1949-02-11 — Page 8

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MICHELIN

NATURAL RUBBER

Sole Agents in South China

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French Bank Building.

HONG KONG PHONE 22765

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2

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" ..

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URISTOL

MYERS

PRODUCT

THE CHINA MAIL, FRIDAY, FEBRUARY 11, 1949.

AUDIT REPORT'S CRITICISMS OF S.T. AND 1.

Without

Actions Taken

Proper Authority

An exhaustive analysis of the affairs of the Department of Sup

for imports into Japan, but that

excccss accruals (in SCAP's

U.S. dollars, "at Axed Intervals. afhtements from

plies, Trade and Industry, with continuous criticism of accoun-avour) should be liquidated in tion was made, by this Office,

SCAP were Trade and Industries Department- tancy methods, and departures from Colonial Regulations, is contained in a Report approximately 11,000 words long by the Director of Audit, Mr. P. H. Jennings, which was laid on the table in Legislative Council on Wednesday.

Chief criticism is of various actions taken, without,

on

the

Acting Director

he that

with the completion of the pro- primeure vouchers of the de- 3033

has

Jumped Goods

of

+

&..

As agents

trade with Japan-asapeliso popOPLE 120477m effort

де

Catering

under

control

Am

be

...

until

after the

to penso Account "for Government ment. It appears from a telegram ; penditure has been charged

and to handle all documents mak dated November 6, 1946, sent Suspense.

Certain ` discrepanoles__ have ing and receiving payment for by Head of the Industries Sec-

been brought to the notice of authorised Imports and experts tion, who was in Japan at this. time, that SCAP agreed to the the Director between statements under normal commercial safe- use of sterling "as, the currency of account received from BCAP guards as to margius etc." and for these arrangements to the ex- and the account for SCAP in informed the Colonial Secretury tent that balances could be used the department's books of wa» [that I had not been informed of

count.

the agreement that had been made- At the time that the examina- with the Bank in this connection. have since seen, on the Supplien at a pre-arranged rate." As re available only up to May 31, 1847 files, a copy of a circular issued by 1 Secretary, a and dated gards any ultimate balance which in respect of imports from Japan the Financial may be due to the Hong Kong and up to December 31 1046 March 4, 1048, in which i

respect of exports to stated that the Hong Kong Government, however, I have seen in

Shanghai a copy of a telegram dated Japan. It is understood, how-

"act Bank Will only

both October 6, 1947, from the Govern- ever, that the Chief Account of far the Government .in. ment's then honorary in the Supplies, Trade and Angus Hone and Tokyo, for the ors

examina- Japan reading theoretically tries operiments recently

receipt of Hong Kong it is suggested, proper authority. It is pointed This purchase was arranged on SCAP will pay all balances in sent to Japan for the purpose of tion and forwarding of documents

behalf of Government by a local dollars... and I have accordingly effecting and up to date reconci-Currency against such documents

Details are also set out in a mem out that the Department's revenue and expen-Grm who received 5% on the cost, enquired from the Financial Se-liation in this connection. Tokyo Agents

orandum aftached to the circular

to the

for dealing diture has,exceeded the Budget for the whole plus freight and handling charges eretary whether a written ac- and it was agreed that the firm knowledgment of this obligation

rates of exchange and coun Colony, and that under the system operating concerned would take over half has bornokbind from SCAPA As from September, 1947, when private traders, Mr, J. A. Galvin the financial transactions of the Department of the consignment for sale locally

