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postage stamps, of 4.7 per cent. in postal cards, and 32.7 per cent. in registered-package and tag envelopes, and the decrease of expenditure, in the face of this increase of quantities, was due to more advantageous contracts for the supply of the articles. The increase of expenditure for stamped envelopes was occasioned by the additional quantities called for, the articles having been furnished during both fiscal years under the same contract.

The appropriations for the last fiscal year amounted to $1,334,400. In nine items the unexpended balances of appropriations amounted to $252,231.64, or 18.8 per cent. of the amount appropriated, and in the remaining item (for ship, steamboat, and way letters) the appropriation was $2,000 and the expenditure was $2,050.83, leaving a deficiency of $50.83 to be provided for. The net excess of the appropriations over the expenditures was, therefore, $252,180.81.

The appropriations for the present year aggregate $995,400, or $339,000 less than the appropriations for the last fiscal year.

The current appropriations are likely to prove insufficient in two or three items, owing to an unexpectedly large increase in the demand for supplies since the estimates were made in November last. In view of the uncertainty as to future demands, no reliable judgment can at present be formed as to the additional amounts that may be required. Better light will be afforded by the issues of the present quarter, in time to submit the deficiency estimates to Congress. In no case, however, is the gross amount likely to exceed $75,000, and a large part of this sum will be due to the recent introduction of letter sheet envelopes.

The total amount of the estimated appropriations to be required for the fiscal year ending June 30, 1888, is $1,244,822. This is an increase of $162,602.81, or 15 per cent., over the expenditures for the fiscal year ended June 30, 1886, and of $172,683.25, or 16.1 per cent., over the expenditures for the year ended June 30, 1885. It is $89,578, or 6.7 per cent., less than the appropriations for the year ended June 30, 1886, and it is 8249,422, or 25 per cent., more than the appropriations for the current fiscal year. The estimates contemplate a liberal increase in the quantities of supplies to be required, and it is not doubted that they will prove sufficient throughout to cover probable needs. In the principal items the increase of expenditure will result in a proportionable increase of the postal revenue. The estimates are explained in detail in my letter addressed to you under date of October 12, 1886, a copy of which is hereto appended.

DIVISION OF FINANCE.

The work of the finance division during the fiscal year ended June 30, 1886, may be summarized as follows, viz: .

There were 4,800 contracts for mail service received during the year from the Second Assistaut Postmaster-General, and 24,287 orders of the Postmaster-General recognizing mail service not under contract, curtailing or extending service, or modifying previous orders. These contracts and orders were entered upon the books of the finance division, for information when acting upon certificates of the Auditor of the Treasury for the Post-Office Department for the payment of mail contractors and other creditors of the Department. The number of such certificates received and acted upon was 72,999, a decrease of 1,660 from the previous year.

In addition to the above, 5,063 certificates were received from the Auditor, upon which 5,063 transfer drafts, covering the sum of $832,555.45,

were drawn against postmasters having a surplus of postal revenne, in favor of late postmasters or postmasters whose revenues were insufficient to meet the demands upon their offices for payment of railway postal clerks, mail messengers, letter-carriers, &c.

The following table will show the number of warrants and transfer drafts drawn, and the number of certificates of deposit received, entered, and passed to the Auditor during the past fiscal year, compared with the number for the previous year.

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There were also prepared and forwarded 3,860 letters pertaining to the business of the division, 74,490 circulars pertaining to the issue of warrants, and 69,840 circulars containing instructions to postmasters as to the time, manner, and place of deposit of postal funds, and demands for balances due the Government and not promptly remitted.

The number of cases of delinquencies made up in the finance division during the year and referred to the chief post-office inspector for investigation was 890. The number of cases prepared for the action of the Postmaster-General, concerning false returns by postmasters of the cancellation of stamps, failures to account for box-rents collected, and overcharges for clerk hire and rent of post-offices was 172, resulting in charges amounting to $78,575.60 against the accounts of the offending postmasters.

In my last annual report an increase from $2,000 to $2,250 in the salary of the chief of the fiinance division was recommended, but this recommendation, though supplemented by one from yourself, did not meet with favorable action by Congress. The position is an arduous and responsible one, and the present incumbent, Mr. George W. Wells, is an officer of unusual efficiency and worth. I am induced by the exceptional merits of the case to urgently renew the recommendation made last year for the increase of his compensation. I also desire to invite attention to the recommendations made in my last annual report looking to a better and uniform system of accounts in the larger post-offices, and to a change in the system of accounting for the key-deposit fund.

DIVISION OF POSTAGE-STAMPS, STAMPED ENVELOPES, AND POSTAL CARDS.

