FEDERAL MARITIME COMMISSION 

Office of Inspector General

Independent Auditor’s Report of 

FMC’s FY 2012 

Financial Statements 

A13-04 

November 2012 
TABLE OF CONTENTS 

Inspector General Transmittal Letter 

Independent Auditors’ Report .......................................................................................... 4

Balance Sheet ................................................................................................................. 8 

Statement of Net Cost ..................................................................................................... 9 

Statement of Changes in Net Position........................................................................... 10 

Statement of Budgetary Recources............................................................................... 11 

Statement of Custodial Activity ...................................................................................... 12 

Notes to the Financial Statements ................................................................................ 13 

APPENDIX A – OIG Comments to Draft Report ........................................................ 26

   
FEDERAL MARITIME COMMISSION

Office of Inspector General 

Washington, DC 20573-0001 

November 14, 2012

Office of Inspector General

The Honorable Richard A. Lidinsky, Jr.

Chairman

Federal Maritime Commission   

I am pleased to provide you with the attached audit report required by the Accountability for

Tax Dollars Act of 2002 (ATDA), which presents an unqualified opinion on the Federal Maritime

Commission’s (FMC) FY 2012 financial statements. The audit results indicate that the FMC has

established an internal control structure that facilitates the preparation of reliable financial and

performance information. We commend the FMC for the noteworthy accomplishment of

attaining an unqualified (clean) opinion for the ninth consecutive year.

The Office of Inspector General (OIG) engaged the independent certified public accounting firm

of Regis & Associates, P.C. (Regis) to perform the audit of the FMC’s financial statements for the

fiscal year ended September 30, 2012. The contract required that the audit be performed in

accordance with U.S. Generally Accepted Government Auditing Standards and Office of

Management and Budget (OMB) audit guidance.  

In its audit of the Federal Maritime Commission, Regis found:

• the financial statements were fairly presented, in all material respects, in conformity with

U.S. generally accepted accounting principles;

• there were no material weaknesses in internal control over financial reporting (including

safeguarding assets) and compliance with laws and regulations; and

• no reportable noncompliance with laws and regulations tested.

To fulfill our responsibilities under ATDA and related legislation for ensuring the quality of the

audit work performed, the OIG monitored Regis’s audit of FMC’s FY 2012 financial statements

by:

• reviewing Regis’s approach and planning of the audit;

2
• evaluating the qualifications and independence of its auditors;

• monitoring the progress of the audit at key points;

• examining its work papers related to planning the audit, assessing the FMC’s internal

control, and substantive testing;

• reviewing Regis’s audit report to ensure compliance with Government Auditing

Standards and OMB Bulletin No. 07‐04, as amended;

• coordinating the issuance of the audit report; and

• performing other procedures we deemed necessary.

Our review disclosed no instances where Regis did not comply, in all material respects, with U.S.

Generally Accepted Government Auditing Standards. However, our review cannot be construed

as an audit in accordance with U.S. Generally Accepted Government Auditing Standards. It was

not intended to enable us to express, and we do not express, any opinion on the FMC’s financial

statements, conclusions about the effectiveness of internal control, or conclusions on

compliance with laws and regulations. Regis is solely responsible for the attached auditor’s

report dated November 9, 2012, and the conclusions expressed in the report.

We appreciate the cooperation and courtesies extended to both Regis and OIG staff during the

audit.

Sincerely,

  

/Adam R. Trzeciak/

Inspector General

 

Attachment

cc: Commissioners

Managing Director   

3
MANAGEMENT CONSULTANTS &

CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT 

The Honorable Richard A. Lidinsky, Jr. 

Chairman 

Federal Maritime Commission 

Washington, DC 

In accordance with the Accountability of Tax Dollars Act of 2002, we have audited the 

accompanying balance sheets of the Federal Maritime Commission as of September 30, 2012 

and 2011, and the related statements of net cost, changes in net position, budgetary resources, 

and custodial activity for the years then ended. In our audit of the Federal Maritime 

Commission’s financial statements for fiscal years ended September 30, 2012 and 2011, we 

found: 

• the financial statements are presented fairly, in all material respects, in conformity with 

U.S. Generally Accepted Accounting Principles; 

• no material weaknesses in internal control over financial reporting (including 

safeguarding assets), and compliance with laws and regulations; and 

• no reportable noncompliance with the laws, and regulations we tested. 

The following sections discuss in more detail (1) these conclusions, (2) our audit objectives, 

scope and methodology, (3) agency comments, and our evaluation. 

Opinion on Financial Statements 

In our opinion, the financial statements, including the accompanying notes, present fairly, in all 

material respects, the Federal Maritime Commission's assets, liabilities, and net position as of 

September 30, 2012 and 2011; and net costs; changes in net position; budgetary resources; and 

custodial activity for the years then ended, in conformity with accounting principles generally 

accepted in the United States of America. 

1400 Eye Street, NW, Suite 425, Washington, DC 20005 Tel 202-296-7101 Fax 202-296-7284

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Consideration of Internal Control 

In planning and performing our audit, we considered the Federal Maritime Commission's internal 

control over financial reporting as a basis for designing our auditing procedures and to comply 

with Office of Management and Budget (OMB) audit guidance for the purpose of expressing our 

opinion on the financial statements, but not for the purpose of expressing an opinion on internal 

control and compliance, or on management’s assertion on internal control included in the 

Management’s Discussion and Analysis (MD&A) section of the Federal Maritime Commission's 

Performance and Accountability Report for Fiscal Year 2012. Accordingly, we do not express an 

opinion on internal control over financial reporting and compliance, or on management's 

assertion on the effectiveness of the entity’s internal control over financial reporting. However, 

for the controls we tested, we found no material weakness in internal control over financial 

reporting (including safeguarding assets) and compliance. 

