FY 2005 FEDERAL MARITIME COMMISSION 

 1 

FEDERAL MARITIME COMMISSION

MANAGEMENT’S DISCUSSION and ANALYSIS 

Fiscal Year 2005 
 1 

 Management’s Discussion and Analysis FY 2005 

A MESSAGE FROM THE CHAIRMAN 

It is my pleasure to present the Federal Maritime Commission’s 

Management’s Discussion and Analysis for FY 2005. As a 

transportation/trade regulatory agency, our Vision is to ensure fairness and 

efficiency in U.S. maritime commerce. Our mandate is to help remove 

impediments to fair competition - undue controls, influences or non-market 

barriers imposed by any nation, carrier, cargo owner or intermediary - which 

can adversely affect U.S. oceanborne trade. We have developed a regulatory 

system that allows for necessary oversight with minimal disruption to the 

efficient flow of U.S. imports and exports. Thus, we ensure that fair 

competition exists in the ocean transportation industry while allowing the 

industry to conduct business as efficiently as possible. 

I am pleased to report that the FMC has achieved virtually all of its performance goals, and is positioning its 

resources with greater precision and effectiveness in order to continue to achieve its mandate within budget 

resources. In FY 2005, the FMC placed a major emphasis on furthering its interactions with external parties to 

increase the value of its services and oversight operations. We also strengthened relationships with government 

agencies responsible for maritime security to facilitate mutual efforts to identify and address potential security 

threats. Further, we improved our communication with agency stakeholders to increase public awareness of agency 

programs and policies, and to help address concerns before they become problems. We also improved the 

management of information by utilizing technology to streamline the flow of information, and to create more 

sophisticated databases. 

One of my responsibilities as the chief administrative officer of the agency is to ensure that our resources are 

efficiently managed and effectively used. This report provides information which demonstrates the judicious 

management of funds, and describes our successes in implementing our strategic goals. In addition, the FMC has 

evaluated its management controls and financial management systems, as required by the Federal Managers’ 

Financial Integrity Act, and I can certify, with reasonable assurance, that the Commission is in compliance with the 

provisions of that Act. 

The FMC is committed to developing and administering policies and regulations that foster a fair, efficient and 

secure maritime transportation system, to protecting U.S. maritime commerce from unfair foreign trade practices 

and market-distorting activities, to facilitating compliance with U.S. shipping statutes through outreach and 

oversight, and to assisting in resolving disputes. The FMC is proud of its FY 2005 accomplishments and looks 

forward to providing high-quality service to the American public in future years. 

Sincerely, 

Steven R. Blust 

Chairman, Federal Maritime Commission 

MANAGEMENT’S DISCUSSION & ANALYSIS 
 FY 2005 FEDERAL MARITIME COMMISSION 

 2 

Chapter 0ne 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Introduction 

This Management’s Discussion and Analysis represents the completion of the Federal Maritime Commission’s 

program and financing management process for Fiscal Year 2005, which began with mission and program 

planning, continued with the formulation and justification of FMC’s budget submission to the President and 

Congress, through budget execution, and ended with a report of our program performance and the use of resources. 

This report was prepared pursuant to the requirements of the Chief Financial Officers Act, as amended by the 

Reports Consolidation Act, and OMB Circular No-A136 (Revised), and covers the Commission’s activities from 

October 1, 2004, through September 30, 2005. 

Our Management’s Discussion and Analysis, provides an overview of the FMC. It consists of nine sections: 

Introduction describes the agency, its mission and structure; Regulatory Responsibility describes its regulatory 

mandate; Future Challenges includes information about the changes in the maritime industry; Program 

Performance Overview reports on the FMC’s success in achieving its strategic goals; President’s Management 

Agenda describes activities related to the relevant initiatives; Financial Performance Overview discusses the 

FMC’s financial position and audit results; Financial Statement Highlights gives an overview of the major 

financial statements; Improper Payments Information Act provides a breakdown of any improper payments made 

by the agency and efforts to collect improper disbursements; and Systems, Controls, and Legal Compliance

discloses the FMC’s compliance with certain legal and regulatory requirements. 

About the FMC 

The FMC is an independent regulatory agency which administers the Shipping Act of 1984 (“1984 Act” or 

“Shipping Act”) as amended by the Ocean Shipping Reform Act of 1998 (“OSRA”); section 19 of the Merchant 

Marine Act, 1920 (“1920 Act”); the Foreign Shipping Practices Act of 1988 (“FSPA”); and Public Law (“P.L.”) 

89-777 (passenger vessel certification). The Commission: monitors the activities of ocean common carriers, marine 

terminal operators, conferences, ports and ocean transportation intermediaries (non - vessel - operating common 

carriers and ocean freight forwarders) who operate in the U. S. foreign commerce to ensure they maintain just and 

reasonable practices; maintains a trade monitoring and enforcement program 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; 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 and service contracts 

pursuant to the 1984 Act for compliance with statutory requirements; and reviews common carriers’ privately 

published tariff systems for accessibility and accuracy as required by OSRA. The Commission also issues licenses 

to qualified ocean transportation intermediaries in the U. S., ensures that all OTIs are bonded or maintain other 

evidence of financial responsibility, and ensures that passenger vessel operators demonstrate adequate financial 

responsibility in case of nonperformance or injury to passengers. 

