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results have not been up to expectations. A recent inquiry into the system in force revealed it to be most cumbersome and unsatisfactory, and it was also found that the records kept by the Apothecary in respect of drugs received by him for compounding mixtures etc. were found to be quite inadequate to ensure proper control, or to allow of a satisfactory check being made by audit. These stores accounts were also referred to in paragraph 44 of the Audit Report for the year 1936.
82. Draft regulations for the medical store, intended to improve the existing system of accounting and to provide for better control, have been drawn up by the Auditor. The department concerned is giving the matter suitable attention.
83. Local Purchases of Drugs, etc.
It would appear also that the quantity of drugs etc. purchased locally is unnecessarily large and that local purchases might be reduced considerably by means of better organisation.
84. Local Purchases of Motor Vehicles.
The necessity for the local purchase of a motor vehicle for the Hong Kong Volunteer Force was questioned by Audit.
As a question of principle was involved the matter was referred to the Colonial Office, and after further correspondence. on
the subject the Secretary of State laid down conditions under which local purchases would be permitted, but stipulated that in all cases a tender should in the first instance be called for fron the Crown Agents.
K. GENERAL,
85. Exchange Fund Accounts.
These accounts have been examined by the Audit Depart- ment to the 31st December, 1937, the results being entirely satisfactory. The Balance Sheet as at that date has been transmitted by Governinent to the Secretary of State.
86. At the end of the year Certificates of Indebtedness amounted to $182,319,502, which is equivalent to £11,394,969 at the rate of 1s. 3d. to the Hong Kong Dollar. The total assets of the Fund at the same date amounted to £12,313,938-12-4d. which was composed of cash, placed on deposit in London at call or short notice, totalling £4,493,605-1-7d. (36.5% of the total) and Investiments valued at £7,820,333-10-9d. (63.5%).
87. The existence of the above assets has been verified by the Controller and Auditor General whose certificate has been examined by audit and agreed with the local records.
88. Currency Accounts.
The accounts and records maintained in connection with the issue of Currency Notes (authorized under Ord. 42 of 1985) and Nickel and Subsidiary coinage have been subjected to audit by this Department.
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89. In accordance with Colonial Office despatch of 16th December, 1986 draft Currency Rules were drawn up and sub- nitted to the Secretary of State for approval vide Hong Kong despatch No. 762 of 22nd December, 1937. These Rules were considered by the Secretary of State to be generally satisfactory, but certain points of detail have yet to be settled.
90. The destruction of Currency Notes, which is carried out by a Board of Officers specially appointed for that purpose, was usually witnessed also by a member of the Audit Depart-
ment.
91. Official Trustee's Accounts,
In order to remedy what Audit considered to be a long standing accounting defect in the books of the Official Trustee, new ledger accounts of Trusts were opened and an Investment ledger was introduced as from the beginning of the year.
92. China Company Fecs.
A local audit examination of the Registrar of Companies Accounts at Shanghai covering the period July 1936-April, 1988 has recently been carried out. The net revenue accruing from this source,
exclusive of the revenue derived from Stamp fees, for the year amounted to $165,703, as compared with $170,966 for the previous year. No Audit Officer visited Shanghai during 1937 owing to difficult conditions prevailing there at that time.
93. Hospital Fee Deposits.
An improved procedure for the accounting of deposits on account of Hospital fees has recently been introduced.
94. Programme of Work.
With the exception of the final Division Sheets of the Kowloon-Canton Railway for the last quarter of 1937 and a few minor Post Office accounts, all of which are not yet available for audit, the Programme of Work as approved by the Director of Colonial Audit has been completed. There has been no material departure from the approved Programme.
95. Local Audit Inspections.
In addition to the routine examinations of accounts (includ- ing store accounts) at departmental headquarters, a surprise inspection has been made of cash balances and stamp stocks etc. at all Government offices in the Colony.
96. A continuous audit has been maintained on the accounts of the Railway, Harbour Master, Imports and Exports Depart- ment, and the Public Works Department (Unallocated Stores), as well as on the accounts of the Accountant-General.
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