A control deficiency exists when the design or operation of a control does not allow management 

or employees, in the normal course of performing their assigned functions, to prevent or detect 

misstatements on a timely basis. A significant deficiency is a control deficiency, or combination 

of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, 

process or report financial data reliably in accordance with Generally Accepted Accounting 

Principles, such that there is more than a remote likelihood that a misstatement of the entity’s 

financial statements that is more than inconsequential will not be prevented or detected by the 

entity’s internal control. 

A material weakness is a significant deficiency, or combination of significant deficiencies, that 

results in more than a remote likelihood that a material misstatement of the financial statements 

will not be prevented or detected by the entity’s internal control. 

Our consideration of internal control over financial reporting and compliance was for the limited 

purpose described in the first paragraph of this section, and would not necessarily disclose all 

deficiencies in internal control over financial reporting that might be deficiencies, significant 

deficiencies, or material weaknesses. We did not identify any deficiencies in internal control 

over financial reporting that we consider to be material weaknesses or significant deficiencies, as 

defined above. 

Compliance with Laws and Regulations 

Our tests of the Federal Maritime Commission’s compliance with selected provisions of laws 

and regulations for fiscal year 2012 disclosed no instances of noncompliance that would be 

reportable under U.S. Generally Accepted Government Auditing Standards, or OMB audit 

guidance. However, the objective of our audit was not to provide an opinion on overall 

compliance with laws and regulations. Accordingly we do not express such an opinion. 

5
Objectives, Scope, and Methodology 

The Federal Maritime Commission’s management is responsible for (1) preparing the financial 

statements in conformity with U.S. Generally Accepted Accounting Principles, (2) establishing, 

maintaining, and assessing internal control to provide reasonable assurance that the broad control 

objectives of the Federal Managers’ Financial Integrity Act are met; and (3) complying with 

applicable laws and regulations. 

 

We are responsible for obtaining reasonable assurance about whether the financial statements are 

presented fairly, in all material respects, in conformity with U.S. Generally Accepted Accounting 

Principles. We are also responsible for (1) obtaining a sufficient understanding of internal control 

over financial reporting and compliance to plan the audit, (2) testing compliance with selected 

provisions of laws and regulations that have a direct and material effect on the financial 

statements and laws for which OMB audit guidance requires testing, (3) performing limited 

procedures with respect to certain other information appearing in the Annual Financial 

Statements, and (4) expressing an opinion on these financial statements based on our audit. 

In order to fulfill these responsibilities, we: 

• examined, on a test basis, evidence supporting the amounts and disclosures in the 

financial statements; 

• assessed the accounting principles used and significant estimates made by management; 

• evaluated the overall presentation of the financial statements; 

• obtained an understanding of the FMC and its operations, including its internal control 

related to financial reporting (including safeguarding assets), and compliance with laws 

and regulations (including execution of transactions in accordance with budget authority); 

• tested relevant internal controls over financial reporting and compliance, and evaluated 

the design and operating effectiveness of internal control; 

• considered the design of the process for evaluating and reporting on internal control and 

financial management systems under the Federal Managers' Financial Integrity Act; and 

• tested compliance with selected provisions of laws and regulations. 

We did not evaluate all internal controls relevant to operating objectives, as broadly defined by 

the Federal Managers' Financial Integrity Act, such as those controls relevant to preparing 

statistical reports and ensuring efficient operations. We limited our internal control testing to 

controls over financial reporting and compliance. Because of inherent limitations in internal 

control, misstatements due to error or fraud, losses, or noncompliance may nevertheless occur 

and not be detected. We caution that our internal control testing may not be sufficient for other 

purposes and that projecting our evaluation to future periods is subject to the risk that controls 

may become inadequate because of changes in conditions, or that the degree of compliance with 

controls may deteriorate. 

 

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We did not test compliance with all laws and regulations applicable to the Federal Maritime 

Commission. We limited our tests of compliance to selected provisions of laws and regulations 

that have a direct and material effect on the financial statements, and those required by OMB 

audit guidance that we deemed applicable to the Federal Maritime Commission's financial 

statements for the fiscal year ended September 30, 2012. We caution that noncompliance may 

occur and not be detected by these tests, and that such testing may not be sufficient for other 

purposes. 

We performed our audit in accordance with auditing standards generally accepted in the United 

States and OMB audit guidance. 

Agency Comments and Our Evaluation 

The Federal Maritime Commission concurred with the facts and conclusions in our report. See 

Appendix A. 

Regis & Associates, PC 

Washington, DC 

November 9, 2012 

   

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FEDERAL MARITIME COMMISSION 

BALANCE SHEET 

AS OF SEPTEMBER 30, 2012 AND 2011 

 2012 2011 

Assets: 

Intragovernmental 

Fund Balance With Treasury (Note 2) $ 4,254,644 $ 3,792,671 

Total Intragovernmental 4,254,644 3,792,671 

Accounts Receivable, Net (Note 3) 4,031 979 

Property, Equipment, and Software, Net (Note 4) 420,323 525,021 

Other - 300 

Total Assets $ 4,678,998 $ 4,318,971 

Liabilities: 

