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(c) A statement of outstanding loans made by the Colony out of its revenue, or public or other loans, generally similar to the statement of public debt rendered under Colonial Regulation 354 (v) (Statement C).

(d) A tabular summary of all unallocated stores accounts showing the open-

ing and closing stocks (Statement D).

I will now refer to each of these changes in detail.

4. In order to secure that the accounts may correctly disclose the free balance at disposal and also to serve the even more important purpose of preserving to the Legislature the fullest control over appropriation, I consider that all transactions which diminish the Colony's free surplus of revenue must be recorded as expenditure at the time payment is made. In future, purchases of stores, or of other material assets, loans for fixed periods and other advances to public or private bodies which are not of a current nature, should be met from voted moneys and not from surplus funds. Repayments or proceeds of realization will be brought to account as revenue, together with the interest received. Where possible, repayment of loans should, however, be effected by a fixed number of equated annuities. The record of these transactions hitherto contained in the Assets and Liabilities Statements will be replaced by the separate appended statements referred to in paragraph 3 (iii), (c) and (d).

5. In defining loans and advances for this purpose, it is necessary to distinguish them from investments. The test is the realizability of the asset.

If the payment represents merely a temporary disposition of the surplus revenue in a marketable form until it may be required to meet expenditure, the transaction does not affect the position of the Colony's surplus and will properly be recorded as an investment.

6. As regards loans made from surplus balances before the receipt of this despatch, while I should prefer the outstanding balances to be voted as expenditure without delay in order to clarify the Colony's budgetary situation, I recognize that in some instances the local circumstances may render this step undesirable, and I am, therefore, content to leave the matter to your discretion.

7. I do not consider that sufficient grounds exist to justify the continuance of the practice of financing unallocated stores out of surplus balances. It is not a necessary feature of a centralized priced store-keeping system that a charge to votes should be delayed until the stores are issued for use or are written off, and in making the change it is not intended to relax in any particular the system of local control or the require- ment that the sanction of the Secretary of State be obtained to establish a stock of unallocated stores within a defined maximum. The change is purely financial.

8. To avoid swelling the expenditure votes by a second charge when the stores are expended, I propose that only the net excess of purchases over issues should be voted. A separate Unallocated Stores sub-head or Manufacturing Suspense sub-head should be included in the Estimates as part of the Expenditure Head of each depart- ment authorized to hold a stock of Unallocated Stores. All purchases, returns and charges during the financial year will be debited to this sub-head, and the value of stores issued to Departments or Works during the financial year will be credited to the debit sub-head. The value of these issues will be included under Expenditure sub- heads exactly as at present, and cash receipts from sales of stores will be credited to a separate Miscellaneous Revenue sub-head.

9. Normally the Unallocated Stores sub-head will show a small debit balance. In the exceptional event of a credit balance resulting either temporarily or from the year's transactions as a whole, this balance will be shown in the Statement of Account as a deduction from the rest of the Expenditure Head.