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Michigan City, December 15, 1862. To His Excellency, 0. P. MORTON,

Governor of the State of Indiana:

The undersigned Commissioners and acting Board of Control of the Northern Indiana State Prison located at Michigan City, Indiana, beg leave respectively to present this their third Annual Rebort, as provided by law, of the condition of said Prison, together with a statement of the expenses of construction during the fiscal year ending December 15, 1862, as well as the expenses incurred in its general management and operation.

We commenced the work of construction, this year, under peculiar difficulties in fact, we might add, without means at command to accomplish little if anything in the construction of buildings. The appropriation for 1862, provided that ten thousand dollars of said sum should be expended in the purchase of materials to be used in the construction of prison buildings, and the residue, $15,000, to support account and payment of salaries of officers. During the summer and fall of 1861, the work of construction was rapidly and vigorously prosecuted, and it become necessary, in order to continue the work and einploy the convict labor, to anticipate the appropriation for materials for 1862, or to divert a part of the construction funds for 1862 to the purchase of materials; so that, when we closed up the work for the year 1861, there reinained but about three thousand dollars of the material fund on hand, not anticipated during the year 1861. With this small sum, and the certainty of a large deficiency to meet the current expenses of the Prison for the year 1862, the question presented two alternatives: either to exhaust the small sum of material fund and then discontinue the work, leaving it in no condition to be productive or beneficial to the State, as well as to incur no inconsiderable debt during the year for the support of the Prison; or, to suggest some other plan, by which workshops could be completed during the summer, to enable us to make the convict labor a source of income during the winter of 1862 and the summer following.

No money could be drawn from the State Treasury, other than specifically appropriated, the same being entirely insuflicient for the ordinary expenses of the Prison. To have remained without construction of workshops during the present summer, would have found us indebted, it the close of the present fiscal year, to the amount of at least fifteen or twenty thousand dollars; without any workshops in which to employ prison labor until the fall of 1863; increasing, necessarily, the amount of indebtedness by that period, to the sum of thirty-five or forty thousand dollars.

The Legislature, at the Extra Session, authorized and required the transfer of two hundred convicts from the Jeffersonville Prison to this, to be employed in construction; but, the Act itself did not provide for their return in case no employment could be found for them at this Prison; consequently, these convicts, is well as those then in the Prison, had to be provided for and supported until further legislation. The same Act making the transfer also provided that this Prison should be a Receiving Prison; and, we had good reason to infer that the number of convicts during the year would be largely increased. And the expense to the State for the maintenance of so large a number of convicts, unemployed for the want of suitable workshops, was one of importance, and had to be met to the best of our judginent and ability.

Under the circumstances thus presented, it was determined to call a meeting of our Board at Indianapolis on the 12th day of March last, with a view to a conference with your Excellency and the State officers, as to the best mode to proceed in the premises. After the consultation held there, it was agreed upon and determined that if a contractor could be found who would construct the necessary workshops during the summer, taking the material on hand and such other personal property as the State had on hand, not essential for it to retain, including engine and mill fixtures which were useless to the State; and, who should advance the cash means to complete the same, waiting for the residue until the Legislature made provision for its liquidation; that we would let such of the buildings as were exsential and important for the present.

Doubts were entertained whether it was probable that a contractor could be found who would take the contract to erect the necessary buildings and advance the cash means necessary to their completion, and await the action of the Legislature for its reimbursement and payment.

To test the matter, the requisite notice was given inviting sealed proposals for the construction of the workshops deemed the most important to be constructed during the summer, the payments to be made in such material as the State had on hand. The engine and mill fixtures purchased by our predecessors, and not in use by the State, and such other personal property as the State night wish to dispose of, and the residue over and above what the State could pay out of the ariicles above enumerated, await the action of the Legislature this winter to appropriate the amount to cover the deficiency, or to take the proper evidence of indebtedness on the scrip i-sued due February 1,1863.

