B—l [Pt. ll]

Rotorua Water-supply and Drainage System Provision was made in section 9 of the Rotorua Borough Act, 1922, for the GovernorGeneral, at any time, to vest in the Roto*rua Borough Council all or any of. certain undertakings owned by the Government. In 1946 the Council was desirous of taking over water-supply and drainage-works, and a Commission was set up under the authority of section 10 of the Act to determine the purchase-price. It valued the assets in question at £88,495, but recommended that, on account of the peculiar situation of the Borough of Rotorua in that it had been a Government-controlled town to 1922, and also on account of its being a tourist resort of the nature of a national asset, the Crown should make a very substantial concession in the price. To give effect to this recommendation the Government appointed a committee to examine it and to recommend equitable terms on which a transfer should be made. The committee recommended that the sum of £20,000 should be accepted, and this figure was agreed to. Payment is to be spread over a period of twenty-five years and will be secured by the issue of debentures bearing interest at £3 ss. per cent, per annum. The property was vested in the Council as from sth December, 1947, and the first annual instalment has been received. . The amount of £53,141 Bs. appearing in the Appendix to this report of sums irrecoverable by the Crown, Department of Tourist and Health Resorts, represents the difference between the book value of the assets, £73,141 Bs. and the price payable for them by the Rotorua Borough Council. Cost-plus Contracts The use of cost-plus contracts has not ceased with the war, and in some cases want of Ministerial or Treasury approval, and other circumstances, have caused the Audit Office concern. The Milk Division of the Marketing Department, for instance, let some cost-plus contracts for building construction and for the installation of machinery in milktreatment stations which appeared to lack desirable authority. Following Audit representations, it was agreed that future work should be let for fixed prices where possible, and that cost-plus contracts, if they cannot be avoided, should be submitted to the Minister for approval. Air Force cost-plus contracts with the de Havilland Aircraft Co. of New Zealand, Ltd., and Airwork (N.Z.), Ltd., have been supervised by Air Force technical staff, and claims have.been verified by an Investigating Accountant attached to the Air Department. These contracts were let with Treasury's concurrence. The Railways Department has a continuing cost-plus contract with an engineering company for the repair and overhaul of Ab locomotives. The work as it proceeds is inspected by a departmental technical officer, and claims are verified by a costing officer. A group of cost-plus contracts let by the Department of Lands and Survey is at present under inquiry. Roading Lands for Settlement The matter of capitalizing the roading costs of lands under development by the Lands and Survey Department and the Maori Affairs Department was considered by those Departments, the Treasury, and the Commissioner of Works some two years ago. The

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