One agent has been assigued to duty in this office as chief of the Divis ion of Revenue Agents. Seventeen agents have been in charge of districts, and seven assigned to general duty. Of the latter number, three have been employed in the examination of collectors' offices and accounts, two in making special investigations for discovering frauds, one has been engaged most of the time assisting United States attorneys in looking up evidence in cases now pending in the courts and in preparing them for trial, and one wholly occupied in the examination of the books of railroad companies for the purpose of ascertaining the amount of taxes due from corporations. On several occasions agents permanently assigned have been detailed to make special examination of distilleries out of their districts. I desire to bear testimony to the faithful and efficient manner in which the agents have generally performed their duties, and to the valuable services rendered by them. The following is a summary of the result of their work for the last fiscal year: Number of persons arrested for violation of internal revenue laws upon their information. 898 Value of property seized upon their information. -$196, 792 Number of illicit stills seized upon their information. 336 Amount of unpaid taxes reported for assessment by revenue agents, (exclusive of taxes from railroad corporations)... $97,087 106 $26, 460 9 Number of persons arrested for violation of law upon their information since the commencement of the present fiscal year..... Value of property seized upon their information . $16,569 In addition to this they have made frequent examinations of distil leries, breweries, tobacco and cigar factories, and exercised a general surveillance in their respective districts for the prevention of fraud and the enforcement of internal revenue laws and the collection of taxes. In several of the Southern States the agents have been very active and successful in their efforts to suppress the illicit manufacture and sale of spirits and tobacco, and in this work they have been exposed to much danger and hardships. The appropriation for detecting and bringing to punishment persons guilty of violations of internal revenue law, as provided in section 3463, for the last fiscal year was $60,000. Of this appropriation, $36,682 was expended by revenue agents in discovering frauds and securing the arrest of offenders. Much the larger proportion of this amount was used for the suppression of the illicit manufacture and sale of spirits and tobacco in the Southern States. Of the above-named appropriation, $3,108 has been allowed to collectors for the purpose of obtaining information as to the locality of illicit distilleries and the employment of guides to the same. I have found that the number of revenue agents as now fixed by law is inadequate to the proper performance of the duties that naturally devolve upon them, and, in my opinion, the interests of the public service will be materially subserved by permanently increasing the force of revenue agents to thirty-five. COLLECTION DISTRICTS. In accordance with the provisions of section 1 of the legislative appropriation act, approved March 3, 1877, the number of collection districts was reduced by consolidation to 126. It is proper to remark that the rule generally observed in making consolidations was to maintain intact the districts with the largest collections, and so it will appear that in the States where the least amount of revenue is collected the smallest number of districts is found. Said collection districts are distributed as follows: The recommendations made for the salaries of collectors for the fiscal year ended June 30, 1877, were based upon an estimate of their probable collections according to the following scale, with the qualification that if the actual collections vary from the amounts estimated, the salaries will be readjusted at the end of the fiscal year: FURNISHING COLLECTORS' OFFICES. Attention is called to the fact that allowances made to collectors have never included pay for furnishing their offices. With very few excep. tions the furniture used by collectors in rented buildings has been paid for by themselves. It would seem probable that the interests of the government for a number of years will require the continuance of in ternal revenue taxes; and I see no reason why collectors of internal revenue should not be put upon as favorable a footing in regard to furniture in their offices as collectors of customs. I respectfully recommend that a suitable appropriation be made for furnishing collectors' offices. ENGRAVING AND ISSUE OF STAMPS. In compliance with instructions received from you, in conformity with the provisions of the legislative appropriation act, approved March 3, 1877, the printing of all internal revenue stamps, except adhesive and proprietary stamps, stamps on checks, and the stamps on tin-foil tobaccowrappers, has been transferred to the Bureau of Engraving and Printing of the Treasury Department. The stock of stamps printed and in the hands of the bank note companies of New York was, during the months of September and October last, brought from the city of New York to the Treasury Department in Washington, from which place they are now issued to collectors. Advertisement has recently been made for proposals for paper to be used in printing internal revenue stamps, and it is believed a large saving will be effected in the cost of paper. I estimate that, with the reduced cost of printing stamps by the Bureau of Engraving and Printing and the probable reduction in the price of paper, a saving of over sixty-eight thousand dollars per annum will be effected in the cost of internal revenue stamps. The following statement shows the number, description, and value of stamps issued for use for the fiscal year ended June 30, 1877: Since the passage of the act approved August 15, 1876, revenue stamps have been transmitted to collectors by registered mail. The service has been performed with entire satisfaction, and up to this time without loss, and I know of no reason why it should not be continued. Under the act of March 3, 1877, the use of postage stamps for prepaying this character of mail matter was abolished. The act, however, by the construction of the Post Office Department, has been limited to the transmission of internal revenue stamps to