Intragovernmental 

Accounts Payable $ 201,490 $ 146,636 

Employer Contributions and Payroll Taxes Payable 191,260 188,998 

Unfunded FECA Liability (Note 6) 324 1,956 

Custodial Liability (Note 6) 256 979 

Other - 870 

Total Intragovernmental 393,330 339,439 

Accounts Payable 177,008 103,362 

Federal Employee and Veterans' Benefits (Note 6) 5,910 5,910 

Accrued Liabilities 901,485 951,116 

Employee Contributions and Payroll Taxes Payable 24,363 24,546 

Unfunded Leave (Note 6) 1,276,758 1,229,110 

Total Liabilities $ 2,778,854 $ 2,653,483 

Net Position: 

Unexpended Appropriations - Other Funds 2,759,038 2,378,313 

Cumulative Results of Operations - Other Funds (858,894) (712,825) 

Total Net Position $ 1,900,144 $ 1,665,488 

Total Liabilities and Net Position $ 4,678,998 $ 4,318,971 

The accompanying notes are an integral part of these financial statements

   

8
FEDERAL MARITIME COMMISSION 

STATEMENT OF NET COST 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

 2012 2011 

Program Costs: 

Operational and Administrative 

Gross Costs $ 16,908,154 $ 17,474,598 

Less: Earned Revenue (41,676) - 

Net Program Costs $ 16,866,478 $ 17,474,598 

Formal Proceedings 

Gross Costs $ 7,374,383 $ 7,576,489 

Less: Earned Revenue - (39,856) 

Net Program Costs $ 7,374,383 $ 7,536,633 

Office of Inspector General 

Gross Costs $ 743,557 $ 721,109 

Less: Earned Revenue (12,984) (19,336) 

Net Program Costs $ 730,573 $ 701,773 

Office of Equal Employment Opportunity 

Gross Costs $ 193,612 $ 198,706 

Net Program Costs $ 193,612 $ 198,706 

Net Cost of Operations (Note 8) $ 25,165,046 $ 25,911,710 

The accompanying notes are an integral part of these financial statements

   

9
FEDERAL MARITIME COMMISSION 

STATEMENT OF CHANGES IN NET POSITION 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

 2012 2011 

Cumulative Results of Operations: 

Beginning Balances $ (712,825) $ (600,844) 

Budgetary Financing Sources: 

Appropriations Used 23,560,395 24,236,436 

Other Financing Sources (Non-Exchange): 

Imputed Financing Sources (Note 11) 1,458,582 1,563,293 

Total Financing Sources 25,018,977 25,799,729 

Net Cost of Operations (25,165,046) (25,911,710) 

Net Change (146,069) (111,981) 

Cumulative Results of Operations $ (858,894) $ (712,825) 

Unexpended Appropriations: 

Beginning Balances $ 2,378,313 $ 2,647,804 

Budgetary Financing Sources: 

Appropriations Received 24,100,000 24,135,000 

Other Adjustments (158,880) (168,055) 

Appropriations Used (23,560,395) (24,236,436) 

Total Budgetary Financing Sources 380,725 (269,491) 

Total Unexpended Appropriations $ 2,759,038 $ 2,378,313 

Net Position $ 1,900,144 $ 1,665,488 

The accompanying notes are an integral part of these financial statements

   

10
FEDERAL MARITIME COMMISSION 

STATEMENT OF BUDGETARY RESOURCES 

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 

 2012 2011 

Budgetary Resources: 

Unobligated Balance Brought Forward, October 1 $ 1,245,904 $ 1,303,927 

Recoveries of Prior Year Unpaid Obligations 182,051 103,585 

Unobligated balance from prior year budget authority, net 1,269,074 1,287,727 

Appropriations 24,100,000 24,086,730 

Spending authority from offsetting collections 54,660 59,192 

Total Budgetary Resources $ 25,423,734 $ 25,433,649 

Status of Budgetary Resources: 

Obligations Incurred (Note 12) $ 24,138,684 $ 24,187,745 

Unobligated balance, end of year: 

 Apportioned 86,652 25,375 

 Unapportioned 1,198,398 1,220,529 

Total unobligated balance, end of year 1,285,050 1,245,904 

Total Status of Budgetary Resources $ 25,423,734 $ 25,433,649 

Change in Obligated Balance: 

Unpaid Obligations, Brought Forward, October 1 $ 2,546,766 $ 3,558,091 

Adjustment to obligated balance, start of year (2,969,594) (2,546,766) 

Obligated balance, start of year, as adjusted (422,828) 1,011,325 

Obligations Incurred 24,138,684 24,187,745 

Outlays (gross) (23,533,805) (25,095,485) 

Recoveries of Prior Year Unpaid Obligations (182,051) (103,585) 

Obligated balance, end of year 

 Unpaid obligations, end of year 2,969,594 2,546,766 

Obligated balance, end of year $ 2,969,594 $ 2,546,766 

Budget Authority and Outlays, Net: 

Budget authority, gross $ 24,154,660 $ 24,145,922 

Actual offsetting collections (54,660) (59,192) 

Budget Authority, net $ 24,100,000 $ 24,086,730 

Outlays, gross $ 23,533,806 $ 25,095,485 

Actual offsetting collections (54,660) (59,192) 

Outlays, net 23,479,146 25,036,293 

Distributed Offsetting Receipts 664,935 2,430,482 

Agency outlays, net 24,144,081 27,466,775 

The accompanying notes are an integral part of these financial statements

   

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FEDERAL MARITIME COMMISSION 

AS OF SEPTEMBER 30, 2012 AND 2011 

STATEMENT OF CUSTODIAL ACTIVITY 

 2012 2011 

Revenue Activity: 

Sources of Cash Collections: 

Miscellaneous $ 1,006,298 $ 2,430,482 

Total Cash Collections (Note 13) 1,006,298 2,430,482 

Accrual Adjustments - 865 

Total Custodial Revenue $ 1,006,298 $ 2,431,347 

Disposition of Collections: 

Transferred to Others (by Recipient) $ 1,006,298 $ 2,430,482 

Retained by the Reporting Entity 865 

Net Custodial Activity $ - $ - 

The accompanying notes are an integral part of these financial statements

   

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FEDERAL MARITIME COMMISSION

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

A.  Reporting Entity

The Federal Maritime Commission (FMC) was 

established as an independent regulatory agency 

on August 12, 1961. The FMC is responsible for 

the regulation of oceanborne transportation in the 

foreign commerce of the United States (U.S.). 

