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Page 8.
37.
Kowloon-Canton Railway Exchange Rates Agreement. After the resumption of through railway traffic between Kowloon and Canton, difficulty was experienced in effecting a satisfactory basis for settlement of indebte mess between the British Section and the Chinese Section of the Railway owing to the considerable fluctuations in the exchange rate between the Hong Kong Dollar and the Chinese National Dollar and the considerable over all depreciation of the latter. At a meeting held in Hengyang with the Canton-Hankow Railway officials, an the 2nd and 3rd of November, 1946, the General Manager, Railway, entered into an agreement which provided that Hong Kong dollar rates and fares should be adopted as the basis for both Sections and that earnings derived from through traffic between Canton and Kowloon should be shared in the proportion of 80% to the Chinese Section and 20% to the British Section. Agreement was also reached regarding the conversion of Chinese National dollars into Hong Kong dollars, at varying rates, for all downward traffic earnings (i.e. from Canton to Kowloon), collected by the Chinese Section in Chinese National dollars, both subsequent to the 15th Novembor, 1946, and also retrospectively to 12th April, 1946. As a consequence of the implementation of the latter part of this agreement, the British Section received only a proportion, varying from 45% to 84% of the Hong Kong dollar basis equivalent of their share of earnings for the period 12th April, 1946, to the 31st August, 1946, which resulted in a total loss in revenue amounting to 31,94-9.34, of which $78,320.59 occurred after the resumption of Civil Government on 1st May, 1946, and the matter was brought to the notice of Government by this Department,
38. Examination revealed that these losses were not reflected in the Railway accounts and that the revenue had been brought to account at the reduced figures, but it was pointed out by this Department that the net loss on exchange for the year as a result of these arrangements was properly chargeable to an expenditure sub-head, for which proper authority should be obtained. It was decided finally that in the case of the 1946/47 accounts, the exchange adjustments already made for that year should be allowed to stand, but that the full extent of the loss ($78,320.59) should be brought to the notice of the Finance Committee. Further losses continued to be made in the year 1947/48. The matter was reported to the Secretary of State in the Governor's de spatch No.68 of the 6th April, 1948, and the Secretary of State has now approved the write off of $78,320.59.
39.
Supplies, Trade & Industry Department - Marketing Section. During the period under review the Section handled a wide variety of canmodities the bulk of which were either taken over from the British Military Administration or received in fulfilment of orders placed during the period of that administration. As a consequence, the fixing of prices proved an extremely difficult matter particularly as suppliers' invoices were frequently not available. It was probably impracticable for the Director to authorise individual selling prices, but it was considered by this Department that some form of pricing policy, from which Section Heads could prepare detailed price lists, should have been adopted. Considerable correspondence and discussion on this point failed to discover any basis for audit other than fram duplicate waigned Demand Notes, the originals of which wore stated to have been signed and issued by the Section Head. This procedure was not considered satisfactory by this Department and this part of the audit of the accounts was accordingly abandoned and Government was informed of the reason
40. As the audit exariination of the accounts of the Marketing Section was limited to an arithmetical check of unsigned duplicate Demand Notes only, no opinion can be expressed as to the correctness or dtherwise of
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