PUBLIC ACCOUNTS COMMITTEE (REPORT OF) ON PAPER B.-15b (ASSETS REALISATION BOARD: CORRESPONDENCE RELATING TO DEBENTURES FOR £1,800,000); TOGETHER WITH MINUTES OF EVIDENCE. (Mr. McNAB, Chairman.)

Appendix to the Journals of the House of Representatives, 1904 Session I, I-11

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1904. NEW ZEALAND.

PUBLIC ACCOUNTS COMMITTEE (REPORT OF) ON PAPER B.-15b (ASSETS REALISATION BOARD: CORRESPONDENCE RELATING TO DEBENTURES FOR £1,800,000); TOGETHER WITH MINUTES OF EVIDENCE. (Mr. McNAB, Chairman.)

Report brought up on the 2nd November, 190%., and ordered to be printed.

ORDERSTOFJREFERENCE. Extracts from the Journals of the House of Representatives. Thursday the 30th Day of June, 1904. Ordered, " That Standing Order No. 218 be suspended, and that a Committee, consisting of twelve members, b e appointed to examine into and report upon such questions relating to the Public Accounts as they ma}' think desirable, or that maybe referred to them by the House or the Government, and also into all matters relating to the finances of the colony which the Government may refer to them ; five to be a quorum : the Committee to consist of Mr. J. Allen, Mr. Colvin, Mr. Fisher, Mr. Flatman, Mr. W. Fraser, Mr. Graham, Mr. T. Mackenzie, Mr. McNab, Sir W. R. Russell, Mr. Wood, Hon. Sir J. G. Ward, and the mover." —(Right Hon. R. J. Seddon.)

Thursday the 4th Day of. August, 1904. Ordered, " That Paper No. 122 (Debentures for £1,800,000 issued by the Assets Realisation Board, Correspondence relative to the countersignature of) be referred to the Public Accounts Committee."—(Right Hon. R. J. Seddon.)

REPORT.

I am directed to report that, in the opinion of the Committee, the object the Controller and AuditorGeneral had in view has been attained by the attention of Parliament having been called to what had occurred, and the Committee has no further recommendation to make. 2nd November, 1904. Bobekt McNab, Chairman.

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MINUTES OF EVIDENCE.

Friday 21st October, 1904. J. K. Warburton, Controller and Auditor-General, examined. 1. Right Hon. R. J. Seddon.] Have you anything to add, in respect to the countersignature of these debentures, beyond what is submitted in your memorandum? —No. 2. There was a doubt in your mind as to the appointments? -Paper No. 7, addressed to the Colonial Treasurer, explains the position. " The Bank of New Zealand Act, 1903," requires the Controller and Auditor-General to countersign the fresh debentures of the Assets Realisation Board, to take the place of the balance of the unredeemed outstanding debentures which matured on the 31st March, 1904. The Audit Office was not the auditor of the bank or of the Assets Realisation Board ; and the Government Auditor of that Board had, previous to 31st March, accepted office in the administration of the bank and was no longer Auditor. In those circumstances the Audit Office had either to audit all the accounts of the Assets Board in order to ascertain the position, or to accept them as they were accepted and to inform Parliament. It seemed to me necessary to inform Parliament of the countersigning in the circumstances. 3. Do you base your contention that Mr. Macintosh had ceased to be Auditor simply on this, that he had accepted a position in the bank ? —He had accepted the principal office in the administration of the bank, and the Auditor's duty was to audit 4. 'My question is this: Is it your contention that, because Mr. Macintosh had accepted office under the bank, perforce by such acceptance he had ceased to be Auditor?- -I did not think he had ceased to be Auditor, except in the sense that his certificate as Auditor for the purposes of my countersignature of these debentures was unsatisfactory. 5. Though he had not ceased to be Auditor, still it was unsatisfactor}- because he held the dual position? —He held the position of chief administrator of the bank —General Manager. 6. Is there anything in the Bank of New Zealand Act, giving power to the Governor to appoint an Auditor, which says that one person may not hold the two positions? —There is nothing expressly to that effect, so far as I recollect. But there is no doubt whatever to my mind that the two positions are incompatible. 7. That would be a matter for the administration to be responsible for, would it not? —It was unsatisfactory to me that I could get only the certificate of an auditor who was the General Manager of the bank of which he was auditor; and in any circumstances if he had not accepted the generalmanagership of the bank I had no foundation for the certificate except the Auditor's assurance. As a general rule the Audit Office is appointed to countersign debentures of the Government, whose accounts are audited by the Audit Office. I have no doubt that the fresh debentures issued and countersigned correctly represent the outstanding debentures. The difficulty was a matter of the theory or principle of a satisfactory audit. 8. I suppose the same thing applies to those Government Departments that have their own officers auditing the accounts —you have pretty well the same feeling about that? For instance, the officers of the Lands Department, the Postal Department, and the Railway Department —they all do their own auditing ? —They audit only the revenue, but practically we audit that revenue too. We audit the receiver's accounts of such revenue, but the detailed audit is done by the administration. 9. You had every confirmation that you desired, as far as it could be given by the officers of the Assets Board and the bank? —I was morally satisfied. Having Mr. Macintosh's certificate, and the certificates of the Manager of the Assets Board and the General Manager of the bank, I thought that, with the approval of the Government, I might countersign the debentures. 10. Mr. W. Fraser.] There is one point I am not quite clear about, as to whether the AuditorGeneral considers that Mr. Macintosh had ceased to be Auditor, and therefore ceased to be entitled to give a certificate, on account of accepting the position of General Manager of the bank. I understood you to say, Mr. Warburton, that you do not think that was the actual legal effect, although you do not consider it was a right position? Was that what you meant? —I am inclined to think that legally the two positions are incompatible. 11. Yes ; but would he cease to be Auditor from the fact of accepting the position of General Manager? —I think so. 12. Surely there would be some statute to say so if that was the case? —As General Manager he was administering the bank of which he was the Auditor for the Government. 13. Do you consider that the fact of Mr. Macintosh having accepted the position of General Manager of the bank in any way affected his position as Auditor to certify to the accounts of the Assets Board ? —Yes ; because his position as General Manager was incompatible with his position as Auditor, and in that case he was not a satisfactory auditor for the purposes of my countersignature. 14. The certificate was not a certificate so much of the bank affairs as of the Assets Board's affairs—is that not so? —Yes. 15. Very well. How far did his taking the position of General Manager of the bank become incompatible with his holding the position of Auditor of the Assets Board ?—Because the Auditor of the Assets Board is, under the Act of 1895, the Auditor of the Bank of New Zealand, and if he accepted the position of General Manager of the bank, and that acceptance took him out of the position of the bank Auditor, he was then no longer Auditor of the Assets Board. And there wa* this, further, that those Assets Board debentures were delivered by the Assets Board to the bank.

