B.—No. lc.

Memoeandtjm by Assistant Teeasueee. 1. In reference to the remarks of the Auditor-General upon the commission paid to the contractor for the issue of Treasury Bills, and especially with respect to a particular sum of £1,000, charged as an expense of the first issue of Bills to the amount of £100,000, the following explanation is submitted —• Under the provisions of "The Treasury Bills Regulation Act, 1866,''"there appeared no other way to get Treasury Bills into circulation but through a contractor, nor any way of selling to the public at par (as required by the Act) Bills bearing only six and one-twelfth per cent, interest. A contract was therefore entered into with Mr. T. Russell, who undertook to get the Bills taken by the Bank of New Zealand, on condition that a commission of one per cent, should be paid nominally to him, but really to the Bank for which he was acting. This contract was for the authorized issue of £1.50,000 the Treasury reserving the right to call on the Bank to take such amounts from time to time as might be required for the exigencies of the public service. The £100,000 spoken of is thus an integral part of the whole transaction, and for it there were issued to Mr. Russell Treasury Bills to the same amount the proceeds of which were paid into the Public Account. The Bank Account at that time was overdrawn to the extent of £95,311 16s. Id., and the Colonial Treasurer desired to pay this off out of proceeds of portion of loan then in course of realization. At that time also there were Debentures amounting to £111,600, payable in London on the 30th of June, and the Colonial Treasurer obtained a draft for £100,000 on account of this payment, drawing that amount out of Public Account. As, however, ho expected that the Crown Agents would have funds enough in their hands to meet the payment-for the Debentures, he granted to the Bank an order on the Crown Agents for a sum equal to that of the draft he had purchased, the amount of which order the Bank applied in extinction of the overdraft. _ The one per cent, paid for the draft was in lieu of the commission due to the contractor, and for this reason it was subsequently charged as an expense incurred in the raising of money by Treasury Bills, the cost to the Colony being the same, whether charged as commission on Treasury Bills or premium on Bill of Exchange. 2. In his remarks under the head of " War Loan of £3,000,000," the Auditor states that "in accordance with a proposal made by tho Superintendent of Auckland, the Bank charged £1,000 for effecting the sale of £100,000 Debentures issued to secure moneys to be advanced to the Province of Auckland." No such charge is found in the Public Accounts; the only commission paid by the Government was the sum of £250 to the Crown Agents. 3. The Draft of £100,000, referred to as a sum received under the Three-Million Loan, was a sum raised by Bills payable drawn against proceeds of tho Loan. The amount of these Bills has since been paid by the Crown Agents. There is no " fictitious "increase "of the Cash Balance, the sum in question having been actually credited in the Bank Pass-Book, as shown above. The Colony undoubtedly incurred a liability, inasmuch as it anticipated the receipt of money to be raised "by the issue of Debentures to the amount of the Bills. J. WoonwAEn, Assistant-Treasurer.

Memobakdum by Accountant to Tbeastjet. 1. The Auditor observes, with regard to the Surplus Revenue Account, that " the annual statement of the Treasury states the over-issue at £325,776 12s. Id., and includes in this amount certain moneys due for Interest and Sinking Fund on the Half-Million Loan, amounting to £18,899 9s 9d " It will be seen, on turning to the statement referred to (page 89), that the items which constitute the debit of £325,776 12s Id. comprise a sum of £18,899 9s. 9d.; of this sum £16,208 10s. 6d. is for Interest and Sinking Fund on the Three-MillAn Loan, and £2,680 19s. 3d. for Interest and Sinking Fund on the Half-Million Loan. 2. Both these sums have since been transferred; tho first named to an account to be kept open till the 30th June, 1870, in terms of "The Loan Allocation Eepeal Act, 1867," and the last to the separate account of the Provinces concerned; this liability has since been discharged It may be added, in reference to the Auditor's observations on this subject, that the sums due for Interest and Sinking Fund, included in the balance of the Surplus Revenue Account, were rejected from the calculation on which the Surplus Revenue Adjustment Act was based, with a view'to the transfer above referred to. 3 Tho balance of £306,887 2s. 4d., at debit of the Surplus Revenue Account, after deducting therefrom tho items mentioned m the preceding paragraph, has been adjusted by crediting that Account

MEMORANDA ON THE REPORT OF THE AUDITOR OF PUBLIC ACCOUNTS.