[Inclosure No. 1.]

FORT WASHITA, C. N., August 8, 1863.

Lieutenant-General HOLMES,

Commanding District of Arkansas, &c.:

DEAR SIR: I regret exceedingly that the nature of your health was such when I was at Little Rock as to render it impossible for me to see you. Knowing the importance of having a personal interviews with you before visiting the Indian country, I remained in that city four or five days for the purpose, and only left when your physician informed me that I would not, perhaps, have an opportunity of seeing you for some considerable time. I was extremely gratified, a day or two ago, to hear that you were rapidly improving, and would immediately enter upon the discharge of the arduous duties of your command.

It has appeared to me proper to make a brief statement to you of the condition of affairs in this part of your district, as far as they have fallen under my observation, although I suppose I will only be giving you information that has been furnished by others.

I am just from General Steele's headquarters, in the vicinity of Fort Gibson. His army I found by no means in good condition. Desertions of late have been frequent in General Cabell's brigade, and more indifference to duty and impatience of restraint have been manifested by a large portion of the Indians in General Cooper's command than ever marked their conduct before. This state of things is partly attributable to the character of the ammunition with which the army is supplied. The powder is perfectly worthless. The mere charging of the gun grinds it into the finest dust, which is little likely to explode; and, should it do so, its power is scarcely more than sufficient to drive the ball our of the piece. A surgeon was left behind, after the late skirmish, by General Cooper, to take care of his wounded, who states that balls were extracted from the bodies of wounded Yankees, in his presence, which were not even buried in the flesh. The Indians have taken up an idea, which I endeavored to overcome, that the powder (which came from Matamoras) was made at the North, and sent out especially to be sold to our army. I think if General Steele (though it is not easy to determine where these are to come from) had one or two good infantry regiments, and a battery, with a supply of reliable ammunition, in addition to the force he now has, he could rid the Indian country of the Yankees in a few weeks. Could they be driven out now, there is but little doubt that they would remain out during the coming fall and winter. Should, however, General Steele be forced back from his present position, I greatly fear that all of the Creeks would leave him, and they and their country be lost to the Confederate States forever. I make these suggestions, general, most respectfully, and, though coming from one possessed of no military knowledge, I am satisfied you will give to them a candid consideration.

I have conferred with the Creeks and Cherokees, and paid them their annuities. The Seminoles and Chickasaws I expect to meet here to-morrow. The Choctaws I shall see in a short time, as well as the Reserve Indians. Before I return to the east side of the Mississippi River, I shall use my best exertions to have the Indians satisfied. Should you wish to make any suggestions to me, I would be pleased to have you write to me at Shreveport, to the care of General Smith.

Very respectfully, your obedient servant,

S. S. SCOTT,

Commissioner of Indian Affairs.