I.—7b.

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30. You would not like to state positively that it is in the same category as the other two transactions ? —I should not like to say so. There was an error discovered before the end of the year in the transfer, some time after it was passed. 31. There was a question asked you by Mr. Seddon, when you were under examination by Mr. Allen, as to what source the Public Works Fund was derived from. It was alleged that the Public Works Fund consisted chiefly of borrowed money. It was also alleged that a considerable amount of money from the Consolidated Fund had been paid into it. Now, is it at all material whether the Public Works Fund consisted of that money or any other moneys from any other source—would it materially affect the answer you have given with regard to the surplus ? —The surplus was in the Consolidated Fund, and these moneys were in the Public Works Fund. 32. And from whatever source the Public Works Fund derived the money, that in no way affects the question as to the surplus ?^—No. 33. Does it in any way affect the question as to how the surplus has been altered by these two transactions : whether the moneys—that is the £30,000 —consisted of borrowed -moneys or moneys transferred out of the Consolidated Fund previous to the period into the Public W 7 orks Fund ?—I do not think the question of a surplus is affected by any consideration of the Public Works Fund. The following is subsection (2) of section 7 of the Public Eevenues Act: " The Public Account shall consist of two funds, as follows: . . . (2) The Public Works Fund, to which shall be carried the produce of all loans or other moneys authorised by Parliament to be raised and appropriated to immigration, public works, or to any other special purpose." 34. I gather from the gist of your evidence that you objected to the transfer of £14,589 Is.—one of these transactions —because the transaction was contrary to the spirit of the law. You say : " This is an effect which surely can never have been contemplated by the Public Eevenues Act." Was that generally your object in raising these objections?— Yes; and in the previous part of the letter I have explained the effect, which is to transfer in the Public Accounts of the colony the expenditure on the Working Railways of last year to the accounts in this year. 35. What was your principal motive in objecting to the transaction and then afterwards reporting to Parliament? Did you do it because it was contrary to the spirit of the Public Revenues Act ? —When the first transaction was passed on the sth of March, the Audit Office could obtain no evidence that the stores were required by the purchasing department, nor that they were surplus stores in the possession of the selling department; and the Audit Office had reason to believe, as has already I think been proved in evidence, that the transfer was for the purpose of an appropriation rendered expedient or necessary to supply a deficiency in the Unauthorised Expenditure Account, or for a deficiency in the appropriation for "Unauthorised expenditure" ; and the question raised by the Audit Office was whether a transfer under such circumstances was a sale contemplated by the law. 36. Mr. Fisher] Does it not appear, Mr. Warburton, that you were fully aware of the whole import of the transaction on the 3rd March, when you said in your letter of that date that " The papers indicate to me that it has been as much the consideration how the Working Eailways could be " accommodated " as whether the requirements of the Public Works Department were such as to render the purchase expedient " ?—Yes. • 37. Does that, or does it not, convey the impression that the advance was made to aid the financial needs of the Public Works Department? —That letter was written with the minutes before me, which are on the top of page 3, 8.-22, 1898: "Mr. Clapham,— Please look into this at once and let me know whether we can take over as much as £20,000 worth of material; and, if so, how we can charge it." The answer is : " Mr. Blow, —We could only take to the extent of £12,000 for Midland Railway, and £3,000 for our own permanent-way vote; total, £15,000." These minutes indicated to me that the transaction was one of " accommodation " between the two departments. 38. You were fully apprised of the nature of the transaction at that date ?—I conceive that I was —of the transaction as it stood at that date. I was not apprised of the transfer back of the property on which the money was realised. 39. There is no getting behind the letter. The letter says that the transaction was in the nature of "accommodation" to the department?— Yes; but the latter was not written with any knowledge of the transfer back of the property. 40. But, can you say anything worse of the transaction to-day ? As you have said just a moment ago that it was a matter of " accommodation " to the Railways Department, that is all you have to say of it to-day, is it not ? —I said that what I conceived it to have been was this : that it was an " accommodation " to the Railways Department —that it was in view of the deficiency in the appropriation for " Unauthorised expenditure." 41. What you said on the 3rd March is the worst you say of the transaction to-day, is it not? You could not characterize the transaction in stronger language than you did in your letter of the 3rd March ?—I was not thinking of strong or weak language. 42. Well, leave out the word " strong " ?—I see no occasion to alter the language. 43. You see no occasion to alter the language used in your letter to Mr. Gavin of the 3rd March?— No. 44. And if you were to write that letter of the 3rd March to-day, you would still characterize the transaction in the same language as you did this morning, as an " accommodation " ?—Yes, as I did this morning. 45. Then, why did you say in the last paragraph of your letter of the 3rd March, " The question consequently arises whether, in view of the .aspects in which the transaction appears to the Audit Office, the Minister for Public Works should not be asked to confirm his approval of the transfer, and whether with this approval the transfer should then be passed by the Audit Office without reporting the matter to Parliament "..?—lt was a question whether it should be. 46. Then you, understanding at that date the serious nature of the offence—for offence it is so construed to be to-day, you understanding the full pith and moment of the transaction at that date —why did you say in the concluding paragraph of that letter that there appeared to you to be no