B. —1 [Pt. ll].

Unemployment Amendment Act, 1932. Many applications have been submitted to this Office by the Lands and Survey Department recently for authority to write off losses incurred in connection with the settlement of unemployed workers under the "Unemployment Amendment Act, 1932, and Audit investigations disclose that some of the " small farms " provided for the settlement of the unemployed have involved the Crown in considerable losses. In the cases which have come under Audit notice it would seem, that in the early stages of the scheme, and prior to the date when the Lands and Survey Department assumed the administration of that scheme, certain properties acquired under the Act were quite unsuitable for the purposes intended ; and that, as a consequence, these properties have been abandoned to the original owners, and the improvements effected thereon by the Crown have been sacrificed or disposed of at a considerably less amount than their cost. Writing off of Losses on Securities taken over by the State Advances Corporation. Pursuant to the provisions of section 36 of the Mortgage Corporation of New Zealand Act, 1934-35, all the mortgages formerly vested in the State Advances Superintendent were transferred to the Mortgage Corporation. As consideration for the mortgages so transferred, the Corporation issued to the Crown interest-bearing stock of an amount of approximately 80 per cent, of the aggregate amount secured by the transferred mortgages, and the balance of 20 per cent, constitutes a contingent liability of the Corporation to the Crown. By section 38 (4) of the Act all ascertained losses suffered by the Corporation in respect of the mortgages so transferred are deductible from the Corporation's contingent liability to the Crown, and that liability is deemed to be reduced accordingly. The Audit Office raised the question as to whether these losses should not be written off by Parliament in the usual way through the Appropriation Act, but the Solicitor-General ruled that in terms of section 38 (4) of the Act the writing-off by the Corporation concludes the matter. The asset of the Crown is thus being reduced at the option of the debtor Corporation, and the Crown has no say in the writing-off of its losses. The position is not altogether satisfactory from the viewpoint of the taxpayer, as it would appear that Parliament has unintentionally weakened its control over the expenditure by altering the customary procedure in regard to the writing-off of debts due to the Crown. Defalcations and other Irregularities in Connection with Public Moneys and Stores. The serious nature of some of the thefts and misappropriations of public moneys and stores that were brought to light during the year clearly indicates how necessary it is that the rules and regulations that have been framed for "the purpose of ensuring a satisfactory internal check should be strictly enforced in all Departments. During the year there were fifteen cases brought under the notice of the Audit Office where Government officials had been found guilty of irregularities involving the theft of public moneys or stores. This number is approximately the same as that of each of the two previous years, but a feature of the irregularities for this year is the large amounts involved in several cases, in two instances running into four figures and in six other instances ranging between £100 and £400. The largest sum stolen in any one instance was £4,550, this being the amount of a theft of Post Office Savings-bank funds committed by an employee of the Savings-bank by means of forging withdrawal slips. These, with passbooks altered to suit each case, were presented in ordinary course for cashing. A portion of the £4,550, amounting to £3,725, was recovered subsequently, and a sentence of three years' imprisonment with hard labour imposed on the offender. Thefts of tin of the approximate value of £1,100 from the Railway Main Store at Woburn, and subsequent sales thereof, were discovered by the Stores Audit Inspector following on inquiries made by him into ledger entries recording inter-store transfers of tin which could not be substantiated by other documents. The employee responsible for the thefts was sentenced to reformative detention for a period not exceeding two years. Action was also taken against the purchaser of this material with the result that he was convicted and sentenced to reformative detention for a period not exceeding one year. Charges of theft involving an amount of £395 were preferred against a Fields Officer of the Lands and Survey Department, Te Kuiti, who during the year was discovered to have been guilty of misappropriations in connection with transactions affecting the Crown. Most of this sum was obtained by the officer by the sale of live-stock, the property of the Crown, and conversion of the sale proceeds to his own use. A sentence of two years' reformative detention was imposed by the Court. A defalcation by another officer in the Lands and Survey Department occurred in the Christchurch District Office, in which case cash amounting to £200 was misappropriated by the assistant cashier by manipulating or withholding the office copies of receipts for moneys received by him over the counter during the absence of the cashier. The officer in this instance was admitted to probation for a period of two years. The Audit Office was also advised during the year that an officer of the Mental Hospitals Department employed at the Sunnyside Mental Hospital's farm had been selling live-stock belonging to the tarm and converting the proceeds from the sales to his own use. Investigation into the peculations of this officer disclosed that they involved an amount of £327, and on a charge of the theft of this amount the officer was sentenced to twelve months' reformative detention. In addition to thefts by departmental officers, numerous thefts of public moneys and stores, principally from the Post and Telegraph Department, were committed during the year by persons not in the employ of the Government,

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