Organization 

The FMC is composed of five Commissioners appointed for five-year terms by the President with the advice and 

consent of the Senate. No more than three members of the FMC may belong to the same political party. The 

President designates one of the Commissioners to serve as Chairman. The Chairman is the chief executive and 

administrative officer of the agency. The FMC’s organizational units consist of: Offices of the Commissioners; 

Office of the General Counsel (“OGC”); Office of the Secretary (“OS”), including the Library and Office of 

Consumer Affairs and Dispute Resolution Services (“CADRS”); Office of Administrative Law Judges (“ALJ”); 

Office of Equal Employment Opportunity (“EEO”); Office of the Inspector General (“OIG”); Office of Operations 

(“OPS”), including the Bureaus of Certification and Licensing (“BCL”), Enforcement (“BOE”), and Trade 

Analysis (“BTA”); and Office of Administration (“OA”), including the Offices of Budget and Financial 

Management (“OBFM”), Human Resources (“OHR”), Information Technology (“OIT”), and Management 

Services (“OMS”). The majority of FMC personnel are located in Washington, DC., with Area Representatives in 

New York, New Orleans, Los Angeles, Seattle, and South Florida. 

In FY 2005, the FMC’s appropriation totaled $19,340,032 with 124 full-time-equivalent staff. 
 3 

 Management’s Discussion and Analysis FY 2005 

Chapter 0ne 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Regulatory Responsibility 

The FMC’s regulatory responsibilities include: 

• Protecting shippers and carriers engaged in the foreign commerce of the U.S. from 

restrictive or unfair foreign laws, regulations, or business practices that harm U.S. 

shipping interests or ocean trade. 

• Reviewing operational and pricing agreements among ocean common carriers and marine 

terminal operators (“MTOs”), to ensure that they do not have excessively anticompetitive 

effects. 

• Reviewing and maintaining a system containing the service contracts between ocean 

common carriers and shippers, and service arrangements between non-vessel-operating 

common carriers (“NVOCCs”) and shippers, and using this system to guard against 

anticompetitive practices and other unfair prohibited acts. 

• Ensuring that common carriers’ rates and charges are accessible to the shipping public in 

private, electronically accessible systems. 

• Regulating rates, charges, and rules of government-owned or -controlled carriers to ensure 

 that they are just and reasonable and are not unfairly undercutting private competitors. 

• Issuing passenger vessel certificates evidencing financial responsibility of vessel owners or 

charters to pay judgments for personal injury or death or to repay fares for the 

 nonperformance of a voyage or cruise. 

• Licensing OTIs to protect the public from unqualified, insolvent, or dishonest companies. 

 

• Ensuring that OTIs maintain sufficient financial responsibility to protect the shipping 

public from financial loss. 

• Investigating discriminatory rates, charges, classifications, and practices of common 

carriers, MTOs, and OTIs operating in the foreign commerce of the U.S. 

The FMC is authorized by the FSPA, section 19 of the 1920 Act, and section 13(b)(6) of the 1984 Act, to take 

action to ensure that the foreign commerce of the U.S. is not burdened by non-market barriers to ocean shipping. 

The FMC may take countervailing action to correct unfavorable shipping conditions in U.S. foreign commerce and 

may impose penalties. The FMC may address actions by carriers or foreign governments that adversely affect 

shipping in the U.S. foreign oceanborne trades including the intermodal operations of carriers or the operations of 

OTIs, or that impair access of U.S.-flag vessels to ocean trade between foreign ports. 

The 1984 Act is applicable to the operations of common carriers and other persons engaged in U.S. foreign 

commerce. It exempts agreements that have become effective under the 1984 Act from the U.S. antitrust laws, as 

contained in the Sherman and Clayton Acts. The FMC reviews and evaluates agreements to ensure that they do 

not exploit the grant of antitrust immunity, and to ensure that agreements do not otherwise violate the 1984 Act or 

result in an unreasonable increase in transportation cost or unreasonable reduction in service. 
 FY 2005 FEDERAL MARITIME COMMISSION 

 4 

Regulatory Responsibility (continued) 

In addition to monitoring relationships among carriers, the FMC is also responsible for ensuring that individual 

carriers, as well as those permitted by agreement to act in concert, fairly treat shippers and other members of the 

shipping public, in accordance with the 1984 Act’s prohibition against undue discrimination. The 1984 Act also 

requires all carriers to make their rates, charges and practices available in automated tariff systems that must be 

available electronically to the public. NVOCCs may assess the rates and charges published in their tariffs or may 

offer service arrangements with shipping customers. Ocean common carriers are permitted to enter into service 

contracts with their shipper customers. Such contracts are filed electronically with the FMC in our Internet-based 

system, and are provided confidential treatment by the FMC as required by the Act. The FMC does not have the 

authority to approve or disapprove general rate increases (“GRIs”) or individual commodity rate levels in the U.S. 

foreign commerce, except with regard to certain foreign government-owned or -controlled carriers. 

