SESSIONAL PAPERS LAID BEFORE THE LEGISLATIVE COUNCIL OF HONG KONG 1938
Table of Contents
1. Colonial accounts
I. Despatch of Secretary of State for the Colonies, Dated 25th November, 1937. -- Ii. Note By Financial Secretary, Hong Kong
2. Estimates of Expenditure
Abstract Showing the Differences Between the approved Estimates of Expenditure for 1938 and the approved Estimates of Expenditure for 1938 and the approved Estimates of Expenditure for 1939
3. Housing Commission
Report of the Housing Commission, 1935
4. Jurors
Jurors List for 1938
5. Mines
Report By the Senior inspector of Mines, Perak, Federated Malay States, on the Subject of the Control Measures Which the Hong Kong Government Should adopt in Respect of Local Mining
6. New Museum
Report on a New Museum in Hong Kong
7. Public Works
Draft Programme of Public Works
8. Rentals for Government Quarters
Report of the Committee on Rentals for Government Quarters
9. Rent Commission
Report of the Commission appointed By His Excellency the Governor of Hong Kong
10. Shanghai Refugees Committee
Report By the Chairman (Mr. W. J. Carrie) of the Shanghai Refugees Committee
11. Third Congress of Prehistorians
Report on the Third Congress of Prehistorians of the Far East, Held at Singapore
12. Training of Teachers
Report of the Committee on the Training of Teachers
13. University of Hong Kong
Despatch No. 514 of 27th June, 1938 to the Secretary of State for the Colonies
14. Water Finances
Memorandum By Financial Secretary
15. Water Finances
I. Memorandum By Financial Secretary. -- Ii. Memorandum on Modifications Decided Upon in Proposals Made in Part I
179
No.
9
1938.
HONG KONG.
COLONIAL ACCOUNTS.
I. Despatch of Secretary of State for the Colonies dated 25th November,
1937.
II. Note by Financial Secretary, Hong Kong.
PRINTED BY
NORONHA & CO., HONG
KONG.
GOVERNMENT PRINTERS & PUBLISHERS.
181
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.
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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.
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10. The net Expenditure sub-heads will be included in the Estimates in the following form :—
Unallocated Stores-
Purchases, freight and other charges
£
Deduct value of stores to be issued to
other sub-heads and services.
£
£
(Net expenditure)
The actual figures for the year will be shown in the same detail as an inset in the annual statements of expenditure under sub-heads.
11. While the cash position would not be affected by the immediate transfer to votes of the present balances of the Unallocated Stores Suspense Accounts, this step would entail comparatively large votes in the case of Colonies where the stocks held are heavy in relation to expenditure of stores, and if you so desire, the course may be taken of debiting fresh purchases and charges to votes and crediting issues and sales to the existing Suspense Stock accounts until they have each been completely liquidated, when credits to the expenditure sub-heads would commence. If the existing Suspense Account balances are transferred immediately to Votes, provision will be made as separate items under the relative sub-heads and not as part of the purchases, etc., items of the year.
12. Under the procedure described in the foregoing paragraphs, only a net sum will be included in the Appropriation Law and in the General Warrant, but it is to be expected that, at certain times of the year, the purchases, etc., of stores will temporarily outrun the recoveries from issues by more than the net sum voted, and I give my approval for the issue, without prior reference to the Secretary of State, of such Special Warrants as may be necessary to authorize the expenditure of the gross amount of purchases and charges shown on the Approved Estimates, the general limit fixed by the Secretary of State under Colonial Regulation 265 (1) (a) being waived in the particular case of the Unallocated Stores sub-heads. Amounts authorized by you under this sanction will be included in the periodical Schedules of Additional Pro- vision.
13. The General Revenue Balance Account will exhibit the balance available for appropriation, and will replace the present running Surplus and Deficit Account as the balance of the Statement of Assets and Liabilities. It will first be opened with the balance of the existing Surplus and Deficit Account at the close of the previous financial year, and at the close of the current year there will be transferred to it (1) the balance of the Surplus and Deficit Account for the current year and (2) the net appreciation or depreciation of the investments referred to in the second paragraph of Colonial Regulation 275. No other entries will in any circumstances be made in the General Revenue Balance Account. All statements of Assets and Liabilities will show the balance of the Account in the following form either as an inset or appendix:
as an
General Revenue Balance-
Balance (1.1.1937)
£
Add or deduct Surplus and Deficit
Account (1937)
£
£
Add or deduct appreciation or depreciation of
investments (1937)
£ (X)
Balance (31.12.37)
£
The item (X) will be included only in the Statement rendered at the close of the financial year.
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14. My decision to exclude unrealized appreciation and depreciation of invest- ments from the Revenue and Expenditure Account has been reached after considera- tion of the questions to which reference was made in paragraph 6 of the circular des- patch from Sir Philip Cunliffe-Lister (now Viscount Swinton) of 7th March, 1935, and, while satisfied as to the desirability of continuing an annual valuation of investments in order that the exact financial position of the Colony may be ascertained, I have recognized that objection may be felt to including in the annual budget an item which does not represent an actual cash transaction and which is not susceptible of legislative control.
