CO129-544-8 Adjustment of exchange account 1-6-1933 - 31-7-1933 — Page 15

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such a policy was opposed to the understood rule of

non-speculation by Colonial Governments. If the

Secretary of State gave his approval to the policy,

the matter would be settled, and it would not be the

Auditor's duty to criticise the terms of any particular

contract, provided that any limitations or conditions

laid down by the Secretary of State had been duly

observed.

3.

As regards the second point B, dealt with

in paragraphs 6- 11 of your letter, I see no objection

the view set out in paragraph 8 of your letter, and

I see no reason to interfere with the normal accounting

procedure for remittances to the Crown Agents; but I

have to point out that the existence of the forward con-

tract introduces a new factor, the result of which is

that on the date when a remittance is made (under the

contract) the transaction probably takes place at a

rate of exchange other than the rate ruling at the date

of the transaction, and that, consequently, a profit

or loss on exchange is actually made and should at once

be carried to the Exchange Account.

This entry in the Exchange Account is not one of

the normal entries contemplated by the Secretary of

State's despatch No. 431 of the 26th November, 1925,

and consequently the Exchange Account cannot properly

be used in this way without the sanction of the Secretary

of State, As, however, the forward contract system

should be referred to the Secretary of State if it is bo

be admitted, as explained in paragraph 2 above, and as

the entries in the Exchange Account follow automatically

upon the adoption of the system, the approval of the

system