Qs. 214-244 and Para. 8 of C. & A. G.'s Q. 514. Qs. 261-4, 7067-7106, and Para. 10 of C. & A. G.'s proposed, Your Committee do not wish to pursue the particular cases in question. But they think it very undesirable that official instructions should be issued to Inspectors of Taxes to refrain from investigating certain types of cases in which there is prima facie liability to assessment, irrespective of the amount of duty involved. POST OFFICE. 13. Contracts placed without competition.-It is a recognised rule of the public Service, which has been endorsed by successive Committees of Public Accounts, that contracts shall not be placed without effective competition. The Public Accounts Committee of 1925, in paragraph 45 of their Second Report, drew attention to departures from this rule in the case of contracts for aeroplanes, seaplanes and engines placed by the Air Council, and while recognising the difficulties which confronted the Air Council, emphasised the necessity of keeping the question under review. Your Committee now learn that during recent years contracts for substantial amounts have been placed by the General Post Office without competition. Contracts were so placed for £490,000 in the first half of 1925, and for £633,000 in the second half, for £606,000 in the first half of 1926, and for £410,000 in the second, almost entirely for work in connection with telephone exchanges and telephone exchange extensions. There have been serious difficulties in securing effective competition for work of this kind: but Your Committee learn that the whole position has been recently reviewed by the Department, that to a considerable extent the prices quoted admit of effective Departmental scrutiny, and that it is now the rule that no such contract involving a cost of £50,000 or over shall be entered into without the personal approval of the PostmasterGeneral. They suggest that this rule should be applied to contracts of substantially lower amounts. 14. Sale of Tenter Street Site.-During the year 1914 the Post Office acquired a site in Tenter Street, London, E.C., for the erection of a telephone exchange, at a cost of roughly £16,000, but clearance operations were necessarily postponed on account of the war. Subsequently, in view of the scheduling by the London County Council of this property in an Improvement Scheme, and the acute housing difficulties in the neighbourhood, the project of utilising this site for an Exchange was abandoned, and an alternative site was purchased by the Post Office in 1920 at a cost of £24,000. Endeavours to induce the London County Council to acquire the Tenter Street property on a replacement value basis were unsuccessful, and an attempt early in 1923 to sell by public tender through the Disposal Board resulted in no better offer than £3,000, the market being apparently prejudiced by the liability of the site to compulsory acquisition. In the meantime it emerged that exclusion of the site from. the Improvement Scheme could be secured on certain conditions, and on this being effected in 1923, the Disposal Board, with the assistance of the Office of Works, were instructed as agents of the Post Office to enter into negotiations with the London County Council with the view of transferring the property to that body at a valuation to be agreed, or of exchanging it for an alternative site or sites in other districts. Negotiations on these lines proceeded between the London County Council and the Disposal Board, the Post Office, and the Office of Works, but during these negotiations an offer of £14,250 was received by the Disposal Board from an outside firm and communicated to the Post Office. Before a decision could be arrived at in regard to this offer, it was necessary to ascertain the position of the London County Council and also of the Stepney Borough Council, who had evinced some wish to purchase the property. The negotiations with these bodies and inter-departmental correspondence occupied a period of three months, and it was then discovered that in the meantime the would-be purchasers had obtained another site. The property was subsequently sold to the London County Council for £8,000, representing a loss of £8,000 on the original transaction. TRADING ACCOUNTS. GENERAL. and Para. 3 of 15. Use of percentages.-Throughout the Volume for 1925-26 Qs. 2291-6 columns showing percentages have been added to the accounts. Overon] and balance-sheets, but in most cases the percentages simply C. & A. G.'s represent the proportion in which each item on the debit or credit Report. side contributes to the total. Your Committee do not think it necessary that any percentages should be inserted in the balancesheets, and there are also a number of trading accounts, e.g., Ministry of Agriculture Farm Accounts, Forestry Commission, and National Physical Laboratory, which are not made more informative by the addition of such figures. In regard, however, to the accounts of undertakings which approximate to commercial conditions and in which turnover or output is an effective standard, Your Committee suggest that a different basis of calculation should be adopted in future, namely, that each item of expenditure should be shown as a percentage of the turnover or output. This will involve minor modifications in the form of some of the accounts. Qs. 5563-68. Appendix 37 STATE MANAGEMENT DISTRICTS. 16. Present arrangements for audit.-The Committee of 1926 pointed out (2nd Report, paragraph 38) that the present arrangements for the audit of the accounts of the State Management Districts involve a certain amount of duplication, and suggested that consideration should be given to the question whether the additional expense of the dual system of audit is justified by its results. Your Committee are informed that the Council and the Treasury have had this matter under review, but that a definite decision has not yet been taken. DOMINIONS OFFICE. British Phosphate Commission. 17. Your Committee wish to draw attention to a very interesting statement dealing with the British Phosphate Commission which has been supplied to them, and in particular to paragraph 7 of that statement which deals with the commercial possibilities of manufacturing high grade super-phosphates in the United Kingdom. Qs. 365-7. Qs. 376-9. POST OFFICE. 18. Post Office Commercial Accounts.-The Commercial Accounts include a statement of the balances over a series of years in the Postal, Telegraph and Telephone Net Revenue Accounts. Your Committee observe that the inclusion in the Telegraph Account of transactions in respect of Wireless Receiving Licences, which have now reached considerable totals, has the effect of masking the true amount of the deficit on telegraph services, and they suggest that the value of the statement and of the net revenue accounts would be enhanced if Wireless Receiving Licences were entirely separated from Telegraph services. 