collectors; the registered mailstamp of ten cents on all packages, and postage stamps to prepay packages passing between collectors and their deputies being still required, I respectfully recommend the enlargement of said act so as to abolish the use of postage stamps altogether for the performance of this service. REORGANIZATION AND INCREASE OF FORCE. In consequence of the transfer of the business of handling stamps from New York to this bureau, it has become necessary to increase the force so as to properly transact the business incident to receiving, caring for, and distributing stamps to collectors. I call attention to the statement in my last annual report, at page xxiii, in regard to the employment of persons in this capacity, and their payment out of the appropriation "for dies, paper, and stamps." The force now employed in this office, and paid out of the appropriation for "dies, paper, and stamps," is as follows: One chief, in charge of receipt and issue of internal revenue stamps, at.... One bookkeeper, at Ten counters, at.. Five persons engaged on stub-books. One chief packer and shipping clerk, at. One assistant packer and shipping clerk, at Five laborers, at...... $1,800 1, 200 900 900 900 720 720 The above force includes the nine persons shown in my last report to have been employed, and five of said persons are still engaged upon the work of examining the stub-books returned by collectors, so as to verify their accounts. The business of the office is such that the services of these persons cannot be dispensed with, but in my opinion they should be provided for by increasing the regular force of the office. At this time there are six persons engaged in the city of New York upon the work of superintending the manufacture and distribution of the stamps still produced in that city. These persons are also paid from the appropriation for "dies, paper, and stamps," but the Graphic Company, which has the contract for imprinting check stamps, reimburses monthly under its agreement the salary of three of these persons. In compliance with an act of Congress approved August 15, 1876, the number of officers, clerks, and employés in this bureau was reduced fifty. four, leaving the office force and salaries as follows: An aggregate of one hundred and eighty-seven persons. $6,000 3, 200 2,500 2,250 1,800 900 I have estimated for the next fiscal year for one hundred and eightyseven persons, as in the above table, but in a letter addressed to you of date, October 22, 1877, I had the honor of recommending that Congress should increase the appropriations of last year so as to conform to the following table: An aggregate of 203, being an increase numerically of 16 persons, as well as an increase of the salaries of the deputy commissioner and five heads of division. An increase in the salary of the deputy commissioner and of the five heads of division is recommended for the following reasons: The law creating the office of deputy commissioner fixed his salary at $3,500. The duties of the office are of great importance, and their faithful performance fully entitles the officer to that pay. The law creating the office of head of division states that there shall be seven heads of division in this bureau, who shall receive each a salary of $2,500. The appropriation for the year ending June 30, 1878, allowed two heads of division at a salary of $2,500 each, and five heads of division at a salary of $2,250 each. There is no just ground for this discrimination; the officers fully earn $2,500 each, and, in my judgment, should receive that amount. My reason for recommending an increase in the number of first-class clerks is that the force of this office has been found inadequate to the interests of the public service, it having become necessary from time to time during the past year to employ persons on special work connected with the detection of frauds upon the revenue, and to pay them out of the appropriation for the detection of frauds. Should this increase be authorized it will afford an opportunity of promoting a number of deserving persons now in the $900 class, and of transferring five persons to the regular roll who are now paid out of the appropriation for "dies, paper, and stamps." I acknowledge with pleasure the efficiency and conscientious attention to duty manifested by the officers, clerks and employés of the bureau during the past year, and the valuable aid they have rendered me in endeavoring to carry out a just, vigorous, and economical administration of the internal revenue laws. AMOUNTS COLLECTED AND COST OF COLLECTION. It will be observed that the collections for the past fiscal year were $118,995,184. The accounts for making said collections have not yet been closed, but I am able to state that the expenses will not exceed the following amounts: For salaries and expenses of collectors, which includes the pay of deputy collectors and clerks, house-rent, fuel, lights, and advertising For salaries and expenses of agents, surveyors, gaugers, storekeepers, and miscellaneous expenses For dies, paper, and stamps.. For detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws For salaries of Internal Revenue Bureau Total. $1,265, 523 1,570,000 402, 600 61,000 272, 372 4, 171, 495 Being scarcely more than three and a half per cent. upon the whole amount collected. When we consider the vast territory over which the internal revenue system extends, the large number of persons engaged in the manufacture and sale of taxable articles, and the amount of watchful care and surveillance necessary to be maintained for the purpose of collecting the taxes and preventing frauds, this exhibit must be regarded as exceedingly gratifying in respect to the small percentage the expenses bear to the amount collected. The collections for the months of July, August, September, and October of the present fiscal year amount to $38,520,551, making a grand total of $157,515,735 collected since the beginning of the last fiscal year; every item of this large amount has been properly accounted for. I had hoped to be able to report that no part of the public funds had been withheld from the Treasury during the period Two sums, however, have been misappropriated, to wit, $1,007.66 and $5,912.64, but for these amounts the sureties of the derelict officers are fully responsible; consequently the government will |