CASE OF MR. MACANDREW.

D.—No. 1

41

state, in explanation, that the Sub-Treasurer and Receiver of Land Revenues continues to pay public moneys to the credit of the Provincial Treasurer at the Bank, instead of paying them to the credit of the " Provincial Account;" thereby defeating the provisions of " The Provincial Audit Act, I860," and placing the Provincial Revenues under the sole control of the Provincial Treasurer. By the course adopted the Sub-Treasurer was rendering himself liable to a penalty of £500. I was about, therefore, to request the Sub-Treasurer to make his payments in future into the Provincial Account, when I learned, on the occasion you refer to, that there was no such account at the Bank, and moreover, that the Gold Fields Revenues were paid by the several Receivers into a Provincial Public Account, instead of into the Public Account of the Colony. As the same name for accounts of different Governments was objectionable and led to mistakes, I requested the Bank to furnish me with a list of the Public Accounts, in order that I might bring the matter under the notice of the Provincial authorities ; and I took the earliest opportunity of calling the attention of the Superintendent to tho necessity of the Audit Act being conformed to, with the view that the officers of the General Government might be instructed where public moneys, due to the Provincial Treasury, might be legally paid. I gather from your remarks, that you cannot understand by what right I thus placed myself in communication with the Provincial Banker. I have to request that you will bring this letter under the consideration of His Honor the Superintendent, and that you will append to it my note marked " Private," to which your communication is virtually a reply. I have, &c, Charles Knight, The Provincial Treasurer. Auditor of Public Accounts.

Memo. —I have no copy of the Private Note, but the following is very nearly the purport of it. Mx deae Sic, —It has occurred to me since I saw you this morning, that you are under the impression that I have shown a want of courtesy to you in the matter of Mr. Macandrew's defalcation, I should be sorry that you should remain under this impression, if it exists. I may state in explanation that, after obtaining the Superintendent's permission to inspect documents in the Provincial offices, I went to the Auditor and requested him to show me certain vouchers. These, it appears, were obtained from your department. At Wellington, the whole of the Treasury vouchers are deposited in tho Audit Office. I mention this to show that naturally I went to the Audit Office here, and not to the Treasury, for the information I required, and that I was not in official communication with the Provincial Treasury at all. I am, &c, CnAEr.Es Knight.

Enclosure 2 in No. 19. Copy of a Letter from Dr. Ksjgiit to the Hon. E. "W". Stafford. Sin,— Dunedin, 18th March, 1867. I reported on the 14th instant that in accordance with the instructions given to me as Auditor of Public Accounts, with reference to the inquiry made under the Commission issued in the year 1861, I had commenced the examination of the accounts of the Province, with regard to the defalcations of James Macandrew, Esq. On the 16th instant I received the letter of His Honor the Superintendent, dated 15th instant, in reply to my application, as Commissioner, for free access to vouchers and accounts of the Provincial Treasury, necessary for the purposes of the present inquiry. His Honor states that the inquiry in question was instituted at the instigation of the Provincial Council of Otago, and that unless that body desires its resumption, the Provincial Government must decline any interference on the part of the General Government with the accounts of the Province. I stated in reply, that in,accordance with the views of the Provincial Government, I had at once closed my inquiries into the Public Accounts of the Province. I have now the honor to report, that I have examined the Provincial Account with regard to the item " Defalcations by James Macandrew, Esq., £1012 14s. 5d.," which appears in the Appropriation Ordinance of the Province of Otago for the year 1861, and paid from the account current of Messrs. James Crawford and Auld, agents in Scotland for the Provincial Government of Otago, that on the Bth June, 1860, they paid Messrs. P. Henderson and Co., the half passage money for 158J adult emigrants, by the ship " Henrietta, amounting to £118S 15s. That on the 20th September, 1860, as appears by the cash-book of the Provincial Treasury, the remaining moiety of the passage money was paid at the Provincial Treasury to Andrew Cumming, master of the ship " Henrietta," for the passage of 151 adults, amounting to £1132 10s. The account current of the Oriental Bank Corporation shows that the sum of £1132 lOs. was paid on the 28th September, by cheque 1417. The voucher on which this claim was paid, and which would have the Superintendent's warrant on it, was not found in its place among the records of the Provincial Accounts ; but as the accounts had been duly audited there is no reason to suppose that anything irregular occurred in the payment of the claim. The Oriental Bank, where the cheque was paid, has some time since removed its branch from Dunedin, and I was unable to obtain an inspection of the cheque. The discrepancy between the number of adult emigrants paid for in Scotland, and the number paid for in Otago, is accounted for by deaths on board during the passage. These payments entirely discharged the claims of the " Henrietta," on account of immigration. I find, however, on inspection of the account current of Messrs. Crawford and Auld, for the period included between the 31st December, 1860, and the 31st March, 1861, that on the 18th of February, 1861, the agents retired the Superintendent's bill for £1012 14s. 5d., dated 24th October, 1860, at thirty days' sight, in favour of Messrs. E. P. and C. It. Eayner, Sunderland, and said to be the 11