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J. K. WARBUBTON.]

16. Right Hon. R. J. Seddon.] I would like to ask Mr. Warburton if he can give us any authority for what he is now stating —that accepting the position of General Manager took Mr. Macintosh out of the position of Auditor? —That is my opinion, that the two positions are incompatible. 17. You say that accepting the one position took him out of the other. I want to know where you get that from? —That is simply my opinion—that the General Manager of the bank cannot be his own auditor. Ido not know whether it is expressed in any statute, but it seems to me there can be no doubt about it. 18. Was Mr. Macintosh holding the position of Auditor at the time? Had he resigned his position as Auditor? —He had not formally resigned it. He accepted the position of General Manager. 19. Have you the section of the Act there, with regard to the appointment of the Auditor? — Section 27 provides that " the accounts of the Assets Board shall be audited from time to time by the said Auditor " —that is, the Auditor under section 16 —the Auditor appointed by the Governor under the Share Guarantee Act. 20. Have you got that clause where it says, " The Governor may from time to time appoint Auditors "? Is there any qualification or limitation? It is in the Bank of New Zealand Act, I think?- I think it is in the Share Guarantee Act. Section 13 of the Bank of New Zealand Share Guarantee Act provides, "In lieu of the Auditors provided to be appointed under the deed of settlement of the bank, the Governor, by an Order in Council, may appoint some fitting person, who shall be an expert in banking business, to act as Auditor in respect to the business of the bank in the Australasian Colonies, or in whatever place or places out of the United Kingdom the bank may carry on business, and whose salary or remuneration shall be paid by the bank, the amount thereof to be fixed by the directors in conference with the Colonial Treasurer, and not thereafter to be liable to alteration by the bank without the consent in writing of the Colonial Treasurer. 21. Was Mr Macintosh appointed Auditor by Order in Council? —I understand so. 22. Had that appointment been determined either by resignation or otherwise? —Not to my knowledge. I believe not. In giving a certificate to me Mr. Macintosh said that he still held the appointment. 23. So that de facto he was at the time the Auditor appointed by the Governor as provided by that Act? —Although he had not resigned the appointment, I think he had practically done so by accepting office in the administration of the bank. 24. Is there anything in any of the Acts referring to this question which disqualifies? —There is nothing expressed, as I say, that I know of to that effect. 25. The Chairman.] You have no reason to suppose that there was anything wrong in connection with the papers submitted to you for signature?—No, I have no reason whatever to suppose so. 26. Your object in reporting to Parliament was to give publicity to the whole proceedings? —Yes. I countersigned these debentures in circumstances that I thought were not quite satisfactory. 27. What do you suggest to prevent the possibility of its recurrence I— l do not think the circumstances are likely to occur again of a certificate being required from an Auditor who has accepted another office incompatible with that of Auditor. 28. With the information that has been made public through your submitting these documents to the House, the Committee can rest satisfied that everything has been done that could be done? —I think so. lam merely informing Parliament, because I countersigned the debentures in circumstances that were, to me, theoretically unsatisfactory. 1 think I should under any circumstances have informed Parliament of the performance of the duty, even if the Auditor had not accepted the position of General Manager, for I was certifying on the certificate of an Auditor who was not myself. I was appointed by this Act—l was not aware of it until I came to read the Act—to countersign debentures representing an outstanding debt, according to accounts that I had not audited. Approximate Cost of Paper.— Preparation, not given; printing (1,425 copies), £ 2 us. 6d.

By Authority: John Maokay, Government Printer, Wellington.—l9o4. Price 3d.]

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