vided in the legislative, executive, and judicial act, approved July 31, 1886, "for the purpose of restoring and repairing the worn-out and defaced rolls in the Second Auditor's Office." At present only such rolls as can no longer be used are taken in hand. The work of copying these rolls is necessarily slow, owing to the difficulty of deciphering some portions that are practically illegible and of supplying other portions that are missing; but, notwithstanding these drawbacks, fair progress is being made. In view of the importance and extent of the work, there being more than 50,000 rolls that should be copied with as little delay as possible, I felt justified, when submitting my estimate for the fiscal year 1887, in asking for a continuance of the special appropriation of $21,000. THE CLERICAL FORCE. In my report for 1885 I expressed the opinion that "the efficiency of the force can be increased and maintained only by the prompt removal of clerks who are incompetent from any cause, by the appointment of none but active, intelligent, well-educated men whose honesty and integrity are above suspicion, and by the promotion and encouragement of the most efficient and meritorious." In consonance with that opinion, I have had to recommend the removal of a number of clerks of the classified service, and have selected new men from among those certified for appointment under the civil-service rules. It is but just to say that the civil-service appointees generally appear to be men of intelligence and capacity, who will undoubtedly make excellent clerks as soon as they have acquired the technical knowledge and expertness which can be gained only by experience and practice. The clerks as a body are entitled to commendation for faithfulness and industry. Very respectfully, The SECRETARY OF THE TREASURY. WM. A. DAY, Auditor. REPORT OF THE THIRD AUDITOR OF THE TREASURY. TREASURY DEPARTMENT, THIRD AUDITOR'S OFFICE, Washington, D. C., November 1, 1886. SIR: I have the honor to transmit herewith the annual report of this office showing the business transacted during the fiscal year ended June 30, 1886. In submitting this report, it affords me great pleasure to direct your attention to the improved condition of the business, as disclosed in the operations of the several divisions, compared with the preceding fiscal year. The total number of claims, accounts, and cases settled and disposed of during the fiscal year ended June 30, 1886, was 13,636, involving $159,401,724. During the preceding fiscal year the number was 8,919, involving $91,578,605-an increase of about 53 per cent. in the number of claims, &c., disposed of, and about 74 per cent. in the money involved, over 1884–85. ARMY PENSION DIVISION. In the pension division it will be observed that there is a decided improvement. At the close of the last fiscal year the accounts of pension agents remaining on hand amounted to $45,222,434.22. During the present fiscal year this amount was reduced to $12,446,349.03. The business of the division is substantially up, and the clerks are now engaged on current work. This division has charge of the settlement of the accounts of Army pension agents and the adjustment of all matters relating to the payment of Army pensions. In order to adjust these accounts properly it is necessary to keep an account with each pensioner from the time when the name is placed on the pension-rolls until his or her pension ceases by death or otherwise. This office, has, therefore, the record of all payments to pensioners from March 4, 1789, and the vouchers and receipts for each separate payment from July 1, 1818, the date when by authority of the act of April 9, 1818, the disbursements were placed under the control of the Secretary of War (instead of the Secretary of the Treasury), and the adjudication of the accounts transferred from the First to the Third Auditor. The vouchers and accounts prior to that time were in the custody of the Register of the Treasury, and have been destroyed. A portion of them were burned by the British in 1814, the remainder in the Treasury fire in 1833. The records of payments, covering the unbroken period from March 4, 1789, are contained in 323 large volumes, of which 299 have been opened since 1862, and 118 are in current use. This office is notified by the Commissioner of Pensions of the issue of each pension certificate, or any change in the status of pensioners already on the rolls, and the facts are at once entered. The original rolls turned over in 1819 contained 5,455 names (Revolutionary pensioners), and the amount expended during that year was $972,360.67. The rolls in 1861 contained 12,807 names (War "12,' Indian-Mexican War pensioners), and the amount expended during that year was $1,032,768.22. The amount required to pay pensioners had increased to $28,000,000 annually in 1879, prior to the passage of the "Arrears" act, and to $64,300,000 the past year, while it is estimated that $75,000,000 will be required the present year, so rapidly is the roll increasing. STATE WAR CLAIMS. The investigation and settlement of State war claims include all claims filed in this office by the several States and Territories under various acts and resolutions of Congress for the costs, charges, and expenses incurred by them for enrolling, subsisting, clothing, supplying, arming, equipping, paying, and transporting their troops employed in aiding to suppress the late rebellion against the United States, 1861-65, and all cases arising out of Indian hostilities and border invasions. The following statement shows the condition of war claims, by States, from April 14, 1861, to June 30, 1886: This The State of Missouri filed a claim December 21, 1874, under act of Congress approved April 17, 1866, for the sum of $2,382,132.67. claim has been conditionally assumed, but not paid by the State. unable to find any authority for the settlement of the same. Eight States have filed claims for a refund of interest. I am The