The stamp division is charged with the duty of issuing postagestamps, stamped envelopes, postal cards, and registered-package and official envelopes, upon the requisitions of postmasters. The articles of

stamped paper issued to postmasters for sale to the public during the year ended June 30, 1886, consisted of the following, viz:

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This was a total of 2,342,364,871 in number and of $43,289,724.02 in value. The gross value of all the stamped envelopes and wrappers issued was $6,932,055.02, and the value of the stamps impressed upon the envelopes and wrappers was $6,216,645.50, leaving $715,409.52 to represent the cost of manufacture and expenses of issue. The cost of manufacture at contract rates was $692,514.25, but the actual expenditure was $692,435.04, the sum of $79.21 having been deducted for specialrequest envelopes that were misprinted through the fault of the contractor. The difference between the cost at contract rates and the amount (less the postage) fixed for the sale of the envelopes and wrappers to the public was $22,895.27, and this amount represents the expenses of issue. As compared to the issues of the preceding year, there was an increase of 155,661,165, or 10.62 per cent., in number, and of $2,742,736, or 9.64 per cent., in value, of ordinary adhesive postage-stamps; of 38,147, or 1.40 per cent., in number, and a decrease of $949,878.50, or 46.39 per cent., in value, of newspaper and periodical stamps; there was a decrease of 7,201,091, or 56.83 per cent., in number, and of $148,503, or 48.13 per cent., in value, of postage-due stamps; there was an increase of 13,021,700, or 9.14 per cent., in number, and of $279,509.53, or 10.10 per cent., in value, of stamped envelopes, plain; of 15,945,500, or 11.65 per cent., in number, and $346,220.95, or 11.51 per cent., in value, of stamped envelopes, printed request; of 2,289,500, or 5.25 per cent., in number, and $26,362, or 5.20 cent., in value, of newspaper wrappers; and of 16,231,500, or 4.78 per cent., in number, and $163,005, or 4.80 per cent., in value, of postal cards.

The large decrease in the value of newspaper and periodical stamps was due to the reduction, on the 1st of July, 1885, of the rate of postage on second-class matter from 2 cents to 1 cent per pound. The decrease in the number and value of postage-due stamps issued was occasioned by the increase in the unit of weight of first-class matter from half an onnce to one ounce, which went into effect on the same date. The net increase in the issues was 199,685,981, or 9.31 per cent. in number, and $2,829,407.98, or 6.99 per cent., in value.

The issues will be found in detail of kinds and denominations in Tables Nos. 5, 6, and 7, attached to this report.

In addition to the supplies above enumerated, there were issued for the use of the postal service 10,953,800 registered-package envelopes, 999,250 tag envelopes for registered packages, 2,515,000 envelopes for returning dead-letters, 27,610,600 official envelopes for postmasters and other postal officials, and 5,984 newspaper and periodical stub-books. The total number of registered-package and tag envelopes was 11,953,050, and of dead-letter and official envelopes, 30,125,600, or 42,078,650 of all kinds. This was an increase of 2,624,050, or 28 per cent., in registered-package and tag envelopes; of 7,772,750, or 34.7 per

cent., in dead-letter and official envelopes; and of 10,396,800, or 32.7 per cent., of all kinds over the issues of the preceding year.

This exceptionally large increase was due to the fact that there was an exceedingly unfavorable contract for these supplies during the year ended June 30, 1885, and an exceedingly favorable one for the year ended June 30, 1886. Under the former contract the supplies to postmasters were confined to urgent current needs, to save as far as possible an unnecessary waste of expenditure, and under the latter contract advantage was taken of the low prices, not only to renew the stock carried in post-offices which had been largely depleted, but to furnish unusually liberal quantities against future needs. The issues for the year ended June 30, 1885, under the first-mentioned contract, showed a diminution in spite of the increased needs of the service of about 19 per cent., as compared to those of the year ended June 30, 1884. The cost of registered-package, tag, official, and dead-letter envelopes furnished during the year ended June 30, 1886, was $72,366.21, (including $40.61 for contract samples,) while the cost of like quantities at the prices in the contract for the preceding year would have amounted to $127,703.22. The saving by the change of contracts was therefore $55,337.01, or 43.3 per cent. The subject will be further referred to hereafter.

REQUISITIONS.

The following tabular statement will show the number of requisitions from postmasters upon which the several kinds of supplies were furnished, and a comparison with the number of requisitions filled during the preceding fiscal year:

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The number of separate parcels in which the supplies were put up

and forwarded to postmasters was as follows, viz:

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The increase in the total number of parcels over those sent for like purposes during the preceding year was 56,881, or 10.2 per cent.

POSTAGE ON SECOND-CLASS MATTER.

589

By the act of March 3, 1885, the rate of postage on second-class matter (newspaper and periodical publications mailed from known offices of publication and news agencies, and addressed to regular subscribers and news agents) was reduced from 2 cents to 1 cent per pound, to take effect July 1, 1885. The weight of second-class matter sent in the mails during the last year, not including matter circulated free within the county of publication, was 109,962,589 pounds, or 54,981 tons, and the amount of postage collected was $1,099,625.89. This was an increase of 8,904,626 pounds, or 8.81 per cent., in weight, and a decrease of $921,533.37, or 45.59 per cent., in the amount of postage collected, as compared to the previous year. The average annual rate of increase for the six years prior to July 1, 1885, was 12.09 per cent., and the reduction in the rate of postage thus does not appear to have had the effect of increasing the use of the mails for the transportation of this class of matter. Accordingly, the loss occasioned by the change during the first year of its operation may be placed in even figures at $1,100,000, equivalent to the amount actually collected.

The number of post-offices at which second-class matter was mailed was 6,550, an increase in number over the previous year of 465, or 7.64 per cent. Collections amounting to $2,086.14 were made from publishers and news agents for matter improperly mailed at second-class rates of postage. This is an increase of $995.77, or 91 per cent., over the amount realized from the same source during the preceding year. The following is a comparative statement of the second-class matter mailed at twenty of the principal post-offices during the past two fiscal years, viz:

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