CO129-246 - Acting Governor Fleming - 1890 [8-9] — Page 257

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I would further add that the absence of any general system of account keeping in the Colony, the absence of any system of audit or of any definite information and instructions for the Audit clerk, enhanced the difficulty. I would further point out that I alone had the detailed accounts of sixteen different departments to audit in the twenty-four working days of each month and over 10,000 vouchers and about seventy books to examine and check. This rendered it almost impossible to enter upon any careful detailed examination of accounts and vouchers, any comparison of dates and entries, any minute examination, which alone could have detected the clever frauds committed by Mr. BARRADAS. I admit at once that beyond checking amount with amount, I never had time to enter into a close examination of vouchers, and never did, and there being no suspicion of dishonesty or fraud, there seemed to be no necessity. When Mr. ROCHA and myself examined in July, 1889, a special account rendered by Mr. BARRADAS in answer to some query from the Audit Office, we checked and compared amounts, totals, &c., &c., but did not look as closely into dates as it now seems probable that we ought to have done.

My first general reply to the charges against me is that with the accounts of sixteen Departments to audit entirely without assistance, I could not give to each that detailed examination that would have been necessary to detect Mr. BARRADAS' deceits.

My second general reply is that the general system of account-keeping in the Colony is such, and the particular system adopted in the Money Order Department is so very defective as to lend itself to the particular form of fraud and concealment adopted by Mr. BARRADAS, and to render its detection most difficult. Of course, Mr. BARRADAS noticed the defect and availed himself of it.

To explain. The Money Order Department issued Money Orders on the United Kingdom and other places in Europe, and on the Colonies, Shanghai, the Coast Ports, Japan, &c., and paid Money Orders drawn in these different places on Hongkong. It also sold Postal Notes in the Colony, and transmitted Postal Notes for sale to the Coast Ports, Shanghai, and Japan.

I may call attention here to the important fact that Postal Notes were first introduced into the Colony about 1885. The Money Order Department had therefore to receive money from the public in Hongkong for the value of the Money Orders and Postal Notes it issued on the United Kingdom, the Money Order drawn on other offices and the commission on these issues; to pay money over the counter for Money Orders drawn on Hongkong, to receive moneys from the places issuing Money Orders on Hongkong, and to pay moneys to the places against which it had drawn.

Whether the Superintendent of the Money Order Department should have been allowed to do more than pay and receive money over the counter, and whether the Postmaster General himself or the Treasurer should not have been entrusted with the settlement of the accounts between the Hongkong Office, the United Kingdom, and the various Colonies and out-ports, settlements involving large amounts, is hardly the question now, but I respectfully submit that the system that allowed Mr. BARRADAS to handle the whole of the moneys of the Department, purchase Drafts on the Colonies and the ports, and receive and cash the remittances from these places had more to do with the defalcations than any fault or neglect of mine.

But for some unaccountable reason, an inferior clerk at a salary of $120 a month was entrusted with these large sums of money, and these responsible duties apparently without any superior control, and he was not provided with any proper books for keeping those accounts, or with any adequate instructions as to his duties.

There were only three books kept in the Money Order Department, an Imperial Cash Book, a Local Cash Book, and a Local Ledger. The Imperial Cash Book contained on the debit side the number of each Post Office Order issued with the date, the name of the office on which it was drawn, the sterling amount, the rate of exchange, the price in dollars, the commission, and the total monies received; on the other side, the number, date, place of issue, and amount of the Money Orders drawn in the United Kingdom and paid over the counter here. Of course, the Orders drawn by Hongkong on the United Kingdom were largely in excess of the Orders drawn there on Hongkong, so that the balance in that Cash Book was always in favour of London, and Mr. BARRADAS had the cash in hand for remittance to London. It was not remitted by him to London, but simply paid into the Treasury here to be adjusted in account with the Crown Agents, who made all payments to the Postmaster General in England.

The Crown Agents' Accounts only come out every six months, and were not available for checking in any way. Mr. BARRADAS' monthly accounts, and these accounts were never seen by me; they were not within my duties.

The Local Cash Book contained similar receipts and payments made in respect of Money Orders issued on or by the Australian Colonies, the Straits Settlements, the Coast Ports, &c., &c., and the balance of this Cash Book was invariably against the Colonies, &c., &c., as they drew more largely on Hongkong than Hongkong did on them. Thus Mr. BARRADAS would constantly be short of funds (specially appropriated) to meet Money Orders from the Colonies, &c., &c., and would have to use, for the purpose of these payments, moneys in his hands due to the Imperial Post Office. He was allowed to receive and cash himself all drafts received from the Colonies and ports and to issue them for current payments.

Here again, I respectfully submit, was a mode of dealing with moneys that made it very difficult to check his receipts and payments. He should have been compelled to pay into the Treasury daily or weekly all moneys he received and have drawn out all moneys required by him for current payments.

The Local Ledger contained the accounts kept with each of the Colonies and Ports, showing the moneys paid over the counter on account of each, the Orders drawn on each, and the remittances either one way or the other.

There were no other books of account kept in the Money Order Office, and especially no Ledger account with the United Kingdom, why, I do not understand.

Now to come to the precise point of my defence. These books were, with the exception just noted above, sufficient for the business of the Office as a Money Order Office, but when in 1885 or thereabouts Postal Notes were introduced, no change was made in the books to meet the new form of issue, and no new book was added. Postal Notes have been received in that Office since 1885, and there was kept in the Office no book or paper in which was kept an account of the receipt or sale by Mr. BARRADAS of these Postal Notes. I understand now that these notes are issued in London, are sent in batches from time to time to the Postmaster General here, and paid for at a fixed rate of exchange through the Crown Agents, that the Postmaster General here handed a lot of notes from time to time to Mr. BARRADAS for sale, and kept a very rough note book in his own private office in which he entered these transactions. Mr. BARRADAS was supposed to pay into the Bank to the credit of which account there I don't know, the moneys received by him for these Postal Notes. He took the receipt to Mr. LISTER, who made a note of it in his private book. Hence, when I went to the Money Order Office to audit the accounts, there were no books or entries in books or vouchers to give me the least hint that Mr. BARRADAS was selling Postal Notes and receiving money for them, and that he had to account for such moneys.