P. L. 89-777 requires the operators of passenger vessels with 50 or more berths who embark passengers at U.S. 

ports to establish financial coverage to indemnify passengers in cases of death, injury, or nonperformance of 

transportation. The FMC certifies such operators upon the submission of satisfactory evidence of financial 

responsibility. The FMC ensures that all OTIs operating in the foreign commerce of the U.S. have established 

sufficient financial responsibility to protect shippers from financial loss. Additionally, the FMC licenses all U.S. 

OTIs. 

The FMC carries out its regulatory responsibilities by conducting informal and formal investigations. It holds 

hearings, considers evidence and renders decisions, and issues appropriate orders and implementing regulations. 

The FMC also adjudicates and mediates disputes involving the regulated community, the general shipping public, 

and other affected individuals or interest groups. 

The FMC also carries out a management and support function for information technology, financial management, 

human resources, and administrative support. 

The FMC oversees approximately 5,200 regulated persons (passenger vessel operators, conferences, OTIs, 

NVOCCs, etc.). 

The FMC has a new, improved, easy-to-navigate website which contains more information concerning the 

agency’s activities and responsibilities. Please visit us at www.fmc.gov. 

Future Challenges 

International trade remains dependent upon an efficient ocean transportation system. Yet the ocean shipping 

industry’s business processes and security requirements have undergone significant changes in recent years. The 

industry continues to face challenges related to port and maritime security, port congestion, industry consolidation 

and dynamic economic conditions. As the industry restructures to adapt to these changes, it is imperative for the 

FMC to ensure that its oversight produces a competitive trading environment in U.S. ocean commerce that is in 

harmony with, and responsive to, international shipping practices, and encourages fair and open commerce. 

The Commission has launched a comprehensive review of its regulatory initiatives to ensure that agency resources 

are utilized in a manner best suited to accomplish statutory obligations with a minimum of government 

intervention and regulatory cost. In addition, cooperative working arrangements with front-line security agencies 

remain in place. Effective use of emerging information technologies continues to facilitate our efforts. 

Chapter 0ne 

 

 MANAGEMENT’S DISCUSSION and ANALYSIS 
 5 

 Management’s Discussion and Analysis FY 2005 

Program Performance Overview 

The FMC, like other Federal agencies, provides an annual performance plan to Congress, pursuant to the 

Government Performance and Results Act (“GPRA”). The FMC has organized its performance goals to achieve its 

strategic goals. The FMC’s FY 2003-FY 2008 Strategic Plan is available on the FMC’s website. The complete FY 

2005 Program Performance Report is contained in Chapter 2, Program Performance, in the Performance and 

Accountability Report. Briefly, in FY2005, the Commission focused on furthering its interactions with external 

parties to increase the value of its services and oversight operations, and on strengthening relationships with 

government agencies responsible for maritime security to facilitate mutual efforts to identify and address potential 

security threats. This includes improving communication with the media, industry representatives, and other 

stakeholders to increase public awareness of Commission programs and policies, and to help address concerns 

before they become problems. In addition, we broadened our efforts to implement the President’s Management 

Initiative to expand electronic government. We improved the management of information by utilizing technology 

to streamline and simplify the delivery of services and information to regulated entities, other government 

agencies, and the public, and we created more sophisticated databases to allow staff to more effectively identify 

regulated activities, complaints, and potential abuses. Also, we implemented an IT Capital Planning Investment 

Control Process for the agency’s major IT investments. Overall, we are pleased with the success we achieved in 

addressing our stated goals and objectives.

Achieving Strategic Goal Results 

The FMC has a distinct process for measuring performance. Performance goals are developed to promote one of 

the FMC’s strategic goals, and the processes or activities required to achieve the goals are identified. The agency 

then specifies the outcomes it believes will result from accomplishing each stated goal, and agrees on performance 

indicators as the quantifiers of performance. Finally, performance measures are established for evaluation of 

achievement of performance goals. Taken together, performance goals under each strategic goal are designed to 

enhance and further those goals each fiscal year, bringing the agency closer to its ideal of full achievement of its 

strategic goals. 

President’s Management Agenda 

The President’s Management Agenda is intended to make Government more citizen-centered, results-oriented, and 

market-based. The five initiatives are: 1) Strategic Management of Human Capital; 2) Competitive Sourcing; 3) 

Improved Financial Management, 4) Expanded E-Government, and 5) Budget and Performance Integration. The 

FMC has achieved some successes in its agenda to address these initiatives. Chapter 2, Program Performance, in 

the Performance and Accountability Report discusses our activities in these important areas in more detail. 

A brief overview of the agency’s successes includes the following. 

