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an Audit Examiner, who visits every Department once a month, and compares counterfoils of licences, fees, receipts, &c., with the Registers and the Collectors' Accounts; and a fourth who, in addition to the copying work of the Office, super- vises the numbering of the receipts and counterfoils of all the Departments, and takes charge of the stationery and printing.

9. Although under the proposed system a part of the work thus done would be saved, there would be no decrease in the amount of time required of the clerks, as the arrangement and classification of all the accounts, and the forwarding of all necessary authorities and vouchers would still rest with them, and entail no incon- siderable labour and responsibility. The omission of a single document would involve delay, and cause the Comptoller and Auditor General's Department much annoyance and inconvenience, and there must not be omitted the, sometimes, harassing correspondence, before certain items could be adjusted.

10. In the matter of cost the difference to the Colony would be considerable. The total expenses of the local Office amount to $5,000; but, if the cost of the new proposal, as the Secretary of State intimates, is to be shared by the co-operating Colonies in proportion to their annual expenditures, then a much larger sum will be required. Taking our annual expenditure, roughly, at $2,000,000, one per cent. would mean an addition of $20,000, and even a half per cent. would add $10,000 to the cost of our audit.

Hongkong, 10th March, 1889.

FREDERICK STEWART,

Colonial Secretary and Auditor General.

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(4.)

Secretary of State to Governor.

HONGKONG.

No. 189.

SIR,

DOWNING STREET,

4th October, 1889.

I have had under my consideration your despatch No. 114 of the 30th of March last, relating to the Audit of the Accounts of the Hongkong Government.

2. I am glad to learn that you had already been considering the arrangements now existing for the local Audit, and that you concur in my view that some altera- tion is required. I desire to say that, while I cannot regard the system as satisfactory, I have no wish to make any reflection upon the manner in which the Colonial Secretary has carried out his Audit work, and I have no reason to suppose that this has been inefficiently performed by the staff at his disposal. The multifarious and increasing duties falling upon the Colonial Secretary make it, however, clearly impossible that he should give to the Audit that continuous personal attention which the importance of the Hongkong finances now demands. I have accordingly felt no hesitation in coming to the conclusion that the time has arrived when a separate Auditor should be appointed, and looking to the fact that in no other Colony of the financial importance of Hongkong is it considered safe to dispense with such an officer, I feel little doubt that the Legislative Council will concur in my view.

3. I learn with some surprise that you are inclined to revert to the principle of pre-Audit, that is to say, the submission of all bills, &c., to the Auditor before payment. I regret that I am quite unable to agree in this view, which appears to me to rest upon a misapprehension of the proper functions of an Auditor. The system of pre-Audit, once widespread, has now been generally condemned, and I should strongly deprecate any approach to its adoption in Hongkong.

4. It is perhaps the union of the offices of Colonial Secretary and Auditor which has led you to look with favor upon pre-Audit, and I entirely concur in