The reduction of the Army has been attended by a corresponding reduction of material and retrenchment of expenditures. The advance depots of the Quartermaster's Department, which has been established as bases of operations, have been broken up; the greater part of the material sold at advantageous rates or concentrated in five principal depots and arsenals, and all unnecessary employes discharged. From May 1, 1865, to August 2, 1866, over 207,000 horses and mules were sold for $15,269,075.54. About 4,400 barracks, hospitals, and other buildings have been sold during the year for $447,873.14. The sale of irregular and damaged clothing in store produced during the fiscal year the sum of $902,770.45. The fleet of 590 ocean transports in service on July 1, 1865, at a daily expense of $82,400, was reduced before June 30, to 53 vessels, costing $3,000 per diem, and most of these have since discharged-ocean transportation being now almost entirely conducted by established commercial lines of steamers. Of 262 vessels which had been employed in inland transportation, at an expense of $3,193,533.28, none were remaining in service on June 30, 1866; sales of river transports, steamers, and barges during the year are reported as amounting to $1,152,859.92. The rates of wagon transportation in the Indian country have also been reduced by favorable contracts. The military railroads, which were operated during the war at a total expenditure of $45,422,719.15, and which are officially reported to have reached an extent of 2,630 1\2 miles, and to have possessed 433 engines and 6,605 cars, have all been transferred to companies or boards of public works, upon condition of the adoption of loyal organizations of directors. Cash sales of railroad equipment to the amount of $3,466,739.33 are reported, and credit sales of $7,444,073.22. Upon the latter there have been paid, principal and interest, $1,200.058.18; leaving due to the United States on June 30, 1866, principal and interest $6,570,074.05. The military telegraph, which attained an extent of 15,389 miles of lines constructed during the period of hostilities, with a total expenditure of $3,219,400 during the war, and $567,637 during the last fiscal year, has been discontinued, the material sold and disposed of, and the employes discharged, only a few confidential operators being still retained for cipher correspondence with commanders of important districts.

Such subsistence stores as could not be retained for supplying the reduced Army have for the most part been sold at satisfactory prices. The sale of unserviceable and surplus stores pertaining to the Signal Corps has been effected; most of the offices have been mustered out and the employes discharged.

All the temporary ordnance depots established during the war, with the exception of that at Hilton Head, where the work is in progress but not completed, have been discontinued, and the supplies havrsenals for storage, or, when not worth the cost of transportation, have been sold. The expenditures at arsenals have been greatly diminished and their operations limited.

General hospitals, hospital transports and railroad trains, ambulance corps, and a number of medical purveying depots have been dispensed with, and all perishable articles of medicines and hospital supplies, in excess of the requirements of a peace establishment, have been disposed of by public sale at advantageous rates, and the reserved supplies concentrated at five depots. The proceeds of old or surplus medical and hospital property amount to $4,044,261.59.