REPORT

OF

LIEUT. FRANK R. M'COY,

AIDE-DE-CAMP.

HABANA, CUBA, January 1, 1901. SIR: I have the honor to submit the following report of the operations of that department of your office charged with the control of allotment of funds and the general supervision of financial affairs.

During the past six months the customs and internal-revenue receipts, amounting to $10,422,439.19, have been allotted by the military governor, not only for the ordinary running expenses of the government, but to provide means for the work of reconstruction, a very large part for placing the charitable institutions and hospitals of the island on a modern and economic basis, and for the organization of a publicschool system.

With the beginning of the American intervention funds were allotted from the island revenues in bulk sums to the various department commanders and expended by them in light of their closer touch with local conditions. This method continued in operation until the 1st of June, 1899, when the present system of allotments was evolved by Maj. Gen. Adna R. Chaffee, chief of staff to Maj. Gen. John R. Brooke, U. S. A., based on a circular of rules and instructions published by the honorable the Secretary of War in furtherance of Executive order of May 8, 1899.

There have been no radical changes in this system, but a reconstructive period with its emergencies and exigencies resulted in large balances in the bands of the civil disbursing officers and furnished a large crop of deficits, principally under the headings of jails, charities and hospitals, and public instruction. At the end of the last fiscal year all unencumbered balances were ordered turned in to the insular treasury, and means were taken to investigate and settle all just claims. To prevent in the future unnecessary accumulations in the hands of disbursing officers, to each of the monthly estimates is attached an extra sheet (marked Exhibit 1), giving a statement of the condition of allotments; and as a further check telegraphic reports of funds on deposit are made at the end of each month by the treasurer of the island.

The military governor, being the unrestricted appropriating authority and directly responsible for the use of state funds, has given his personal attention to the systematizing of the methods of allotments and disbursements. His endeavor has been to safeguard the advance

of moneys by allotting on monthly estimates, which must be fully itemized, or refer to previously approved detailed projects, or carefully prepared budgets, which have insured regulated disbursements and proper accounting and auditing.

As a result of the previous year's experience, the secretaries, and officers of the Army serving as heads of departments, were able to comply with the order of these headquarters, to submit budgets of the personnel and matériel required for the new fiscal year, and on these as a basis the monthly estimates have been prepared by their various bonded disbursing officers.

Due to the variety and constant changes of their work, the officers of the Army in charge of engineering and sanitary works were provided for specially by Order No. 249, June 26, 1900, for the governing and conduct of public works, and the explanatory letter of this office of October 8, 1900 (Exhibit 2). For the same reasons the secretary of public works was excepted, and his department is governed in the conduct of public works by Order No. 220, May 28, 1900, based on the regulations of the United States Corps of Engineers.

Until this time, also, the department of finance consisted of a central office in Habana and provincial haciendas in each of the six capitals, which had supervision and control of the finances in so far as internal revenues were concerned. Their administrators, on requisitions of the alcaldes, estimated for those state funds allotted by the military governor as assistance to the impoverished municipalities. The alcaldes had been obtaining these funds in accordance with the provisions of Order No. 25, Jannary 17, 1900, for which they received one check from the administrator of the provincial hacienda for the whole of the monthly disbursement.

This method was changed, in that the administrators forwarded to the alcaldes, simply for distribution, individual checks to cover all the payments for which the alcalde made requisition. The provincial haciendas themselves were found unsatisfactory for prompt disbursing, due to the large districts under their control. Upon the recommendation of the secretary of finance, the island was divided into eleven fiscal zones, arranged with regard to the easiest accessibility to the central offices. The adoption of this plan obviated many of the difficulties and delays. The alcaldes still acted as disbursing agents for the administrators of the fiscal zones, being obliged to make monthly requisitions, receive, distribute, and account for the funds allotted their respective municipalities, for the pay of the police, jail employees, expenses of civil charitable institutions, and for public instruction. This was more than they could properly do. Being paid themselves on a municipal budget, many of them had the independence and faults of town bosses, and did not see the necessity of accounting for their expenditures, nor for making them in accordance with the specific allotments. Endeavor was made to hold them to account by refusing to surrender the monthly allotments until the accounts of the preceding month had been properly rendered. Not being personally interested, this only resulted in many cases in unnecessary deficits. A satisfactory method of making the jail disbursements was provided in Order No. 459, of November 10, 1900, by substituting the jail wardens for the alcaldes as distributing agents. The alcaldes still pay their police, but bonded disbursing officers, whose salaries are paid by the state and included in their own monthly requisitions, were provided for charities and hospitals and municipal instruction.