By an act passed January 29th, 1861, it was made the duty of the Colonel of Ordnance, under direction of the Governor, to procure the necessary arms, equipments and munitions of war, for the defence of the State. He is authorized, also, to contract for the manufacture of equipments and munitions, and to buy materials therefor, and to contract for altering and improving cannon and small arms, and to purchase machinery and materials therefor. The act appropriates $800,000 to accomplish these purposes. Col. Charles Dimmock was nominated to the Senate, and confirmed as Colonel of Ordnance, and immediately entered upon the discharge of his duties. His report herewith transmitted (Appendix B) will show what was done under this act. By the same act the Governor is authorized to employ an Engineer, to plan and construct coast, harbor and river defences, and to execute the same if approved by the Governor. For this position Col. Talcott was selected, and he has been most industriously and energetically employed in the discharge of his important duties. The act also provided for the construction of three arsenals in different sections of the State, and for the purposes mentioned in this paragraph, the sum of $200,000 was appropriated. Under this act the amounts appropriated could not be raised in the usual mode, by the sale of State bonds; the bonds having depreciated twenty per cent. or more, and our law prohibiting their sale at less than their par value. Hence an act was passed on the 14th day of March thereafter, authorizing the issue of one million of dollars of treasury notes. This act authorized the Governor to direct the Auditor to borrow for the State, from time to time, the sum aforesaid and to issue treasury notes therefor. Under this act the banks were authorized to discount or purchase such treasury notes.

The Convention subsequently, by an ordinance passed April 30th, 1861, authorized the Governor to raise for the defences of the State, by treasury notes, a sum not exceeding two millions of dollars. These notes are made payable to bearer, and are redeemable one year after their dates, and when paid, are to be cancelled and re-issues are authorized for a like amount.

In less than one week after the passage of the ordinance of secession, the Navy Department was fully and effectively organized, and the report of Capt. Barron, the officer in charge, (which is herewith transmitted and will be found in Appendix C,) shows how much has been done in an incredibly short time.

The State has had full work for all the officers, seamen and marines embraced in this organization, and all, so far as I know or believe, have worked laboriously, cheerfully and effectively. Besides the laborious work of removing the heavy guns and other munitions from the Navy Yard to the various points on our river at which the batteries are located, we have had to construct the gun carriages and to provide the necessary fixed ammunition for the batteries. Those batteries are in good working order and are effectively manned. The fact that these guns weigh from five to ten thousand pounds each, with transportation essentially by land, will show the amount of labor required to get them in position.

Besides, the steam frigate Merrimac, which had been sunk by the Federal authorities and burned to the water's edge when they deserted the Navy Yard, has been raised and is now in the naval Dry Dock undergoing repairs. An effective battery has been placed on board the frigate United States and the Navy Yard itself is well prepared for vigorous defence. At Richmond the steamer Yorktown has been nearly completed, as a war steamer, and a steam tug bought by the State has been completely fitted up. These will soon be ready to cooperate with the other military operations and will be prepared to render efficient service.

Provisonal Army.—Appointments in the higher grades were confined to retired officers of the army who had left the service of the United States. To carry into immediate effect the provisions for recruiting, appointments were made of a number of first and second lieutenants, nearly one half of whom are graduates of the Virginia Military Institute, and they have been distributed throughout the state on recruiting service. It is now satisfactorily ascertained that while the volunteer organization is so actively pressed, as it now is, in our State, it is impossible to raise the ten thousand men proposed by the ordinance. One regiment perhaps may be raised. To give employment to the young officers, the commanding general has made good use of them in organizing and drilling the volunteers as they were received at the various camps of instruction. As many of them as may be required for this and the engineer service, may be retained with advantage until their services shall be no longer necessary—the remainder might be disbanded after organizing the companies already recruited.

The report of Major General Lee is herewith transmitted, and I commend it to the attention of the Convention. It presents information that cannot fail to be interesting and instructive, as it shows the progress of our military matters since the ordinance of secession was passed. (Appendix D.)

The Harper's Ferry machinery and the disposition made of it, was the subject of a previous communication and to that and the accompanying paper I refer.

I transmit a copy of the proclamation turning over the military power of the State to the Confederate States. The terms are satisfactory, I believe, to both sides. (Appendix E.)

The intercourse between the Council and the Executive has been of the most agreeable character. The journal, regularly kept, will show that their action has been characterized by a remarkable unanimity, and it is a source of satisfaction to me to know, that I have rarely felt constrained to dissent from their advice. Their services have been appreciated by me and should be appreciated by the State.

The rule which has regulated me in making appointments was to ascertain, in the first place, whether the applicant was loyal to the State. If he was loyal, competent and efficient it was all I required. In making my selections I have not regarded old party divisions. Whether a man originally belonged to the one or the other of the old political parties, into which our people have been divided, was an inquiry that I thought unworthy of the times. We had a common interest and a common object in defending our state against the assaults of the Federal Government and my desire was to make our people a unit, if possible, for the successful prosecution of the great work which was before us. I think I can safely affirm that there is not the name of an unfaithful son of the Commonwealth upon the list, and it is cause of congratulation with me to know that they have been confirmed by the council with very general unanimity. No one was objected to, as I am informed, on the score of a want of fidelity to the State.