On the 10th day of April, the time fixed for the letting, and the examination of proposals, propositions were submitted by ibree different parties, for the construction of the buildings. Not being aware of the usual and customary prices charged for work of that character, and at your suggestion, Mr. Stunph, of Indianapolis, a mechanic of acknowledged reputation as a builder, was present, to assist us in deterinining correctly the character of the bids presented as to ihe price of the different kind of work required. The bid of Mr. Divid J. Silvers, of Fort Wayne, was the only one which was specific in detail, and the prices considered by Mr. Siumph as about the usual average cost of work of a similar character at the city of Indianapolis. The other bids were such as could not for a unoinent be entertained. We accordingly accepted the proposal of Mr. Silvers, and entered into contract with him, taking bond and security for the faithful performance of the same.

The contractor at once coinmenced the work, and vigorously prosecuted the same to completion on the 14th instant, all of which has been accepted by 17s, and is now ready for occupancy.

The buildings thus completed consist of one workshop 40 by 150 feet, two stories and stone basement; also, one workshop 0 by 132 feet, two stories and stone basement; one blacksmith shop 40 by 76 feet, one story, iron roof; one engine house to by 60 feet, one story-all of which are built of brick and Joliett stone of the best quality; also the foundation of offices and stone gate-way on the cast side, and the east main wall completed to the height of nineteen feet.

or the character of the work done by Mr. Silvers under his contract, we feel no hesitation in saying that no other prison in the Western States can excell it. Visitors who have examined it from the State Prisons of Joliett, Jackson and Columbus, pronounce the work and capacity of the shops superior to any in either of those prisons. We are runder obligations to our energetic Superintendent, Mr. Richard Epperson, for the faithful vigilence exercised during their construction, to make cvery portion of ihe work conform to the express terms of the contract, both in material and workmanship. He has faithfully devoted his time and energy to accomplish that end.

The work completed under this contract has all been done according to the original plan and specifications approved by our predecessors, and adopted by the Legislature of the State, with the exception of the substitution of slate roofing on three of the buildings, instead of corrugated iron. Having tested the corrugated iron

roofing on one of the buildings, we deemed the slate roofing preferable.

Of the personal property sold to the contractor, amounting to five thousand eight hundred and eighteen dollars, was included out steam engine and mill fixtures, appraised by two disinterested machinists-Messrs. Aldrich and Condon, of Michigan City—at two thousand dollars, although the original cost to the State was much larger when purchased by our predecessors, and for any purpose of utility connected with the Prison was of but little value to the State, the contractor since having sold the same at a loss of five hundred dollars.

The total amount of work done under this contract amounts to the sum of $39,242 17, as will appear fully in detail, in the Report of the Superintendent herewith published, and to which you are respectfully referred.

There is still due to the contractor, froin the State, the sun of $24,650 25, for which sum we have issued to him evidence of indebtedness in the shape of Prison scrip, maturing February 1, 1863, and for which amount we ask the Legislature to make the necessary appropriation to meet it at maturity. The work is now completed; the contractor has invested his own cash means for the benefit of the State. The work could not be done during next summer with the present high price of materials, without an advanced cost of at least 20 per cent. The income which will be derived from convict labor, by having good and sufficieut buildings in which to work them, will bring to the State at least ten thousand dollars, before the time could arrive for their completion, if left until the following summer.

The number of workshops now completed will accommodate', without inconvenience, from three to four hundred convict laborers, which will be, in all probability, as large a number as will be received at this Prison for some time to come. When the walls shall be completed and one cell-house finished (the foundations already being laid) and offices built, the convenience and capacity of the Prison will meet the wants of the State for no inconsiderable periou of time; and we would again, in this Report, urge upon the attention of the Legislature the importance of an appropriation sufficient the coming winter to enable our successors to complete them at an carly day.

It will be seen, by an examination of the Report of the Warden, hereto appended, that we are indebted for the supplies of prison clothing and salaries of officers at the close of the fiscal year, in the sum of $22,403 82, for which amount we have issued scrip or approved evidence of indebtedness, to the several parties entitled thereto, maturing February 1, 1863, and for which we ask the Legislature to make an appropriation sufficient for their payment and liquidation. These sums are principally due to persons who have furnished supplies necessary for the comfort and support of convicts, and to guards of Prison.

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