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In our opinion the custody of the Revenue Files should not have been entrusted to the person charged with the duty of preparing the receipts and posting the Collection Books; and the use of a system of loose-leaf Revenue Files (a practice which has been in force for thirty years) should not have been continued by the Treasurer, nor should he have permitted such Files to be posted in a manner which caused them to be valueless for de- termining the progress of collections for any given quarter.
If the Files had been kept in a satisfactory manner by a person other than the Collec- tion Book Clerk it must have been realized that large sums were outstanding, and a reference to them on receipt of the Treasury Solicitor's monthly reports must have led to the discovery of the misappropriations.
105. The duties of the Cashier, (Mr. Barton) in connection with the collection of revenue, except as touching his duty to ensure that all collections were brought to account and paid to the bank, do not appear to have been defined with any clarity, and, there- fore, though there was an inadequate check on the arrears, we do not attach blame to the Cashier. The system in force compelled him to be, practically, wholly dependent on in- formation derived from the Collection Book Clerks.
106. We consider that audit of the accounts should have brought to light the mis- appropriations. We accept the statement of Mr. Sung Kan, clerk in the Audit Depart- ment, that the Revenue Files were falsified and his copies of the Water Authority's Schedules tampered with after he had checked them. He was not in a position to prevent the falsification of the Files, but the tampering with the Schedules was rendered possible by his lack of common sense in keeping them in an unlocked drawer in the office of the Assessor's clerks contiguous to the General Office of the Treasury.
107. Although no loss has arisen in connection therewith, we consider
consider that the Cashier's infrequent checks of the cash in the hands of the individual shroffs are entirely inadequate as a safeguard against the loss of public moneys.
Colonial Regulation 336 calls for the ascertainment of the cash in hand at the close of each day, and we do not consider that the Treasurer is justified in relying therefor on figures supplied by shroffs and Collection Book Clerks.
As the Cashier had received from Mr. Messer explicit instructions that checks might be made every other month he must be absolved from blame for the lack of more frequent checks.
These instructions appear to us to be in conflict with the requirements of Colonial Regulation 336 and to facilitate embezzlement of moneys in the hands of the shroffs.
108. The frauds in the Education Department would seem to be directly attributable to the successive Directors having entrusted important financial duties to a Class III clerk over whose performance of these duties they appear to have exercised inadequate super- vision.
We have not had before us Mr. Irving or Mr. Orme, but Mr. A. E. Wood has given evidence and it is quite clear that during his administration no attempt was made by him to exercise any effective supervision in this respect.
Mr. Wood had not had any previous experience in the department when he was appointed Acting Director in December, 1925, and he took over the administration in circumstances which precluded his obtaining from his predecessor any advice as to the financial operations of the department. For the first six weeks he was, moreover, largely engaged on other Government matters.
His prodecessor appears to have entrusted substantially the whole of the financial operations of the department to the clerk, Chan Tsz Un. So far as was known to Mr. Wood the duties thus delegated had been performed in an able and conscientious manner by this man, of whom all spoke highly.
Mr. Wood himself knew the clerk and his parents, who were respected residents of the New Territories.
In these circumstances Mr. Wood continued the delegation of duties introduced by his predecessor and reposed implicit confidence in the clerk. Immersed as he was in the educational side of his work he did not realize the possibility of fraud occurring and
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