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.

THE PROPERTY DIVISION.

Under the provisions of Act No. 215 every officer or agent of the insular government who has public property in his charge must be held responsible for the value of the same until relieved from such responsibility, pursuant to the provisions of the act, and every officer accountable for public property is required to make quarterly returns of the same to the auditor.

At the commencement of the past fiscal year the work of the property division, already several months in arrears, was necessarily almost suspended during the preparation of detailed reports of receipts and disbursements then urgently required by the War Department for presentation to Congress. Since that time the force of the division. has been increased by the addition of two Filipino and two American clerks, making a total of seven now engaged in the work. Due to changes in accountable officers by transfers, resignations, etc., whose returns must necessarily be liquidated, it has not been possible to bring all of the work up to a given period, but with the increased clerical force provided for by the Commission it is believed that the work can be brought up and maintained at no time more than one quarter behind. From July 1, 1902, the vouchers for property sold by the insular purchasing agent to the insular bureaus and different departments of the city of Manila have been audited and certified for payment by settlement warrant in this division, thus saving the time which would have been spent in verification and payment by the various disbursing officers and in the double audit in this office of the same vouchers, first in the sales account of the insular purchasing agent and again in the disbursing accounts of the individual officers. One competent clerk does this work, and it is believed that the work of five or six men is saved by this system, which was suggested by Mr. Russell Howard, late chief of the miscellaneous division of this office.

Considerable difficulty is still encountered in the adjustment of the accountability between the insular purchasing agent and provincial supervisors, usually arising from differences between the property as shipped by that bureau and as received by the provinces. The action of inspectors and committees has left, as a rule, considerable to be desired. An amendment to Act No. 215 covering some of the most prolific sources of dispute was recently enacted.

Some legislation fixing a definite system of weights and measures, at least in transactions with the Government or its agents, is also recommended, as at the present time hay is invoiced as tons, pounds, and bales; rice as sacks, piculs, cavans, and pounds; medicines in almost every conceivable weight and measure. For instance, rice has been purchased as piculs, invoiced as pounds, taken up as sacks, and sold as cavans or gantas. The impracticability of securing correct property accountability under such conditions is certainly apparent.

This division has received during the last fiscal year and from July 1 to October 1, 1903, 2,062 property returns; has examined 1,319, and there still remain to be examined 1,093 returns. The difference between those received and examined and those remaining on hand to be examined is due to the fact that there were 350 returns not checked at the time of rendering the last annual report.

A property return embodies the transactions of three months, and is in reality three reports as compared with a disbursing account.

It devolves upon this division to review all reports of committees and inspectors, excepting those relating to subsistence stores, which are referred to the miscellaneous division. In instances where loss of funds arises, the reports are handled by the auditor personally. The number of delinquent returns October 1 was 88.

PURCHASE OF SUPPLIES IN THE UNITED STATES.

On account of the fact that invoices of funds for purchase of supplies were frequently made to the Philippine disbursing agent at Washington by the various bureaus of the insular government as well as by the insular purchasing agent, and the further fact that the disbursing agent made disbursements for supplies for the Philippine service not only out of these two classes of funds but also from the general appropriations for disbursement in the United States, a great many complications arose in connection with the settlement of the money and property accounts involved, which it is believed are now obviated by the adoption of the policy herein outlined:

(a) That no disbursement be made by the Philippine disbursing agent for purchase of supplies from his general appropriations, said appropriations being confined exclusively to payment of salaries, transportation, and other service in the United States not involving property.

(b) That all disbursements made by the Philippine disbursing agent for purchase of supplies shall be from funds appropriated for the insular purchasing agent here and transferred through that officer to Washington.

(c) That all supplies so purchased shall be shipped to the Philippine Islands through the insular purchasing agent here and not direct to any bureau.

(d) That the supplies so received here by the insular purchasing agent shall be sold to the various branches of the service and reimbursed as in the case of supplies purchased in the islands.

This method of procedure received executive approval June 10, 1903, and if rigidly adhered to will afford all necessary checks and safeguards without inconvenience to any branch of the service.

ADMINISTRATIVE AND FIELD EXAMINATION OF ACCOUNTS.

Until a recent date no satisfactory system of field inspection and examination of accounts had been effected. The provincial act and its amendments required the treasurer and auditor jointly to examine the accounts of provincial treasurers at least once each quarter. Every effort was made to comply with this requirement, but it was found impossible to do so on account of an inadequate force of examiners and the further fact that the examiners authorized were unable to get to and away from provincial capitals promptly.

Toward the close of the fiscal year, upon the joint recommendation of the treasurer and auditor, the responsibility for the examination of provincial treasurers' accounts in the field was placed upon the insular treasurer, who was given authority at the same time to employ 12 additional examiners.

In the audit of the collection accounts of provincial treasurers much dependence must necessarily be placed on the reports of examinations by these traveling examiners, as it is not always possible to determine

from the papers submitted to the auditor that the provincial treasurer has taken up and accounted for all moneys received by him.

