Sir WILLIAM MULOCK.

I much appreciate the tenor of my hon. friend's remarks. With reference to the first point to which he alluded, the separation of the accounts, he spoke of the service in the Northwest Territories when that country was being brought under control. The committee has perhaps forgotten it, but I may say that a somewhat similar practice was pursued in that case. At the commencement, instead of keeping the accounts separate. as I have done, there was a special vote taken for Northwest account. That

vote was resorted to for payment of a number of services. I do not remember them all, hut they included the postal service, and the money voted in that special vote to carry on the postal service was not included in the expenditure of the Post Office Department.

Mr. COCHRANE.

Was not the same principle applied when the hon. Postmaster General used the mounted police ?

Sir WILLIAM MULOCK.

We did not use them without paying for them.

Mr. COCHRANE.

Neither did the other government.

Sir WILLIAM MULOCK.

Yes, they did. There was a bulk sum voted for a number of services, including the postal service, as it was not considered fair to charge the various departments with the total expenditure in connection with the carrying on of those services. So much as went for carrying on the postal service of the Territories was not charged as part of the disbursements of the Post Office Department. You will therefore see that there is a precedent for maintaining a separate account for the service in an unorganized territory- I mean a territory that is far from selfsustaining and in a more or less primitive state. As my hon. friend from Pictou says, the Yukon is coming to be looked on -as' part of old Canada, and the time is arriving if it has not arrived, when this distinction in the postal accounts may he discontinued, as the late government, in the course of a few years, discontinued voting a special stun for the various services in the Territories, and allowed the sum for the postal service to be defrayed out of the ordinary appropriations for the post office generally.

Mr. COCHRANE.

When did that vote for the Northwest Territories cease to be taken ?

Sir WILLIAM, MULOCK. I cannot say from memory.

ill1. COCHRANE. It did not continue until 1896, did it ?

Sir WILLIAM MULOCK.

No, it did not. The Northwest Territories were taken over in 1870 ; but I am speaking of a period much later than that, coming down to a comparatively recent date. With regard to the payment of the accounts for the year, my instructions to the department are that all accounts for carrying on the service for the year shall be included in the accounts for that year, so that when they are laid upon the table they shall truly represent the cost of maintaining the service for the year; and I am assured by the accountant that those instructions are lived up to, and that there is nothing owing. I asked him if there was a cent owing. He said he would not say to a cent, but

there is not $100 of arrears so that practically speaking everything is included in the accounts represented in this return. The Auditor General gave us till the 15th of August, that is, six weeks after the accounts were due, and on the approach of the end of the fiscal year efforts were made to get in all the accounts before the end of the year ; so that in the early part of July we know pretty well the state of the accounts. My hon. friend may rely upon it that if any considerable unpaid account were not included in the year to which it belonged, it will, so long as I am at the head of the department, be reported to the House and included if possible in the printed re-l>ort.

Mr. HENDERSON.

Is the same system pursued now as in former years ?

Sir WILLIAM MULOCK.

In the Postmaster General's Report for 1895-6, there will be found a report signed by two auditors, which shows that when the late government went out of office there were unpaid accounts exceeding the appropriations by $680,000. The hon. gentleman will remember that the change of government took place just at the close of the fiscal year, and shortly afterwards I learned that the whole appropriation for the year was exhausted and there was this large amount of unpaid accounts. The Deputy Postmaster General, Mr. White, told me that the practice had been to pay these arrears out of the revenue voted for the current year. That practice had grown up from year to year. Under it the shortcoming each year of $50,000, $60,000 or $100,000, instead of being included in the supplementary estimates for the following year, was carried on as an ever-increasing balance. The first year the amount carried over was, say $50,000, then it increased to, say $100,000 and so on until the amount of unpaid debts not provided for, when we took office, was as high as $680,000. There was no money voted by parliament to pay this sum, but apart from that accumulation of unpaid accounts, there was an actual deficit for the year of $7S0,000. So that besides the deficit of $780,000 on the year's operations, the department owed $680,000 of accumulated unpaid accounts. I reported the matter to the Finance Department, and that department treated this $680,000 as a debt of the Grown and put an item for it in the estimates. It was thus voted as a special vote, and we were enabled to start with a clean sheet. That was in the second session of 1896, because it took us several months to ascertain the exact amount.

Mr. CLANCY.

Was there a separate account kept of those payments ?

Sir WILLIAM MULOCK.

That transaction did not enter into the accounts of the post office for the fiscal year 1896-7 at all. It will be found in the Finance Department Sir WILLIAM MULOCK.

the same as any debt due by the Crown. In the statutes of 1896-7 there will be found in the appropriation Bill an item to pay these arrears, and the amount was paid by the Finance Department. We then started with a clean sheet.

Mr. HENDERSON.

