The balance reported in the bands of paymasters on June 30, 1862, differs from such balance, as stated in the last annual report, by the sum of $1,360, 453.19, which is announced for as follows:

Errors in the last balances reported during the fiscal year ending June 30, 1862, and subsequently corrected............ $861,273.09

Balances of dead and discharged officers

not included in this statement....................... 326,479.59

Balances of seceded officers not

included in this statement........................... 172,700.51

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1,360,453.19

The troops in the various armies and distributed over the whole area almost of the United States have, it is believed, been paid with commendable promptness and regularity.

Funds have been furnished and distributed for the required payments in full to August 31, 1863, and payments have been made to all the armies to that date, except to the armies of the Cumberland and in East Tennessee, where the military operations in progress prevented the disbursing officers making such payments, though provided with funds and ready to distribute them as soon as deemed proper by the department commanders. Additional funds have been furnished the paymasters of those armies to make a payment in full to October 31, 1863, and they will commence such payment immediately after the muster of that date unless forbidden by the commanding general.

Requisitions have also been made for the funds required to pay all the remainder of the troops in service to October 31, 1863, and it is expected that these funds will be promptly furnished by the Treasury Department, and that by the 1st of December next the various armies will all be paid in full to the latest possible date, viz, October 31, 1863.

On the 4th of August last the steamer Ruth, having on board a party of paymasters and the sum of about $2,600,000 in U. S. notes for the payment of the army of General Grant, was destroyed by fire on the Mississippi River below Cairo, and all the money on board consumed. The strictest investigations and the inquiry of a board of officers, appointed by yourself, leave no doubt that these funds were entirely destroyed. Being in U. S. notes, there is no actual loss to the Government, as they can be replaced by issuing new notes.

I would respectfully urge that Congress be requested to pass an act for the relief of the paymasters who are now charged on the books of the accounting officers of the Treasury with the funds thus destroyed.

The officers of the Pay Department of the Army consist at present of 1 Paymaster-General, with the rank of colonel; 2 deputy paymasters-general, with the rank of lieutenant-colonel; 25 paymasters and 329 additional paymasters, with the rank of major. This number of officers is considered ample for the performance of all the duties of the Pay Department with the present size and distribution of the various armies in the field.

It has, however, been found absolutely necessary, for a proper organization of the department, and to insure the prompt and regular performance of its duties, to establish certain pay districts, generally corresponding in number and limits to the various military departments. In each of these districts a corps of paymasters is stationed and placed under the charge and superintendence of some selected officer, who receives all the funds for the payments required in such district, distributed them to his subordinate paymasters, directs and