The principal statutes or statutory provisions 

administered by the Commission are the Shipping 

Act of 1984, as amended by the Ocean Shipping 

Reform Act of 1998 (OSRA), the Foreign 

Shipping Practices Act of 1988 (FSPA), section 

19 of the Merchant Marine Act of 1920, and 

sections 2 and 3 of Public Law No. 89-777. 

13

The Commission monitors the activities of ocean 

common carriers, marine terminal operators 

(MTOs), ports and ocean transportation 

intermediaries (OTIs) (non-vessel-operating 

common carriers and freight forwarders) who 

operate in the U.S. foreign commerce to ensure 

that they maintain just and reasonable practices; 

maintains trade monitoring, enforcement and 

dispute resolution programs designed to assist 

regulated entities in achieving compliance and to 

detect and appropriately remedy malpractices and 

violations of the prohibited acts set forth in 

section 10 of the 1984 Act; reviews competitive 

activities of common carrier alliances and other 

agreements among common carriers and/or 

terminal operators; monitors the laws and 

practices of foreign governments which could 

have a discriminatory or otherwise adverse impact 

on shipping conditions in U.S. trades, and 

imposes remedial action, as appropriate, pursuant 

to section 19 of the 1920 Act or FSPA; enforces 

special regulatory requirements applicable to 

carriers owned or controlled by foreign 

governments; processes and reviews agreements, 

service contracts, and service arrangements 

pursuant to the 1984 Act for compliance with 

statutory requirements; and reviews common 

carriers’ privately published tariff systems for 

accessibility, accuracy, and reasonable terms. The 

FMC also issues licenses to qualified OTIs in the 

U.S., ensures that all OTIs are bonded or maintain 

other evidence of financial responsibility, and, 

pursuant to 46 U.S.C. §§ 44102 and 44103, 

ensures that passenger vessel operators (PVO) 

demonstrate adequate financial responsibility to 

indemnify passengers in the event of 

nonperformance of voyages or passenger injury or 

death. 

The FMC is composed of five Commissioners 

appointed for five-year terms by the President 

with the advice and consent of the Senate. The 

President designates one of the Commissioners to 

serve as Chairman, who is the chief executive and 

administrative officer of FMC. 

The FMC reporting entity is comprised of General 

Funds and General Miscellaneous Receipts. 

General Funds are accounts used to record 

financial transactions arising under congressional 

appropriations or other authorizations to spend 

general revenues. 

General Fund miscellaneous receipts are accounts 

established for receipts of non-recurring activity, 

such as fines, penalties, fees and other 

miscellaneous receipts for services and benefits. 

The FMC makes custodial collections and holds 

custodial receivables that are non-entity assets 

and are transferred to Treasury at fiscal year end. 
The FMC has rights and ownership of all assets 

reported in these financial statements. FMC 

does not possess any non-entity assets. 

B.  Basis of Presentation

The financial statements have been prepared to 

report the financial position, net cost of 

operations, changes in net position, and the 

status and availability of budgetary resources of 

the FMC. The statements are a requirement of 

the Accountability of Tax Dollars Act of 2002. 

They have been prepared from, and are fully 

supported by, the books and records of FMC in 

accordance with the hierarchy of accounting 

principles generally accepted in the United 

States of America, standards approved by the 

Federal Accounting Standards Advisory Board 

(FASAB), OMB Circular A-136, Financial 

Reporting Requirements, as amended, and FMC 

accounting policies which are summarized in 

this note. These statements, with the exception 

of the Statement of Budgetary Resources, are 

different from financial management reports, 

which are also prepared pursuant to OMB 

directives that are used to monitor and control 

the FMC’s use of budgetary resources. The 

financial statements and associated notes are 

presented on a comparative basis. Unless 

specified otherwise, all amounts are presented in 

dollars. 

C.  Basis of Accounting

Transactions are recorded on both an accrual 

accounting basis and a budgetary basis. Under 

the accrual method, revenues are recognized 

when earned, and expenses are recognized when 

a liability is incurred, without regard to receipt 

or payment of cash. Budgetary accounting 

facilitates compliance with legal requirements 

on the use of Federal funds. Balances on these 

statements may therefore differ from those on 

financial reports prepared pursuant to other 

OMB directives that are primarily used to 

monitor and control the FMC's use of budgetary 

resources. 

D.  Fund Balance with Treasury

Fund Balance with Treasury is the aggregate 

amount of the FMC’s funds with Treasury in 

expenditure and receipt, accounts. Appropriated 

funds recorded in expenditure accounts are 

available to pay current liabilities and finance 

authorized purchases. 

FMC does not maintain bank accounts of its 

own, has no disbursing authority and does not 

maintain cash held outside of Treasury. 

Treasury disburses funds for FMC on demand. 

