The department does not propose to charge the railroads for expenditures or repairs, of for materials actually used on the roads; nor does ot propose to allow any charge against it for the use and profits of the roads while occupied as military routes, nor damages done by its troops or agents under the pressure of military operations.

A railroads is an engine of war more powerful that a battery of artillery, subject to capture and to use; and there is, it would seem, as little reason for paying damages or rent for its occupation and use as there would be for a captured battery.

The rolling-stock and movable machinery have been hired to the railroads desiring their use until arrangements could be made for a sale. Most of that colored in the Atlantic States has at this date been disposed of at public auction, either for cash or in payment of debts for transportation due by the department to railroads.

In the Southwest the rolling-stock belonging to the United States, some 220 engines and 3,000 cars, was all of the wide gauge, fitted for the Southern roads. In could not be used without expensive alterations upon the Northern railroads, and these could not be expected, therefore, to purchase it at territory of the Southwest were too much impoverished by the events of the unsuccessful rebellion to be able to purchase for cash the rolling-stock and machinery which had cost this department several millions of dollars.

The reconstruction of the Southwestern railroad and their operation were of the great importance to the pacification, restoration, and prosperity of the country, and on the 8th of August an Executive order was issued prescribing the terms upon which these railroads should be restored to their lawful owners.

Difficulties having arisen in carrying this into full effect, additional orders were issued on the 14th of October, 1865.

Under these orders the railroads and the railroad property of the department in the Southwest are being disposed of. Copies of the orders, as published by this department for the information and guidance, of its officers, accompany this report; they are General Orders of the War Department, Numbers 276, 1863, and Quartermaster-General's Office, Nos. 56 and 62, 1865.

This branch of the service has been a very costly one, but its expenditures have accomplished their objects. They have supplied our armies, and have enabled them to move and accomplish in weeks what without them would have required years, or would have been impossible.

Of the skill and ability of General D. C. McCallum, director and general manager of the U. S. Military Railroad, and of the able body of engineers, superintendents, and assistant, who have enabled the department to repair, to build, and to manage the railroad during these great operations, it is impossible to speak too highly.

The commanding generals of armies as well as the Quartermaster- General recognize their courage and devotion, their service, and their merits.

TELEGRAPH.

The Military Telegraph continued to be a most important instrument in the conduct of military operations. Its officers have shown the same fidelity and devotion as in former years.

Colonel Anson Stager has been chief of the Military Telegraph, and Major Thomas T. Eckert, assistant quartermaster has been assistant