SCAP Requirement and that Government would take

was appointed as the Hong Kong mission charges. Full information have not been submitted for legislative ap the balance. On the arrival It appears that when the origin- Government's agent in Japan on is awaited as to the authority for proval and are not detalled in the published the timber, however, the firm al arrangements were made, the an honorary basis on the recom- this esot ponalble at this stago

offered and Government accept- Supreme Commander for the Al-mendation of the Director. Mr. ed the whole consignment. In lied Powers required that all im- Galvin had formerly-beca em to form an opinion as to whether accounts of the Colony. Below are the principal points which had deteriorated. In rea- reply to on enquiry the Director ports from, and exports to, Japan ployed in a temporary capacity by the arrangements made by Goy

ponse to a request to be referred atted that the high cost of trans should be handled by the Hong the Department as head of the ernment for financing trade dealt with in the Report:

the authority for the sport was due to the fact that Kong Government. While Gov- Industries Section, but resigned at tween Hong Kong and Japan con- When form with the general policy ad- On the hand over of the ad-to

of State, ministration of the Colony by write off of the loss, involved, ship, was specially chartered at ernment was therefore obliged to the end of July, 1947

replied $5,000 a day, which had to make act, technically, as a principal, in making his recommendation, the rised by the Secretary the British Military Adminis-

considered that this a thirty-five day voyage, in bal- effect,, orders for goods Imported Director stated that Mr. Galvin since it is not known whether all communications from the Secre- tration to Civil Government onjwas impllelt in his authority to last outwards, to load the timber. from Japan were pinced with was proceeding to Japan as rac state have been' vassed to

In response to a further mini SCAP by Government of the re- presentative of the "Chin Matthi De May 1, 1946, the Supplies, Trade conduct the department on con-

Department, but I who were.

net. quest

satisfied that the present: & Industries Department was inercial lines. When bringing the by my predecessor asking for in- qu

Government in the capacity of formed to continue the functions matter to the notice of the Fin- formation as to the ultimate dis

and what required to pay a deposit and sign and had offered his services to this

of fully posal of the timber

Gov-arrangements do conform with the Secretary, my predecessor aticial

what an undertaking to accept deli-hond

ere honorary agent in Japan. performed by a similar branched out that the write off of Government had lost or gained very, On arrival, the goous We crnment agreed to refund to him 1 Secretary of State's requirement. of the British Military Adminis-

the condemnation of the tration. could be classified as follows;~stores should be dealt with in ac- Stores ase, the Controller of "gold" to the local Arm at landed the actual expenditure incurred It is assumet, however, that the.

Briefly, its activities losses and

recently informed the cost plus Government's profit per- by him on Government's business. matter will be fully ventilated in Fluancial Secretary that, while centage, which

ence the despatch which, it is under- it it understood It appears from correspondence cordance with Colonial Regula-

Governer (a) Price control, and

tions. In his savingram No. 502, records show that all the timber was fixed at 10% until August 16, between the

Tokyo, the Secretary of State. (b) the procurement and dis- the Sceretary of State has now has been issued, there are still at 1947, when it was reduced to 292 % | Majesty's Ambar and His stood, will shortly be addressed to Colonial Regulation large number of logs in stock and by the Acting Director. Goods however, that Mr.

Gaivin was tribution of goods in short supstated that ply in the Colony, or goods pro- No. 340 must be held to apply that the timber was conaldered to exported to Japan were purchased also given permission to act

On the re-occupation of the curable only

through govern- even where stores have been ac- be of very poor quality. The value by Government from local firms agent for seven local firm ough Colony, two hotels owned by the ment channels.

part from the purchase and quired in connection with a gov- was still further reduced by the for cash and shipped at Govern- ducting trade with Japan, though

operated commercial logs being cut ernment

two lengthwise in_tw distribution of coal, flour, meat, undertaking of an emergency after delivery. The Controller of men's risk (which was covered information to this effect does not Hong Kong & Shanghal Hotels by insurance) for sale to SCAP appear to have been recorded on Ltd., were requisitioned and these Stores expresses the view that In Japan at landed cost plus Gov- the ale at the time that Mr. Gal-remained rice, sugar, butter, which were

nature "world allocation," the de

During the examination of the Government has incurred a heavy crnment's profit percentage. vin's appointment was originally June 16, 1946. The catering at.

on the deal but this has not

As from September, 1947, trade approved, Mr. Galvin acted until these hotels was also undertaken partment was mainly concerned

It was

observed that yet been ascertained.

