B.—l [PT. ll].

Banks Indemnity (Exchange) Act, 1932-33. The following statement shows in a summarized form the transactions under the above Act up to 30th September, 1933 :—

Statement showing the Result of the Transactions under the Banks Indemnity (Exchange) Act, 1932-33, from the Date of Operation of the Act to the 30th September, 1933.

At 30th September, 1933, the amount of Treasury bills outstanding under the Banks Indemnity (Exchange) Act, 1932-33, had been reduced from £17,881,256 ss. to £11,014,597, bills to the amount of £6,866,659 ss. having been redeemed partly from the proceeds of other Treasury bills issued under section 41 of the Public Revenues Act, 1926, and partly from revenue. The abstract of the Public Account for the six months ended 30th September, 1933, which has been gazetted, shows that though the amount of £14,255,000 surplus exchange moneys had been credited to the Ordinary Revenue Account of the Consolidated Fund, a balance of £8,354,000 only, including imprests and investments, then remained in this account. It will be seen, therefore, that at least £5,900,000 of the credit so provided had been utilized to meet Ordinary Revenue Account charges in London and New Zealand. The rate of interest paid on the Treasury bills issued to provide for the purchase of the exchange on London has averaged over 5 per cent., while the rate of interest received on the deposits of exchangemoneys in London has averaged considerably less than 1 per cent. There has therefore been a loss to the Government in respect of interest of about 4 per cent, in respect of these transactions. The moneys placed on deposit in London were treated as Public Account cash balance investments (which are investments made from the accumulations of cash balances of the various separate accounts within the Public Account) instead of being treated as investments of the Ordinary Revenue Account alone, to which the exchange-moneys were credited, and against which the interest on the Treasury bills was charged. As a result, even the small amount of interest received on the 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 as 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 the 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 moneys, to satisfy itself that payment is due. In the case of the payments under the Banks Indemnity (Exchange) Act it would be impossible for the Audit Office to directly satisfy itself that any bank held 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 a course was not possible, and I have passed the vouchers for the payments to the various banks on the certificate of the Chief Auditor of the Bank of New Zealand.

XVIII

Transactions to Total Transactions to Slot Match, 1938. sotl/leptembe?, 1938. 30th September, 1933. £ s. d. £ s. d. £ s. d. Amount raised by the issue of Treasury bills under section 2,380,337 0 0 15,500,919 5 0 17,881,256 5 0 7 of the Act, for the purchase of surplus exchange on London and the payment of exchange thereon Amount provided for payment of exchange on surplus 0 10 0 1,130,287 0 0 1,130,287 10 0 exchange from funds not raised by the issue of Treasury bills under the Act Total amount provided for the purchase of surplus 2,380,337 10 0 16,631,206 5 0 19,011,543 15 0 exchange and the payment of exchange thereon ——~ r-=, _ —, 1 -= Amount paid to the banks for purchase of surplus exchange 1,910,000 0 0 13,345,000 0 0 15,255,000 0 0 under section 4 of the Act Exchange paid to the banks on surplus exchange under 470,337 10 0 3,286,206 5 0 3,756,543 15 0 section 6 of the Act Total amount paid for the purchase of surplus 2,380,337 10 0 16,631,206 5 0 19,011,543 15 0 exchange and payment of exchange thereon Amount of discount on Treasury bills issued under the Act 18,111 17 0 278,772 5 8 296,884 2 8 Total expenditure incurred under the Act .. 2,398,449 7 0 16,909,978 10 8 19,308,427 17 8 Amount of surplus exchange paid into the New Zealand 1,910,000 0 0 13,345,000 0 0 15,255,000 0 0 Government Indemnity Exchange Account, London Amount of surplus exchange transferred from the New 380,000 0 0 13,875,000 0 0 14,255,000 0 0 Zealand Government Indemnity Exchange Account, London, to the New Zealand Public Account, London Amount of surplus exchange retained in the New 1,530,000 0 0 —530,000 0 0 1,000,000 0 0 Zealand Government Indemnity Exchange i—~—. 1 r ■ , ■. j, —c Account, London