E.  Accounts Receivable

Accounts receivable consists of amounts owed 

to the FMC by other Federal agencies, its 

employees and the general public. Accounts 

receivable in the Salaries and Expense Fund 

represent employee-related receivables. An 

allowance for uncollectible accounts receivable 

from the public is established when, based upon 

a review of outstanding accounts, management 

determines that collection is unlikely to occur 

considering the debtor’s ability to pay. Debts 

six months or more past due are referred to the 

Department of Treasury for follow-up collection 

efforts in keeping with the Debt Collection 

Improvement Act of 1996 (DCIA). Treasury’s 

Debt Management Services (DMS) administers 

the program and adds a fee equal to 28 percent 

of the amount of debt that is less than 2 years 

delinquent or 30 percent of debts delinquent by 2 

years or more. Collections, net of fees, are 

returned to the FMC for remittance to the 

general fund of the Treasury. 

F.  Property, Equipment, and Software

Property, equipment and software represent 

furniture, fixtures, equipment, and information 

technology (IT) hardware and software which 

are recorded at original acquisition cost and are 

depreciated or amortized using the straight-line 

method over their estimated useful lives. Major 

alterations and renovations are capitalized, 

except wherein the tenant improvement 

allowance specified in lease agreements covers 

14
the costs of certain renovations. Maintenance 

and repair costs are expensed as incurred. The 

FMC's capitalization threshold is $25,000 for 

individual purchases. Applicable standard 

governmental guidelines regulate the disposal 

and convertibility of agency property, equipment 

and software. The useful life classifications for 

capitalized assets are as follows: 

Description Useful Life (years)

Leasehold Improvements 5 

Office Furniture 5 

Computer Equipment 5 

Office Equipment 5 

IT Software 5 

G.  Advances and Prepaid Charges

Advance payments are generally prohibited by 

law. There are exceptions, such as some 

reimbursable agreements, subscriptions, and 

payments to contractors and employees. 

Payments made in advance of the receipt of 

goods and services are recorded as advances or 

prepaid charges at the time of prepayment and 

recognized as expenses when the related goods 

and services are received. 

H.  Liabilities

Liabilities represent the amount of funds likely 

to be paid by the FMC as a result of transactions 

or events that have already occurred. 

The FMC reports its liabilities under two 

categories, Intragovernmental and With the 

Public. Intragovernmental liabilities represent 

funds owed to another government agency. 

Liabilities With the Public represents funds 

owed to any entity or person that is not a federal 

agency, including private sector firms and 

federal employees. Each of these categories 

may include liabilities that are covered by 

budgetary resources and liabilities not covered 

by budgetary resources. 

Liabilities covered by budgetary resources are 

liabilities funded by a current appropriation or 

other funding source. These consist of accounts 

payable and accrued payroll and benefits. 

Accounts payable represent amounts owed to 

another entity for goods ordered and received 

and for services rendered except for employees. 

Accrued payroll and benefits represent payroll 

costs earned by employees during the fiscal year 

which are not paid until the next fiscal year. 

Liabilities not covered by budgetary resources 

are liabilities that are not funded by any current 

appropriation or other funding source. These 

liabilities consist of accrued annual leave, 

actuarial FECA, and the amounts due to 

Treasury for collection and accounts receivable 

of civil penalties. 

I.  Annual, Sick and Other Leave

Annual leave is accrued as it is earned, and the 

accrual is reduced as leave is taken. The balance 

in the accrued leave account is adjusted to reflect 

current pay rates. Liabilities associated with 

other types of vested leave, including 

compensatory, restored leave and sick leave in 

certain circumstances, are accrued at year-end, 

based on latest pay rates and unused hours of 

leave. Funding will be obtained from future 

financing sources to the extent that current or 

prior year appropriations are not available to 

fund annual and other types of vested leave 

earned but not taken. Nonvested leave is 

expensed when used. Any liability for unused 

sick leave that is accrued but not taken by a Civil 

Service Retirement System (CSRS)-covered 

employee is transferred to the OPM upon the 

retirement of that individual. Credit is given for 

sick leave balances in the computation of 

annuities upon the retirement of Federal 

Employees Retirement System (FERS)-covered 

15
employees effective at 50% beginning FY2010 

and 100% in 2014. 

J.    Accrued and Actuarial Workers’

Compensation

The Federal Employees' Compensation Act 

(FECA) administered by the U.S. Department of 

Labor (DOL) addresses all claims brought by 

FMC employees for on-the-job injuries. The 

DOL bills each agency annually as its claims are 

paid, and the actual costs incurred are reflected 

as a liability to the agency. Payment of these 

bills is deferred for two years to allow for 

funding through the budget process. Similarly, 

employees that the FMC terminates without 

cause may receive unemployment compensation 

benefits under the unemployment insurance 

program also administered by the DOL, which 

bills each agency quarterly for paid claims. 

Future appropriations will be used for the 

reimbursement to DOL. The liability consists of 

(1) the net present value of estimated future 

payments calculated by the DOL, and (2) the 

unreimbursed cost paid by DOL for 

compensation to recipients under the FECA. 

K. Retirement Plans

FMC employees participate in either the CSRS 

or the FERS. The employees who participate in 

CSRS are beneficiaries of FMC's contribution, 

equal to seven percent of pay, distributed to their 

annuity account in the Civil Service Retirement 

and Disability Fund. 

Prior to December 31, 1983, all employees were 

covered under the CSRS program. From 

January 1, 1984 through December 31, 1986, 

employees had the option of remaining under 

CSRS or joining FERS and Social Security. 

Employees hired as of January 1, 1987 are 

automatically covered by the FERS program. 