with Japan was opened to private Becember, 1947, when he asked by the British Military Adminis of The Government's regulations in con-

traders, though the numbers per- to relinquish his agency and Mr.tration and continued curement programmes British Military Administration.

onnection with the supply of ser

mitted to enter Japan were limit D. M. Kenrick, who was employ handover to civil government until Subsequently, however,

It was stated by the Director ed. It appeared, therefore, that ed in a temporary capacity by the June, 1940, and responsibility for procure vipes were not being adhered to. partment undertook the procure In no cases that came under re- that the cost of goods dumped it was no longer necessary for Department as Price Controller, the accounts in this connection

between Hong ment of yarn for locul industry vlew were tendera called for rould not be assessed as the bulk trade

Kong was sent to Japan to take over was assumed by the Catering Sec and the financing of both im- through the Tender Board, and formed part of a purchase of war and Japan to be handled by Gove the duties of Government Agent, dan of the Supplies, Trade and

that Industries Department. It appeared at first that have surpluses "on an 'as is' basis of so ernment on behalf of private Japan. port and export trade between

the hotels were As the Colony and Japan on behalf arrangements appeared to

a memorandum Mr. Kenrick was being transfer- been made direct with selected much a ton" which were received traders, but in

On the basis of addressed to firms by the Director or members in May, 1948. of local merchants.

Accountant red on temporary duty but the requisitioned until June 15, 1940, September 12 Director subsequently stated that the final settlement with deng of the staff.

selling prices fixed by the Direc- General

Low Price

of the some cases, arrangements tor, however. It was ascertained wake made by exchange of lot that the value of the goods dumn 1947, the Acting Director stated Mr. Kenrick would not return to Kong & Shanghai Hotels Co., be-

the responsibility As Civil Government. In arriving at in others it appeared that ed amounted to 3081,871.34, and in had agreed that "In the interim Controller was appointed. ters agreements had been entered view of the Director's advice to period before trade could be car- this action was tantamount to the the settlersent, the amounts due to Into verbally, as no written svi the effect that selling prices were ried on a sterling basis the de-creation of a new post of Tokyo Government in respect of rations, dance could be produced for axed so as to "bring in 25% over partment should continue to pass Agent within the departmental ete: have been offset against of amounts due for rent and Inspection by this Department. cost if all (goods) were sold" it all trade through the two-way establishment, the attention

the counter-claime Government was drawn to

respect but in none of the cases that would, appear that the cost could

account with SCAP". came under examination was be roughly set at $500,000, to

It was also stated that Govern- necessity to obtain the proper breakages, etc. made by the Hotele anal claim" sont authority.

Company, and s

Accountant General of dumping amounting to appro-"banker" for local traders who

made contracts direct with Jap-ed to the post of Price Controller | April, 1947, showing a net ximately $10,000.

by the Secretary of State at In commenting on the matter anese traders.

due to Government of ance I asked the Director to inform

transpired subsequently that salary of £1,200 per annum on was offset by counter-claims by

Company amounting the Director had been given me of the authority under which to the Financial Secretary, my "Full authority o fix selling four and rice purchased by Gov- predecessor observed that he was goods were consigned by. SCAP contract for one year. His con- the

"not convinced that a polley filrect to local importers without tract was subsequently extended prices at his discretion (except ernment, presumably for distri- which aimed at a lower return to advice having been sent to Gov-for six months

reached, but on September 11, In the case of rice and four Inbution to the public, was exchang Government and to the traders i ernment and that, in some cases, raised to £1,400 per annum with a final settlement has, yet been

Executive ed for

the reply respect

The Secre- wrotn to the Hong Kong and Audit Department has at no tim Director gave no reference to the selling the goods, would not have shipping. Arms released goods so out, the prior approval of the 1947, the Accountant General

time authority under which these ar- resulted in far mare goods being consigned under Letters of Guar-Secretary of State.

