B.—l [Pt. ll].

expenditure was not covered by authority of law, as the Order in Council could not be made retrospective. The Audit Office, however, did not consider it necessary to raise any objection, as it was clearly in the interests of the Dominion that the exchange-moneys should be used in this manner, thus obviating further borrowing, and the breach of law was merely a technical one. 3. Section 79 of the Public Revenues Act, 1926, provides that moneys issued by bank order from the New Zealand Public Account in London shall, except in the case of charges of the public debt, be transferred to an account called the Foreign Imprest Account, and shall be deemed to be imprested to the High Commissioner. Section 84 of the Act requires that " The bank at which the New Zealand Public Account is kept shall twice in every month transmit to the Treasury and to the Audit Office a statement (in the form prescribed by the Treasury) showing the entries in the New Zealand Public Account and the Foreign Imprest Account respectively for the period to which the statement relates." The statement of the New Zealand Public Account is supplied by the bank in London, but no statement of the Foreign Imprest Account is supplied, as required by law. The Audit Office has on several occasions pointed out this omission, but nothing has been done to remedy the breach of law. The Audit Office would suggest that either the bank be required to supply the statement in accordance with the requirement of the Act, or the Act be amended to relieve the bank of the obligation to supply a statement of the Foreign Imprest Account. 4. In the year 1928 it came under the notice of the Audit Office that an imprest account was being kept in London, known as the Finance Officer's Imprest Account, and it was pointed out to the Treasury that the keeping of such an account was without authority of law. In view of the defalcations which took place in connection with this account it is suggested, although it is not anticipated that further defalcations in the account are likely to occur, that the Finance Officer's Imprest Account should either be provided for by law, and proper safeguards imposed, or the account should be discontinued altogether. 5. It has also come under notice that another account is kept in London, known as the High Commissioner's Deposit Account, which is not authorized by law. This account is used for the receipt and payment of moneys by the High Commissioner in London on behalf of persons or bodies domiciled in New Zealand. In New Zealand similar transactions are dealt with as public moneys and passed through the Public Account, as required by sections 26 and 32 of the Public Revenues Act, 1926. It would seem that, these sections also apply to the moneys received in London and that to pass them through the High Commissioner's Deposit Account, instead of through the Public Account in London, is contrary to law. It is suggested, therefore, that such moneys should be dealt with through the Public Account in London in the same manner as is done in New Zealand, or, failing this, that the keeping of the High Commissioner's Deposit Account be authorized by law. 6. The normal method of issuing moneys from the Public Account is by means of a bank order signed by the Paymaster-General and countersigned by the Controller and Auditor-General, but section 82 of the Public Revenues Act, 1926, provides that for certain limited purposes as set out therein, moneys may be issued out of the New Zealand Public Account in London before the bank order for the issue of the money for such payments has been received in England, by means of an order known as a " Commissioners' order," signed by the Commissioners in London and countersigned by the Audit Officer in London. In some cases during the year Commissioners' orders were issued for purposes which were not covered by section 82, and such issues were therefore made contrary to law. On the matter coming under the notice of the Audit Office, the attention of the Treasury was called to the position, and steps were taken to ensure that Commissioners' orders would not be issued, except when such issue was in accordance with law. The payments in question were in themselves perfectly legal and proper, and it was only the method of payment which was open to question as being technically contrary to law, and no further action appears necessary in connection therewith. 7. Section 102 of the above Act requires that all securities in which public moneys are invested shall be held by tne Custodians of public securities. An exceptionally large amount of investment securities was held in London as a result of the investment of exchange-moneys and loan-moneys, and it was thought desirable to lodge certain of these securities with the Bank of New Zealand for safe keeping, instead of with the Custodians appointed under the Public Revenues Act. It was later decided to place certain of such securities in the custody of the Bank of England under similar circumstances. The Audit Office concurred in the desirability of placing such securities in the custody of the banks, instead of in the custody of the Custodians as required by law, and therefore raised no objection to the procedure followed. 8. In my report for the year 1931-32, 8.-I [Pt. ll], page xxviii, attention was drawn to the illegality of the use of " Disbursement Accounts" In connection with the Public Account, the Government Accident Insurance Account, the Government Insurance Account, and the State Fire Insurance Account, and it was indicated that the matter could be put in order by the introduction of suitable legislation. The suggested legislation has, however, not been introduced. The position remains as it was when attention was drawn to the matter, and the use of disbursement accounts in conjunction with the accounts mentioned above still continues, although not provided for by law. As it is proposed shortly to remove the Public Account Disbursement Account from the Bank of New Zealand to the Reserve Bank, it would be advisable to provide statutory authority for the existence of that account. Advantage could be taken of the introduction of such legislation to give legislative authority also for the keeping of the other disbursement accounts referred to herein.

IV