2
X
54420/49
HONG KONG
NO. 226
gir,
COLONIAL OFFICE,
THE CHURCH HOUSE,
GREAT SMITH STREET,
S.W.1.
27 September, 1949
I have the honour to refer to your despatch No. 48 of the 19th March, 1949, in which you dealt with the various matters raised by the Director of Audit, Hong Kong, in his report to the Director General of Colonial Audit on the subject of the financial operations and accounting methods of the Department of Supplies Trade and Industry, now renamed the Department of supplies and Distribution.
2.
I am aware of the very exceptional' and difficult circumstances of the period immediately following the resumpton of civil government in Hong Kong in May, 1946, and I note that you consider this to be the main reason for the failure then to secure my authority for the opening of Suspense Accounts and other steps which followed inevitably from the decision to continue to operate the Supplies Trade and Industries Department on a commercial basis. I have therefore decided, after consultation with the Director General of Colonial Audit, to give general covering approval for the unauthorised departures from Colonial Regulations which have resulted and to which attention has been drawn in the report by the Director of Audit.
I also agree exceptionally that the certificate of Messrs, Lowe, Bingham and Matthews as to the accuracy of the Profit and Loss Accounts of the various activities of the Department, which they are preparing, may be accepted as adequate.
3.
Having regard to the continuing exigencies of the world commodity and trading position, I agree that, for the present at least, the Department of Supplies and Distribution must continue its trading activities and be run largely on commercial lines. I therefore approve the maintenance of Suspense Accounts as proposed in paragraph 5 of the Memorandum by the Financial Secretary at enclosure 3 to your despatch and consider it unnecessary for the present in order to meet the objections raised by the Director of Audit to make any changes in the existing arrangements for financing trade with Japan. I also agree that the Director of Supplies and Distribution shall have general discretion, subject to overall control by Government and within the limits of the Suspense Accounts, to fix selling prices and decide the volume of his purchases.
40 In view of the wide divergence from the orthodox regulation of public finance which these arrangements involve, I consider that their adoption should be subject to the concurrence of the Legislative Council. I note that the outstanding Profit and Loss Accounts will be submitted to the Legislative Council when completed and I consider that thereafter
GOVERNOR,
SIR ALEXANDER GRANTHAM, K.C.M.G.
ETC.,
ETC.,
ETC.
/annual
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