to condra a Shanghai Hotels Ltd. to After verbal inal agreement" to been informed that the Diree-rangements were made but stated sold and possibly, for less being antes given by the consignees. As tary of State's covering authority Shang

consequence, Government was was eventually obtained. that dumped through deterioration"

effect

that Government would tor was accorded this authority, my contention, however,

pay the Company $12,000, on- condition nor is it known by whom he these batter transactions repre- and added "At all events, And not in a position either to insist the expiry of the extended period.

of myself completely out sym-on pre-payment by the local. Im of his contrect and before obtain the

#200 80 authorised

noirt a method, albeit roundurpose pathy with a polley which per portera before delivery, nor in ing the Secretary of State's up that the Company returned In conveying authority for the o

further extenslotron beds and mattresses to of fulfilling

original purpose mils of stocks of foodstuffs being fact, to know what the

had proval for a to rather

mill do authority was given by the Col- }***** better effect than would m department to be run as a com-

ertiment Stores." The matter is marcial careath the Governor be achieved by normal distribu-held until they deteriorate and been shipped by SCAP also authorised salaries to be When commenting on the then dumped at a time of acute tailed statements of account were onial Secretary for Mr. Kearick still under investigation by this paid at

nt commercial

mesecetury of world food shortage (particularly received (at a much later date) to draw a duty allowance, in lieu Department, and I have not yet. despatch to discretionary Director gave the

State prepared by the Director in the United Kingdom) and, in of the amounts which SCAP had of a high cost of living allowance, been informed of the authority for in of $288.33 a month with effect the ferms of the proposed settle- It is from the date when Mr. Kenrick's ment. authority as to recruitment and expressed the opinion that the Hong Kong, of notoriously high charged against Government

him

Coal and Firowood rates. With a few exceptions Secretary of State should be in prices and huge commercial pro- the Two-way Account.

understood that for certain ship-wife left the Colony to join for the higher paid posts, formed of the matter.

Industries Section ments action was taken to obtain in Japan. Again, as a result. of appointments,

During the period of the British dismissals,

original

Department, As a result of the

and the an enquiry by this variations in salaries, etc. for query, it came under notice that Under the British Military Ad-rictails of all cargoes,

but the attention of approval was obtained for the obtained from Japan and ship-. by the Director on this author- Government from the sale of the after the handover to Civil. Gov-a temporary staff have been made the gross proceeds received by ministration, and in the early days consignees, from ships the Secretary of State's covering Military, Administration, coal was Government was drawn to the further extension of his contract. ments from this source have been ity. It was pointed out to Gov- flour, and the rice received in ex-ernment, this Section appears to passibilty of loss in respect of I have now enquired whether the continued up to date and the fo ernment that, though the Estim- change for flour, appeared to he have functioned principally in un

Personal Emoluments less than the cost of Government advisory capacity in assisting the gonds not consigned by SCAP la authority of the Secretary of has been charged to

Way" Account maintained by tries Department. Tho Acting been obtained.

SCAP. of the department for the years of the flour and rice. The mat-rehabilitation of industry and ac- the Supplies, Trade and Indus-State for the duty allowance hus Kong Government in the "Two- In this Government with *1046-47 and 1947-48

ter has been brought to the notice cordingly did not come within the Director subsequently stated that did not

No Claim detall posts etc. and that there of the Director with a request purview of audit In December: SCAP has been

It was observed

No claim was made by Mr. connection, it has been observed may not therefore have been to be informed of the authority 1940, however,

received during the period of the technical infringement

to his relinquishing the agency British Military Administration Colonial Regulation 267 when funds.

pense Account had been opened

in Japan but i have been in has been preferred against the additions or variations are

Under the terms of the agrees and arrangements made for Gov-

War ernment to

Bnance

Government in the trade between

formed that Government have

Kong Hong by the Director, it is implicit ment made between the

approved a lump sum payment statement of account received from the Regulations that the Governor once, the Colonial Ofee and the Japan and Hong Kong on behalf

to him

HK$8,000 and SCAP for the period up to Dec- should obtain the authority of Treasury in the United Kingdom of local merchants through

