HEADQUARTERS EIGHTEENTH ARMY CORPS,
DEPARTMENT OF VIRGINIA AND NORTH CAROLINA,

Fortress Monroe, December 27, 1863.

Honorable E. M. STANTON, Secretary of War:

SIR: On Thursday last, in compliance with your order by telegram, I went to Point Lookout and made a full inspection of its locality as a prisoners' camp, the means of retaining the prisoners within and defending it from any attack from without, and also of the condition of the prisoners there confined, and made inquiry into the general administration of the affairs in that district.

Immediately upon receiving your suggestion of the possibility of a rescue I sent the army gun-boat General Jesup to report to General Marston, and also a very efficient light battery.

I am convinced that Point Lookout is one of the best situations and with sufficient capacity to retain and control all rebel prisoners that we have or are likely to have in our hands. It is entirely defensible, owing to its situation, with much lest than the present force guarding it, against the attack of the whole of General Lee's army.

I found the prisoners well fed, perfectly well covered as regards tents, and sufficiently clothed.

I send appended a memorandum of a conversation reduced to writing by my phonographic clerk and afterward sworn to by the six Confederate prisoners who were sergeants of the cook-houses. It will be observed that their statement is a complete answer to all slanders against the management of the prisoners.

I found that the internal administration of the post had been very satisfactorily carried on by Brigadier-General Marston, who deserves much credit for his efficiency and economy, but I think the external arrangements are exceedingly expensive. All the supplies, whether quartermaster's or commissary's, are furnished from Washington; so that bread and forage are first to be carried by Point Lookout to Washington and then brought back and delivered at Point Lookout. That necessitates the running of a steamer daily between Washington and that point. I shall take leave to alter the arrangement as to supplies, and shall furnish the supplies directly from Baltimore or New York, to be landed at Point Lookout without any transshipment.

I also propose that the steamers of the Bay Line, being mail steamers running between Baltimore and Fortress Monroe, as they pass Point Lookout each way on their route, shall stop there for the mail matter and passengers, so that communication between Point Lookout and Washington by mail will be twice as frequent as at present and every day between Fortress Monroe and Point Lookout, and that, too, without any additional expense to the Government and the saving of a steam-boat upon the Potomac. I have written to the Postmaster-General so to arrange the mails. This will relieve the services of one steamer plying on the Potomac River.

I find that there has been the sum of $65,000 in cash saved from feeding the prisoners, over and above the allowance. I propose to use such portion of that fund as may be necessary for the purpose of furnishing facilities of transportation in the exchange of prisoners which are now chargeable to the Quartermaster's Department.

I have taken 500 prisoners from Point Lookout and sent them to City Point by flag of truce, as opening the exchange, and I expect to be able to telegraph you by the time you receive this report of the success of the experiment, and I will then report at length the correspondence had between Mr. Ould and myself upon the subject of exchange. I have sent none away that did not desire to go.