In the past, whenever the Secretary has placed an amount to the credit of a disbursing officer, it has been the custom to carry that on the Treasury statement as a disbursement. As a matter of fact, the money in many instances is not spent for months, and sometimes not at all, being returned to the Secretary's account. Funds are placed to the credit of disbursing officers practically as a bookkeeping arrangement, and they are as much a part of the working balance of the Treasury as the money which is subject to the warrant of the Secretary. As the net balance should represent the funds in the Treasury available for paying the current obligations of the Government, the amount placed on the books to the credit of disbursing officers should be included therein.

The amount deposited by national banks for the retirement of national-bank notes, but not yet paid out for that purpose, is also included in the net balance. In the old statement this amount was carried on the liability side of the general fund. This was an error, because by law deposits for the retirement of national-bank notes are a part of the public debt. The act of July 14, 1890, prescribes that such deposits shall be covered into the Treasury as miscellaneous receipts, and that the notes thus rendered subject to retirement by the United States shall be carried as a part of the public debt. This fund is not the 5 per cent fund provided for the redemption of the current circulation of national banks, but is a fund for the redemption of the notes of national banks which have ceased to circulate notes or which have reduced their circulation. As directed by the act of July 14, 1890, the amount to the credit of this fund was placed in the general-fund balance, where it was carried continuously by every Secretary of the Treasury, whether Republican or Democratic, until the early part of this administration (1913), when the form of daily Treasury statement was changed and this item mistakenly carried as a liability. The item is now restored to the general-fund balance of the daily statement, where it belongs. It will appear as a liability on what was previously known as the monthly public-debt statement.

Following the general-fund statement appears the daily trial balance of the general fund, entitled "Receipts and disbursements this day." This is a simple statement of the day's transactions. One important change contained in this table, as well as in the "Comparative analysis of receipts and disbursements" on page 2, is the segregation of Panama Canal receipts.

In the past it had been customary to set forth Panama Canal disbursements separately as extraordinary expenditures, but receipts from tolls, profits from the sales of material on account of the canal, etc., have been included in the ordinary miscellaneous receipts. In

future these Panama Canal receipts, like the disbursements on account of the Panama Canal, will appear separately.

The new daily statement is on a cash basis. Receipts have been reported on a cash basis, while disbursements have been on a mixed basis. This has proved confusing. Under the new form disbursements, like receipts, represent cash transactions.

It will be impossible to state outstanding checks in the column of liabilities in the daily statement, because it is not practicable to get the information daily from disbursing officers. Outstanding checks and warrants are offset in large measure, however, by receipts which are in transit to the Treasury. All outstanding warrants and checks will be shown monthly in what previously was known as the public-debt statement.

Several tables that appeared on the fourth page of the old statement are either omitted entirely as unimportant or uninforming or are included in the new items on page 3, "Federal reserve notes and national-bank notes outstanding" and "Transactions affecting Federal reserve and national-bank note circulation." "Bonds held in trust for national banks" still appears, but the table of "Pay warrants drawn" has been omitted. It is believed that a daily statement of these warrants is of no value, and it will hereafter appear in what was known previously as the public-debt statement.

The new statement gives an accurate idea of the actual condition of the Treasury as far as it is ascertainable from day to day. The old statement, with its cumbersome notations of purely bookkeeping transactions within the Treasury Department, which had little bearing upon actual expenditures, had been very confusing, and had led to much misconception as to the actual condition of the Treasury.

The public-debt statement in the new form is changed to "Financial statement of the United States Government."

Instead of reproducing the daily statement for the last day of each month on the public-debt statement, the new statement includes a table of cash available to pay maturing obligations, or, in other words, the working balance of the Treasury with the liabilities against it. On the asset side of this table is the net balance in the Treasury. On the liability side of this statement are set up outstanding warrants, checks, and matured coupons. While it is not practicable, as stated above, to get daily from disbursing officers a statement of their outstanding checks, it is possible to get this information once a month.

It is necessary to get information from disbursing officers all over the country for the monthly statement, but it is believed that this can be so expedited that the department will be able to issue the statement on the 15th of each month.

DESTRUCTION OF CANCELED SECURITIES.

During the past year the regulations regarding the destruction of canceled paper currency and other securities of the United States have been codified and revised. The original regulations in this respect were issued by Secretary Chase when the Government for the first time issued paper money and Congress authorized the replacement and destruction of unfit notes. Since that time changes in department business and routine have resulted in modification of practically every procedure established by the original regulations, but up to this time the regulations have never been formally abrogated or revised. The regulations now cover the present conditions; the procedure has been simplified and the department's security increased. Securities to be destroyed are delivered to the so-called destruction committee composed of representatives from the Secretary's Office and from fiscal bureaus concerned. Some idea of the amount of work handled by this committee may be had from the fact that during the year just closed 377,364,188 redeemed notes (paper money) of a nominal value of $1,541,131,111 were destroyed, as well as large quantities of other securities.

COMMITTEE ON IMPROVEMENT.

On September 3, 1915, I appointed the following committee on improvement to conduct a thorough investigation of the entire Treasury service, for the purpose of making recommendations for placing the Treasury Department on a more efficient, economical, and modern business basis: Hon. Wm. P. Malburn, Assistant Secretary of the Treasury, chairman; Hon. W. W. Warwick, Comptroller of the Treasury; Mr. J. L. Wilmeth, Chief Clerk Treasury Department; Mr. F. M. Halstead, Chief Division of Customs; and Mr. S. H. Boyd, Chief Income-Tax Division.

My experience in the department has impressed me with the fact that there is room for many improvements and economies in the Government service. The growth of the Treasury Department has been a process of years, and as the structure has reached its present great proportions there has crept in much duplication of work, as well as useless work, and cumbersome and inefficient methods which impede business and cause needless expense. I have instructed the committee that it is my earnest desire to have useless offices abolished, duplication of work eliminated, and archaic methods replaced with the up-to-date methods that characterize the best modern business enterprises. The report of the committee has not yet been received, but I hope that as a result of its investigations and efforts the means may be found for substantial improvements in the Treasury service.

SALARIES OF ASSISTANT SECRETARIES OF THE TREASURY.

I desire to recommend most earnestly to the Congress that the salaries of the Assistant Secretaries of the Treasury be increased from $5,000 to $7,500 per annum. The present compensation of $5,000 per annum is wholly inadequate for these important positions. It is a great injustice to the able men who now occupy the positions of Assistant Secretaries of the Treasury to be forced to work for inadequate compensation. They are rendering highly useful services to the country of far greater value than the pay they receive. It is not every Assistant Secretary who has independent means to help him support himself in a position for which the Government compensates so poorly. We must keep men of ability in these positions. It would advantage the Government in every way to pay the Assistant Secretaries the small increase I have suggested, involving, as it does, for the three, an additional appropriation of only $7,500 per annum.

GENERAL SUPPLY COMMITTEE.

The General Supply Committee, which at the time of its establishment in 1910 encountered strong opposition, both inside of the service and among the contractors, has overcome complaints from both sources and has succeeded in demonstrating its value in a marked degree, although hampered in the performance of its duties by the lack of sufficient permanent help. It annually prepares and issues specifications, opens and examines proposals, and recommends to the Secretary of the Treasury the awards of contracts for furnishing governmental establishments in Washington with all supplies in common use, as well as draws all contracts and obtains execution of the same. It performs the clerical work which was formerly required of 50 purchasing offices variously distributed in the different departments, and the results which it has achieved are most commendable. Its intelligent uniformity of action and careful study into the needs and requirements of the service, coupled with an administration of economic reforms, have resulted in obtaining for the Government a better class of supplies at cheaper prices and on more prompt deliveries than in the past.

As an indication of the growth of this office the first schedule of awards issued in 1910 shows only 564 bids received and 282 contracts negotiated, covering about 3,000 items, while for the year 1915, 714 bids were received and 462 contracts executed, covering approximately 15,000 items. The following table shows to what extent purchases have been made from the general supply schedule by the

different purchasing agents of the Government during the last three years:

1913 (inclusive of field-service purchases, since withdrawn).

1914 1915

$2,728, 767. 64

2, 382, 203. 52 2, 544, 051. 54

The experience of great commerical enterprises has shown that large financial operations, involving accounting for revenues and disbursements as to transactions which are similar or closely related, are more efficiently and economically administered under one compact organization than under separate and independent systems with their attendant diversity of methods, duplication of work and employees, and additional expense. This naturally suggests a consolidation of the contracting and purchasing offices of the Government into one complete and well-balanced organization, to which the attention of Congress is earnestly invited.

SINKING FUND.

The sinking-fund account shows on June 30, 1915, an accumulated balance of $991,096,467.86 for the retirement of the public debt. This balance, of course, does not exist except on the books of the department. As a matter of fact, there never has been a real sinking fund established. Amounts have been set up as belonging to the fund, as the law directs, and charges have been entered as certain items of debt have been retired. It is and has been for years only an account, not a fund.

After the original sinking-fund acts were passed conditions regarding the public debt changed very materially. The credit of the United States improved and all obligations have been met. The act of May 31, 1878, stopped further retirements of United States notes; their redemption was definitely provided for through the goldreserve fund established by the act of March 14, 1900. The bank act required the deposit of United States bonds in order to secure circulation, and for many years practically all the interest-bearing obligations of the United States were used for this purpose. Moreover, the revenues of the Government have not always been adequate to carry out the sinking-fund provisions, even if other conditions had not estopped the Secretary. As a result the only entries that have appeared on the sinking-fund account since 1903 are payments of matured bonds.

The sinking-fund acts should be revised. Either an actual fund should be established, with definite and specific appropriation made. therefor, together with specific provisions for the administration of the fund, or else the existing acts should be repealed and the Secretary directed to purchase and retire interest-bearing obligations of