CAB129-37 — Page 256

C. F. Huntley, Esq.,

Ministry of Food,

Montagu House,

Whitehall, S.W.1.

Dear Sir,

Page 256

SCHEDULE IV

March 7, 1949.

In submitting the accounts of the East African Groundnut Scheme covering the period from inception to February 29, 1948, we have the following com- ments to offer:-

Conditions in East Africa, and the speed and nature of these operations, considerably handicapped the keeping of detailed records. Despite every effort to do so, it was not possible under the circumstances to compile a complete inventory at. February 29. It is considered, however, having regard to the inventories which were compiled and subsequent checks, that the Fixed and Current Assets shown on the Balance Sheet were in existence at February 29.

It was impossible to carry out an expert examination of each individual Asset and therefore no write-off has been made to cover depreciation, deterioration or other wastage except in the specific cases mentioned below.. In our view, having regard to service conditions in East Africa, the appli- cation of normal commercial depreciation rates might be misleading, especially as second-hand material constitutes a large part of the Assets.

No provision has been made in, or note made on, the accounts in respect of commitments under existing contracts for the future delivery of goods or services. These commitments, which are considerable, are largely in respect of work to be carried out as directed from time to time on a Cost plus Fee basis, and the financial commitment cannot therefore be assessed.

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The following notes are in further explanaton of the figures shown:→ Note 1. Development of Land, Buildings and Installations at Cost

(a) In the absence of a fully developed costing system, it has been impossible to allocate many of the general expenses to the in- dividual assets produced and these expenses have therefore been grouped with the Overhead and General Administration expenses included in Schedule 1.

(b) The deficiencies as detailed at the foot of Schedule 1, have been included in Development Expenditure as they represent losses inseparable from the launching of a pioneering venture of this nature. The basis of valuation of these deficiencies is explained elsewhere.

(c) The items, Land Clearing, Roads, Buildings and Installations, Oil Pipeline, Water Supplies and Landing Grounds shown on the face of the Balance Sheet are Prime Costs in so far as these have been allocated.

Note 2. Tractors, Vehicles, Machinery and Equipment at Cost

For the reasons given above, no attempt has been made to reflect the condition of these assets in the figures given and landed cost in East Africa has been retained as the basis, and, apart from items in transit and awaiting shipment valued at cost, the basis landed cost in East Africa has been used,

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