102
31. The first item for consideration in the above table is item 3 of table (c), "Maintenance Expenditure on Waterworks " We were informed that the sum of $10,000,000 represented the capital outlay on waterworks prior to 1.1.27. Deprecia- tion at the low rate of 1% was charged annually on this sum because it was anti- cipated that at some future date these works would require renewal. It was admitted that in point of fact (a) the works had been fully paid for out of past revenues, (b) that the annual depreciation of $150,000 was not earmarked or credited to a re- serve fund which could be drawn upon for renewals, but was simply paid into the general revenue of the Colony, (c) that depreciation was charged annually upon the full capital value of $10,000,000 and not upon the depreciated capital value, (d) that normal replacements were covered by maintenance charges under Public Works Recurrent, (e) that extensions and small developments were covered by Public Works Extraordinary and, finally, (f) that in the event of a catastrophe rendering necessary renewal of a major work the undertaking would in all probability be financed out of loans.
32. In these circumstances, we cannot agree that there is any justification for the inclusion of this item in Maintenance Charges on Waterworks. To so include it is to mix capital expenditure with revenue, which is contrary to the principles of sound accountancy. The capital outlay of $10,000,000 has already been fully paid for out of revenue and any major replacements which may become necessary in the future should be dealt with as they occur preferably by means of loans. opinion it is quite unnecessary to burden the revenue derived from water with an annual charge of $150,000. for depreciation.
In our
33. Turning next to items 4 and 5 of the same table ("P.W.E. Extensions and Improvements " and "New Meters ") it is admitted that the major portion of this expenditure is capital outlay which will in its turn be productive of increased revenue. This being so, it is our unanimous opinion that this expenditure should be debited to loan account and not be made a charge on current revenue.
34. Applying these recommendations to the figures given above for 1933, we find that a sum of, roughly, $847,000 is removed from Maintenance Expenditure, of which $697,000 is transferred to loan account and $150,000 is eliminated alto- gether. If from this $847,000 we subtract the $114,000 referred to in table (d). (item 5), we are left with a nett credit balance of $733,000. If, therefore, these three items had not been charged against current revenue it would have been possible, even after making provision for the nett loss on the year's working, to have budgetted for a revenue from water some $916,000 less than was the case in 1933, ($916,000 less 20% Military Contribution = $733,000). Since the revenue from excess water con- sumption for that year was $1,521,000, it would have been possible to have given a rebate of 60% on excess water charges and still have balanced legitimate working expenditure out of revenue. We therefore recommend that the rate for excess water
be considerably reduced.
35. Furthermore, we are of the opinion that the present system of aggregating the revenue and expenditure on water with the general revenues of the Colony tends to obscure the situation regarding water charges and to reverse the expressed policy of Government that water should not be made a source of revenue. We are in full agreement with this policy and we recommend that, to ensure its observance, the water supply of this Colony should be re-organised as a separate Municipal under- taking under Government control and should be kept entirely separate from the Public Works or any other Government department.
Chapter XI.
FINANCIAL MATTERS.
Currency, Banking and Foreign Exchange.
1. The whole question of the Colony's currency and banking economy was adequately dealt with in the Report of the Currency Commission issued in May, 1931, and there is very little that your Commissioners can usefully add to that com- prehensive document.