchange on London had averaged over 5 per cent., while the rate of interest received on deposit of exchange moneys in London had averaged considerably less than one per cent. There had therefore been a loss to the Government in respect of interest of about 4 per cent, in respect of those transactions. The report continued that moneys placed on deposit in London were treated as Public Account cash balance investments (which are investments made from accumulations of cash balances of various separate accounts witl.’in Public Accounts) instead of being treated as investments of the ordinary revenue account alone, to which the exchange moneys were accredited and against which interest on Treasury bills was charged. As a result, even a small amount of interest received on deposits has not been credited to the ordinary revenue account, but has been allocated between all the accounts forming part of the Public Account and the net charge against the Consolidated Fund has thus been increased to an amount larger than would have been the case had the deposits been treated in investments, of the ordinary revenue account to which the moneys belonged. “I find it difficult to see. why the charge against the Budget should have been unnecessarily increased by treating investments as cash balance investments instead of treating them as ordinary revenue account investments. As far as possible under the Public Revenues Act 1926 it is the duty of the Audit Office, before passing vouchers for any payment of public money, to satisfy itself that payment is due. In the case of payments under the Banks Indemnity. (Exchange) Act it would be impossible for the Audit Office to directly satisfy itself that any bank held an excess of exchange on London coming within the provisions of the Act without an examination of the records of the bank by some officer appointed by the Controller and Auditor-General. Such course was not possible and I have passed vouchers for payments to the various banks on the certificate of the chief auditor of the Bank of New Zealand.”