D.—l.

(2) The Board has been of the opinion that as much construction as possible should be financed from revenue, particularly in the case of bridge-construction, which in most instances is largely in the nature of renewals. On account of the diversion of its funds in 1931, the Board was forced to finance the whole of its construction work in 1931-32 from borrowed money. This is the first occasion since 1927 when the Construction Fund was not reinforced by a transfer from the Revenue Fund. (3) lhe Board has consistently adhered to a policy during the past eight years of having a fairly substantial reserve in its Revenue Fund to meet emergencies, such as floods and earthquakes. As a result of that policy, practically the whole cost of the Murchison and Hawke's Bay earthquakes has been met from revenue. There are now no reserves whatever to meet such emergencies in the future. (4) The Board has been of the opinion for some years that the time would arrive when the supply of borrowed money would cease, but it has also realized that although loan funds might not be available, nevertheless the reconstruction of a large number of bridges would have to be faced annually. It was hoped that the balance of the accumulated fund, together with possible transfers from the Revenue Fund, would enable these vital links in the country's arterial- and feeder-road system to be maintained without dependence on borrowed money. By the 31st March, 1933, bridge reconstruction on the highways will be behind the necessary programme by about £250,000. (5) On account of the diversion to the Consolidated Fund of up to £500,000, authorized by the Finance Act, 1932, the provision for highway-maintenance is insufficient to maintain the assets to their original standard, and therefore some borrowed capital invested therein must be irretrievably lost. The continuance for two more years of the policy of reduced maintenance which has been in operation for the past eighteen months will bring about the drastic physical collapse of many sections of the most important roads in the country. _ Stated briefly, the Board's opinion is simply that expenditure temporarily avoided by neglecting maintenance and bridge-renewals does not constitute savings. Another result of the diversions has been that paving in dustless and durable materials has had to be postponed practically indefinitely. The Board, however, considers broadly that in view of the general financial situation in the Dominion this postponement is not unreasonable, but there are certain cases in which postponement is uneconomical. For the year ending 31st March, 1932, the expenditure, including administration charges, &c., under the Construction Fund was as follows :— Expenditure. £ North Island .. .. .. .. .. 271,529 South Island .. .. .. .. 112,616 Total .. .. .. .. .. £384,145 An analysis of the Board's expenditure, excluding overhead charges, and the expenditure by local authorities under the Construction Fund shows the following position :—

It is noteworthy to point out that the average proportion of the cost found by the Board towards construction in 1931-32 is almost exactly the same as that found towards the cost of maintenance, the ratio being £4 to £1 in each case.

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Board's Local Percentage of T , ~ Contribution. Board's Contri- tT Contribution. bution to Total, to Total. I I (1) Primary Highways. £ £ £ North Island .. .. 235,788 55,870 291,658 80-84 19-16 South Island .. .. 89,210 32,028 121,238 73-58 26-42 Totals.. .. 324,998 87,898 412,896 78-71 21-29 (2) Secondary Highways. £ ; £ £ North Island .. .. 20,928 j 4,392 25,320 82-65 17-35 South Island .. .. 16,043 2,683 18,726 85-67 i 14-33 Totals.. .. 36,971 I 7,075 44,046 83-94 16-06 (3) Complete System. North Island .. .. 256,716 60,262 316,978 80-99 19-01 South Island .. .. 105,253 34,711 139,964 75-20 24-80 Totals.. .. 361,969 94,973 456,942 79-22 20-78