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35. That the Postmaster has no authority by law for paying miscellaneous or other expenses without the authority of the Treasury ?—Payments could be made out of imprest money. 36. Then, the Auditor-General is perfectly right ? He has stated the fact and the law connected with it ?—That is so. He must have ascertained what is in the balance-sheet. 37. The amount being right, you think he is right in stating that the payments are illegal?— Yes. 38. Bight Hon. B. J. Seddon.] Had you any warning about this tag, or was it a sudden development ? You stated in your evidence that this had been practically going on since 1888: was any notice given of this by the Audit Department to the Treasury ?—No ; I was not aware they were going to put any tag on. 39. Are you aware that during the present Auditor-General's term of office that it has been going on for some time, and that he must have been aware of it ?—I think he must have passed several quarters' accounts, likewise overdrawn, without calling attention to it. 40. Mr. Graham.] You think he must have been aware of that?—l do not know; it was his duty to be aware of it. 41. Bight Hon. B. J. Seddon.] This is a sudden development, then, he having passed several quarters' accounts while this practice was going on? —You can get the date when he took office as Auditor-General, and I think the amounts were overdrawn in June and September of 1897. 42. At all events, the payments were overdrawn ? —Yes. 43. Now, is there any risk, Mr. Hey wood, of an illegal spending of moneys by the Postal Department—any danger of fraud, or anything of that sort, in payments on imprest accounts ?— Not the slightest. 44. There are times, even as between the Postal Department and the Treasury, when there might be a little delay in complying with the requisition ?—lt must necessarily occur in connection with a system such as this. Ido not uphold the system ; I think it is radically wrong—this system of the Post Office being allowed to make their own payments. It is a most improper departure from the ordinary rule of the Treasury. 45. What do you think ought to be the system ? What would you recommend?—To go back to the system that obtained before 1891. It was 1888, I think, when the change was made. 46. Can you give the Committee any other reason for making the change?— Well, I never did thoroughly understand what the reasons were. The Treasury made it, as far as I remember, upon pressure from the Post Office in connection with the payments to their contractors. Speaking from memory, I think there had been one or two complaints on the part of their contractors that they had not got their payments at the due date —at the end of the quarter; and I think the Post Office advanced arguments to the Government of the day to the effect that it would be a favourable condition of affairs to the public generally if they were allowed to make the payments themselves instead of by the existing method of the Treasury making the payments. The system of payment by the Treasury is that of issuing cheques direct to the various claimants when the vouchers for such payments had been passed by the Audit Office. This is the system of pre-audit, which is the system of the colony. The system of the Post Office is the system of audit after payment, which is antagonistic to the existing Treasury system. 47. Mr. Duthie.] Which do you think is the more desirable for the public convenience and the Audit? — Well, lam satisfied with the Treasury system. I think, considering the enormous amounts of money which have to be paid by the Treasury, the public are very well satisfied with the system, and it is one of very great safety and value to the finances of the colony ; and I might take the opportunity also of advancing the fact that it is much easier to finance, because, as I said before, to have to find suddenly a huge sum of money for the Post Office presents a more difficult finance than the ordinary filtration of smaller amounts through the Treasury in the ordinary course. It is easier to make payments in a gradual way in the course of a month than to find a very large sum of money in a lump sum. 48. The Auditor-General is strongly in favour of post-audit. He says it is better that the responsibility should be on the heads of departments?— The matter was very much discussed at the time by the late Controller, who had visited all the other colonies and inquired into the different systems of account-keeping. The Government of the day adopted the proposal of the Controller, and it was admitted that the system of pre-audit was far better. 49. Bight Hon. B. J. Seddon.] The system of pre-audit had the approval of the late AuditorGeneral, after he had examined the systems obtaining in other places ?—Yes. He had a mission to make himself acquainted with the various systems of account-keeping. 50. Is there any limit to the Postal Department in making their demands for imprests ? Suppose they sent for £100,000 suddenly, have you any right to refuse them, or to ask what it is wanted for ?—No; I should not take upon myself to ask what it was wanted for, except that if it reached £100,000 I might hesitate to pass it, as being of abnormal proportions. 51. There was £33,000 odd requisitioned for in December, although for the same month you had met demands for £55,000?— Yes. 52. That is £88,000 and £11,000—it is not far from £100,000 ?—No. 53. I ask you that because it might cause great inconvenience. They might requisition for a large sum of money when you were not aware that it was going to be asked for, and it might disorganize the finance and make it difficult ?—That is so. That is the outcome of this particular system. 54. Mr. J. Allen.] When was the £55,000 that was paid in December requisitioned for ?—I could not give you the dates, although I have no doubt that a portion of it was requisitioned for in the month of November, because £30,000 was paid on the 2nd December. In all probability that was requisitioned for in November, but that is an assumption of mine, I would like to show you the amount