5

B.—lo.

be quite true that the hopper dredge was bought mainly, if not solely, for the improvement of the bar and its purchase was undoubtedly a legitimate and necessary expenditure under section 172 of " The Harbours Act, 1878," Had it been bought after the creation of the Lower Harbour Fund it might, in my opinion, have legitimately been made a charge on that fund; but it was bought out of the General Harbour Fund, before the division of that fund into two. It is claimed, I understand, that this difficulty might be overcome by the nominal sale of the dredge to an outside party, and its repurchase by the Board on behalf of the Lower Harbour Fund. lam under the impression that such a transaction would not be permitted by the Courts. Courts of equity are very jealous of transactions whose intent is to evade the provisions of the law, even though there be no improper motive or object. In conclusion, I have to acknowledge the courtesy and frankness, on the part of the Chairman, members, and officers of the Board, with which all the affairs of the Board have been submitted to me, and the full information which has been given me by the gentlemen who take opposite views on the matter which is the subject of this report. I have, &c, James Edwabd FitzGeeald, His Excellency the Governor. Controller and Auditor-General.

APPENDIX A. Memorandum prepared by the Secretary and Treasurer to the Otago Harbour Board, showing the State of the Lower Harbour Board Account on the 12th August, 1885.

2—B. 10.

Net tenders for £190,000 of debentures ... ... ... 182 868 3 6 Less rebate on tenders paid in advance ... ... ... ' 60 6 6 Debentures handed over for purchase of tug ... ... ... 10 000 0 0 t <. t * <.- ■ ■ ■ 3 * • • 192,807 17 0 -Less cost oi advertising, commission, and floating ... ... ... 3 §24 13 3 188,983 3 9 Credit, Lower Harbour, one-half above ... ... 94 491 11 li Expenditure on Lower Harbour, Works to 31st December, 1884 ... ... ... .... £27 727 6 3 Ditto to 11th June, 1885 ... ... ... ... ... 8522 6 0 Ditto to 12th August, 1885 ' ... ... ... ..." 2*480 8 1 38,730 0 4 Proportion of interest on overdraft prior to floating loan 855 0 0 Ditto engineer's salary to 31st December, 1884 ... 788 0 0 Ditto (6 months) to June, 1885 ... ... ... ... 275 0 0 Percentage of plant, other than "222" dredge, such as "Vulcan" tugs, to 31st December, 1884 ... 800 0 0 Ditto to 30th June, 1885 ... ... ... ... \\\ 10 o o 0 Value of plant removed to the heads 2 777 10 0 Pour half-years'interest on coupons ... ... ... 10,000 0 0 Bank commission, payment of same ' 50 0 0 Half cost of Dredge 222 ... ... ... ... ... 23,850 0 0 Half cost of tugs ... ... ... ... . 6*750 0 0 84,975 10 4 9 516 1 7 Credit, one-half profit on tug service ... 1764 17 3 P11 oon i o in £11,280 18 10 John L. Gillies, Secretary and Treasurer. £11,280 18 10