Sessional_Paper_1938 — Page 185

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CIRCULAR.

Downing Street,

25th November, 1937.

SIR,

I have the honour to inform you that I have recently had under consideration the existing regulations and practice in regard to the form of Colonial accounts, and in this connection my attention has been drawn to the increasing difficulty experienced in ascertaining the financial position of a Colony from the accounts and statements at present prepared under Colonial Regulation 354 (a). In the case of those Colonies receiving grants from His Majesty's Exchequer in aid of their expenses of administration it has become evident that the information contained in these accounts is inadequate for the purpose of assessing the amount of the assistance required, and I have no doubt that more informative accounts would be of value both to you and the Legis- lature when framing and considering the Colony's budgets and would facilitate the task of the Colonial Office in forming a due appreciation of the financial position.

2. Owing to the widening scope of the financial operations carried out in the Public Treasuries, the number of accounts contained in the Colony's Ledger tends continually to increase, and the balances of all these accounts are included in the Assets and Liabilities Statements with a common cash balance. The liquid assets appearing in these statements do not always afford reliable guidance as to the cash available to meet voted expenditure, while the Excess of Assets, which appears as the. balance of the Statement of Assets and Liabilities, includes the Colony's working cash balances, and, in many cases, sums already expended in the purchase of stores, or advanced and immobilized in the form of loans, and hence does not reveal the amount available for appropriation. Further, the annual statements at present prescribed do not include particulars of outstanding loans made by the Colony, but only of the public debt.

3. After full consideration, I have decided that the following steps are necessary in order to secure that the accounts may fulfil their functions of setting forth the financial position and of ensuring financial control :—

(i) All expenditure which diminishes (other than temporarily) the surplus of revenue available for appropriation should be provided on votes and should be charged as expenditure at the time payment is made.

(ii) A "General Revenue Balance" account should be opened to which will be posted the balance of the Surplus and Deficit Account for the year, and the appreciation or depreciation of investments.

(iii) The following additional statements should be rendered as appendices to the Annual Statement of Assets and Liabilities :—

(a) A tabular summary of all special funds, trust funds, unspent loan moneys, etc., deposited in the Public Treasury, showing appreciation and depreciation of investments, where applicable, and the disposition of the balances of the funds, whether as investments or as cash balances in the hands of the Treasurer (Statement A).

(b) A statement of balances, excluding the balances of funds, etc., in the

hands of the Treasurer shown in Statement A, but including all other items in the Assets and Liabilities Statement (Statement B).

The Officer Administering

the Government of Hong Kong.