States of Nevada and Oregon have filed claims for expenses incurred in suppressing Indian hostilities, under act of Congress approved June 27, 1882, aggregating $741,572.30. These claims have been referred to the Secretary of War for his action. During the fiscal year ending June 30, 1886, but one clerk has been employed in the settlement of State claims, and he only for a period of five months, beginning February 1, 1886. Seventeen cases have been disposed of, involving $917,896.19, out of which sum $63,131.72 was allowed the States of New York, Massachusetts, Pennsylvania, Ohio, and Nebraska. I have found that these claims generally are of long standing, and it is my purpose to finally dispose of them during the present fiscal year, at least such of them as relate to the war of the rebellion. While a full investigation has not been completed touching these claims, yet a cursory examination unfolds gross irregularities, arising out of absolute carelessness or willful perpetration of fraud. To illustrate in detail, I found, after a thorough examination of the claims of the State of Indiana, that, in round numbers, $98,000 had been illegally allowed. The records of this office show that $52,000 of this sum were in the year 1874 discovered and withheld from a credit found due the State; and, upon investigation now, $46,000, made up from accounts allowed in excess of the vouchers presented, amounts allowed twice for the same service, and amounts allowed without vouchers, appear as a legitimate charge against the State. In the matter of the claims of the State of Vermont, it appears that, for want of a proper system in keeping the accounts, large sums, amounting in the aggregate to $225,254.29, have been, at various times since the close of the rebellion, paid the State, which, instead should have been applied to an indebtedness amounting to $543,780.23, a charge against the State of Vermont on the books of the ordnance office of the War Department, being the money value of arms, equipments, &c., furnished by the United States during the years 1863 and 1864, which have never been returned or accounted for. I am informed that the State sold the greater portion of these arms, &c., to a foreign country, and deposited the proceeds, amouting to about $170,000, in her treasury. At this time the claims of the State of Iowa are receiving attention, but the examination is not sufficiently advanced to include a full report. I am, however, warranted in stating that a considerable sum has been unlawfully paid the State growing out of reimbursements on account of advances to troops, the same service having been previously paid for by a United States paymaster. It is at present uncertain what a complete investigation may develop with reference to the claims of the States generally, other than those claims already examined, but I shall continue the work until the whole field has been thoroughly explored. On the 8th of June last a circular letter was addressed to the governors of the several States, requesting the presentation of further evidence, if it should be contemplated to offer any, in reply to outstanding differences, and asking final settlement of the claims in question. SIR: I have the honor to submit the annual report of the work of this Bureau for the fiscal year ending June 30, 1886. During the year considerable gain has been made upon the work on hand; the number of claims unsettled has been greatly reduced and the accounts of disbursing officers are now taken up for examination and statement almost as soon as received. A reference to the tabulated reports of the work done by the several divisions shows gratifying re sults is this regard. BALANCES AND LIABILITIES UNDER PAY OF NAVY AND MARINE CORPS. The following table shows the balances available on June 30, under "Pay," and also the ascertained liabilities under same appropriations. The most of this has been liquidated since the close of the fiscal year, although there remains a considerable sum due and unpaid to officers and men, which will further diminish the balances of the appropriations shown as available: Statement of appropriations, pay of Navy and pay of Marine Corps. PAY OF NAVY. Balance in hands of disbursing officers June 30, 18-6.... Total balance The liabilities June 30, 1886, were as follows: Amount due and unpaid officers and men Amount due Naval Hospital fund.... Amount due clothing Navy Amount due small-store fund Amount due general account of advances Total liability.... Available balance June 30, 1886...... PAY OF MARINE CORPS. Balance in hands of disbursing officer June 30, 1886.. Balance in Treasury, as shown by ledger, June 30, 1886.. Total balance.... The liabilities June 30, 1886, were as follows: Amount due and unpaid officers and men Amount due general account of advances. Total liability. Available balance June 30, 1886 ... EXCHANGE. 29,627 28 290,339 74 319,967 02 $71, 143 20 31, 433 01 102,576 21 217,390 81 Bills of exchange were sold by the pay officers of the Department of the Navy during the year to the amount of $1,689,154.79. Of this sum $1,417,974.89 was drawn on the Navy agents, London, and $271,179.90 on the Secretary of the Navy. ACCOUNTABILITY FOR PUBLIC PROPERTY. I deem it my duty to again urge that some system of property ac countability be instituted by which an audit of the accounts of officers in charge of public property may be had by the accounting officers. In the last annual report attention was called to this matter, and the necessity for a rendition and examination of property returns of the Navy, similar to that provided by law for the Army, was endeavored to be shown; and now, in view of the increased appropriations for the construction of new ships and their fitting out for service, the necessity for an accounting for property purchased may, and probably will, be more imperative. The words of the statute (sec. 277, R. S., par. 5), giving the Fourth Auditor jurisdiction over all "accounts" accruing |