Strategic Management of Human Capital – In FY 2004, the FMC implemented a realignment which has improved 

operations and provides a framework for the agency to more efficiently and effectively implement the agency’s 

strategic goals. We continue to assess our realignment to ensure that we are structured to achieve optimal 

effectiveness. We also began a wholesale review of our performance management system to ensure that it is a 

viable tool for enhancing skills, guiding career development, and assessing agency and employee progress. The 

agency also offers a range of flexible work options and employee-friendly and family-friendly programs and 

policies. Managers are encouraged to review their staff’s critical skills and to target training to improve expertise. 

Budget and Performance Integration - The FMC made completing budget and performance integration a key 

performance goal in FY 2005, and was successful in achieving it. In FY 2005, we also began an agencywide 

assessment of our strengths, weaknesses, opportunities and threats to assist us in identifying our initiatives and 

priorities for the future, along with the resources necessary for successful operations. The Strategic Plan and 

Annual Performance Plan continue to represent the fundamental framework for the agency’s planning and 

budgeting activities. 

Chapter 0ne 

 

 MANAGEMENT’S DISCUSSION and ANALYSIS 
 FY 2005 FEDERAL MARITIME COMMISSION 

 6 

Chapter 0ne 

 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

President’s Management Agenda (continued) 

In the FMC’s FY 2005 Annual Performance Plan, performance goals were aligned with the agency’s strategic 

goals for the first time, a major change from previous plans which aligned performance goals by agency program. 

 

Competitive Sourcing - The FMC submitted its FY 2005 Federal Activities Inventory Reform Act Inventory to 

OMB in June 2005. The Inventory identifies 78 of the agency’s 133 FTEs as commercial activity FTEs. No 

challenges to its commercial inventories have ever been received. 

Expanded Electronic Government - The FMC has planned and continues to implement the expansion of electronic 

government. A major accomplishment during FY 2005 was the unveiling of the agency’s new, expanded, updated 

and more user-friendly public website. In FY 2005, the FMC’s SERVCON system was re-written to provide 

greater functionality and increased security features. Network and security upgrades were effected to provide an 

upgraded platform for the delivery of electronic services to agency staff and stakeholders. 

The FMC also developed its Enterprise Architecture to formally define its IT functionality. Further, the FMC has 

implemented a Capital Planning and Investment Control process, and has formalized its Systems Development 

Life Cycle process. 

Improved Financial Performance - The FMC received an unqualified opinion on its financial statements in FY 

2005, for the second straight year. The FMC will continue to strive to achieve unqualified audit opinions. 

Financial Performance Overview 

As of September 30, 2005, the financial condition of the FMC was sound with respect to having sufficient funds to 

meet program needs and adequate control of funds in place to ensure obligations did not exceed budget authority. 

The FMC’s accounting services provider, the Bureau of the Public Debt (“BPD”), prepared the agency’s financial 

statements in accordance with accounting standards codified in the Statements of Federal Financial Accounting 

Standards and the Office of Management and Budget Circular A-136, Financial Reporting Requirements (Revised 

8/23/2005). 
 7 

 Management’s Discussion and Analysis FY 2005 

Chapter 0ne 

 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Sources of Funds 

The FMC has a single source of funds, Salaries and Expenses, funded by an annual appropriation that is available 

for commitments and obligations 

incurred during the fiscal year in which 

the authority was granted. The FMC’s 

total new budget authority for fiscal 

year 2005 was just over 19 million. 

This represents a net increase in budget 

authority over fiscal year 2004 of 561 

thousand dollars. Although the FMC 

collects remittances for “user fees” and 

“fines and penalties,” the agency is not 

authorized to offset any of its budget 

authority by utilizing these funds. The 

collections are deposited directly into 

the Treasury General Fund, and 

captured in the Statement of Custodial 

Activity which can be found in Chapter 3, Auditor’s Reports and Financial Statements, of the Performance and 

Accountability Report. 

Personnel Strength History 

 

As the chart demonstrates, the FMC’s actual FTE level has fluctuated slightly since 1999, with a decline in FTEs 

during the early 2000s, followed by 

modest growth and recent small 

fluctuations of the FTE level. The 

agency has endeavored to develop the 

appropriate mix of staffing and other 

available means to ensure the effective 

accomplishment of our mission. 

In recent years, the Commission has 

been authorized a total of 180 full-timeequ iv alen t po sition s. Du e to 

appropriation levels, the Commission 

has been required to maintain full-time 

personnel levels much lower than 

authorized. 