The commissary, quartermaster and medical appointments were made at the earliest practicable moment after the authority was given, and although some bad appointments were made, (some of which have been removed,) the result has shown great efficiency in all these departments. The paymaster's department has also been organized, and will, I believe, prove as efficient as the others.

When the war commenced, I was greatly embarrassed not only from my own want of knowledge in military matters, but also from the want of experienced military advisers, commanders and an organized staff corps. Under these circumstances, I was called at once to make provision for commands at the important points of Norfolk, Harper's Ferry, Alexandria and Fredericksburg. Until Gen. Lee was appointed, I was without the aid and advice of an experienced military man. If I have, under these circumstances, made blunders, it is not to be wondered at—the only wonder is that I have not committed many more.

The State has paid out under the direction of the auditing board from the 31st day of April to the 14th day of June, the following sums, viz: For the Army . . . . . $1,737,950 49For the Navy . . . . . 100,748 49[Total] . . . . . 1,838,698 98

Outstanding allowances not yet presented at the Treasury, will add $100,000 to this sum. (Appendix F.) On the first of July, we will be required to raise $1,800,000 to pay our troops now in the field.

Besides all these difficulties to encounter and overcome, the Executive, by law and by ordinances of the Convention, has been compelled to provide the means necessary to meet the expenditures incident to such important movements and to the exertion of such extraordinary power. At the time when the ordinance of secession was passed, there was in the treasury to the credit of the commonwealth, the sum of $384,605 25, and from that period to this, the entire amount received from the revenue of the State is about $321,617 75, making, $706,223 to meet the ordinary expenses of government and the extraordinary expenses of the war. The actual sum expended for the war alone, has been nearly two millions, and the sum necessary to meet the liabilities incurred, and not yet presented for payment, will be nearly two millions of dollars additional.

To meet these expenditures, the General Assembly had authorized the issuing of treasury notes to the amount of one million of dollars. For this purpose the Auditor of Public Accounts had made arrangements to have the treasury notes engraved at the North, but when the plates were ready for delivery, they were seized by the Government of the United States. This occasioned delay in the execution of the notes and rendered it necessary to contract for engraving new plates here, in the city of Richmond, which could not be executed until within a few days past.

Subsequently the Convention authorized the issue of two millions more of treasury notes, and both the law of the Legislature and the ordinance of the Convention authorized the banks to receive these notes and to discount upon them.

Under this authority there has been raised from the banks, by giving temporary notes, payable in July, the amount of $1,854,500, which, with the amount in the treasury, has realized the sum of $2,560,723 and the government has been able to meet every engagement of the Commonwealth, so far, with the currency of the State, promptly. No creditor having to wait longer than necessary to audit and settle his accounts.

A summary of the operations of the Executive Department since the 18th of April, 1861, shows the following results:

1. The Navy Yard and Harper's Ferry arsenal, captured without the loss of a single life, and securing to the State property, estimated in its intrinsic value, at from $25,000,000 to $30,000,000.

2. Upwards of 40,000 volunteers have been drawn from their peaceful pursuits, and some of them from the most distant parts of the State—have been instructed in the most elementary exercises of the soldier; have been armed, equipped and supplied with every necessary for active service in the field, and are now ready to defend the honor and maintain the liberties of the State.

3. A navy department, hitherto unknown to our State organization, has been thoroughly and effectively organized. Navy batteries, numbering upwards of 320 pieces, and heavy ordnance, varying in weight from 5,000 to 10,000 pounds, have been established, the gun-carriages for the most part made, and the ammunition prepared, while upwards of 120 pieces of heavy ordnance have been forwarded to other States of the Southern Confederacy.

4. The various staff corps, embracing commissary, quartermaster, medical and engineer departments, have been organized under ordinances passed since the 20th April, 1861, and their efficiency has not only contributed to the promptness and completeness of the preparation which has enabled us to put so large a force from our own State into the field, but to facilitate the movements and efficiency of most of those who have come to our aid from the other States of the Confederacy.

5. And, finally, these results have been reached in due regard to an economical expenditure of the public money. The stores and other property, purchased for the military operations, have been paid for, as they were bought, and thus the credit of the State has been fully sustained.

It is due to truth and justice that I should here record, in this recapitulation, my high appreciation of the industry, judgment and professional skill which have marked the conduct of the distinguished officer who has been called by me, with the unanimous approval of the Convention, to conduct the military and naval operations of Virginia.

From every principle of duty and patriotism, the executive department of the State has felt called upon to cooperate cordially and heartily with the government of the Confederate States, and the policy which has controlled my action heretofore, will continue to regulate it. The great interests at stake demand the surrender of all questions of a subordinate character, in a vigorous and united effort to maintain the common rights of the South. Nothing will be left undone to advance the interests of all, and the candor, frankness and sincerity which have been exhibited by the President, assure me that harmony and concert of action will be the result. He duly appreciates the importance of the occasion, and his courage, prudence and military experience will exert a salutary influence in directing and controlling the military movements, now in progress for the protection of Virginia and the South.

And finally, I communicate herewith, orders issued to Generals Carson, Taliaferro and Haymond, and also a letter acknowledging the receipt of General Harper's report of operations at Harper's Ferry. General Harper was placed in charge of the expedition against Harper's Ferry, and I regret that the orders given to him, on the 17th day of April last, have been mislaid. These orders show that I acted with the promptness and decision due to the occasion. General Harper's report will be found with these orders. (Appendix G.)