bureau of posts, have uniformly been rendered in United States currency. The money-order account with the United States is necessarily so kept. The vast number and general minuteness of the individual transactions of postmasters in selling stamps and stamped paper would have rendered impracticable and abortive any attempt to require an accurate accounting by the currencies actually involved. Philippine money orders, however, though drawn and accounted for in terms of United States currency, bear on their face such notation and indorsement that the amount and kind of currency actually received by the issuing postmaster for each order is shown and paid accordingly, if the order is paid in the Philippine Islands.

No credit for loss due to change in ratio has ever been claimed or allowed in any postal or money-order account. On the contrary, a gain in exchange of $2,545.77 United States currency, accrued on moneyorder transactions with the United States, which gain, together with money-order fees to the amount of $10,686.49, has been transferred to the postal revenues.

The number of post-offices in the Philippine Islands on June 30, 1903, was 212, showing an increase of 134 offices during the fiscal year. Twenty-six postmasters received fixed salaries, while 185 are compensated on the basis of a percentage of the gross postal receipts, and one officer of the United States Army serves as postmaster without compensation. Thirty-three post-offices are authorized to issue and pay money orders.

There were received for the fiscal year 2,212 monthly postal accounts and their settlement was completed by September 30.

Weekly money-order statements to the number of 1,599 were received and settled, and a statement of these transactions appears elsewhere in this report.

In accordance with the general plan agreed upon by the Philippine government with the postal authorities of the United States, this division has prepared and transmitted to the Auditor for the Post-Office Department, Washington, D. C., as remittances for the credit of the government of the Philippine Islands on money-order account, twelve monthly money-order statements of orders of United States issue paid in the Philippine Islands during the fiscal year 1903, each statement being accompanied by the vouchers therein listed, the whole aggregating $136,440.61 United States currency. Twelve corresponding remittances of Philippine money orders paid in the United States, transmitted to this bureau by the Auditor for the Post-Office Department, aggregating $1,396,848.20 United States currency, have been carefully audited by this division and passed to the credit of the United States. Section 4 of act No. 181 gives to postmasters compensation on the basis of a percentage of the gross receipts of their respective offices100 per cent of the first $25 of receipts per month. It is noted that a considerable number of the postmasters so compensated uniformly report monthly sales of stamp stock amounting either to $25 or a slightly less sum. It is not possible for this office in any particular case to establish the fact that the reported sales are not bona fide, but such suspicion may reasonably be entertained in view of the quantities of stamps sometimes found in the hands of private parties and even business firms for sale. I am unable to suggest an adequate and practicable remedy, except that it might be made unlawful for any person

to purchase stamps from outside venders or other than postmasters at their offices.

The compensation of fourth-class postmasters in the United States was formerly based on a percentage of their sales, as here, with the result that many such postmasters, usually country merchants, purchased of wholesale houses with stamps a part of their stocks of merchandise, thus increasing their salaries in many instances to the maximum limit of $1,000. Congress found it necessary, therefore, to fix the compensation of this class of postmasters on the basis of actual cancellation of stamps affixed to matter mailed at their offices. An examination by an inspector of the outgoing mail from a post-office suspected of padding its returns usually resulted in determining the legitimacy or illegitimacy of apparently excessive claims for compensation. A similar change in policy may be found necessary in these islands.

Notwithstanding the active cooperation of the director of posts with this bureau in its endeavors to secure prompt rendition of monthly postal accounts, the division is much inconvenienced by the failure of postmasters to render accounts promptly at the close of each month. This is particularly true of school-teachers and other insular employees, who are also authorized by law to act as percentage postmasters. When transferred or on vacation they frequently abandon their postoffices without making a proper accounting. Hereafter when it is shown that a delinquent postmaster is receiving a salary from some other branch of the Government a request will be made for stoppage of all pay until the delinquency is cured.

In view of the temporary character of the service, this division was charged with the settlement of the accounts of the census bureau, embracing 39 provincial treasurers and 13 military officers acting as disbursing officers of the census.

THE MISCELLANEOUS DIVISION.