All employees are eligible to contribute to the 

Thrift Savings Plan (TSP). For those employees 

participating in the FERS, a TSP account is 

automatically established and FMC makes a 

mandatory one percent contribution to this 

account. In addition, FMC makes matching 

contributions, ranging from one to four percent, 

for FERS eligible employees who contribute to 

their TSP accounts. Matching contributions are 

not made to the TSP accounts established by 

CSRS employees. For FERS participants, FMC 

also remits the employer's share of the required 

contribution. 

FERS employees and certain CSRS 

reinstatement employees are eligible to 

participate in the Social Security program after 

retirement. 

The FMC recognizes the imputed cost of 

pension and other retirement benefits during the 

employees’ active years of service. OPM 

actuaries determine pension cost factors by 

calculating the value of pension benefits 

expected to be paid in the future and 

communicate these factors to FMC for current 

period expense reporting. OPM also provides 

information regarding the full cost of health and 

life insurance benefits. FMC recognized the 

offsetting revenue as imputed financing sources 

to the extent these expenses will be paid by 

OPM. 

The FMC does not report on its financial 

statements information pertaining to the 

retirement plans covering its employees. 

Reporting amounts such as plan assets, 

accumulated plan benefits, and related unfunded 

liabilities, if any, is the responsibility of the 

OPM. 

L.  Other Post‐Employment Benefits

FMC employees eligible to participate in the 

Federal Employees Health Benefits Plan 

(FEHBP) and the Federal Employees Group Life 

Insurance Program (FEGLIP) may continue to 

participate in these programs after their 

retirement. The OPM has provided FMC with 

certain cost factors that estimate the true cost of 

providing the post-retirement benefit to current 

16
17

employees. FMC recognizes a current cost for 

these and Other Retirement Benefits (ORB) at 

the time the employee's services are rendered. 

The ORB expense is financed by OPM, and 

offset by FMC through the recognition of an 

imputed financing source. 

M.  Use of Estimates

The preparation of the accompanying financial 

statements in accordance with generally 

accepted accounting principles requires 

management to make certain estimates and 

assumptions that affect the reported amounts of 

assets and liabilities and disclosure of contingent 

assets and liabilities at the date of the financial 

statements and the reported amounts of revenues 

and expenses during the reporting period. 

Actual results could differ from those estimates. 

N.  Imputed Costs/Financing Sources

Federal Government entities often receive goods 

and services from other Federal Government 

entities without reimbursing the providing entity 

for all the related costs. In addition, Federal 

Government entities also incur costs that are paid 

in total or in part by other entities. An imputed 

financing source is recognized by the receiving 

entity for costs that are paid by other entities. 

FMC recognized imputed costs and financing 

sources in fiscal years 2012 and 2011 to the 

extent directed by OMB. 

O.  Contingencies

The FMC recognizes contingent liabilities when 

a past event or exchange transaction has 

occurred, a future outflow or other sacrifice of 

resources is probable, and the future outflow or 

sacrifice of resources is measurable. Liabilities 

are deemed contingent when the existence or 

amount of the liability cannot be determined 

with certainty pending the outcome of future 

events. FMC recognizes contingent liabilities, in 

the accompanying balance sheet and statement 

of net cost, when it is both probable and can be 

reasonably estimated. FMC discloses contingent 

liabilities in the notes to the financial statements 

when the conditions for liability recognition are 

not met or when a loss from the outcome of 

future events is more than remote. In some 

cases, once losses are certain, payments may be 

made from the Judgment Fund maintained by 

the U.S. Treasury rather than from the amounts 

appropriated to FMC for agency operations. 

Payments from the Judgment Fund are recorded 

as an “Other Financing Source” when made. 
NOTE 2.  FUND BALANCE WITH TREASURY

Fund balance with Treasury account balances as of September 30, 2012 and 2011 were as follows: 

2012 2011

Fund Balances:

Appropriated Funds $ 4,254,644 $ 3,792,671 

Total $ 4,254,644 $ 3,792,671 

Status of Fund Balance with Treasury:

Unobligated Balance

 Available $ 86,652 $ 25,375 

 Unavailable 1,198,398 1,220,529 

Obligated Balance Not Yet Disbursed 2,969,594 2,546,767 

Total $ 4,254,644 $ 3,792,671 

The available unobligated fund balances represent the current-period amount available for obligation or 

commitment. At the start of the next fiscal year, this amount will become part of the unavailable balance 

as described in the following paragraph. 

The unavailable unobligated fund balances represent the amount of appropriations for which the period of 

availability for obligation has expired. These balances are available for upward adjustments of 

obligations incurred only during the period for which the appropriation was available for obligation or for 

paying claims attributable to the appropriations. 

The obligated balance not yet disbursed includes accounts payable, accrued expenses, and undelivered 

orders that have reduced unexpended appropriations but have not yet decreased the cash balance on hand. 

(See also Undelivered Orders at the End of the Period, Note 10.) 

   

18
NOTE 3.  ACCOUNTS RECEIVABLE

Accounts receivable balances as of September 30, 2012 and 2011 were as follows: 

2012 2011

With the Public

Accounts Receivable $ 4,031 $ 979

Total Accounts Receivable $ 4,031 $ 979

The accounts receivable is primarily made up of employee receivables and custodial collections. 

Historical experience has indicated that the majority of the receivables are collectible. There are no 

material uncollectible accounts as of September 30, 2012 and 2011. 

