in stock on June 30, 1917, was $6,326,611.90, as against $4,198,392.34 on June 30, 1916, not including the stock of obsolete material and scrap. The total issues of material from storehouses was $12,083,926.25, as compared with $9,028,564.07 for last year. The increase in value of stock on hand is attributable to the constantly increasing cost of material and supplies and to the necessity for increasing the stock of articles such as paints, rope, etc., for sale to steamships, to the policy of carrying a six-months' supply of gasoline, oils, grease, etc., on hand at all times, owing to uncertainties of delivery on account of war conditions, and also to the increased amount of ship work being performed by the mechanical division, making it necessary to increase the stock of steel. Sales to Government departments and to commercial steamships totaled $593,623.00 in value, which is an increase of $157,543.20 over the previous year; sales to steamers increased by an amount of $180,755.41; sales to the Army amounted to $211,466.05; and to the Navy, $27,760.38. The principal items sold to the Army and Navy were lumber, building material, general hardware, gasoline, and kerosene. The consumption of cement for the year was 270,053 barrels. Details of the collection and disposition of obsolete material, equipment, and scrap are contained in the report of the chief quartermaster, Appendix E.

Fuel-oil plants.-The contract with the Standard Oil Company of California expired on June 30, 1917, with one order remaining for delivery at Balboa of 85,000 barrels on or before August 3, 1917. New contracts for the following year were entered into with the Standard Oil Company of California for delivery at Balboa of 700,000 barrels, at $1.60 per barrel, and with the Atlantic Refining Company for 240,000 barrels for delivery at Cristobal, at $2.09 per barrel. To provide for the increased storage of oils, two 55,000barrel capacity tanks, one at Cristobal and one at Balboa, were leased from the Panama Canal Storage Corporation. The West India Oil Company completed a tank at Balboa with capacity of 65,000 barrels, and a 55,000-barrel tank was completed at Cristobal for The Panama Canal. The total fuel oil handled by the plants at Balboa and Mount Hope tank farms amounted to 2,975,223 barrels for 406 vessels, an increase of 719,104 barrels and of 96 vessels receiving oil, as compared with the previous year.

Gasoline.-Gasoline was stored in bulk in tank No. 31 at Balboa, and 81,895 gallons were drawn from storage.

Subsistence.-The commissaries of the Panama Railroad continued under the management of the supply department of the canal. The policy of making the canal as nearly as possible independent of outside sources of supply of foodstuffs has been considerably developed in the effort to keep down the cost of living. The cattle industry has been particularly successful in this regard. The value of native beef

produced increased from $446,882.69 to $927,551.06, and the consumption varied from 3,843,377 pounds in 1916 to 7,117,613 pounds in 1917. The fresh beef imported from the United States decreased from 3,237,598 pounds in 1916 to 1,832,714 pounds in 1917. In the development of pastures for fattening cattle 23,000 acres have been cleared, planted in grass, and fenced. Cattle have been purchased in Colombia, and the cattle ship Caribbean has brought in 14,032 fat cattle and 1,637 varying from 1 to 3 years in age. As the result of the cattle industry in the Zone, it has been possible to sell to employees beef at the following prices, as compared with the prices for fresh beef imported from the States.

Comparative prices of beef, American and native, prevailing at the close of the fiscal year.

In the gardens and plantations, the development of which has been begun, it is expected to grow the following products in sufficient quantities to provide for the Canal Zone population: Cocoanuts, cacao, plantains, bananas, mangoes, grapefruit, limes, oranges, alligator pears, papayas, breadfruit, corn, yams, yampees, sweet potatoes, yucas, peanuts, melons, beans, tomatoes, okra, eggplant, lettuce, cucumbers, and other small vegetables. Other operations designed to produce food supplies locally include a hog farm, chicken farm, and dairy. These are in the early stage of development and are as yet not sufficiently advanced to have an appreciable effect upon the prices of the commodities concerned.

The net revenue for the year from restaurants and messes was $641,067.59, a decrease of $19,950.31 from last year. The total cost of operations was $634,150.33, a decrease of $14,415.06. The profits were $6,917.26, a decrease of $5,535.25 from last year. No charge has been included for repairs to buildings, fuel, light, etc., in arriving at these figures. The Tivoli Hotel, owned and operated by the canal, showed a net profit of $1,084.86, as compared with a net profit of

$17,007.51 for last year. The Washington Hotel, which is owned and financed by the Panama Railroad but operated by the canal, showed for the first time a profit on operations. The profit for the year was $2,464.99, as compared with the loss for 1916 of $12,454.70. The Washington Hotel is now becoming of more service to the traveling public, and the increased business is largely due to the fact that the steamship lines operating down the west coast of South America have made Colon their terminal point. Some of the increased business at the Washington Hotel has been at the expense of the Tivoli Hotel, for the reason just stated. Prior to the 1st of February the tourist traffic at both hotels was heavy, but it has practically ceased on account of the war. On account of the failure of appropriations for the construction of the new Tivoli Hotel it has been necessary to authorize the expenditure of about $75,000 for repairs to the present structure.

Mount Hope printing plant.—The value of the stock on hand on June 30, 1917, was $81,767.72, as compared with $53,407.02 for last year. There were added to the equipment of the plant during the year items amounting in value to $8,409.80. Unserviceable items to the value of $174.76 were surveyed and disposed of, and the total value of equipment on hand June 30, 1917, was $46,132.61, as compared with $37,897.57 for last year. The total value of material issued from the plant was $87,482.47, as compared with $78,115.24 for the preceding period. This printing plant manufactures and supplies various forms, record books, correspondence paper, and other similar supplies for the canal and railroad, and prints The Panama Canal Record.