Federal Maritime Commission 

Appropriation 

(000s)

14,133

18,471 19,032

16,447 16,591 15,466 14,097

8,000

10 ,0 00

12 ,0 00

14 ,0 00

16 ,0 00

18 ,0 00

20,000

1999 2000 2001 2002 2003 2004 2005

Fiscal Year

Appropriation

Federal Maritime Commission FTE Strength

124 129 129 127 121

139

128

100

125

150

175

200

1999 2000 2001 2002 2003 2004 2005

Fiscal Year

Strength

Authorized FTE 
 FY 2005 FEDERAL MARITIME COMMISSION 

 8 

Uses of Funds by Expense Category 

In FY 2005, the FMC incurred obligations of $19.3 million, which was a $993 thousand dollar increase over fiscal 

year 2004. Approximately 72.6% of the total appropriation was used for salaries and benefits. Of the remaining 

budget authority, .7% was used for Commission travel expenses and the remaining 26.7% was used for 

administrative expenses also known as operating expenses (e.g., rent, furniture, printing, maintenance). The unobligated authority balance of $1,302 will remain active for four years to service FMC-established requirements. 

Audit Results 

The FMC received an unqualified opinion on its FY 2004 financial statements from the auditing firm of Clifton 

Gunderson LLP under contract through the FMC’s Inspector General. For FY 2005, the FMC was again awarded 

an unqualified opinion on its financial statements. Comparative statements can be located in Chapter 3, Auditors’ 

Reports and Financial Statements, of the Performance and Accountability Report. 

Financial Statement Highlights 

The financial statements have been prepared to report the financial position and results of operations of the entity, 

pursuant to the requirements of 31 U.S.C. 3515(b). While the statements have been prepared from the books and 

records of the entity in accordance with the formats prescribed by OMB, the statements are in addition to the 

financial reports used to monitor and control budgetary resources which are prepared from the same books and 

records. The statements should be read with the realization that they are for a component of the U.S. Government, 

a sovereign entity. One implication of this is that liabilities cannot be liquidated without legislation that provides 

resources to do so. 

The FMC’s financial statements summarize the financial position and financial activity of the agency. The 

financial statements, footnotes and the remainder of the required supplementary information appear in their 

entirety in Chapter 3, Auditors’ Report and Financial Statements, of the Performance and Accountability Report. 

A brief analysis of the principal statements follows. 

Chapter 0ne 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Utilization of Funds by Expenses Categories

($000s)

5,164

14,043

133

13,415

121

4,811

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Salaries & Expenses Travel Administrative

FY 2005 FY 2004
 9 

 Management’s Discussion and Analysis FY 2005 

Chapter 0ne 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Analysis of the Balance Sheet 

The FMC’s assets in fiscal year 2005 were 

$2,269,606 as of September 30, 2005. This 

represents an increase over fiscal year 2004 of 

$307,418 million. The FMC’s assets reported 

in the balance sheet are summarized in the 

accompanying table. 

The Fund Balance with Treasury represents 

the FMC’s largest asset of $2,217,146 as of 

September 30, 2005. This is an increase of 

19.9% over fiscal year 2004 and represents 

97.7% of the agency’s total assets. The Fund 

Balance with Treasury is comprised only of annual appropriations maintained by the Department of the Treasury 

to address current liabilities. 

Accounts Receivable as of September 30, 2005, was at $2,021.00. This is a 169% increase over fiscal year 2004, 

and accounts for .09% of the FMC’s total assets. 

Capital Assets, also known as Property, Plant and Equipment, accounts for 2.21% of the FMC’s total assets as of 

September 30, 2005. The “Net” value of $50,439.00 accounts for the depreciation of all assets and represents the 

current book value of those assets. 

The FMC’s Liabilities totaled $1,957,549 as 

of September 30, 2005. The accompanying 

table depicts an increase of $252,201 total 

liabilities over fiscal year 2004. Accounts 

Payable represents the total goods and services 

received by the FMC as of September 30, 

2005. The FMC is not in receipt of a billing 

from the various vendors as of the close of 

fiscal year 2005. Federal Employee Benefits 

represents accrued salaries and liabilities that 

are not funded by budgetary resources. These 

liabilities represent future workman’s 

compensation, and accrued annual leave that remains on the books. The Federal budget process does not recognize 

future benefits for today’s employees, however, these liabilities will be recognized in future budget cycles as they 

are paid. 

Net Position is the difference between total 

assets and total liabilities. The total net 

position for fiscal year 2005 is an increase of 

$55,217 from fiscal year 2004. Unexpended 

Appropriations represents the total authority 

granted by Congress that the FMC has not 

expended as of September 30, 2005. 

Cumulative Results of Operations represents 

the net results of all operations of the FMC. The decrease in Cumulative Results is due mainly to the net decrease 

in Capital Assets as of September 30, 2005. 

FY 2005 FY 2004 

Fund Balance with Treasury $2,217,146 $1,849,004 

Accounts Receivable $2,021 $749 

Capital Assets $50,439 $112,435 

Other $0 $0 

Summary of Assets as of September 30, 2005 

Total Assets $2,269,606 $1,962,188 

Summary of Liabilities as of September 30, 2005 

FY 2005 FY 2004 

Accounts Payable $89,197 $102,935 

Payroll Taxes Payable $82,970 $71,980 

Accrued Liabilities $10,130 $10,381 

Total Liabilities $1,957,549 $1,705,348 

Federal Employee Benefits $1,775,252 $1,520,052 

Net Position Summary as of September 30, 2005 

FY 2005 FY 2004 

Unexpended Appropriations $1,231,683 $1,124,548 

Cumulative Results of Operations ($919,626) ($867,708) 

Total Net Position $312,057 $256,840 
 FY 2005 FEDERAL MARITIME COMMISSION 

 10 

Chapter 0ne 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Analysis of the Statement of Net Cost 

The analysis of Net Costs presents the net 

cost of FMC’s five Commission Programs 

as identified in the FMC’s Annual Report. 