NOTE 4.  PROPERTY, EQUIPMENT, AND SOFTWARE

Schedule of Property, Equipment, and Software as of September 30, 2012: 

Major Class

Acquisition 

Cost

Accumulated 

Amortization/

Depreciation

Net Book 

Value

Leasehold Improvements 225,000 $ $ 157,500 $ 67,500

Furniture & Equipment 315,250 143,006 172,244

Software-in-Development 180,579 - 180,579

Total $ 720,829 $ 300,506 $ 420,323

Schedule of Property, Equipment, and Software as of September 30, 2011: 

Major Class

Acquisition 

Cost

Accumulated 

Amortization/

Depreciation

Net Book 

Value

Leasehold Improvements 225,000 $ $ 112,500 $ 112,500

Furniture & Equipment 520,566 288,624 231,942

Software-in-Development 180,579 - 180,579

Total $ 926,145 $ 401,124 $ 525,021

   

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NOTE 5.  LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

The liabilities for FMC as of September 30, 2012 and 2011 include liabilities not covered by budgetary 

resources. Congressional action is needed before budgetary resources can be provided. Although future 

appropriations to fund these liabilities are likely and anticipated, it is not certain that appropriations will 

be enacted to fund these liabilities. 

2012 2011

Intragovernmental – FECA $ 324 $ 1,956

Intragovernmental – Unemployment Insurance - 870

Actuarial FECA 5,910 5,910

Unfunded Leave 1,276,758 1,229,110

Total Liabilities Not Covered by Budgetary Resources 1,282,992 $ $ 1,237,846

Accounts Payable 378,498 249,998

Accrued Funded Payroll and Leave 901,485 951,116

Employer Contributions and Payroll Taxes Payable 215,623 213,544

Custodial Liability 256 979

Total Liabilities $ 2,778,854 $ 2,653,483

FECA and the Unemployment Insurance liabilities represent the unfunded liability for actual workers 

compensation claims paid on FMC's behalf and payable to DOL. FMC also records an actuarial liability 

for future workers compensation claims based on the liability to benefits paid (LBP) ratio provided by 

DOL and multiplied by the average of benefits paid over three years. 

Unfunded leave represents a liability for earned leave and is reduced when leave is taken. The balance in 

the accrued annual leave account is reviewed quarterly and adjusted as needed to accurately reflect the 

liability at current pay rates and leave balances. Accrued annual leave is paid from future funding sources 

and, accordingly, is reflected as a liability not covered by budgetary resources. Sick and other leave is 

expensed as taken. 

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NOTE 6.  OPERATING LEASES

FMC occupies office space in seven locations, of which six of the lease agreements are required to be 

accounted for as operating leases. Lease payments are increased annually based on the adjustments for 

operating cost and real estate tax escalations. The lease locations and terms are listed below: 

Location Term Lease Expiration Date

Washington DC 10 years 10/31/2012

Jamaica, NY 5 years 07/01/2013

Houston, TX 10 years 09/14/2018

Tacoma, WA 10 years 06/30/2019

Hollywood, FL 10 years 05/31/2020

San Pedro, CA 10 years 09/30/2021

The lease amounts vary from year to year depending on the specific lease. The schedule of future 

payments for the term of the leases is as follows: 

Fiscal Year Totals

2013 $ 347,931

2014 71,819

2015 73,070

2016 74,665

2017 75,665

Thereafter 189,221

Total Future Payments $ 832,371

The operating lease amount does not include estimated payments for leases with annual renewal options. 

Real estate taxes included in the Washington, DC lease may escalate depending on the market during the 

year they are due. 

NOTE 7.  CONTINGENCIES

FMC did not have any material commitments or contingencies that met disclosure requirements as of 

September 30, 2012. FMC records commitments and contingent liabilities for legal cases in which 

payment has been deemed probable and the amount of potential liability has been estimated. There is one 

legal action pending against FMC in which claims have been asserted that may be based on action taken 

by FMC. Management intends to vigorously contest all such claims. In FY2012, based on information 

provided by legal counsel, FMC estimates a possible liability of $300,000 in connection with this lawsuit. 

There were no contingent liabilities as of September 30, 2012. 

NOTE 8.  INTRAGOVERNMENTAL COSTS AND EXCHANGE REVENUE

21
Intragovernmental costs and exchange revenue represent goods and services exchange transactions made 

between two reporting entities within the Federal government, and are in contrast to those with nonFederal entities (the public). Such costs are summarized as follows: 

2012 2011

Operational and Administrative

 Intragovernmental Costs $ 4,811,649 $ 5,107,709

 Public Costs 12,096,505 12,366,889

 Total Program Costs 16,908,154 17,474,598

 Less: Intragovernmental Earned Revenue (41,676) -

 Net Program Costs 16,866,478 17,474,598

Formal Proceedings

 Intragovernmental Costs 1,529,477 1,553,388

 Public Costs 5,844,906 6,023,101

 Total Program Costs 7,374,383 7,576,489

 Less: Intragovernmental Earned Revenue - (39,856)

 Net Program Costs 7,374,383 7,536,633

Office of Inspector General

 Intragovernmental Costs 129,247 129,943

 Public Costs 614,311 591,166

 Total Program Costs 743,558 721,109

 Less: Intragovernmental Earned Revenue (12,984) (19,336)

 Net Program Costs 730,574 701,773

Office of Equal Employment Opportunity

 Intragovernmental Costs 28,549 33,614

 Public Costs 165,063 165,092

 Total Program Costs 193,612 198,706

 Net Program Costs 193,612 198,706

Total Intragovernmental costs 6,498,922 6,824,654

Total Public costs 18,720,784 19,146,248

 Total Costs 25,219,706 25,970,902

Less: Total Intragovernmental Earned Revenue (54,660) (59,192)

