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1. A suspension of all recent allowances from the credit of the contractors.

2. A refusal to accept or pay any drafts drawn on the Department, except by special arraugement.

3. The application of the income of the current quarter to the payment of that quarter's expenses, the surplus only to be applied to the payment of pre-existing claims.

4. The introduction of a system which should effect a more prompt collection and application of the current income of the Department.

The allowances suspended amounted to about $157,000. Without reference to their nierits, it was believed that a preference ought to be given to other claims in making payments.

The discontinuance of acceptances was essential to enable the De. partment to command its means. A revenue arises wherever the mails are carried ; and it would seem obviously appropriate, as well as convenient, that the services of contractors should be paid for in the sections of country where they are rendered, anil, as far as practicable, out of the income which they produce. But the practice of suffering the contractors to draw for their pay subjected the Department to the inconvenience of collecting its funds from the post offices throughout the Union, and trans. ferring them to Washington to meet the drafts. The slowness and uncertainty of this operation made it an insufficient reliance to meet its acceptances, produced the necessity of looking elsewhere for the means, and rendered it difficult to manage its finances with any convenience or regularity.

By paying the expenses of the current quarter at its close, and anuouncing a determination to pay in like manner at the close of each succeeding ove, applying only the surplus to the discharge of former debts, it was believed that the credit of the Department would immediately be elevated, and thenceforward sustained.

Orders to deposite in banks, and irasts on postmasters in favor of contractors, constituted the system of collection found in operation. Upwards of two thousand post offices bail orders to deposite, and upwards of eight thousand were instructed to retain their postages until drawn upon. Many of the deposite offices were dilatory, and defaication among them

was not uncominon. Many of the other offices were not drawn upon for several quarters, on account of the smallness of their income, or other circumstances. The necessities of the Department compelled it to draw

on the more productive offices at the end of each quarter, before their accounts could be adjusted ; and its drafts, being predicated on estimates, could not be for the exact sum in hand. To avoid the danger of a protest, in consequence of drawing for too much, the treasurer generally rew for too little, thereby leaving sınall balances in all the draft offices also. There were, consequently, balances remaining in the hands os more than eight thousand postmasters, which, though generally small, amounted in the aggregate to a large sum.

For the purpose of proniptly bringing into action the means of the Department at the end of each quarter, ihe undersigned divided the offices, finto three classes. The first class, called “ Collection Offices,are up-i wards of wine thousand in number. The postmasters of this class haven been instructed to pay on dema ud, at the close of each quarter, the whole

amount due to the Department ou account of the postages of that quarter, to the contractors who carry the mails along their respective routes, and forward their receipts to the Department. The contractors are instructed to forward acknowledgments, setting forth the whole amount received from each and all the postmasters, and to report forthwith every postmaster who fails to pay, and his reasons therefor, is known to them. To secure promptness and fidelity on the part of the contractors, they are permitted to collect only from so many postmasters as may pay them about seventy-five per cent of their quarterly compensation, and they are informed that the balance will not be paid them until tbey shall have collected from every office on their list, or shown, by reporting the delinquent postmasters, that they have used due diligence to do so, and are not in fault for the failure.

The second class, called “ Depasiting Offices,” about five hundred and fifty in number, are instructed to deposite their income in bauks quarterly, monthly, or weekly, according to its amount. This class einbraces all the large offices and most others which can as conveniently deposite as pay to contractors, together with the most considerable offices on interior routes, which yield a surplus revenue, and whose proceeds cannot be used in paying the contractors who supply them.

The third class, called “ Draft Offices," about two hundred and fifty in number, embrace those not convevieut to banks, whose proceeds cannot be paid over to covtractors at the close of the quarter, without danger of their being overpaid, but may generally be drawn for in whole or in part, to pay the balances due, after giving the contractors credit for all their collections.

The interest of the contractors induces them promptly, after the quarter ends, to push their collections, and report all delinquents. During the same time, the depositing offices are placing their funds in the banks. When the contractor's acknowledgment for moneys collected comes in, his account is examined. If the balance due, or any part of it, can be paid by draft on one or more of the diast offices, it is done ; and that which cannot be so discharged is paid by check on some convenient bank,

The results anticipated from these measures have been fully realized On the 1st July last, payments on claims accruing prior to the preceding! quarter were suspended ; and all the energies of the pay clerks were devoted to paying the debts of that quarter. These payments were completed on the 19th day of August, leaving a considerable amount of funds in bank. The payment of the old debis was then resumed. From that moment the Department was disembarrassed. In no instance since, has the payment of any claim been refused for the want of funds.