The five agency programs are Formal 

Proceedings, Inspector General, Equal 

Employment Opportunity, Operations and 

Administration. The Statement of Net 

Costs shows the net cost of operations for 

the agency as a whole and its suborganizations and/or programs. Net Costs 

compared to Budgetary Resources can be found in Chapter 3, Auditors’ Report and Financial Statements, of the 

Performance and Accountability Report.

Analysis of the Statement of Changes in Net Position 

The Statement of Changes in Net Position found on page nine reports the change in the agency’s net position 

during the reporting period. The statement is a summary of two factors, Unexpended Appropriations and 

Cumulative Results in Operations. The increase of $55,217 from fiscal year 2004 to fiscal year 2005 is due 

principally to the net change in Cumulative Results of Operations due to further depreciation of Capital Assets and 

an increase in unexpended appropriations. 

Analysis of the Statement of Budgetary Resources 

 The Statement of Budgetary Resources 

(SBR) shows the source of the agency’s 

budgetary resources and the status of those 

resources at the end of the reporting period. 

The statement shows the relationship between 

budgetary resources and the status of the 

resources. The total budgetary resources must 

be equal to the status of budgetary resources 

at all times. A more detailed SBR can be 

found in Chapter 3 Auditors’ Report and 

Financial Statements, of the Performance and 

Accountability Report. For fiscal year 2005, 

the FMC had total budgetary resources available of $19,622,729. This represents a 5.6% increase over fiscal year 

2004 budgetary resources available of $18,581,200. For fiscal year 2005, the Statement of Budgetary Resources 

shows the FMC had incurred obligations of $19,441,873, representing 99% of funding available, and had an 

unobligated balance of $180,856. 

Analysis of the Statement of Financing 

The Statement of Financing is intended to provide a connection between accrual-based information (financial 

accounting) contained within the Statement of Net Cost and the obligation-based information (budgetary 

accounting) contained within the Statement of Budgetary Resources. The Statement of Financing provides a 

reconciliation between the budgetary and proprietary accounting information within the financial system and 

ensures that they are in balance. Non-budgetary resources, costs not requiring resources, and financing sources yet 

to be provided are deducted from the budgetary obligations. This balance is then reconciled against the Net Cost of 

Operations. 

 Summary of the Statement of 

Net Cost as of September 30, 2005 

FY 2005 FY 2004 

Intragovernmental Net Costs $7,140,719 $6,248,754 

Net Costs With the Public $13,270,708 $12,635,332 

Net Cost of Program Services $20,411,427 $19,064,086 

 Summary of the Statement of Budgetary Resources 

as of September 30, 2005 

FY 2005 FY 2004 

Total Budgetary Resources $19,622,729 $18,582,525 

Obligations Incurred $19,441,873 $18,391,284 

Status of Budgetary Resources $19,622,729 $18,581,200 

Unobligated Balance $180,856 $191,241 
 11 

 Management’s Discussion and Analysis FY 2005 

Improper Payments Information Act 

Narrative Summary of Implementation Efforts for FY 2005 

and 

Agency Plans for FY 2006—FY 2008 

I. The Federal Maritime Commission has not identified any program that in and of itself constitutes a 

high-risk for improper payments. Therefore, the FMC considers all of its payments to fall within the 

realm of high-risk. As such, the FMC has instituted a separation of duties concerning payments that 

has been very successful in curtailing any improper payments. The National Finance Center (“NFC”) 

became the agency’s payroll provider in 2002 and is responsible for monitoring and reporting on any 

payroll-related payments. Any overpayments made to an FMC employee by the NFC on behalf of the 

FMC are offset by NFC. In FY 2005, the FMC had one travel-related overpayment of $15.00. The 

FMC received two improper Intergovernmental Payments and Collections (“IPAC”) collections in the 

amount of $7,237.05, each made against the Commission’s Agency Location Code (“ALC”). The 

collecting agency was not a trading partner of the FMC and the improper IPAC collections have since 

been reversed. 

II. The FMC did not use a statistical sample to conduct its improper payment rate. The sample contains 

one hundred percent of all disbursements made by the FMC. This was the case for all programs. 

III. In order to reduce the rate of improper payments, the FMC will continue to monitor all payments to 

strive for a zero dollar improper payment figure. To this end, the FMC will ensure that there are 

sufficient segregation of duties pertaining to payments concomitantly with closer scrutiny of all IPAC 

collections made against the Commission. The cause of the overpayments resided in improper IPAC 

collections made against the Commission’s ALC for services that were not rendered to the FMC, and 

a double payment for local travel expenses. The improper IPAC collections were reversed and the 

FMC is in the process of collecting the travel overpayment. The FMC will continue to monitor all 

disbursements made on its behalf to ensure payments are valid and proper. 

