B.—l [Pt. ll].

VI

depreciation other than for repairs, replacements, and renewals, should such provision be deemed necessary. To comply with the Act, however, it is not permissible that such depreciation in the case of capital assets should be written off the value of the assets in the books, nor is it permissible that it should be charged against the statutory Depreciation Fund, which is limited to repairs, replacements, and renewals. Any such provision should therefore be made by means of a special depreciation reserve. A further departure from the provisions of section 11 (4) has arisen from the fact that the Depreciation Fund, instead of being reserved for the purpose of meeting the cost of repairs, replacements, and renewals, as required by this section, has been utilized for purchasing capital assets of the various schemes. In effect it has been invested in the schemes. As a result the Depreciation Fund would not be available if called upon, and should heavy charges for repairs, replacements, or renewals arise it woidd probably be necessary to have recourse to fresh borrowing in order to meet them. Prior to the amendment of the law contained in section 15 (2) of the Finance Act, 1925, section 14 of the State Supply of Electrical Energy Act, 1917, required that the Depreciation Fund should be invested in Government securities, but such investment is now optional. It has been suggested to Audit that this amendment was intended to enable the utilization of the Depreciation Fund for the general purposes of the scheme (including the purchase of capital assets), which view could not be endorsed by Audit, and the Solicitor-General has since given an opinion to the effect that the section referred to contains no authority which would enable the Fund to be applied in this manner. It seems unlikely that Parliament intended to authorize a change in the law which might lead to such a position that there might no longer be an actual fund available when called upon to meet repairs, replacements, and renewals, but merely a book entry unsupported by realizable assets. The reserve might be sunk in purchasing capital assets of the various schemes which could not be realized when required, and the reserve would therefore not be available for the purposes for which it is specifically constituted. This would seem to defeat the whole purpose of constituting such a fund. It has also been found that the provisions of section 12 of the State Supply of Electrical Energy Act, 1917, have been departed from owing to a misinterpretatiou of the meaning of the law, the capital cost of the scheme at the beginning of the year having been taken as a basis for computing the appropriation for sinking fund though in the opinion of the Solicitor-General the capital cost at the end of the j'ear should have been taken. The Audit Office has asked that the changes in the accounts necessary to bring them into conformity with the law be made before they are again submitted for audit. 10. Section 33 (3) of the Samoa Act, 1921, authorizes the Minister of Finance, on the recommendation of the Controller and Auditor-General, to make temporary advances to the Samoan Treasury out of moneys available in the Public Account for the unauthorized expenditure of the New Zealand Treasury, but provides that all advances so made shall be repaid by the Samoan Treasury within six months after the making thereof. An advance of £2,000 was made under the above authority out of the Unauthorized Expenditure Account on the 16th March, 1925. On the 17th September, 1925, the Audit Office found that the provisions of section 33 (3) had not been complied with, the advance not having been repaid within a period of six months as required by that section. The matter was brought under the notice of the Treasury, and the advance was repaid on the 30th September, 1925, and credited as a recovery on account of "unauthorized expenditure'' of previous years. 11. Under clause 3 of the New Zealand Reparation Estates Amendment Order, 1920, and clause 6 of the New Zealand Reparation Estates Amendment Order, 1924, provision was made for the Minister of External Affairs, under the authority of an Order in Council, to direct that moneys of the New Zealand Reparation Estates should be transferred to the Samoan Treasury. As the Reparation Estates are the property of New Zealand, and not of Samoa, it appeared to the Audit Office that the moneys of those estates ought not to be diverted to Samoa without the direct authority of Parliament, and that the provisions in the Reparation Estates Orders authorizing such diversion were therefore ultra vires. Representations were made on the matter, and the opinion of the Audit Office was supported by the Attorney-General. The Audit Office agreed to the continuance of the existing procedure on the understanding that confirmatory legislation would be introduced during the present session. 12. Section 16 (6) of the Main Highways Act, 1922, provides that there shall be credited to the Main Highways Construction Fund all moneys appropriated by Parliament out of the Public Works Fund for the purposes of main highways, being not less in any year than the sum of £200,000. No moneys were credited in terms of this section during the year ended 31st March, 1926, as, owing apparently to an oversight, no moneys were appropriated from the Public Works Fund for the purpose, and the moneys could not therefore be expended from that fund. Furtunately there were sufficient loan moneys available for the year without the £200,000 appropriation. It is understood that the matter will be adjusted by taking an appropriation during the current financial year of an amount sufficient to cover the contributions for the years 1925-26 and 1926-27. 13. Section 12 of the Stamp Duties Act, 1923, gives authority for allocating the revenue from " revenue stamps " between the various Departments to which the revenue belongs, but section 13 provides that all the revenue from " postage and revenue stamps " is to be deemed to be part of the revenue of the Post Office. As portion of the revenue from " postage and revenue stamps "is earned by various Departments other than the Post Office, the Treasury had allocated such revenue to the various Departments. The Audit Office, though in agreement with the principle of allocating to Departments, was forced to draw attention to the fact that such allocation was contrary to the express provisions of section 13 of the Act. At the request of the Treasury the Audit Office agreed to pass the allocations to the various accounts, on the understanding that legislation would be introduced providing authority for such allocations.