For further details of the work of the supply department, attention is invited to Appendix E.

ACCOUNTING DEPARTMENT.

The organization of this department has continued as described in the annual report of 1916, except for changes that were made on account of the death of Mr. Ad Faure, chief accountant, who had faithfully served the canal in an important accounting capacity since 1905. The auditor, Mr. H. A. A. Smith, continued in direct charge of the auditing and accounting division. The division of disbursement remained under the paymaster, Mr. John H. McLean, and the division of collections under the direction of Mr. T. L. Clear.

Disbursements were made by the paymaster to the amount of $28,150,610.55 during the year, of which amount $9,363,739.34 were on account of the Panama Railroad. Employees on the gold roll of the canal were paid $6,206,950.72 and those on the silver roll $5,914,259.72. Collections by pay-roll deductions were made from

employees in the sum of $4,028,566.94; of this amount the sum of $3,822,212.07 was collected for commissary coupon books and meal tickets and $55,025.07 for rent of quarters by silver employees. The Commercial National Bank, of Washington, D. C. (Panama branch), has continued as a Government depository, and small deposits of both Government and Panama Railroad funds are carried in this bank. On account of the failure of two local banks other banks found it desirable to increase their cash balances, thus reducing materially the supply of cash in local circulation. This made it necessary to import from the United States more money than usual, and $1,425,500 in United States currency were imported by the canal. By arrangement with the Republic of Panama 1,000,000 pesos Panaman coin (equivalent to $500,000 United States currency) were withdrawn from circulation and replaced with gold coin. The large bulk necessary to be handled in making payments with the Panaman silver made this retirement advantageous to the canal.

The collections during the year repaid to appropriations amounted to $7,844,602.02. Deposits for the payment of tolls and bills for supplies and services were made with the Assistant Treasurer of the United States by shipping agents and interests to the credit of the collector of the canal in the sum of $3,623,334.93. Similar deposits were made with the collector on the Isthmus in the sum of $6,641,140.92. Of the total amount thus deposited, the sum of $593,677.89 was refunded upon settlement of accounts. Money-order funds to the amount of $1,676,500 were transferred to the Postmaster General in the United States in payment of money orders drawn on the United States by the Canal Zone post offices.

Under the provisions of section 3 of the sundry civil act of March 3, 1915, two employees detailed by the Treasury Department, one from the Office of the Auditor for the War Department and one from the Office of the Comptroller of the Treasury, made the required semiannual examination of accounts on the Isthmus.

The act of June 12, 1917, authorized a refund of amounts erroneously collected as tolls prior to the ruling of the Attorney General that the tolls collected under the Panama Canal rules of measurement shall not exceed $1.25 per net registered ton, as determined by United States rules for measurement.

Small claims for damages to vessels passing through the locks have been paid in accordance with the provision of section 5 of the Panama Canal act; also a few claims for damages arising in the canal and harbors. The sum of $2.368.12 has been paid in settlement of five claims. All claims have thus far been adjusted and settled by mutual agreement without recourse to the courts.

The total amount appropriated by Congress to June 30, 1917, for the canal and its fortifications was $439,002,360.22. Of this amount,

$28,580,347.30 were for fortifications, $1,500,000 to cover annual payments of $250,000 each to the Republic of Panama for Canal Zone rights, and $6,000 for the expense of presenting the launch Louise to the French Government. The sum of $23,890,000 has been specifically appropriated for the operation and maintenance, sanitation, and civil government of the canal and the Canal Zone. In addition thereto the act of August 1, 1914, makes the amounts therein appropriated for the construction of the canal available for expenses of maintenance and operation. The sum charged against operation and maintenance, in accordance with this authority, was $4,289,159. Under authority of the same act the sum of $2,225,000 of general appropriations has been expended in the purchase of a stock of materials and supplies for the operation and maintenance of the canal. Experience has shown that this sum of $2,225,000 is too small to cover the value of stock required for operation and maintenance and for sale to ships using the canal. Under appropriations for construction, materials and supplies for construction purposes have been purchased and additional purchases have been made from funds for operation and maintenance, so as to make the total value of stock on hand at the end of the fiscal year $6,663,458.99; when the constructions are completed and the materials and supplies absorbed therein a sufficient stock can not be maintained for operation and maintenance unless future appropriations make provision there for. It is apparent that the stock of materials must be maintained at not less than $5,000,000 to supply the needs of operation and maintenance of the canal, construction and work performed by it, and its commercial operations.

Deducting from the total canal appropriations all appropriations for purposes other than construction, there remains a total of $378,511,853.92 appropriated for the construction of the canal and its immediate adjuncts. Of this amount $3,600,000 appropriated for colliers and coal barges, $1,500,000 for Dock No. 6 at Cristobal, $300,000 for work on the colliers Ulysses and Achilles, and $720,000 for reboilering and repairing the steamships Ancon and Cristobal, were specifically exempted by law as a charge against the authorized bond issue. This leaves as chargeable against the bond issue for the construction of the canal a total of $372,391,853.92 thus far appropriated. The ultimate cost of the canal will be further reduced by receipts of sale for construction material and equipment, and by payments to be made by the Republic of Panama for amounts expended on account of waterworks, sewers, and pavements in the cities of Panama and Colon. As a credit on the books, the cost of the canal is also entitled to the value of buildings and other public works, equipment and plant, transferred without actual payment therefor to the Army, the Alaskan Engineering Commission, and