lation, instead of as now done, locked up in our vaults until required; where funds of municipalities can be deposited for safe-keeping and at the same time be in circulation to help out the stringency in the Panaman money situation, instead of being hoarded up in my vaults until called for by the municipalities, without any bond from me to protect them; where postmasters can deposit to the credit of the Canal Zone treasurer the money-order receipts, and where the treasurer of the Canal Zone can remit the same to the Post-Office Department at Washington by draft, thereby saving and controlling to a large extent the circulation of the United States currency on the Isthmus and keeping the little republics in this vicinity from picking it up and carrying it off for their people to use at our expense; where money can be trasferred from one point to another by check in a businesslike way, instead of continuing to do as is now done-bring the actual money from one point on the line to Panama, and then the next day return the same money to the same place for disbursement. running the risk of loss each time it is handled, when it could be done with safety, dispatch; and speed, and without undue risk, as stated, by check. That this concern be charged with the duty of supplying all the monetary requirements of the Commission, and if necessary, of dealing direct with the local banks, instead of having each one, as is now done, deal direct with me, and also to deliver funds for me at Empire, Ancon, and Cristobal, against my checks on them, to paymasters, and pay clerks at detached pay houses and cars, thus ultimately giving me the paid check as an additional voucher and furnishing further safety. In other words, I wish to use this bank as a depository and distributing agent, there being no express company or other safe means for the secure transportation of money on the Isthmus, as well as to obtain from them my supply of United States and Panaman moneys, and at the same time have a control through them of the Panaman silver, to prevent a tie up of silver by any possible combination or trust to the detriment of the work and for the purpose of holding up the Commission. I wish you to be able to treat with this concern just as if they were a department of the Commission. They being, however, separate and distinct from the Commission are in a position to promote our fiscal policy on account of their ability to transact business with the community at large, by which our financial policy can be promulgated and made effective; it of course being understood that this bank must in every way act in accordance with the wishes of the Commission. In order to be assured of a stable silver currency, without reference to the present arrangements made by the Panaman Government for maintaining the parity, this bank must, upon demand at any of its offices from any person, subject to necessary restrictions as to time, mutilated money, etc., pay one gold dollar for two silver pesos, by which means the value of the silver pesos can not go below the value of 50 cents United States gold, and the result would be the same as if the money were guaranteed by the United States and as if we had a United States subtreasury established on the Isthmus. The bank and branches should, if possible, be located upon a spur track, subpay stations being similarly located, in order that the money may be loaded direct from the vaults of the bank into pay cars upon sidings, transported to the subpay stations and unloaded directly into the vaults therein. As the silver money of this country weighs about 55 pounds to the thousand dollars, and at the present time we are expending for pay rolls alone about $720,000 per month. it will readily be seen what a saving in the matter of labor, hauling, and counting incident to the transfer of these funds would thus be made. The money should be counted by the bank and put up in packages convenient for payment, amounts of same to be specified by the disbursing officer, and delivered to the disbursing office in this shape, various sized packages sacked separately in amounts of $1,000 each. The ability to depend upon the count of the bank would thus relieve this office of the counting now necessary, which at the present time costs the Commission $135 gold per month for counters alone. The three-fourths of 1 per cent now paid the members of the bankers' agreement for the gold furnished to the Commission has been estimated for the fiscal year 1907 to cost the Commission about $54,000 in premiums. The elimination of the cost of the money counters, which next year has been estimated at $2,460, and the premium required under the present agreement, $54,000, would make a total expense for those two items alone of $56,460, which would go a long way toward payment of any expense necessary in the arrangement above recommended. The advantage to this office of this arrangement for the receipt of silver would be vastly more than above indicated, as it requires considerable work and time daily to handle this silver upon its receipt from the banks, turning over to and receiving again from the money counters and transfers incident to payment of the pay rolls, aside from the work, labor, transportation, etc., necessary in the transfer of these funds from the vaults to the pay car and return each pay period. I believe that the payment of the above sum would be sufficient to make some such arrangement, which would be far and away better than the present one and save additional expense, great risk, work, and inconvenience, which has been experienced, and give the Commission a very exhaustive check on my cash accounts. In addition to the above there is an absolute need for the immediate establishment at all post-offices in the Canal Zone of the United States post-office moneyorder system-so successful and popular in the United States-by which means employees will have the facilities for remitting money to different parts without having to leave their work for a few hours or, as is now done in many instances, for a whole day, in order to buy drafts at Panama or Colon, where now the only banks are located, with the result that the Commission loses their time, which, if counted in dollars and cents, amounts to a large sum each month, with often a further loss from the fact that when some return to work they are unfit for duty from overindulgences. This would, in the course of a year, save many thousand dollars in time and service of employees, and be a great source of revenue to the Government if the same rate is charged here as is charged in the