US$2,000 (payable to Mr Member 31, 1940 and that this liabl the Legislature and the covering for the handover from the Mill- two-way" account with the Su

vin's bank account In New lity is included in the ledger so- of tary Commander for the Allied

possible to support with detalls the Supplies, Trade &

count Industry of the actual expenditure in- Department. While the assumption curred by him on behalf of the of this liability would appear to Hong Kong Government during

Commercial Basis General authority for the des partment to be run as a com mercial concern was conveyed by the Governor in July, 1948, and the Director, Supplies, Trade and Industry Department, was subsequently allowed discretionary authority to "conclude price distributors." agreements with In the

despatch to draft of the Secretary of State

Prepared by the Director, Supplies, Trade! and Industry, it was stated that

of which Council L consulted)."

was

ates for

alsa

rates

The

+

that

the

the

dated

Financial

Secretary his

etary his former post and a new

Cama

formal contract entered into as which should be added the cost ment was prepared to act as Mr. Kenrick was first appoint "by the

required by General Orders.

Bartor Deal.

aytion

the

of

made

rice. In als

is that

Ats.

manifests

informed that

and his salary 37.83 It

in

not de-

of

in

to

not known whether

the

the

Hong

for the loss to be borne by public that an Industries Section Sus-ly' in respect of goods consigneri{ "J. A. Galvin for exponses, prior at liability for shipments of cont

all

It

event. be held to be limited to, should be mot from elvil

..

Ja

Government will accept liability direct to the Department.

This Department has not been Informed of any limitation placed. by the Hong Kong: Government 趙

be on the extent to which SCAP debit or credit with ment through the "Two-Way Account, vealed that the activities of the to the Accountant General, the Industries Section had, in fact, Acting Director undertook to been extended to include rés-limit the amount owing by SCAP | ponsibility for the purchato and im distribution of yarn and for at any particular time to a ma-

ximum

of US$1,750,000, and handling the Imports from, and stated "there is little danger of exports to, Japan.

Bubsequent

fin-

Estimates for

by

the amount due to us from SCAP Įsigned 'an Imp the Governor observed from: correspondence on

Warrant for

the

•

State for all variations in ommment, it was provided that the Powers in Japan.vestigation ; but in a memorandum addressed mental establishments. It was

vas proceeds from the sale of brought to the notice

of stores purchased from United Government that the general au- Kingdom funds should be paid to thority conveyed by the Governor His Majesty's Government

the period he acted as Govern be in accord with the terms of the agreement for the handover to to the Director must, in any was also provided that after May

ment Agent, Japan. 1946, all bills presented, for

Civil Government, it has been ▾ In Jamary, 1948 Class III appointments unless tho

payment

the Department's Ales that the prior approval of the Secretary of Government funds irrespective of related, the period to which they relat

were All payments involved State is obtained, since the Gove the k

in favour of Mr. Henrick,

formed the subject of

overal tele The ernor is not himself authorised to and similarly, with the exception charged to the Industries Section reaching too high a gure as our $10,000 in

and receipts dificulty is rather the opposite, to be available to him for hir method of settlement with SCAP above this of the proceeds from the sale of Suspense account,

expenses. Le make appointments

that of selling enough to offen

graphie communications with the

period

iod of the stores referred to above, that from sales were credited to that Japan to finance our Import trade Secretary also approved that ox War Office during the Class-without this approval.

ut The prior approval

the purchase of the British Military Adminiatom- all

e, in fact, at present relying ponditure on the pu revenue received subsequent account.