On the 1st of October last, the new system of collection came into action. Encouraged by its favorable operation, and finding the funds or the Departmeut in bank to exceed $140,000, the undersigned, on the 18th of the last month, directed the payment of the bank debts in Baltimore and Boston, a mounting to $67,304 38.

The entire debt on the 1st July, as above stated, was $1,064,381 92 of this debt there has been paid out of

postages accruing before the 1st of July, about the sum of

$409,991 34

Out of postages accruing since the 1st
July, the suin of

187,086 14

597,077 48 Old debt remaining unpaid on this day, about

$467,304 44 of this debt, about $205,000 is due to banks, and the balance in contractors a nd others.

The statements of the amount of debt, and the amount paid out of postages accruing prior to the 1st of July, are not supposed to be exact, but they do not vary materially from the actual amounts.

The result of these operations is :

That the claims of contractors and others against the Department, arising within the quartez ending 30th June Jast, hare been paid, with the exception of a few suspensions.

That the claims arising within the quarter ending 30th September lası have been paid as far as they were ready for adjustment.

That one hundred and eighty-seven thousand and eighty-six dollars of the pre-existing debt have been paid out of postages accruing since 30th June last.

That the funds in bank on this day, are seventy-three thousanri seven hundred and thirty-seven dollars.

The payment of an amount of the old debt so far beyond the available surplus of the last quarter, leaving a large sun on hand, will create no surprise, when it is recollected that, in addition to that surplus, the Department has been able to avail itself of a considerable amount stopped

from contractors on account of overpayments, and a still larger sum arising from the deposites of the weekly and monthly depositing offices, lon account of the current quarter.

The debt of the Department, except that portion of it which is due to bauks, and the suspended allowances, is now perfectly manageable, and cannot hereafter embarrass its operations. The bank debt is reduced to about $205,000.

The following statement of the quarterly income and expenditure of the Department for the last two years, which, though not accurate, may be relied upon for all practical purposes, will more fully show the progress of its financial concerns, and its prospect of speedy redemption from debi :

Gross revenue.


Excess of reve.


Excess of Ex


$90,855 27 27,206 25

Sept. 30, $655,242 88 $746,098 15
Dec. 31, 720,209 27 147,415 52

March 31, 729,600 51 699,205 86 $30,394 65
June 30, 718,696 00 717,885 00 811 00
Sept. 30, 725,273 03 703,494 75 21,778 28

31, 724,542 34 701,497 08 23,045 26
March 31, 763,494 47 689,652 66 82,841 81
June 30, 780,046 82 671,705 59 108,341 23

As it bas already been ascertained, from examinations of the returns, that the revenue of the last quarter exceeds that of the corresponding quarter of the last year about twelve per cent., it may be safely stated that the surplus of revenue over expenditure for that quarter will be about $120,000 ; and that there was, on the 30th September last, a surplus of available means over the whole debt of the Department, amounting to about $100,000. It is confidently expected that this surplus will be increased at the end of the current quarter to about $220,000, and, at the end of the next quarter, to about $340,000. The old debts due to contractors and others are now paid as fast as they are presented aud can be adjusted ; and the accumulation of funds, notwithstanding these pay. menis, is so considerable as to justify a belief that $100,000 of tbe remaining bank debt may be paid in January next, and the balance in April.

The undersigned takes pleasure in presenting you with the data which justify this anticipation. He is happy to say that, so far from needing) any pecuniary aid froin the Treasury, the Department may be presented to Congress, before the termination of their approaching session, substantially free from debt, with a clear annual surplus exceeding $400,000, applicable to the establishment of new mail routes, and the improvement of old ones. Even should the suspended allowances be finally paid, the anticipated result cannot be delayed beyond the month of July, 1936.

A balance of the books of this Department has not been effected for about inenty years.

