The Acting Secretary to the Treasury has forwarded the following memorandum to me for advice:

The Department of Home Affairs sells to men employed on the Transcontinental Railway certain tools. The proceeds of the sales are not immediately received by the Department, which recovers by deductions from the wages of the men.

1. The tools are paid for out of moneys provided under the authority of Loan Act 1911 (No. 24). The Department of Home Affairs desires to credit the proceeds of the sales to the expenditure account of the Loan Fund, in order that the amount may be again expended under Loan Act 1911. In other words, the Department desires that the proceeds be credited in reduction of expenditure.
2. When property on hand at date of transfer of a Department to the Commonwealth, or purchased out of the Commonwealth Consolidated Revenue Fund, is sold, the Treasury credits the proceeds to the receipts account of the Consolidated Revenue Fund. This is done even when the property was purchased by the Commonwealth in the finan-cial year in which the proceeds come to hand. That is to say, the expenditure account is not reduced, but the receipts account is increased. The argument which the Treasury relies upon to justify this course is that, expenditure once made legally, the amount must be shown in the accounts as expended and cannot be reduced by any portion which is returned as the proceeds of sales. We hold that the Parliamentary Vote once used is exhausted, and cannot be used again.
3. It may be that the proceeds of sales of property purchased out of Loan Funds are in a different position. Loan moneys are raised, as well as appropriated, for a particular pur-pose. Consolidated Revenue Fund moneys are not raised for a particular purpose, but are appropriated only for such a purpose. It may be argued, therefore, that the money which purchased the tools under notice, when returned to the Treasury as proceeds of sales, can be used only for the construction of the Railway. If this argument is sound, the course proposed by the Department of Home Affairs can be followed. The question is likely to assume much importance, because sales of property purchased out of Loan Funds will be considerable in amount.
4. A possible alternative is to credit the moneys to the Loan Fund, but to require further Parliamentary appropriation for their expenditure. Yet another course would be to credit the proceeds of the sales to the Consolidated Revenue Fund.
5. Will you kindly advise me in the matter.

In order to be able to sell the tools the Department must have purchased them first.

I assume that, in so purchasing them, the Department acts on its own behalf and buys the tools absolutely and pays for them, so that the tools become the property of the Commonwealth and the money paid for them becomes the property of the person from whom the tools were purchased.

On the above assumption the money paid for the tools would undoubtedly be expenditure and would have to be debited as such.

Once the tools have become the property of the Commonwealth, the proceeds of the sale of them would form part of the Consolidated Revenue Fund, in the absence of any special provision such as that contained in certain trust accounts.

The method by which the proceeds of the tools are received is quite immaterial and could not in any way alter their character.

I am of opinion therefore that the Department of Home Affairs cannot credit the proceeds of the sales to the expenditure account of the Loan Fund.⁽¹⁾

[Vol. 10, p. 479]

(1)This Opinion was published in Commonwealth of Australia, Parl.Papers1913,Vol.II,p.1171.