This is by far the largest division of this bureau, both as to number of clerks employed and variety of accounts received, settled, and adjusted. Approximately one-third of the entire clerical force is employed in this division. It audits practically all insular disbursing and revenue accounts not distinctive in character, as are those of the customs and postal services, and they may be enumerated as follows: The Philippine Commission, executive bureau, civil service board, insular purchasing agent, board of health, quarantine service, mining bureau, weather bureau, bureau of public lands, bureau of agriculture, ethnological survey, bureau of government laboratories, Philippine Civil Hospital, civil sanitarium at Benguet, signal service, bureau of Philippines constabulary, bureau of prisons, bureau of coast and geodetic survey, bureau of engineering, bureau of the insular treasurer, bureau of the insular auditor, insular cold storage and ice plant, bureau of justice, bureau of education, bureau of public printing, bureau of archives, American circulating library, Official Gazette, exposition board, superintendent of intendencia building, Benguet wagon road, district commander at Isabela de Basilan, district commander at Pollok (Mindanao), city of Manila (all departments), custodian of Santa Potenciana Building, and the insular accounts of the

chief quartermaster, the chief paymaster, the chief commissary, and the chief engineer of the Division of the Philippines, the latter including the improvement of the port of Manila.

The fiscal year 1903 was marked by many changes in the personnel of this important division, several of its most valuable clerks having resigned to return to the United States. Among those who returned to the United States was its former chief, Mr. Russell Howard, who resigned about February 1, 1903, on account of ill health. Mr. Howard's departure was a serious loss to the bureau. He was succeeded as acting chief by Mr. Floyd E. White, who held the position for a brief period only, owing to his death, which occurred February 15, 1903. The present chief of division was designated as acting chief and served as such to April 18, when he was designated as chief of the division.

Vacancies were necessarily filled by clerks unacquainted with auditing work, and the time of the chief of the division and that of one or two experienced clerks has been occupied to a great extent in teaching the inexperienced recruits. The work of the division has been somewhat retarded on this account.

The following statement shows the amount of work accomplished during the fiscal year 1903: Number of unaudited monthly accounts on hand June 30, 1902, 2,569; number of monthly accounts received during the fiscal year, 6,292; number of monthly accounts audited during the fiscal year, 6,811; number of unaudited monthly accounts on hand June 30, 1903, 2,050. In addition to the foregoing should be included about 500 supplemental settlements.

These monthly accounts vary in size from a simple account consisting of an account current and 5 or 6 vouchers to one containing from 1,500 to 2,000 vouchers.

On account of the ramifications of the work of this division it is impracticable to comment on any particular phase. Many features which enter more largely into the work of this division than any other are discussed elsewhere.

THE PROVINCIAL DIVISION.

The principal work of this division is the audit of the accounts of provincial treasurers with their respective provinces.

The division grew out of the old internal-revenue section upon the establishment of provincial governments and the consequent abandonment of the offices of collectors of internal revenue, all internal revenue, so called, having become, in organized provinces after July 1, 1901, joint provincial and municipal revenue, under section 18 of Act No. 83.

Including Marinduque, merged with Tayabas in November, 1902, and Subig Bay Naval Reservation, which was treated in the same manner as a province until its abandonment, in November, 1902, the division received during the fiscal year 1903 provincial accounts from fortyone provinces. There were twelve internal-revenue offices-located in territory since included in Moro Province-the accounts of which were received by the division in addition to the accounts of the acting collector of internal revenue at Manila.

The division also received for audit the accounts of provincial treasurers collecting insular-revenue taxes on forest products, the collection

accounts of the mining bureau and the bureau of patents, copyrights, and trade-marks, the insular treasurer's stamp report, the disbursing account of the forestry bureau, and the accounts of disbursements for the maintenance of internal-revenue offices.

There were received in the provincial division the following accounts pertaining to the fiscal year 1903: Provincial treasurers' revenue accounts, 480; provincial treasurers' disbursing accounts, 490; provincial treasurers' forestry accounts, 492; internal-revenue accounts, 136; miscellaneous accounts, 60; or a total of 1,658 accounts.

Provincial treasurers, in their capacity as such, are accountable for three distinct funds: (1) Provincial and municipal; (2) forestry collections; (3) deposits for safe-keeping.

Each provincial treasurer, in person or by deputy, collects in his province all provincial and municipal revenues (with the exception of certain minor municipal taxes), pays over to the municipal treasurer the municipal share of the collections, disburses under the direction of the provincial board the funds of the province, and renders accounts to the auditor for all these transactions.

