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what I understand to be your opinion that every voucher should be thoroughly examined, checked and passed as correct before payment. This is, however, the function of the Head of the Department concerned, and the Colonial Treasurer, not that of the Auditor, whose business, in this respect, is merely to see that the duties of these Officers are properly fulfilled.
5. I feel it important that there should be no misunderstanding on this point. As described in the Model Financial Instructions enclosed in my Circular Despatch of the 25th of February last, every account presented for payment should be sigued by the Head of the Department concerned, as a certificate that the work has been properly performed; that the prices charged are according to contract, or are fair and reasonable; that the arithmetical computations are correct; and that the service has been duly authorised. If the form of voucher in use in Hong- kong does not explicitly state these requirements, I would suggest that it should be amended at the next opportunity. The Heads of Departments cannot properly be relieved from this obligation of certifying to the correctness of the vouchers of their several Departments, and it should be the duty of the Treasurer, or other Officer actually paying the money, to see that this certificate is properly given in all cases, and to detect any obvious errors or defects in the voucher. This practice affords the only adequate security against over-payments or fraud, and to rely upon the Auditor for this purpose cannot fail to weaken the security.
6. There will, however, be no objection to Heads of Departments in all cases. of doubt, seeking the covering authority of the Colonial Secretary, or (through him) of the Governor; and this applies equally to the classification of items by the Treasurer, and to his preparation of returns, statements of account, etc.
7. In the absence of any proper system of check before payment, it is obvious that the smallest delay in the audit is fraught with danger, whereas if the system above described be fully carried out, a delay even of a few months in the detailed ́ examination of the Vouchers becomes of less consequence.
8. This leads to the question of the supervision and control to be exercised over the Auditor. I am strongly of opinion that it is desirable in the case of Hongkong to accept the services of the Comptroller and Auditor General for this purpose, as described in my Circular despatch of the 18th of September 1888. The wide experience of the Exchequer and Audit Department enables it, by sug- gestions and criticisms, to ensure the maintenance of a high level of audit efficiency, while its conplete independence furnishes the best possible guarantee of a perfect audit. Once it has been decided to appoint a local Auditor, the question merely becomes one of convenience of administration, and I feel confident that the Legisla tive Council will see the advantage of securing, in addition to the constant presence of the local Auditor himself, the benefit of the experience and supervision of the Exchequer and Audit Department.
9. The principles of Audit administration are so well settled, and the experi ence gained in other colonies is so conclusive, that I do not think it necessary to adopt your suggestion of sending an Audit expert to Hongkong for the purpose of advising the best course of action. Such a visit would necessarily be expensive, and it appears practically certain that the result would be the adoption of essentially the same course as is now proposed.
10. I think it right to refer, in conclusion, to the estimated cost of the proposed alteration. Whether the actual examination of vouchers should take place partially in the Local Auditor's office, or whether the vouchers should be sent direct to So- merset House, is a question which may be left to experience to settle, but if the latter course is adopted, the local Auditor will be enabled to devote himself entirely to the important duty of checking the receipts, examining the manner in which the books of the Colonial Government are kept, and maintaining a thorough system of Audit of cash balances and store accounts. If the work properly falling upon the Heads of Departments and Treasury is duly performed by them, and the examina tion of vouchers is performed in London, I feel convinced that the total increase in expense would not exceed the salary of the local auditor, which would probably have to be $3,000 or $3,500 per annum. Whatever expense is involved by the connection with the Comptroller and Auditor General will almost certainly be met, as it has been elsewhere, by the possible reduction of the present staff of clerks, one of whom would at once be replaced by the Auditor himself. It must, moreover, not be overlooked that it may be found possible to arrange that the local