Potter, auditor, submitted a report of the revenues and expenditures of the islands up to June 30, 1899, under date of August 29, which was duly forwarded to the Secretary of War.

It appears there had been no books or records of any kind kept (with the exception of a letter-press copy book) by the department. It is understood that Lieut. Col. C. L. Potter requested assistants, but was denied them on the ground that civilians were en route from the United States to reorganize the department, and consequently he merely confined his efforts to examining all papers submitted, noting that they were correct, supported by proper authority, and in accordance with army regulations.

General Orders, No. 39, office military governor, dated September 20, 1899, appointed "Capt. Albert Todd, Sixth Artillery, U. S. A., auditor of public funds of the Philippines, relieving Capt. Charles L. Potter, Corps of Engineers, U. S. A. Shortly thereafter the department was moved from the office of the chief of engineers to the present suitable and commodious premises in the treasury building. Two clerks and a stenographer were engaged and, with one enlisted man detailed, began the work of organizing the department on a businesslike basis. The completing of proper records of all accounts on file and the keeping of the work of examination up to date was all this small force could accomplish.

About the middle of November the services of a bookkeeper were engaged (relieving 1 clerk) and another enlisted man detailed to the department. Start was made on a "scratch ledger," entering up all accounts therein from the date of American occupation. It was very slow and unsatisfactory work, but was finally completed about the beginning of March, 1900, when the entries were transferred into a permanent ledger.

Up to the end of December the methods as set forth in the rules and instructions herein referred to had not been followed, but on January 1, 1900, requisitions for funds for paying necessary and proper expenses were made upon this department, and receipts for funds deposited with the treasurer were countersigned by the auditor.

A treasurer's ledger was started, in which was entered daily all funds received and transferred by the treasurer. This ledger is balanced daily with the treasurer's books. Before the end of January the force was again augmented by the addition of a property clerk and another enlisted man, making the total force 9. The number of accounts, however, was doubling, and the force could not handle them. On April 1, when I took charge, Capt. Albert Todd, Sixth Artillery, having been relieved by General Orders, No. 41, office military governor, March 30, only a few of the accounts for the month of January and practically none for February and March had been examined.

The first matter to be attended to was a half-yearly report for the six months ending December 31, 1899; also a detailed report, by direction of the Secretary of War, of certain disbursements incurred since the date of American occupation to December 31, 1899, these necessitating the examination of all accounts for the period of seventeen months. The task was immediately undertaken, completed, and mailed to the Secretary of War on June 9. While these reports were being made the work of the department fell further behind, and it was imperative to have additional force. By the beginning of June I had under me 1 assistant auditor, 1 chief clerk, 5 clerks, 2 stenographers,

and 3 detailed men; total force, 13. This number was further augmented toward the end of June by the arrival of the Assistant Auditor for the Post-Office Department and a clerk from the United States.

As previously stated, methods as set forth in the rules and instructions as laid down by the War Department had not been followed, with the exceptions noted. I have found it impracticable to make any radical change from the procedure of my predecessor, who was governed entirely by General Orders, No. 71, office military governor, December 23, 1899. This order distinctly sets forth that all money accounts shall be kept in Mexican currency, which is at variance with rules and instructions referred to. The question of currency is of vital importance and will have to be faced in the near future.

The Executive order herein referred to, directing the methods to be followed, is dated Washington, May 8, 1899, but apparently never was interpreted as canceling instructions in Executive order dated May 3, to the effect that collectors of customs at subports should forward all moneys collected to the collector of customs for the islands, the latter in turn to deposit same with the treasurer. In April last, by order of the military governor, a similar method was inaugurated, directing collectors of internal revenue to forward all moneys collected to the collector of internal revenue for the islands, the latter in turn to deposit same with the treasurer.

I know of nothing to be gained by having the heads of the departments of customs and internal revenue receive moneys from suboffices. On the contrary, it appears objectionable from several standpoints. As minor objections may be noted burdening officers with the receiving and transferring of funds, complications in accounts, and the diverting of funds temporarily from direct control of the treasurer. We would recommend that at an early date orders be issued that the Executive order of May 8 be complied with.

General orders covering issue of certificates of registration permit. the expenditure of not to exceed 50 per cent of the revenues received from their sale, and since internal-revenue officers also issue certificates of registration these instructions often lead to misunderstanding and a consequent expenditure by the latter from revenue.

Further, many complications arise in the expenditure from the revenue received from the sale of certificates due to the month in which issued and the demand. Thus, the proportionate expenditure for issuing in one month of 2,000 certificates may not be similarly applied to the month in which less than 50 may be issued.

The above points require consideration that the general rule laid down by Executive order shall be followed, namely:

The officers or agents authorized to receive and collect moneys arising from the revenues of the islands, of whatsoever kind, shall be required to pay the full amount received and collected by them, respectively, to the treasurer of the islands, and to render to the auditor monthly accounts therefor, * and take credit for the amounts paid to the treasurer, as evidenced by his receipts countersigned by the auditor.

* *

DEPARTMENT OF CUSTOMS.

Record shows the assistant auditor for customs arrived in Manila about the 1st of July, 1899, reported to Lieut. Col. C. L. Potter, U. S. V., and immediately commenced the auditing of customs accounts, going over all revenue vouchers-import, export, etc.-and all disbursement vouchers of the subports from their opening. Also, the

accounts of the port of Manila from the 1st day of June, 1899, certificates from the auditor having been. issued certifying to their correctness up to the 30th day of May, when Lieut. Col. G. R. Colton, U. S. V., was relieved by Lieut. Col. J. D. Miley, U. S. V.

The work of this department has increased considerably. Starting with the ports of Manila, Iloilo, and Cebu, there are now 6 entry ports and some 70 interior ports, the latter being for interisland trade only.