Under the provisions of Act No. 752 a committee, consisting of the provincial governor, the provincial supervisor, and the provincial secretary, is required to count the cash in the hands of the provincial treasurer promptly at the close of business on the last day of each month. If the provincial treasurer is authorized to deposit funds in a designated depository he must keep a true and correct record of all deposits made by him therein and a true and correct list of checks drawn against his depository. In counting the cash in the hands of the provincial treasurer the aforesaid committee is required to include as a separate item the balance on deposit in such depository, as shown by the records kept by the provincial treasurer. If the provincial treasurer is acting as a disbursing officer of insular funds the committee is required to count and determine the cash balance on hand under each separate designation as disbursing officer in the same manner and at the same time as the balance of provincial funds is ascertained.

The report of the committee must include separately the amounts of cash on hand and on deposit in the various funds provincial, municipal, deposits for safekeeping, census, and other insular moneysshowing the exact sums in actual kinds of currency in which held, which report must be submitted to the insular treasurer and insular auditor.

The practical value of regular and frequent reports on this subject can hardly be overestimated, while the moral effect of the examinations is obvious.

Inspectors or field examiners are now authorized for substantially all branches of the insular service. For the service outside of the city of Manila special agents, inspectors, and examiners have been provided for the customs, postal, and constabulary services, respectively. Other branches of the service must be covered by special examinations by the auditor until the responsibility is elsewhere placed.

Every special agent, inspector, or examiner who conducts a field examination should submit to the auditor a brief report of such examination, inviting attention to any phase of the examination which should be known to the auditor when the final official audit is made.

The responsibility for the field or office examination of the accounts and cash of disbursing and revenue officers located in the city of Manila rests upon the auditor under the provisions of Act No. 490. Mr. A. M. Easthagen was appointed city examiner, under this provision of law, in November last. He has been vigilant and energetic in the performance of this duty, and the results have been very satisfactory, although unpleasant in specific instances. The accounts of thirty-five revenue and disbursing officers serving in sixty-four capacities had been examined by him up to September 1. In some instances the accountability covered but a month or so, the average number of months covered being six.

In addition to the office examinations made under the supervision of the auditor, each head of bureau, under the provisions of executive order No. 21, of March 16, 1903, is expected to exercise a reasonable supervision over the affairs of all cashiers or disbursing officers serving under them, consistent with the responsibility imposed upon such officers and the discretion conferred by law upon each disbursing officer. For this purpose each head of bureau or office is required to WAR 1903-VOL 7—25

cause to be counted and verified at least once each month the cash with which each cashier or disbursing officer is chargeable and make report thereon to the auditor.

RESPONSIBILITY OF DISBURSING OFFICERS.

Suspensions of credit in the accounts of disbursing officers have been unusually large in the past, such suspensions being made necessary by reason of insufficient or defective vouchers, absence of proper approval or authority, as well as failure to submit copies of contracts as required. These suspensions are usually removed when proper vouchers, documents, or explanations are submitted. This condition arises largely through the inexperience of some of the disbursing officers concerned, and is in time overcome in individual cases. There is another class of suspensions, which finally become disallowances, arising from overpayments and illegal payments. In such instances refunds are required. Disbursing officers thus embarrassed have in a number of cases sought relief on the ground that the disallowed payment was ordered by the head of the bureau or a superior officer who possessed the power of

removal.

In order that the authority of the chief of the bureau and the responsibility of the disbursing officer might be more fully defined executive order No. 49 was issued by the civil governor. The general principles are therein laid down that every disbursing officer is responsible to the government, under his bond, for payments made by him, whether such payments are made by direction of his superior officer or not, and the fact of such direction does not relieve him from responsibility; and that a disbursing officer, in determining the legality of expenditures, must act independently of the head of his bureau or office and at his own peril.

Provision is made by law (sec. 1, Act No. 145) that a disbursing officer or head of any department, bureau, or office may apply for, and the auditor shall render, his decision upon any question involving a payment to be made by them or under them, which decision, when rendered, shall govern the auditor in passing upon the account containing the said disbursement, and in all cases of doubt such action should be taken. Pending such decision the disbursing officer may properly refuse to make payment in any case wherein he believes that the payment ordered is not warranted by law.

The auditor is pleased to note and commend a gradually increasing efficiency on the part of disbursing officers, some of whom are now as efficient as any of the experienced officers in the Federal service. Frequent changes in disbursing officers should be discouraged. An efficient and honest disbursing officer should be retained in the same line of service as long as possible, even at an increased salary, as a matter of real economy.

While the official telegraph service throughout the islands brings quick results from the administrative standpoint, it often requires weeks to secure a necessary account, voucher, or document from a remote point in the Archipelago because of a lack of transportation. Accounts are therefore sometimes delinquent through no fault of the accountable officer. This condition is being rapidly improved by regular schedules of the coast guard vessels.