United States for money orders. The money received by the different post-offices from the sale of money orders would be immediately deposited with the Zone depository and accounted for through them, and in this manner would be continually checked by the proper officers and kept in constant circulation. An arrangement of this kind will have to be paid for in some mutually satisfactory manner, but I think the benefits to be derived by us will be far in excess of the cost and at a great saving over our present arrangement and far safer. If the above suggestions are placed in operation at the earliest possible moment, a great amount of the detail work of handling the actual coin will be done in a safe and expeditious manner and at the same time I shall be assured of obtaining the results required for prompt, safe, and systematic disbursement of funds, early and quickly audited, and at the same time be assured of a reliable source from which to draw funds and handle any financial question which may arise in the future. If Congress could be persuaded to do this and some good reliable bank were to secure the contract, it would place another desirable and effective safeguard around the money, be reasonably profitable to the bank that gets the contract, and be a great saving to the Commission over the present arrangement. If such a bank as I have described can not be arranged for, or an express company put in operation on the Panama Railroad, I would heartily favor our remaining here in Panama, knowing as I do, that an office at Empire would be far better for us in every other regard. Respectfully, yours, EDWARD J. WILLIAMS, EXHIBIT 11.—Memorandum in re method of selecting employees for the isthmian service. First. Prior to November 15, 1904, employees of the Isthmian Canal Commission were in no sense subject to civil-service requirements. They were selected by the Canal Commission in such manner as that Commission saw fit. It was understood, however, that the practice was to accept and file applications, and, upon the need of employees, to select from such applications the persons deemed best qualified. Second. On November 15, 1904, the President issued an order placing the employees of the Canal Commission in the classified service, reading as follows: "In exercise of the power vested in the President by section 1753 of the Revised Statutes and acts amendatory thereof: It is 66 Ordered, That the Isthmian Canal Commission be classified and the civilservice act and rules applied thereto, and that no person be hereafter appointed, employed, promoted, or transferred in the service of said Commission until he passes an examination in conformity therewith, unless specifically exempted thereunder. This order shall apply to all officers and employees, except persons employed merely as laborers, persons whose appointments are confirmed by the Senate, and engineers detailed from the Army. "The officers and employees included within the provisions of this order are hereby arranged in classes according to annual salary or compensation, as follows: In connection with this order of classification the President issued the following Executive order defining the positions which may be filled without competitive examination under the civil-service rules: 66 EXECUTIVE ORDER. "Schedule A of the civil-service rules is hereby amended by adding at the end thereof a new section, reading: 66 66 4. Chief clerk. 3. Executive secretary to the governor of the Canal Zone. 66 "19. Superintendents of canal hospitals, one for each hospital. -66 "20. Chief quarantine officer. "21. Two assistant quarantine officers. "22. Sanitary officer at Colon. "23. Sanitary officer at Panama. "24. Chief justice and judges of supreme and circuit courts. "25. Clerks of the supreme and circuit courts. 66 28. Occasional officers of courts, such as referees, trustees, commissioners, and guardians ad litem. "29. Notaries public. "30. Mayors of municipalities. "31. Municipal secretaries. "32. Assessors of taxes. "33. One private secretary to governor of Canal Zone. "34. Warden and keeper of penitentiary at Gorgona. "35. One chief of police. "36. Captains of police. "37. Detectives. "38. Corporals and privates of police force. 66 39. All employees in mechanical trades or other skilled manual occupations who are appointed locally upon the Isthmus of Panama, and whose compensation is $4 per diem or less, or $100 per month or less while actually employed." The Civil Service Commission was necessarily unable to immediately establish eligible lists for the various positions, and until the Canal Commission was formally notified of the establishment of an eligible list for a particular position it was authorized to follow the old method in selecting employees for that. position. Furthermore, after establishing an eligible list for a particular position in the first instance, when that eligible list became exhausted the Canal Commission was also authorized to select its employees under the old procedure. Pursuant to authority contained in the foregoing instance, the Canal Commission did continue the method of selecting from applications placed on file. Third. Following the reorganization of the Canal Commission in the spring of 1905, the demand for employees on the Isthmus materially increased, and the practice grew up of authorizing subordinate officials, while on leave of absence in the United States, to select their subordinates. In addition, Captain King, who had charge of personnel under Engineer Wallace, accompanied that official to the States, and remained in Washington about six weeks following the reorganization. During this period he selected a large number of all classes of workmen. These subordinate officials from the Isthmus selected their employees, under authority of the Civil Service Commission, for those positions for which that Commission either had not yet established eligible lists in the first instance or the eligible lists for which had become exhausted. To supplement the labors of these subordinate officials on leave, and with the approval of the isthmian authorities, a practice grew up of allowing a subordinate official newly appointed to select employees of a character which would probably be under his supervision when he assumed his duties on the Isthmus, to accompany him down there. Fifth. The method outlined in the preceding paragraph was subject to two vital objections: First, the uncertainty as to whether or not the Civil Service Commission had an eligible list, or would have an eligible list available, and the further fact that by giving