POSTAL DEPARTMENT.

From the date of American occupation up to and including April 30, 1899, all accounts of the department of post-offices were carried in the name of the postmaster at San Francisco, Cal., by a clerk of that office specially detailed for that purpose, and while Mr. Vaille, directorgeneral of posts, had the approving of all expenditures, the postmaster at San Francisco and his clerk were personally responsible for all matters of a financial nature, and all vouchers during that period were forwarded to him.

On May 1, 1899, the department of post-offices came under the jurisdiction of the military governor of the Philippine Islands, instructions having been received from Washington by cable to that effect, and from a small number of offices has spread until June 30, 1900, there were 21 offices in charge of acting postmasters, besides 11 stations in charge of military officers, and new offices are being opened constantly as, in the opinion of the director-general of posts, the necessities of the service warrant.

INTERNAL-REVENUE DEPARTMENT.

The number of accounts submitted by internal-revenue officers has also greatly increased. The records of this department show only 2 offices, Manila and Iloilo, open in June, 1899; the close of the fiscal year 1900 shows there were over 100 appointed internal-revenue officers and about 150 officers detailed to issue certificates of registration.

About the middle of April internal-revenue officers and officers appointed to issue certificates of registration were brought under the supervision of the collector of internal revenue for the islands. Supervisors were appointed in each department and district collectors in each district, who were allowed assistants when necessary.

With this vast improvement over the old system, it is believed that the accounts will be submitted hereafter within the prescribed time and that the work of examining will be greatly facilitated.

MISCELLANEOUS DEPARTMENT.

Under this head come all revenues not taken up by customs, postal, or internal-revenue departments, i. e., collections by captains of ports, provost-marshals, seized funds, and sundry collections by disbursing

officers.

The largest percentage of disbursements from island revenues are paid from this fund, by quartermasters, for the repair of roads and bridges, rents, transportation, etc.; provost-marshals, who look after municipal affairs, paying police, sanitary and health officers, keeping streets in proper repair, and meeting the many expenses incidental to

the office; and captains of ports, who superintend the shipping of the various ports, tending to pilotage and light-houses. From this fund was also paid, up till March, the allowance of 30 cents per day for the regimental sick, which was largely taken advantage of by surgeons. Transfers are repeatedly made from the customs receipts to meet expenditures that come under this fund, no less than $3,500,000 having been transferred during the six months ending June 30.

Having no statistical department as yet, I am not in a position to go into details of revenue or expenses, but to show the volume of work that is being done I may state, from the records of my predecessor, that there was on file for the month of June, 1899, 50 account currents and 80 property returns, while for the month of June, 1900, we have 540 accounts current and 275 property returns, and are still getting them in from remote stations. This gives some idea of the great increase in the number of accounting officers, and it can be easily understood that the average number of transactions made by each has also largely increased.

Due to several attendant circumstances, considerable irregularity exists from the standpoint of rendering proper accounting. Officers detailed to civil duty, having more important matters calling for their attention, do not devote the necessary time to civil affairs, and frequently their stay at one station is brief. This becomes particularly embarrassing when new stations are opened, since the officer does not remain there sufficiently long to become familiar with the duties or receive proper instructions.

In the third quarter of the fiscal year 1900 the ports in southern Luzon and in the southern islands were opened, thus greatly extending the scope of civil affairs.

Until recently, instructions and the necessary forms of the several civil departments were either lacking or imperfect, but the close of the fiscal year finds these matters in excellent shape and in the hands of accounting officers, except those at remote stations.

The duties of captains of the ports so intermingle and conflict with those of the collectors and inspectors of customs that, in my opinion, better results would follow were the duties of the former merged into the customs department.

It is with pleasure I state that the records of this office do not show a deliberate attempt at fraud, and when errors have been discovered the accountable officers have promptly rectified same on being notified. Very respectfully,

WALTER G. COLEMAN, Auditor.

APPENDIX DD.

UNITED STATES CUSTOM-HOUSE,
Manila, P. I., August 14, 1900.

SECRETARY TO THE U. S. MILITARY GOVERNOR

IN THE PHILIPPINE ISLANDS,

Manila, P. I.

SIR: On the 27th of September, 1899, I had the honor to submit a report on the administration of affairs in the custom-house of the port of Manila for the period from the date of American occupation until the close of the fiscal year ending June 30, 1899, to which I respectfully refer, as it contains matters of interest to the customs service.

I have now the honor to submit the following as the annual report of the collector of customs of the islands and of the chief port for the fiscal year ending June 30, 1900.

CLASSIFICATION OF PORTS, ETC.

Entry port: A port at which a custom-house is located, a collector of customs is in charge, and duties are collected.

Open port: Same as entry port.

Interior port; One at which an inspector of customs has been assigned to duty, but at which no duties are collected.

Local port: Same as interior port.

Equipped port: Either an interior or entry port, or any port at which a customs official has been assigned to duty.

Unequipped port: One at which no customs official has been assigned to duty; at which no duties are collected and no vessels are permitted to enter, excepting by order of the military governor or district commander.

In this report the only ports referred to are entry and interior ports. On the 1st day of July, 1899, the ports of Manila, Iloilo, and Cebu were the only customs ports open in the islands. The ports of Jolo, Zamboanga, and Siassi were opened in the latter part of 1899, the exact date of entry of each being unknown at this office.

These six above-mentioned ports are all of the entry ports in the islands at this time. The island of Guam is not considered, as said port has never made any report to this office, either financial or otherwise.

On June 30, 1900, there were, in addition to the six entry ports, seventy interior ports. The following exhibits their names, where located, when opened, and the collection district and jurisdiction to which they belong, viz: