special advantage of parties making payments to make them wholly in local currency, and by continuing to make the government disbursements mainly in local currency the amount of money of the United States in the treasury on the 4th day of October, 1902, was $2,634,535.185. BANKS AND BANKING. In the last report of the Commission, under date October 15, 1901, the status of the banks then existing in the islands and of the paper currency in circulation was detailed. There having been no additional legislation by Congress authorizing the establishment of banks in the Philippine Islands, with power to issue bank notes, no action in that direction has been taken by the Commission. The report above referred to contains the recommendations of the Commission in regard to the establishment of a banking system for the islands. Those recommendations I renew, calling special attention to the burden that is now imposed upon commerce by the absence of a sufficient paper currency. Paper money is used but very little in the ordinary operations of commerce, because it is not available. The mechanical difficulties in the way of using the present bulky coins are very great. The counting of money imposes great burdens upon all receiving and disbursing officers and upon the treasury. The handling of large sums involves very considerable expense, and is a serious handicap upon business and governmental transactions. It is urgently recommended that the system of banking which was before recommended be enacted into legislation by the Congress of the United States, or that another system, such as shall commend itself to the judgment of that body, be provided, or that legislation be enacted specifically authorizing the Commission to establish such a system, with a right to authorize the issue of bank notes. Since the date of the last report of the Commission two powerful American banking institutions have opened offices for a general banking business in the Philippine Islands-the International Banking Corporation, of Connecticut, and Guaranty Trust Company, of New York. Both of these institutions have been made authorized depositories for public funds of the United States and of the government of the Philippine Islands in the archipelago. They have introduced a new element of competition, so that exchange, in the large sense, and exchange of currencies in a smaller sense, can be had at a more reasonable rate than formerly prevailed. The funds belonging to the insular government have been so distributed that each of the authorized depositories has about the same amount as the other, and in the insular treasury something over one and a half million in local currency and something over $100,000 in money of the United States are now stored in the vaults. Two small American banks have been started in the city of Manila during the past year, with inadequate capital and an uncertain status as to the legal capacity to transact a banking business. One of them has already been closed, except as to its savings department, and the other has been subjected to frequent examinations, and is now making strenuous efforts to collect some doubtful notes which it has received for loans. Its business is small. The opinion is still entertained that banks with small capital have little field for usefulness in these islands. GENERAL CONDITION OF THE TREASURY. The accounts of the treasury of the Philippine Archipelago have been well kept, and the office has been well administered. All receipts and disbursements have been thoroughly audited by the auditor of the Philippine Archipelago. Both the treasurer and the auditor are to be commended for their efficiency and fidelity. The amount in the treasury at the beginning of the fiscal year July 1, 1901, stated in money of the United States, local currency being reduced to money of the United States at the ratio of 2 to 1, was $6,222,912.78. The amount in the treasury at the end of the fiscal year June 30, 1902, local currency being reduced to money of the United States at the ratio then prevailing, $1 of money of the United States to 2.27 local currency, was $5,995,006.494. The sum available for appropriation on July 1, 1901, was $3,919,420, money of the United States, local currency being reduced to money of the United States on the basis of 2 to 1, exclusive of certain Spanish and insurgent seized funds and special deposits. The sum available for appropriations on June 30, 1902, was $3,999,426.47, money of the United States, local currency being reduced to money of the United States on the basis of 2.27 to 1. The total receipts and disbursements of the insular government during the fiscal year ending June 30, 1902, were as follows: Unassigned bureaus, offices, etc By military officers for civil purposes. Philippines disbursing agent at Washington, not elsewhere indicated Miscellaneous payments by settlement warrants City of Manila, for period prior to August 7, 1901 Refunds to provinces: Internal revenue. Forestry Special refunds Total disbursements to June 30, 1902 Total receipts. Total disbursements to June 30. $9,022, 855. 04/ 239, 291.92 118,711.41 3,777.29 1,253,512.89 10, 638, 148.56 180, 133.57 105, 324.23 1, 188, 244.88 1,689, 344. 70 832, 216.37 1,591, 826.31 339, 384. 13 1, 110, 404. 231 7,875.64 31,655.78 210,637.92 1,533, 706.64 245, 554.08 78, 925. 27+ 4,010.63 9, 149, 244. 39 10, 638, 148. 56 9, 149, 244. 39 1,488, 904. 17 Excess of receipts over disbursements. Of the total receipts, $8,550,758.49 came from customs duties. The general government, in fact, is supported mainly from that source. The excess of receipts over disbursements arises from the fact that the fiscal year 1902 includes all that period from July 1 to December 31, 1901, when many of the bureaus had not been organized, and many of the disbursements that subsequently became necessary were not required. During the second half of the fiscal year 1902 the disbursements exceeded the receipts. During that period the total receipts were $6,777,339.85, of which $1,310,191.74 were repayments from former appropriations not fully disbursed; and refundable duties to the amount of $64,498.13, making a total deduction of $1,374,689.87; leaving a net revenue for the period of $5,402,649.98, United States currency. Disbursements, $6,114,932.34, leaving an apparent deficiency of $712,282.36. Many of the disbursements during the second half of the fiscal year 1902 were in the nature of permanent investments, as for the purchase of vessels for the bureau of coast guard and transportation, the completion of payments for the construction of the insular cold storage and ice plant, purchase of equipment and arms for the insular constabulary, the harbor improvement of the port of Manila, construction of the Benguet road, building and equipping printing plant, and other works of a general character. The organization, equipment, and maintenance of the insular constabulary was a very large expense mainly during the latter part of the fiscal year. The cholera epidemic. has diminished the revenues by decreasing the imports and disturbing the public conditions, and has increased expenditures by nearly $500,000, money of the United States, in the attempt to prevent the spread of the pestilence. The details of the sources from which all receipts came and the purposes for which all expenditures have been incurred are shown in the Combined statement of the receipts and disbursements for the Philippine Archipelago for the fiscal year 1902," prepared by the auditor, hereto annexed and marked "Exhibit IV." It is believed that the insular revenues for the fiscal year 1903 would be adequate to meet all disbursements for the purposes of administration and for the expenditure of considerable sums for improvements and extraordinary expenses were it not for the great depreciation that has existed in the value of the silver coin held by the treasury as above stated. This depreciation will cause a deficit which must be met from the surplus heretofore accumulated in the treasury. The probable amount of the deficit will be apparent from the budget, as hereinafter stated. The available assets will be to some extent increased by the action of Congress in dedicating to insular purposes the Spanish seized funds and seized insurgent funds that have been kept as special funds in the treasury heretofore. The available assets, however, will not be increased to any appreciable extent by the provisions that customs duties collected in the United States on imports from the Philippine Islands shall be returned to the insular treasury. Experience has already demonstrated that the insular treasury will receive very little benefit from that provision of law. The rates now imposed by law upon imports into the United States from the Philippine Islands are still practically prohibitive and afford no encouragement to the industries of these islands. SEIZED FUNDS AND SPECIAL DEPOSITS. Acting under the authority of the act of Congress last referred to, the insular treasurer, the auditor, and the assistant executive secretary have been appointed a committee to furnish a complete list of the Spanish seized funds, and funds seized from insurgents, and special deposits in the treasury, and to recommend a scheme for converting the same into cash in the insular treasury, subject to such claims as may be established against the funds. The committee has not yet made its report, but it is expected that the report will soon be forthcoming and suitable legislation will be enacted upon the subject. INSULAR BUDGET. It is impracticable to make estimates for the fiscal year 1903 that will be entirely accurate, but to that end a most careful investigation has been made of the necessary operating expenses of every department and bureau in the islands and of the extraordinary expenses that are liable to be incurred, the extraordinary expenses being mainly for new equipment and permanent improvements, and the expense incident to taking the census required by the act of Congress of July 1, 1902. For the first quarter of the fiscal year 1903, ending September 30, 1902, the total appropriations have been $2,646,994.83, of which $2,074,820.94 were for current expenses, and $572,173.89 were for extraordinary expenses. The appropriations for the city of Manila are included in this statement, all payments on account of the city of Manila being made from the insular treasury. Using as a basis these data, as well as the actual disbursements for the latter portion of the fiscal year 1902, when substantially all the bureaus had been organized, and making a suitable allowance for extraordinary expenses that are now foreseen for the fiscal year 1903, the estimate is that the total expenditures required will be $11,570,637.22, of which $8,583,209.38 are for current expenses and $2,987,427.84 are for extraordinary expenses. All disbursements for the city of Manila are included in this estimate. Included in the estimate for extraordinary expenses for the fiscal year 1903 are $75,000 for the suppression of epidemic diseases and pests, and $50,000 for expenses in connection with the establishment of a leper colony, $31,149.60 for apparatus and books for a new laboratory building; $875,612.67 for the construction of vessels for the coast guard and transportation, construction of light-houses and purchase of lanterns; $362,056.32 for the construction and maintenance of public buildings, including the new government laboratory; $28,406 for the construction of wharves at Lligan, Siassi, Jolo, and ParangParang; $500,000 for harbor improvements at the port of Manila; $125,000 for the Philippine exhibit at the Louisana Purchase Exposition, at St. Louis; $150,000 for the construction of a road into Benguet Province; $54,706 for the purchase of a rock crusher, alteration of markets, completion of city pound, improvement and widening of the streets of Manila; $56,182.25 for the installation of the pail system of sanitation in the city of Manila; $561,853 for taking the census, and $100,000 for improvement of the harbor of Cebu. The revenues of the insular government from all sources, aside from refunds, during the first quarter of the fiscal year 1903, ending September 30, 1902, including the city of Manila, amounts to $3,272,283.52. Using as a basis the revenues last stated and the amount collected during the latter portion of the fiscal year 1902 it is estimated that the revenues for the fiscal year 1903 will be as follows: From all departments of the insular government proper Making a total of $9,389, 858.36 1,407,926.78 10,797, 785, 14 Showing an apparent deficit of $772,852.08. It is anticipated that some revenue will accrue from the bureau of agriculture during the fiscal year 1903, but no estimate of such receipts has been included in the above computation, because of the uncertainty of results, nor are the expenses or revenues of the forestry bureau included in the estimate, because under a recent law enacted by the Commission the revenues of the forestry bureau will be returned to the provinces from which they are collected after deducting the expenses of collection. Should it be determined that the revenues accruing from that source should go into the insular treasury, and the expenses of collection be charged to the insular government, the expenses for the fiscal year 1903 should be increased by $106,568 and the revenue by, approximately, $300,000. The receipts from the city of Manila for the fiscal year 1903 will probably be more than is above estimated. In the statement of revenues collected the refundable export duties collected in Manila on exports to the United States are not included, nor in the estimate of revenues is anything included for the customs receipts for Philippine goods imported into the United States, accurate data for this latter sum being not available and the amount thereof being inconsiderable according to such information as has been received. Taking everything into consideration, it is probable that at the end of the fiscal year 1903 there will be in the treasury available for appropriation approximately the sum of $3,226,574.39, aside from seized funds and special deposits now in the treasury and from the sum of $208,000 received from the Navy Department for gunboats purchased out of insular funds and taken over by the United States Navy, being $772,852.08 less than the sum available for appropriation at the end of the fiscal year 1902. All sums are stated in money of the United States. The details of the purposes for which the expenditures for the fiscal year 1903 will be made and the sources of revenue from which they will be met are contained in the tabulation hereto annexed and marked "Exhibit VI." BUDGET OF THE CITY OF MANILA. The charter of the city of Manila took effect on the 7th day of August, 1901, and the data of its financial condition for the fiscal year 1902 cover the period from August 7, 1901, to June 30, 1902, and show the actual receipts and disbursements down to June 11, 1902, and the estimated receipts and disbursements from June 11 to June 30, 1902. They appear in the report hereto annexed, which has been prepared by the municipal board, and is marked "Exhibit VII." The aggregate of expenses during that period was $1,603,893, in money of the United States; and the receipts deposited by collecting officers during the same period were $992,359.05 down to June 10, 1902. The estimated deposits by collecting officers from June 10 to June 30, 1902, were $69,139.80. Thirty per cent of the expenses of the city of Manila are, by law, borne by the insular government, and that 30 per cent amounts to $481,167.90. There is, therefore, an overdraft which the municipal government has made upon the insular treasury of $61,226.25, which will be easily taken care of from the proceeds of collections for the fiscal year 1902. The estimate of collections from all sources of revenue for the fiscal year 1903 is $1,874,280, and of ordinary expenses for the fiscal year 1903, $1,556,666; of extraor |