IV. The table below represents the improper payments made by the FMC in FY 2005 with percentage 

forecasts through FY 2008. To reflect a total percentage, the decimal point would need to be carried 

out to the 9th position. The same is true to reflect as a percentage the $15.00 overpayment in the 

Inspector General Program and the improper IPAC collections identified in the Administration 

Program. Therefore, FY 2005 exhibits 0% in improper payments. 

Chapter 0ne 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

FY05 FY05 FY 05 FY 06 FY07 FY 08

Program Outlays IP % IP $ % % %

Formal Proceedings 6.00 0.0000 0.0000 0.00 0.00 0.00

Inspector General 0.00 0.0000 0.0000 0.00 0.00 0.00

Equal Employment Opportunity 0.00 0.0000 0.0000 0.00 0.00 0.00

Operations 8.00 0.0000 0.0000 0.00 0.00 0.00

Administration 4.00 0.0000 0.0145 0.00 0.00 0.00

Totals 18.00 0.0000 0.0145 0.00 0.00 0.00

Improper Payment Reduction Outlook FY 2005 - FY2008 

(Millions)
 FY 2005 FEDERAL MARITIME COMMISSION 

 12 

Chapter 0ne 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Improper Payments Information Act (continued) 

V. The FMC has in place a segregation of duties to ensure that all invoices processed for payment are 

legitimate expenses of the agency. When an invoice is received it is first verified as a valid invoice 

belonging to the agency. The invoice is then processed by the OMS to identify the proper purchase order 

the payment is to be expensed against. The OBFM then processes the invoice against the purchase order to 

ensure that there are sufficient funds available on the purchase order to make the payment. If there are 

insufficient funds on the purchase order, a request is made to modify the purchase order to increase 

funding. Once the payment authorization has been processed, it is verified by a second member of the 

finance office. From there the payment request is forwarded to the BPD for processing. When the payment 

is loaded into the Oracle database, a final funds availability check is made by the financial system against 

the fund controls set for the FMC. Currently the fund controls are set to the summary appropriation level. 

 The receipt of an invalid IPAC collection must be processed as a payment for the reason that the funds 

have already been moved from the Treasury General Fund as a disbursement against the FMC’s ALC. The 

internal controls in place remain unchanged, with a closer scrutiny paid to all invoices and subsequent 

payments. The agency was able to have the improper IPAC collections in the amount of $14,474.10 

reversed and credited back to the General Fund. We are currently in the process of collecting the $15.00 

overpayment made against a local travel voucher. 

VI. The Chairman, as the Chief Administrative Officer of the FMC, is ultimately responsible for the efficient 

and effective utilization of the authority granted the agency by Congress. The Chairman has delegated 

financial responsibility to the Director, OBFM. The Director of OBFM has the responsibility to ensure that 

all disbursements made by BPD on behalf of the FMC are legitimate expenses of the agency and that there 

are sufficient funds available. The OBFM is responsible for reducing and recovering improper payments, 

and keeps senior agency officials appraised of all relevant activities. 

VII. a. The FMC does not have an in-house information system to help reduce improper payments. The agency 

utilizes the infrastructure and financial system maintained in Parkersburg, WV by BPD. 

 b. In fiscal year 2005, the FMC requested funding to maintain the contract between the FMC and BPD for 

financial support and platform access to the Oracle database through Oracle’s Discoverer portal. 

VIII. There are no statutory or regulatory barriers that limit the agency’s ability to take corrective actions to 

address any improper payments. 

IX. The current IPAC system does not allow an agency to refuse a collection against its ALC through the 

general fund it deems improper. The end result is a requirement to make the payments during the 

accounting period in which the collection was made and reversing the collection at a later date. The ability 

to challenge the collection would reduce the number of improper collections made against the agency, 

therefore reducing the number of improper payments. 
 13 

 Management’s Discussion and Analysis FY 2005 

Chapter 0ne 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Systems, Controls, and Legal Compliance 

This section provides information on FMC’s compliance with the: 

Federal Managers’ Financial Integrity Act 

Federal Financial Management Improvement Act 

Prompt Payment Act 

Debt Collection Improvement Act 

Biennial Review of User Fees 

Performance Measure Summary 

Inspector General Act 

Federal Managers’ Financial Integrity Act 

The Federal Managers’ Financial Integrity Act (“FMFIA”) requires that agencies establish controls that reasonably 

ensure that obligations and cost comply with applicable law; assets are safeguarded against waste, loss, 

unauthorized use, or misappropriation; and revenues and expenditures are properly recorded and accounted for. It 

requires the agency head to provide an assurance statement of the adequacy of management controls and 

conformance of financial systems with Government standards. 

