B.—l [Pt. ll].

Changes in the Form and Classification of the Public Accounts. One of the most desirable and useful characteristics of public accounts is uniformity and continuity. In this connection a recognized authority on public accounting says, — " In both estimates and accounts it is very desirable, from the point of view of Parliament, that there should be great facility for comparing one year's outlay, on any head of expenditure, with that of other years. Consequently, great importance is attached to the preservation of continuity of form in the estimates —that is to say, to providing as far as possible for the same class of expenditure and the same services under the same heads and in the same votes from year to year. " To destroy such continuity is undoubtedly a serious step, as on it must depend the means of comparison between the estimates and accounts of a series of years. While any important change may be to the departmental experts chiefly a matter of considerable inconvenience, it must practically take from Parliament all power of comparison, thus excluding the possibility of such criticism as depends on comparing the expenditure under the same head in different years." During recent years the changes in the form and classification of the public accounts of the Dominion have been so numerous and so frequent that it is almost impossible to obtain a correct comparison of the receipts and expenditure relating to individual services extending over a period of years. Unless this fact is kept in mind when studying the public accounts, an entirely erroneous impression may be obtained. For example, in 8.-l [Part I], 1932-33, on page 7, under " General Administration —vote ' External Affairs,' " net expenditure amounting to £83,094 7s. 6d. is shown for the year 1932-33 compared with £1,955 12s. sd. for the year 1931-32. It would be a natural conclusion that there had been an increase of £81,138 15s. Id. in the net expenditure of the External Affairs Department between the years 1931-32 and 1932-33, but this conclusion would be an erroneous one, the fact being that there was a small increase of £1,062 7s. 7d. only. Under the heading " Other Receipts —External Affairs," on page 4, £80,076 7s. 6d. is shown for the year 1932-33 compared with nothing for the year 1931-32. The increase shown was not an actual one, the apparent increase being due to the fact that receipts classified as credits to the vote in the year 1931-32 were differently classified as credits to " Other Receipts—External Affairs" in the year 1932-33. Similarly, the apparent increase of nearly £3,000,000 shown on page 7 of the same statement under vote " Pensions " does not represent an actual increase in the expenditure on pensions, but is due to the fact that most of this expenditure had previously been provided for under permanent appropriations. The abolition of the permanent appropriations, though itself a very desirable thing, thus had a disturbing effect on the comparative figures. Many instances of a like nature occur in the accounts. Had there been a few instances only it would have been possible to indicate the position in each case by notes on the accounts, but the changes which have been made are so many and varied that such a method was not practicable. Frequent changes in the form and classification of the public accounts must prejudicially affect the control of Parliament, and, though it is recognized that changes may at times be necessary and desirable, it is clear that no change should be made without very serious consideration, and that frequent recurring changes are most undesirable, and must be very difficult to justify. A cognate matter, which has the same effect, and is open to the same objections, is the practice of altering the votes in the annual Appropriation Act, frequently by combining several votes into one. Regarding this matter the authority already quoted states, — " Since Parliament appropriates the grants which it makes for each vote to the service of that vote, it necessarily follows that the control which it can, from the legal point of view, exercise over the Department is in direct proportion to the number of votes. The greater the number of votes, the greater the control; for the money is more explicitly appropriated and the discretionary power of the Department is correspondingly restricted. 'In every case where there is reason for maintaining parliamentary control —to the extent of requiring that any excess over the money granted by Parliament for a particular object or servioe should be submitted to the House —provision should be made for that service in a separate vote. To substitute in these cases for that parliamentary control, a control of the Treasury —such as that Department now exercises over the application of money voted for one subhead to the use of another —would be a great change.' The fewer the votes, and the larger those votes consequently are, the greater the freedom of the Department, which, so far as Parliament is directly concerned, is only limited by the vote total. ' Money hitherto voted under three separate votes, for three different objects, will, if included in one vote, be applicable, without any fresh resolution of Parliament, to all or any of the three objects. An excess on the estimate for any one or two of the objects will not have to be submitted to Parliament for sanction, if it be met by a surplus on the remainder of the new vote, whereas every excess on a separate vote is brought to the notice of the Public Accounts Committee.' ,: The Audit Office has no authority over the form and classification of the public accounts, which are largely decided by the form of the estimates, on which the accounts are based. In view of the importance of this matter, and of the undesirable results which must follow unnecessary or too frequent changes in the form of the accounts, I have thought it desirable to bring the subject under notice in order that steps may be taken to preserve as far as possible the uniformity and continuity of the public accounts from year to year, and thus provide that sound basis for comparison which is such a necessary feature in the case of national accounts.

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