Profit or loss realized on sales of investments will continue to be included in the Revenue and Expenditure Account, and the procedure set forth in paragraph 3 of my circular (2) despatch of 27th August last, will continue to be applied to the transfers to or from the Crown Agents of the interest and the appreciation or depreciation of Stock Transfer Stamp Duty Funds, and to any similar transactions where the profit or loss on investments is actually received or paid out in cash.
15. The purpose of the TABULAR SUMMARY OF SPECIAL FUNDS, ETC. (Statement A) is to segregate the transactions and balances of funds in the hands of the Treasurer which, while appearing in the Annual Abstract Account and the Statement of Assets and Liabilities, are not part of the public funds at the disposal of the Legislature.
Where a deposit is made in the form of an investment, or it is the duty of the Treasurer to invest the moneys deposited and credit to the special fund the interest received, any appreciation or depreciation of the investments will be shown in this summary and not in the General Revenue Balance Account. The assets of which the balance of cash fund account consists will be set out as investments and sums due to or from the Treasurer. The difference between the totals of these latter sums will show the amount of cash in the Treasurer's hands which does not form part of the Colony's available surplus, and will be carried to Statement B.
A model form of Statement A is appended. Unspent loan moneys, and balances of advances from the Colonial Development Fund or of other grants or loans from His Majesty's Exchequer funds, should be included in this statement, but, in the absence of special arrangements, General Reserve Funds should appear in Statement B.
16. THE STATEMENT OF BALANCES (EXCLUDING SPECIAL FUNDS, ETC.) (Statement B) will include all the items in the Assets and Liabilities Statement except the balances and investments of the special funds, etc., included in Statement A, and the balance of these funds in the hands of the Treasurer appearing in that statement will be deducted from the Colony's general cash balances and investments. This statement is designed to show clearly to what extent the Colony's surplus balances and temporary deposits are required for financing its current financial administration and to what extent cash is immediately available to supplement revenue. A model form is appended.
17. THE STATEMENT OF OUTSTANDING LOANS (Statement C) will record the position of all loans repayable to the Colony, except the temporary advances and imprests which continue to be provided out of surplus balances, whether the loan has been made out of voted moneys in accordance with paragraphs 4-6 above, or out of Colonial Develop- ment Fund or other Exchequer loans or grants, or out of the proceeds of loan issues.
Particulars will be given of the source and date of the loan, the ordinance or other authority under which it was made, the rate of interest and terms of repayment, the amount repaid or sinking fund accumulated, and the amount outstanding at the end of the financial year. In the case of a number of small loans made from a common source, e.g., loans to cultivators out of a Hurricane Loan, aggregate figures of the amounts lent, repaid, and outstanding will suffice.
18. This statement is the counterpart of the statement of the Colony's public debt at present rendered, and I take this opportunity to request you to arrange for the in- clusion in the latter statement of all outstanding debts due to His Majesty's Exchequer in repayment of Colonial Development Fund and other loans, if this is not already the practice in the territory under your administration.
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19. THE TABULAR SUMMARY OF UNALLOCATED STORES ACCOUNTS (Statement D) will show, in respect of each authorized stock of unallocated stores the following parti- culars :-
1. Stock in hand at commencement of financial year.
2. ADD Purchases, returns and charges, as charged to Expenditure Sub-head. 3. DEDUCT Issues to votes and services as credited to Expenditure Sub-head
(Y).
4. DEDUCT Proceeds of stores sold as credited to Revenue (less percentage for
stores on cost) (Y).
5. Transfers between Stores (+ or−).
6. Adjustments for stores not paid for in year in which received (+or-). 7. DEDUCT Losses and deficiencies written off.
8. Stock in hand at close of finarcial year.
(Y) These items may temporarily be credited to the existing Unallocated
Stores Suspense Account.
20. Copies of each of the four additional statements will be supplied to the Auditor for examination with the Annual Account and other documents referred to in Colonial Regulation 323, and copies will also be transmitted to the Secretary of State with the returns rendered under Colonial Regulation 354 (a). In the case of those Colonies, etc., whose finances fall under the control of His Majesty's Treasury, four signed copies of the additional statements should be forwarded to me with the state- ments asked for in paragraph 9 of my predecessor's circular despatch to those Colonies of 22nd May, 1936.
21. The necessary amendments of Colonial Regulations are under consideration and will be promulgated in due course. I shall be obliged if you will arrange for the changes to be brought into operation so far as possible in preparing the accounts for the current and succeeding financial years, and for the complete procedure to be followed in the preparation of future Estimates and the relative Annual Accounts.
I have the honour to be,
Sir,
Your most obedient, humble servant,
W. ORMSBY GORE.
1
MODEL A.
STATEMENT OF SPECIAL FUNDS, ETC., DEPOSITED IN THE PUBLIC TREASURY.
Special
Deposit.*
Savings
Stock
Transfer
Supple-
Loan