In his Message earlier in this document, the Chairman provided his annual assurance statement. This statement 

was based on various sources and included management knowledge gained from the daily operation of agency 

programs and reviews, discussions with senior managers who together comprise the agency’s Senior Policy Group, 

audits of financial statements, annual performance plans, and Inspector General reports, among other sources. The 

Senior Policy Group is comprised of all SES-level senior executives, including the Director of Operations, the 

General Counsel, and the agency’s Chief Financial Officer, among others. Additionally, the Chairman meets 

regularly with, and receives regular reports from, the FMC’s Inspector General. 

Management control deficiencies, when identified, are addressed at the highest management levels within the 

agency. For instance, corrective actions for material weaknesses identified in the agency’s information technology 

area are overseen directly by the agency’s Chief Information Officer. 

FY 2005 Integrity Act Results 

The Chairman of the FMC determined that, as of September 30, 2005, the management controls of the FMC 

provide reasonable assurance that the objectives of the FMIA are being met, and that the FMC, as a whole, is in 

compliance with section 2 of the FMFIA. The FMC’s financial management systems also are in substantial 

compliance with the objectives of the FMFIA, and the Commission is in compliance with section 4 of the FMFIA. 

During the fiscal year, the FMC mitigated one material weakness which was first identified in a previous fiscal 

year. This weakness concerned the adequacy of the agency’s information technology office to support the agency’s 

mission in the areas of management, operations and technology. Much progress had been made to address this 

weakness in previous fiscal years, however some issues remained to be addressed during FY 2005. The final 

corrective actions necessary to correct this deficiency were completed during the fiscal year. The FMC has 

strengthened its IT management, operations, and technology infrastructure and staffing, including finalizing 

numerous standard operating procedures, completing procedures for system life cycle development, implementing 

an improved Help Desk system, improving staff skill levels, and hiring an IT Security Officer, among other things. 

Additionally, the FMC made an extensive commitment during recent fiscal years to improving its IT infrastructure 

by upgrading network security, stabilizing the network environment, replacing all personal computers, adopting a 

more robust web content manager, and otherwise improving the posture of its IT infrastructure. 

 15 

 Management’s Discussion and Analysis FY 2005 

Chapter 0ne 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Debt Collection Improvement Act

The Debt Collection Improvement Act enhances the ability of the Government to service and collect debts. The 

Act centralized the collection of non-tax delinquent debt owed to the government. The collection of delinquent 

debts is conducted by the Financial Management Service through the Treasury Offset Program where the names 

and taxpayer identification numbers (TIN) are matched against the TINs of recipients of government payments. 

The balance owed the government is deducted or offset from the payment to the entity to satisfy the debt. All 

Office of Personnel Management (“OPM”) retirement, vendor, IRS refunds, Social Security Benefits, and some 

federal salary payments are being offset. Federal agencies are required to refer delinquent accounts in excess of 

180 days to Treasury for collection. The goal of the FMC is to minimize the amount of delinquent debt owed to the 

agency. 

Biennial Review of User Fees 

The Chief Financial Officers Act requires agencies to conduct a biennial review of fees and other charges imposed 

by agencies, and to make revisions to cover program and administrative costs incurred. During FY 2005, the FMC 

published its revised fees subsequent to its biennial review. The fees are posted on the FMC’s website. 

Performance Measure Summary 

The FMC does not have an in-house financial accounting system, and as a small agency does not receive a 

Performance Measure Summary from the Department of the Treasury. The agency receives accounting services 

from BPD located in Parkersburg, WV. The Commission verifies and reconciles all financial statements and 

reports prior to submission, and has remained in compliance with all reporting thresholds including FACTS I 

(Federal Agencies’ Centralized Trial-Balance System) reporting, timely reporting, and reconciliation of any 

financial statement differences. 

Inspector General Act 

The FMC has a very good record in resolving and implementing open audit recommendations presented in its 

Inspector General reports. Section 5(b) of the Inspector General Act requires agencies to report on final actions 

taken on Inspector General audit recommendations. Information can be found in Appendix C of the Performance 

and Accountability Report.

Briefly, during fiscal year 2005, the Inspector General completed the following audits/inspections: 

FY 2005 Federal Information Security Management Act Compliance 

FY 2005 Financial Statements 

Audit of Procurement of Vendor Training Services 

Audit of Controls Over Agency Property 

Audit of Agreement Filings 

FY 2004 Financial Statements 

SERVCON Review 

 

The Inspector General’s reviews disclosed no instances of questioned costs nor were any recommendations made 

that funds be put to better use, nor were any material weaknesses reported. The FMC has addressed a number of 

recommendations from these reviews, and it is anticipated that the few which remain outstanding will be 

completed early in FY 2006. 

During FY 2005, the agency worked diligently to correct two material weaknesses which had been identified in a 

previous fiscal year. It is anticipated that final corrective action on both material weaknesses will be completed in 

FY 2006. Further, one material weakness identified in a previous fiscal year was mitigated.