19. Treatment of agency services in accounts.-In the general income and expenditure account (Account III) as also in the subsidiary accounts (IV, V, and VI) relating to the separate Postal, Telegraph and Telephone Services, credit is taken as a separate item for the value of agency services rendered to other Government Departments; but on the debit side the expenditure relating to those agency services is not separately distinguished. This obscures the comparison between the expenditure and the receipts on business transacted for the general public. Your Committee would invite the Postmaster-General to consider whether this result could be avoided without unduly complicating the expenditure side of the account. 6 & 7 of 20. Manufacturing Accounts of the Royal Naval Torpedo Qs. 6772-3 Factory, Greenock.-A special investigation conducted by the and Paras. Admiralty after the close of the year 1925-26 disclosed substantial C. & A. G.'s errors in the Manufacturing Accounts of this Factory as originally Report. prepared. The errors, which have been corrected in the final account now published, are attributed to the somewhat incomplete system of cost accounting in force at the Factory. Your Committee are informed that the whole system of cost accounting is being revised, and that improvements are being introduced. NAVY. Para. 6 of 21. Advances in anticipation of fixing of price.—In paragraphs Qs. 6400–16 37 to 39 of their Report for 1925 the Public Accounts Committee and referred to two cases brought before them by the Admiralty, at C. & A. G the request of the Treasury, in which the Department had found Report. it necessary to depart from an undertaking, given to the Committee in 1905, that advances to contractors should not be made in anticipation of the signing of contracts. The orders in question were for the manufacture of gunmountings to a new design which, though sufficiently developed for manufacture to begin, as required for the proper co-ordination of shipbuilding, was still far from complete; no price therefore could be quoted or approved. The Department did not consider at the time that there would be any further occasion to depart from the understanding reached in 1905, and the Committe acquiesced in the action taken in the particular instances. The Comptroller and Auditor General has now reported as a further development that a form of order has been devised by the Admiralty in consultation with the Treasury Solicitor designed to create a binding contract without waiting for a settlement of price, etc. This form has been applied to further orders placed in 1926, and regular instalments based on provisional prices can now be, and are being, paid without infringement of the pledge given in 1905. The Admiralty admit, however, in evidence, that the situation will not be quite satisfactory until they get back to a situation in which they can draw up a form of contract which does include the price. They state that they are gradually working to this position, which should be reached before long for the present type of gun. They point out, however, that if the type of gun is again changed to one for which a new gun mounting design will be required the same difficulty may recur. Your Committee regret the necessity for departure from normal procedure, but recognise that, under existing circumstances. there is no satisfactory alternative that can be suggested. and 22. Compensation for suspension of Contract work. The Qs. 6417-56. Comptroller and Auditor General reported to Your Committee Para. 7 of that in September, 1925, pending further trials, the Admiralty C. & A. G.'s had suspended work on large orders for shells under manufacture Report. Qs. 6457-72 C. & A. G.'s by two firms, and had paid £15,000 to the firms, as extras to the prices fixed by contract, in settlement of claims amounting to £36,000 for shop and overhead charges during the period of suspension to 31st March, 1926. Further claims of £10,700 for additional cost of manufacture due to the revised design which was ultimately adopted have been preferred but are still under Admiralty consideration. The Comptroller and Auditor General suggested to the Admiralty that the covering sanction of the Treasury was necessary for the payment of £15,000, and finding that the Department did not agree, he referred the matter to the Treasury for decision. Your Committee consider that the Comptroller and Auditor General was fully justified in bringing the question before them, and they agree with the view expressed in evidence by him and by the Treasury that an unusual incident of this character arising out of a contract should be reported to the Treasury, whose function it is to consider whether there has been negligence or error in administration, and whether the settlement is reasonable, and to direct, if necessary, that the matter shall be brought to the notice of Parliament by means of a note on the Account or otherwise. Your Committee learn that rules already exist requiring that certain classes of payment, e.g., for compensation, fruitless expenditure, &c., should be covered by Treasury sanction, and in their view there should be no serious difficulty in arriving at a modification or extension of these rules to secure that special cases not precisely within the letter of the rules shall similarly be referred to the Treasury. They will be glad to learn that as a result of the discussion still proceeding between the Admiralty and the Treasury, satisfactory arrangements on these lines have been made for the future. As to the particular case the reasons for the suspension of the contract as given by the Accounting Officer in evidence appear to be adequate, and we learn that the Treasury has felt able to sanction the payments in question. 23. Bills of Exchange fraudulently drawn.-The account includes a charge of £1,047 3s. 1d., being public money lost owing to the defalcations of an acting British Consul. The sum represents the amount of three Bills of Exchange drawn by that officer and accepted and paid by the Admiralty on 11th September, 30th October, and 6th November, 1922, which did not relate to bona fide transactions. There is a definite instruction that when a Bill is drawn by a Consular Officer a letter of advice must be sent at the same time to the Department. None of the three Bills in question was supported by such an advice. Your Committee are of opinion that the Admiralty were justified in honouring the first Bill, notwithstanding this omission; they feel, however, that the Admiralty were at fault in accepting the second and third Bills as no account or explanation had come |