authority to so many different persons to select employees there was great danger of applicants being misadvised as to the true conditions of employment; therefore, under agreement with the Civil Service Commission in the late summer of 1905 permanent employment agents were placed in the field in the United States. These agents were to be charged only with the securing of the mechanical trades and building trades people and the outdoor railroad positions. The eligible lists of the Civil Service Commission for such employees were to be done away with. The employment agents were to be made members of the local civil-service boards throughout the country, and a system of ratings based on the elements of age, experience, and physical condition by such employment agents as members of such boards was to satisfy the civil-service requirements. Sixth. The divided responsibility as imposed in the preceding paragraph proved unsatisfactory, and ultimately resulted in a clean-cut division of employees into two classes-those to be selected by the Civil Service Commission and those to be selected by the Canal Commission in such manner as it saw fit. This was accomplished by the President's order of January 12, 1906, under the provisions of which clerks of all kinds, bookkeepers, stenographers, typewriters, surgeons, physicians, internes, trained nurses, and draftsmen were to be selected from the civil-service lists. Following this three employment agents, representing the chief engineer and selected by him, were placed in the field. Requisitions for personnel are made direct upon the Washington office, which utilizes these three employment agents stationed in different parts of the country in rounding up properly qualified persons for isthmian service. A fixed wage scale has been adopted, and if the employment is an unusual one not provided for in such wage scale the salary is set forth in the requisition calling for such employee. Employees are selected strictly in accordance with requisitions and sent to the Isthmus according to prearranged schedule. The system is working satisfactorily. W. LEON PEPPERMAN, Assistant Chief Isthmian Canal Affairs. MEMORANDUM REGARDING T. A. DAVIS. WASHINGTON, D. C., March 26, 1906. In the letter of June 23, 1905, Mr. Wallace, then chief engineer, stated to this office that he had detailed Mr. T. A. Davis "for the purpose of securing some good track foremen," and requested that this office issue appointments upon Davis's recommendation. Mr. Davis, under date of June 29, informed this office that the chief engineer had authorized him to secure 100 or more track foremen, and in accordance with these two letters, Mr. Davis proceeded to the selection of employees. Davis arrived in the United States the latter part of June, and his operations in securing employees extended from June 30 to the latter part of July. He sailed for the Isthmus on the boat of August 2. The records show that Mr. Davis was granted extension of leave, at the direction of the chairman, for two weeks, in order that he might secure employees, although this was done with reluctance. He desired that a further extension of leave be granted him, but this office refused to grant it, as it was very much dissatisfied with his operations in New York. After he left for the Isthmus he put in a claim for expenses, including daily side trips to all sections of the country, even as far as Baltimore, different parts of Connecticut, and New York State. He had no authority in any way for making such extended trips. Upon the accession of Chief Engineer Stevens it was ascertained that the employees selected by Mr. Davis were not qualified for the positions to which appointed, and under date of September 28, in a letter from the manager of labor and quarters on the Isthmus, it is stated: "He (Davis) was discharged in the interest of the service, one of the reasons for his discharge being, I understand, his total lack of judgment in hiring track foremen for the account of the Commission while he was in the States on this work, many of the men whom he brought down as foremen never having had any experience whatever, and the majority of them being very poor. It is believed that in some instances the men he hired were brought down as foremen with the intention of getting them transferred to a clerical position when they arrived.” Mr. Davis selected in all 36 men. The percentage of that number which were disqualified is not known in this office. PEPPERMAN.. MEMORANDUM OF MR. COOLEY FOR THE SECRETARY OF WAR. Section 1 of civil-service rule II, as promulgated by the President on April 15, 1903, and still in force, defines the classified civil service as follows: 66 'The classified service shall include all officers and employees in the executive civil service of the United States heretofore or hereafter appointed or employed in positions now existing or hereafter to be created, of whatever function or designation, whether compensated by a fixed salary or otherwise, except persons employed merely as laborers and persons whose appointments are subject to confirmation by the Senate." In the opinion of the Civil Service Commission the employees of the Isthmian Canal Commission were subject to the rules governing the classified service as soon as the act creating the Isthmian Canal Commission was passed. The Civil Service Commission therefore communicated with the Isthmian Canal Commission with a view of ascertaining what modifications the latter Commission might desire to the sweeping terms of the classification contained in the rule above quoted. On November 7, 1904, Admiral Walker, chairman of the Isthmian Canal Commission, submitted to the Civil Service Commission a statement of the desired modifications. The Civil Service Commisson also drew up a form of order and submitted it to the Isthmian Canal Commission, and on November 14 Admiral Walker replied, approving the proposed order, which was submitted to the President and signed by him on November 15, 1904. On December 12, 1904, the President authorized the Civil Service Commission, in cases where no register had been established, to allow appointments without examination, in view of the necessity of filling vacancies immediately. This authorization has, with the permission of the President, been construed as covering also cases where eligible registers existed from which, in the judgment of the Commission, suitable selections could not be made. Early in December, 1904, Commissioner Greene and Mr. C. L. Snyder, chief of the examining division of the Civil Service Commission, visited the Isthmus |