After a full consideration of the subject, it was deemed expedient to close them, and open a new set from the 1st of July, 1835. The bilances of accounts are not carried forward from the old books to the new, but all collections inade of moneys due before that day are credited to an account headed “ Arrearages” on the new books; and all payments made ou debis contracted prior to that day, are charged to the same account. 'That account, when closed, will show the exact amount of debt and of available means at the coininencement of the present fiscal year-facts which cannot be sooner ascertained with exactitude.

In keeping the new books, an attempt is making, through the agency of general accounts, to show, speciñcally, from what sources the revepue on the Department is derived, and in what purposes it is applied. The accruing revenue is credi:ed to general accounts headed Leller Posla ges," "Newspapers and Pumphlets," and " Fines.” The expenditures are charged to general accounts, headed “Compensalion of Postmasters," Transportation of the Mails,Ship, Steamboal, and Way Lellers,"

Wrapping Paper," " Office Furniture," - Advertising,Mail Bags," Blanks," Mail Locks und Keys, and Stamps," " Mail Depredalions and Special Agents," Clerks, &c for Ofices,” and “ Miscellaneous." When the entire business of a quarter is brought upon the books, the credit general accounts will be balanced by transfer to the credit of a general account, headed “ Post Office Department," which will thus exhibit, at a glance, the entire income of the Post Office Depastinent for the quarter, and the sources whence it is derived. In like manner, tho debit general accounts will be closed by transfer to debit of " Post Office

Department," which will thus show, ou a single page, the whole expenditures of the quarter, with the objects of expenditure. The balance of

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the retus this account, thus made up, will exhibit the condition of the Department Trespect )

at the end of each quarter.
fely sati It has long appeared to the undersigued, that, by a systein of this kind,
er vil

the application of the public moneys inay be shown more specifically
than by any other system of specific appropi jution.

The efficiency of a department, with so many thousand agenis in its
employment, essentially depends on the vigilance and energy of the
directing and supervising power. Impressed with this conviction, it is
the policy and the effort of the Department to make the supervision so
complete, that every individual in its service shall feel that he acts
directly under the eye of some of its officers or clerks.

To secuse promptitude in the rendition of accounts, the poslına sters,
with the exception of a few at the large offices, have been required
lo forward their accounts within two days, or by the first mail, after
the close of each quarter. As a means of enforcing this requisition, the
post offices are divided into four classes, in reference to their distance
|from Washington, and other circumstances. For the arrival of the ac-
counts of the first class, ten days are allowed; for the second, twenty i
for the third, thirty ; and for the fourth, forty. Il is made the special
duty of a clerk to note the day on which each quarterly return arrives,
and promptly call all delinquents to account when the allotted time shall

have expired. This plan of supervision was put in operation at the
commencement of the present quarter.

To produce an ever-active supervision over contractors, it is made ibe
duty of postinasters at the ends of all post routes to keep, and returb to the
Department weekly or monthly, according to the importance of the route,
registers, showing the exact time of arrival and departure of every nail,
with such remarks as the occasion may require. It is made the duty of
a clerk in each division to see that the postmasters keep and return
these registers, to examine them when returned, and note all delinquen-
cies of contactors. This plan is not yet in full operation.

It is intended to apply the same principle of strict supervision to the return of receipts by postmasters; to the making of deposites by the depositing offices, and the forwarding of certificates of deposite ; to the printing and furnishing of blanks ; and, as far as practicable, to all services required by law and the regulations of the Department.

Sufficient attention has been given by the undersigned to the mamer in which newspapers and other printed matter are conveyed by mail, to satisfy him that it is radically defective. No supervision or power of punisiament, exercised or possessed by the Postmaster General, is adequale to prevent, on some occasions, the canvass bags in which printed papers are stowed from being left behind, so long as they are carried separately from ihe letter mails, or on the ouiside of coaches and stages. To preveut the evil in some degree, it has been provided in the contracto lately awarded on the avain routes to the West, that, on the outward trip, no passengers shall be carried in the inside of the mail coach, but that it shall be devoted exclusively to the mails ; and on similar routes along the seaboard, the same restriction will be applied in both directions. It is believed that the enforcement of the contracts in this respect will iusure the safe conveyance of the newspapers as far as they travel on ibese routes,

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