The provincial treasurer's disbursing account, covering funds not subject to appropriation by the Commission but under the control of the provincial board within certain limitations, is necessarily treated in the audit somewhat differently than the ordinary disbursing account. The general laws with regard to insular affairs passed by the Commis sion are applied, however, as far as practicable to the audit of provincial accounts. This is not always an easy matter, as the provincial boards, while limited in their powers under the law, are to a certain extent independent, and constant care is necessary in order that they may not, either through ignorance of the law or lack of proper understanding of their powers and duties, countenance practices by provincial officials which are not permitted in the case of insular officials. It is also necessary to note that they do not authorize expenditures the payment of which is assumed and appropriated for by the insular government, such as salaries of secondary school-teachers (sec. 15, Act No. 477) and expenses of vaccinators (sec. 14, Act No. 309). Such expenditures, if made by the provinces, would make possible double payments, which would be exceedingly difficult of detection. A complete set of instructions, intended primarily for provincial treasurers, but which will give needed information to all provincial officials, is in course of preparation, which it is believed will assist materially in the proper rendition of provincial accounts.

Under the act of Congress of July 1, 1902, collections under the forestry regulations on timber cut in the islands were made insular revenue and required to be deposited in the insular treasury. Under Act No. 527 of the Philippine Commission a permanent appropriation was made for the return proportionately to the respective provinces in which the timber is cut of the net amount of the forestry revenues, after deducting the entire expenses of the forestry bureau from the gross collections. The refunds are made quarterly by settlement warrant on certification of the auditor, and have been made as soon as possible after all the collection accounts and the disbursing account of the forestry bureau have been received and audited. The total collections for the year (excluding possible collections in Davao, Mindanao, from April 1 to May 2, 1903, the collector of internal revenue at that place

having failed to render account for the period) were $27,174.05 United States currency and $457,785.55 Mexican currency.

The expenses of the forestry bureau were $227,750.57 Mexican currency and $620.58 United States currency, which, for the purpose of prorating the returns in the currency actually collected, was reduced to an equivalent of $12,067.16 United States currency and $200,892.85 Mexican currency, or an average of 43.94 per cent of the amount collected, leaving 56.06 per cent as refundable to the various provinces. The refunds for the first three quarters of the fiscal year were made February 18, March 27, and August 6, 1903, respectively, the first quarter being delayed partly because of nonreceipt of accounts and partly because of the necessity for completion of the audit of fiscal year 1902 accounts before this work was taken up. The third quarter was delayed in order to make return in the new Philippine currency. The return for the last quarter is now in process of refundment.

Provincial treasurers are required by law to receive municipal funds deposited for safe-keeping by municipal treasurers and court funds deposited by the clerk of the court. For the purpose of keeping a proper check on the cash on hand this office now requires an account current showing these and any other moneys not properly accountable for as provincial and municipal funds. These accounts are consulted in connection with the audit of the regular provincial accounts.

Under the provisions of Act No. 311, as amended by Act No. 739, all internal-revenue collections, so called, made prior to the organization of a province are refundable after organization to the province and municipalities in which collected. These refunds are also made by settlement warrant on certification by the auditor. A part of these refunds was made during the fiscal year 1902. During the fiscal year 1903 the balance due the provinces has been refunded, except certain small amounts which are withheld pending full deposit by the collectors of internal revenue and the collections which will now be refunded to the newly organized province of Moro.

There will be some additional work in this division for the next fiscal year on account of the independent provincial government of Moro, which has just been organized. How much extra work this will entail can not at this time be estimated, but the system of accounting will be practically the same as the insular system, only on a smaller scale. Preliminary instructions for the rendition of accounts and vouchers to this office, and also forms for a complete system of accounting, have been prepared and forwarded to the provincial treasurer. It is not presumed that these instructions and forms will meet all of the phases of the accounting in the province, and changes will be made from time to time as the needs of the service and the acts of the legislative council may indicate.

During the fiscal year the books in which the accounts of provincial treasurers were kept were posted in this division, but have since been transferred to the bookkeeping division. During the fiscal year 543 certificates of settlement of provincial treasurers' collection and disbursing accounts, covering period settlements of from one to twelve months pertaining to the fiscal year 1903 and to accounts supplemental to the fiscal year 1902, have been posted on these books, in addition to the posting of 644 certificates of settlement of the regular accounts of 1902, all of which were posted after July 1, 1902, as the books for these settlements were not received in time for earlier use.