£ 4A
LOWE, BINGHAM & MATTHEWS, HONG KONG
8
when reviewing results of the year's operations :
at
1. Although the accounts are presented on com-
mercial lines it cannot be said that the Branch is
operated strictly on a commercial basis. We believe
Government policy calls for the retaining of stocks at
specific target levels but it is extremely doubtful
whether a commercial concern would find it necessary
to carry the quantity of stocks required to be held by
the Branch.
It is not practicable to separate extra
costs and expenditure incurred as a result of stock-
piling but the following costs are considerably increased
as a result thereof: Storage Charges, Interest, Storage
Losses, Incidental Expenses, Losses arising from Deter-
ioration (e.g. Flour) and Loss in Weight (e.g. Firewood).
It would appear therefore that these accounts
are burdened with considerable expenditure and losses
which are, strictly speaking, not applicable to a true
trading concern.
2.
Interest at the rate of 3% per annum has been
charged in these accounts on the maximum monthly balances
of the combined Suspense Accounts. We understand that
this interest, which amounted to $1,825,807.80, will be
credited to general revenue in the Colony's accounts.
Authority for this procedure is contained in the Secre-
tary of State for the Colonies' despatch HK. No. 62
(Confidential) of 9th March, 1951, to His Excellency,
•(4)/54126/19/51
The Governor.
If the Branch were operating on purely com-
mercial lines then perhaps this interest charge would
be justified as, if operations were not financed by the
Treasury, necessary working funds presumably would have