I understand that an entire change has been made in the system. Under the former government, it was customary, at the end of each fiscal year, to pay out of the next year's appropriations whatever was short in the estimates of the previous year. As the Postmaster General has stated, one year it might be $50,000 another year $60,000 and another year $100,000. Consequently year after year there was a continuous increase of these unpaid balances or a continued overlapping [DOT] from vear to year. The first amount for example might be $50,000 and should there be a shortage the next year of $25,000, then in the succeeding year there would be $75,000 of an overlapping and the following year if there was again a shortage of $25,000 there would be an overlapping of $100,000. This went on over a long series of years. The Postmaster General of that period continuously paid the amount that was unpaid at the first of July out of the succeeding year's appropriations, and it appears that about 1896 when the hon. gentleman's predecessor went out of office that this overlapping had amounted to about $685,000 in round numbers, and according to the practice of former Postmasters General that would be charged up to the fiscal year 1896. At the end of 1894 we will say it would amount to $616,712 and that overlapping would be charged up to the year commencing July 1, 1895. It would go on for another year and at the end of 1896 there would be still this overlapping, but it would then have amounted to a larger sum. A change of government and a change of book-keeping took place and the incoming Postmaster General refused to charge up this large sum to the succeeding year's estimates. Now what was the result V The overlaping of the previous year was charged to 1896 which makes this enormous sum of a shortage in revenue of which the Postmaster General has boasted all over this country.

Sir WILLIAM MULOCK.

That had nothing whatever to do with it.

Mr. HENDERSON.

It stands to reason that if the overlapping at the beginning of the year went to the next year's expenditure it would certainly make apparently a very large shortage in the revenue of the country.

Sir WILLIAM MULOCK.

That is not what happened.

Mr. HENDERSON.

I say to the Postmaster General that my conviction is that that is just what happened, and it has never been made plain to the people of this coun: try that that is not what happened and consequently the Postmaster General has ob-

tained a very large amount of credit in this country for having kept the expenditure within the revenue which he says his predecessors were unable to do. The whole matter requires to be thoroughly investigated, r.ot by the accountants, the personal friends of the Postmaster General, whom he brought in from Toronto to make out an account to suit his own purposes, but by an independent commission that would show the actual condition of the account. My conviction is that that is just the way the thing happened and that the $6S5,447.03 as provided for by the Postmaster General by statute is a portion of the $781,152 shown as a deficit at the end of the year 1896, so that if you deduct the $685,447.03 which are shortages, the accumulations of some 18 or 20 years, and not of one year, you find that the deficit or shortage of revenue of the old government was a comparative trifle indeed. That is the way I have explained the whole matter. I feel pretty well satisfied, in fact I remember distinctly the words of the Minister of Trade and Commerce (Sir Richard Cartwright)

and if I could only lay my hands on the ' Hansard ' I should cite them, but I have not been able to find the passage in the few moments of this discussion. I remember well the words of Sir Richard Cartwright (Minister of Trade and Commerce) in answer to a question put across the floor of the House by the Hon. Mr. Foster. He said that this large sum was made up of the accumulations of a great number of years, and I have never yet been convinced that this sum was not made up of these accumulations, and that the sum that was provided for by the Postmaster General by a special statute or by a special estimate-I think by an Act of Parliament-was not a portion of this $781,152, which the bon. the Tostmaster General has been parading for the last seven or eight years as the shortage in the revenue of this country as compared with the expenditure. I have no doubt that if I am wrong the Postmaster General will be able to put me right, but I tell him that it would take a great deal more to do so than a special account prepared for the Postmaster General by his own personal friends, to accomplish a specific purpose.

Sir WILLIAM MULOCK.

I have sent into the library for the report of that year and as soon as I receive it I shall deal with the hon. gentleman's contention. Perhaps the committee will allow me to reserve my remarks until that report comes. Meantime I would say, to correct my hon. friend at the beginning, that his suspicion, his imagination is entirely at fault jnd that the deficit of $781,000 in the revenue as compared with the expenditure for 1890 was for the actual workings of the department that year and was over and above all accumulated arrears of preceding years.

Mr. HENDERSON.

What I intended to say was that for that specific year the overlapping at the beginning of the year was charged up as a portion of the expenditure of that year and at the end of that year the shortage for that year was charged up inasmuch as the succeeding Postmaster General refused to have it taken out of the appropriation of the succeeding year, so that you have the overlapping at the beginning of the year and the shortage for the year all charged in that year and it is no wonder if the accounts did in that way show the immense shortage claimed by the Postmaster General.

Sir WILLIAM MULOCK.

If the amount of $680,000 the accumulated arrears, had been added to the expenditure for the fiscal year 1895-96 instead of the auditors reporting a deficit of $781,000 they would have had to make it $781,000 plus $680,000 or something over $1,400,000.

Mr. COCHRANE.

I have no objection to the Postmaster General reducing the postal rates, but I think he was a little unfair when ho answered me as he did about the Northwest Territories. I think it would have been fairer if he had frankly stated to me and to the committee that the late government had the expense of post offices in that country to bear out of the ordinary revenue of the Post Office Department for several years before the hon. gentleman took office, and they did not keep a separate account. It would be a fairer statement if he would charge the expenditures of the Post Office Department in the Yukon and also credit it with the amount received in the Yukon, balance the two amounts and give us a fair balance of the statement. Would that not be fairer than to keep a separate account for the Yukon when he has a deficit there ? There is no doubt in my mind, and I think there is no doubt in the mind of the Postmaster General, that if there had been a separate account kept for the Northwest Territories in reference to the post office expenditure and revenue in that country there would have been a large deficit in that territory; When the late government was in power.