 Total Net Cost $ 25,165,046 $ 25,911,710

22
NOTE 9.  IMPUTED FINANCING SOURCES

FMC recognizes as imputed financing the costs of future benefits which include health benefits, life 

insurance, pension and post-retirement benefit expenses for current employees. The assets and liabilities 

associated with such benefits are the responsibility of the administering agency, OPM. For the years 

ended September 30, 2012 and 2011 imputed financing was as follows: 

2012 2011

Office of Personnel Management $ 1,458,582 $ 1,563,293 

Total Imputed Financing Sources $ 1,458,582 $ 1,563,293 

NOTE 10.    BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE UNITED STATES

GOVERNMENT

The President’s Budget that will include FY12 actual budgetary execution information has not yet been 

published. The President’s Budget is scheduled for publication in February 2013 and can be found at the 

OMB Web site: http://www.whitehouse.gov/omb/. The 2012 Budget of the United States Government, 

with the "Actual" column completed for 2011, has been reconciled to the Statement of Budgetary 

Resources and there were no material differences. 

NOTE 11.  APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

Obligations incurred and reported in the Statement of Budgetary Resources as of September 30, 2012 and 

2011 consisted of the following: 

Category A apportionments distribute budgetary resources by fiscal quarters. 

2012 2011

Direct Obligations, Category A $ 24,084,024 $ 24,128,553

Reimbursable Obligations, Category A 54,660 59,192

Total Obligations Incurred $ 24,138,684 $ 24,187,745

 

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NOTE 12. UNDELIVERED ORDERS AT THE END OF THE PERIOD

Undelivered orders represent goods and services which have been ordered but not yet received at fiscal 

year end. Statement of Federal Financial Accounting Standards No. 7, Accounting for Revenue and Other 

Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, states that the 

amount of budgetary resources obligated for undelivered orders at the end of the period should be 

disclosed. For the years ending September 30, 2012 and 2011, respectively, undelivered orders amounted 

to the following: 

2012 2011

Undelivered Orders $ 1,473,988 $ 1,132,410 

Total Undelivered Orders $ 1,473,988 $ 1,132,410 

NOTE 13.  CUSTODIAL ACTIVITY

FMC is an administrative agency collecting for the General Fund. As a collecting entity, FMC measures 

and reports cash collections and refunds as custodial activity on the Statement of Custodial Activity. 

Cash collections result primarily from FMC regulatory activities to include the assessment of fines and 

penalties and the payment of license application fees by ocean transportation intermediaries. A small 

portion of amounts collected is for interest on past due fines, petitions, status changes and special 

permission fees. 

Custodial receipts are broken out in the following general receipt funds: 

2012 2011

Fines, Penalties, and Forfeitures $ 665,000 $ 2,097,500 

General Fund Proprietary Receipts (user fees) 341,673 336,252 

Refund of User Fees (375) (3,270)

Total Custodial Collections $ 1,006,298 $ 2,430,482 

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NOTE 14.  RECONCILIATION OF NET COST OF OPERATIONS TO BUDGET  

FMC has reconciled its budgetary obligations and non-budgetary resources available to its net cost of 

operations. 

2012 2011

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations Incurred $ 24,138,684 24,187,745

Spending Authority From Offsetting Collections and Recoveries $ (236,711) (162,777)

Obligations Net of Offsetting Collections and Recoveries 23,901,973 24,024,968

Offsetting Receipts 664,935 2,430,482

Net Obligations 24,566,908 26,455,450

Other Resources

Imputed Financing From Costs Absorbed By Others 1,458,582 1,563,293

Net Other Resources Used to Finance Activities 1,458,582 1,563,293

Total Resources Used to Finance Activities 26,025,490 28,018,743

Resources Used to Finance Items Not Part of the Net Cost of Operations:

Change In Budgetary Resources Obligated For Goods,

Services and Benefits Ordered But Not Yet Provided (341,579) 211,467

Resources That Fund Expenses Recognized In Prior Periods (2,502) 1,086

Other (664,935) (2,430,482)

Total Resources Used to Finance Items Not Part of Net Cost of Operations (1,009,016) (2,217,929)

Total Resources Used to Finance the Net Cost of Operations 25,016,474 25,800,814

Components of the Net Cost of Operations That Will Not Require or

Generate Resources in the Current Period:

Components Requiring or Generating Resources in Future Periods

Increase In Annual Leave Liability 47,648 12,109

Other (5,911) - 

Total Components of Net Cost of Operations That Will Require or

Generate Resources In Future Periods 47,648 6,198

Components Not Requiring or Generating Resources

Depreciation and Amortization 104,698 104,698

Total Components of Net Cost of Operations That Will Not Require or

Generate Resources 100,924 104,698

Total Components of Net Cost of Operations That Will Not Require or

Generate Resources In The Current Period 148,572 110,896

Net Cost of Operations $ 25,165,046 $ 25,911,710

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APPENDIX A - 

FEDERAL MARITIME COMMISSION COMMENTS ON

DRAFT AUDIT REPORT

   
27

FEDERAL MARITIME COMMISSION

Office of Inspector General 

Washington, DC 20573-0001 

November 14, 2012 

 

Office of Inspector General 

 

Regis & Associates, PC 

Lateef Abassi, CPA 

1400 Eye Street, NW Suite 425 

Washington DC 20005 

Dear Mr. Abassi, 

I have reviewed the draft audit report provided to me relating to your audit of the Federal 

Maritime Commission for the fiscal year ended September 30, 2012. I concur with the facts and 

conclusions in the draft report. 

 Sincerely, 

 /Adam R. Trzeciak/ 

 Inspector General 

 

Attachment 

cc: Commissioners 

 Managing Director