B.—No. Ib.

MEMORANDUM BY THE OFFICERS OF THE TREASURY ON THE REPORT OF THE AUDITOR-GENERAL.

With reference to the £60,000 remarked on by the Auditor-G-eneral in paragraphs 1-4, it is admitted that as that amount was represented by a Deficiency Bill (instead of being an overdraft as in the former year), it would have been more correct to include it in the Public Debt Account, and this course will be followed in future. It is to be observed, however, that this will make no difference in the Cash Account. The repayment of the former overdraft is shown on page xvi., and again in the tabulated form on page 96; while the cash received for the Deficiency Bill is brought to charge on page 15, and stated to be "In renewal of overdraft." The Cash Account is thus complete within itself, and does not require, nor admit of (as a merchant's account would) the entry under " Bills Payable " to balance it. Perhaps the most strictly correct mode of dealing with such an item would have been to state the balance of Consolidated Fund (page vi.) thus : — £ s. d. £ s. d. Consolidated Fund 29,278 18 7 Do., Proceeds of Deficiency Bill ... 60,000 0 0 89,278 18 7 In paragraph 3 the Auditor-G-eneral remarks, that the officers of the Treasury state that to show the indebtedness to the Bank would increase unnecessarily the total liabilities. The officers of the Treasury cannot find that they made the statement referred to, and they certainly never intended to convey a meaning so manifestly absurd. With regard to the sums of £20,295 6s. 6d. and £46,000, to which the Auditor refers in paragraphs 5 and 6, it is admitted that the record of the transaction is incomplete, the reason being that while the accounts of the Crown Agents showing the receipt of this sum into the Consolidated Fund had been received in the Colony before closing the Accounts of the year 1870-71, the Accounts of the Bank of New Zealand, showing the sum as raised on account of and advanced out of the Special Fund, had not been received. The Treasury Accounts record the exact facts so far as it had information; and had it been in possession of complete accounts, and thus been enabled to record the transaction in full, it would have made the two entries following, viz.: —■ £ s. d. Or. Temporary Loan Act Account — Amount received from Bank of New Zealand ... ... 66,295 6 6 Dr. Temporary Loan Act Account — Amount advanced to the Consolidated Fund ... ... 66,295 6 6 It will be seen that while these two entries would have absolutely completed the record of the transaction, they would have had no effect whatever on either of the Accounts to which the Auditor-G-eneral refers: the Consolidated Fund would have continued to show, as was the fact, that it had received a temporary advance of £66,295 6s. 6d. from the Special Fund in London, and that it had repaid to that fund £46,000 of the sum so advanced. The Auditor-General proceeds to state that this operation, together with that of the Deficiency Bill of £60,000, leave " no less a sum " than £126,295 6s. 6d. to be written off the Accounts of the year IS7O-71. The Treasury dissents altogether from this opinion. It is true that the Consolidated Fund was liable on the 30th June for the repayment of the two sums of £60,000 raised by a Deficiency Bill, and £20,295 6a. 6d. advanced from the Special Fund; but the only sum to be written oil' the Accounts was the sum which the Treasury did write off—namely, the £46,000 which it had repaid ; the balance of the sum received into the Consolidated Fund remained there on the 30th June, 1871, and it is so shown in the Accounts. The Treasury admits the error to which the Auditor refers in paragraphs 8 and 9, as to the Sinking Fund Account of the Loan of 1860, pages Ixiv. and lxv. The error consists in having brought forward the total instead of the balance on the one side, and in having inserted on the other an entry of the previous year corresponding in amount with the difference. It is an error purely clerical, confined to the printed copy, and does not in any way affect the position of the Account, which is properly stated in the balance sheet, on page viii. With regard to the observations made in paragraphs 9, 10, 11, 12, as to differences between the Monthly Accounts rendered to audit and the Annual Account under review, the Treasury desires to observe that to characterize these differences as " great discrepancies existing in the Sinking Fund transactions" is to create a false impression. The Auditor-General has not pointed out any discrepancy in the Sinking Fund Accounts, except the clerical error of £9,991 6s. 2d. on both sides of the Sinking Fund Account of the Loan of 1860, already referred to. The differences between the Monthly and the Annual Accounts being no more than this —that while the Sinking Fund Accounts, made up to the 30th June, 1871, are incorporated in the Annual Statement, those Accounts had not at the time been entered in the account for the month of June, 1871, rendered to audit. The Sinking Fund Accounts are not transactions of the Treasury, but are simply rescripts of the account of the Trustees of the several funds incorporated from year to year in the Treasury Books, and the Audit Officers were advised of the intention of the Treasury to add these transactions to the account for the last month of the year 1870-71, as had been done on former occasions.