We are Special Arrangements

Line of

don,

the of State for the on purchasing credits from the motor car for

War Office during which on the instructed, inter

alla During the course of the ex- to May 1, 1946, should accrue to the Secretary

Battle that the civil government. Owing to suspense account method of amlastion of the Personal

Subsequent audit examination purchase of wines and spirila upment should not be effected by Emoluments of the department Crown Agents accounts and the not obtained and as no financial at the Two-Way Account ro- to 250 per month for entertalbert

the delay in the rendition of the ancing these arrangements was Singapore Government." Government Agent, and

barter and that the price of U.S.- 'It came under notice that the Floe Controller, Mr. R. G. Les, presentation of invoices, tonsider provision had been made vealed that the balance owing by ment purposes by this officer ID a ton was not agreed. My pre- was employed without reable difficulty was experienced in Estimates for 1946-47 (nor, sub- SCAP at December 31, 1947, should also be charged against docessor accordingly enquired

for Account

whether any arrangements for ascertaining which stores had sequently, in the

Trade. My predecessor settlement of this lability wore mundration. The terms of Me been paid for from United King- 1947-46). Dovernment was in- stood at US$3.258,885,69 Lee's appointment "ro not

dom funds, but proceeds from the formed by my predecessor, that | wolves an appropriation of nutilicl expres400 Incurred. In the run-have been informed that the mat- essed the opinion that the erected by the War Offico and I accumulation of this balanco in-Į Japatiese Fr known by this Department.

funds of n like amount which has It was also observed that cer sale of such stores and supplies the action taken appeared to be

not been authorised by the Legis-ning of the pot proper charge is

of the Government Agenorter has been taken up with the tain temporary appointmarts were handled by the Marketing and unconstitutionat.

Japanese Trada" lature. on a part time basis and I there- Rico Sections amounting to $18,-

In connection:

PANGAN - Suspense and, that from the polat Crown:Algents for 'the Colonies.

tio... puc The 'monger in which the sr-

ย foro suggested to Government 620,710.17 were credited to a de- that the covering authority of the posit account in the Accountant

General's accounts in the name of Pangements were first made for chase from the Malayan Govern- of view of financial control. It bo .ob- Secretary of State should

His Majesty's Government in the handling of trade between ment of credits with SCAP, a nastisfactory, as well:irre After the handover to the Civil Hong Kong and Japan is not en- query has recently been address-gular, that the Government Agent Government, on the May 1, 1940, and also for the appointment of March 1816 tirely clear, but in response to aed to the Accountant General on should be authorised to incur ex- the supply of drewood continued to D.D. Techbretained for these arrangements

Mr. J. 4. Galvin as Government' Hardwood Purchase request to be referred to the a payment of. H.K.311,967,270.30 penditure which; la entside the be obtained through Mr. Philipps Honorary Agent. In Japan. It is in connection with the purpgreement made with SCAP my to the Hong Kong and Shanghal authority of the General Warrant Agency (In Bornoo) and the ar

rangement for the supply and

local distribātion: 1.481 Thankinta Boka: understood that Mr. Leo has ro-

'cently resigned his appointment Chardwood from indoiChins, the arrangements, were "notiem- Singapore for. Biraits 36,357,015.00) spproved by the Legialaysia PTE prices:fxsed by the Director w

the draft dospatch to as Rico Controller Be visit which the con- verjedlog anda kestab milltary and form of an agreements and Infustries Beclion Eusponse, Ac- Secretary of Stay here that under kein tatio. Department

State, prepared by undertaken by the Coal demnation of stores, and wilts of Administration, the south of the that the basis ommunication are given on the:Payment Government had made-, arrange 'A' separate Suspense Account War" of loases were being dealt with TOL ZV146 | come under notice in connection APB 8 with the dumping of a consider

abla quantity of canned goods

IPANA

IPANA

HELLWIS

Du

The the

which was arranged during the bodied in any ono document in which has been charged to the

provident traight and handling charges sundry exchange of

I have accordingly inents with the Hong Kong amounted to over four times, the tions with SCAPE Coples of the Voucher and f cost of the "Ember at the port relevant communications were asked to be fully informed and of Bhanghal Banking Corporation to of shipment.

Miller I subsequently sent to this Depart the authority under which the ex- operate, the Japanese, Trade Sü

Firewood

maintained, to which receipts and

(Continued on Page 9 payments arising from this activity

4