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Lastly, the recommendation for comment # 4 relates to the lack of a contingency 

plan to ensure continuity of operations in cases of emergency. Management agrees this is 

an issue and has plans to address the deficiency. The status of this issue will be reviewed 

during the OIG’s FY 2014 Federal Information Security Management Act evaluation. 

The OIG appreciates the attention and cooperation by FMC management and staff. 

I am happy to meet with you to discuss these issues, and I can be reached at (202) 523-

5258. 

Attachment 

CC: Office of the Managing Director 

Office of Budget and Finance 

Office of Information Technology 
 

 

MANAGEMENT LETTER 

ON THE FY 2013 FINANCIAL STATEMENT AUDIT 

OF FEDERAL MARITIME COMMISSION 

 MANAGEMENT CONSULTANTS &

 CERTIFIED PUBLIC ACCOUNTANTS
 
ANAGEMENTONSULTANTS
 

CERTIFIEDPUBLI C CA COUNTANTS
 

M C &

December 30, 2013 

Federal Maritime Commission 

Washington, D.C. 

We have audited the financial statements of the Federal Maritime Commission (the Commission), as 

of and for the years ended September 30, 2013 and 2012, and have issued our report thereon dated 

December 2, 2013. In planning and performing our audit of the financial statements of the 

Commission, we considered internal control over financial reporting in order to determine our 

auditing procedures for the purpose of expressing an opinion on the financial statements. 

During the course of our audit, we had the opportunity to observe various accounting and operating 

matters, as they relate to the Commission. Based on our audit, we have additional observations and 

recommendations. Even though, the matters described in this management letter are not considered 

significant deficiencies, as defined by the American Institute of Certified Public Accountants, these 

matters are still important in the overall internal control structure of the Commission and require 

management’s attention. 

Prior Year Findings - Updated 

There were no findings and recommendations in the prior year. 

Current Year Comments 

# 1: The Commission’s Office of Budget and Finance does not have access to the Internet 

Payment Platform (IPP) in order to monitor invoice and payment approval activities of the 

Contracting Officer’s Representatives and Bureau of the Public Debt’s Administrative 

Resource Center. 

The Bureau of the Public Debt’s (BPD) Administrative Resource Center (ARC) uses the U.S. 

Treasury Financial Management Service's IPP, an electronic invoice processing solution 

(mandated for all Treasury Bureaus by the Department of Treasury), to process invoices and 

make payments on behalf of the Commission. IPP is a web-based electronic invoicing and 

payment information system that is hosted by the Federal Reserve Bank of Boston. Purchase 

Orders are interfaced from the Oracle system, maintained by ARC, to IPP. Invoices are 

submitted in IPP by either the vendor or ARC personnel, and are routed to the Commission’s 

delegated Contracting Officer’s Representatives (CORs) for approval. Upon approval, the 

invoice is scheduled for payment. Payment is then made by ARC when due. 

The Commission’s Chairman has delegated administrative funds control to the Director, Office 

of Budget and Finance (OBF), through Commission Order 77, Administrative Control of Funds. 

The Director is therefore responsible for approving, certifying, or otherwise authorizing those 

actions dealing with the use of funds made available to the Commission. 

1400 Eye Street, NW, Suite 425, Washington, DC 20005 Tel 202-296-7101 Fax 202-296-7284 
During our fieldwork, we noted that invoices submitted in IPP, by either the vendor or ARC 

personnel, were routed to the CORs for approval; and were subsequently scheduled for 

payment, and then paid without being reviewed by the OBF. We noted that OBF has 

established limits for purchase orders in the Oracle system, and have adequate controls in place 

to ensure that those limits are not exceeded. However, the lack of review by OBF, of invoices 

approved for payment by the CORs on a routine basis, puts the Commission at risk of making 

payments that should not have been authorized. The IPP, as presently set-up, without access by 

OBF, does not allow for adequate monitoring of the payment approval activities of the CORs 

prior to payments being made. 

Recommendation: We recommend that the Director of OBF establish a procedure to routinely 

monitor the payment approval activities of the CORs, prior to payments being made by the 

Commission. 

# 2: Penalties and Fines levied by the Commission were recorded as Accounts Receivable, 

rather than Custodial Activity. 

Accounts receivable are legally enforceable claims for payment to an entity by its customers or 

clients for goods supplied and/or services rendered in execution of the customers’ or clients’ 

orders. Penalties and fines, on the other hand, are financial impositions by a government agency 

as restitution for wrongdoing. The wrongdoing is typically defined by a codification of 

legislation, regulations, or decrees. 

Although the Commission collects remittances for user fees and penalties, the Commission 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. As such, the Commission is considered an administrative agency, collecting funds for 

another government entity or the General Fund of the United States. As a collecting entity, the 

Commission is required to measure and report cash collections and refunds. These collections are 

required to be reported as custodial activity on the “Statement of Custodial Activity.” The type of 

cash collected is for fines, penalties, and administrative fees. A small portion is for interest on 

the past due fines. Another part of the custodial activity is the application fees for licenses issued 

to qualified Ocean Transportation Intermediaries (OTI’s) in the U.S., Commission reviews, 

petitions, status changes, and special permission fees. 

During our fieldwork, we noted that the Commission recorded penalties, fines, and forfeitures as 

receivables on its books of accounts, rather than custodial activity. The matter was brought to 

the attention of the Commission’s Office of Budget and Finance (OBF), and Bureau of the 

Public Debt’s Administrative Resource Center (ARC), and was promptly rectified. We 

commend the management of OBF, and ARC, for taking immediate action to properly 

reclassify the penalties, fines, and forfeitures. 

Recommendation: We are not making any recommendation, due to the actions already taken by 

OBF and ARC. We, therefore, consider this comment closed. 

2
 
 

# 3: Comprehensive contract database is not maintained to facilitate tracking of open 

contracts/obligations for timely contract/obligation closeout. 

Commission Order 112, Procurement, establishes standards and procedures for the 

procurement of materials, equipment, and services for the Commission; and serves as internal 

agency guidance for all applicable Commission acquisitions, in accordance with the Federal 

Acquisition Regulation (FAR), and as set forth in Titles 41 and 48 of the Code of Federal 

Regulations. These standards and procedures are promulgated to ensure that materials, 

equipment, and services are obtained efficiently, economically, and in compliance with the 

provisions of the FAR, and all applicable Federal laws. 

Commission Order 112 also charges the Director, Office of Management Services (OMS), as the 

principal Contracting Officer for the Commission, with the overall responsibility for managing 

the Commission’s procurement program. Explicit in this responsibility is compliance with FAR. 

FAR, Subchapter A- General, Part 4, Administrative Matters, Subpart 4.6- Contract Reporting, 

requires the head of a contracting activity to develop a monitoring process to ensure timely and 

accurate reporting of contractual actions to the Federal Procurement Data System (FPDS). 

Implicit in this requirement is the need for a comprehensive database to track contracts in open, 

completed, or closeout status. The database will also facilitate efficient use of the Commission’s 

resources; since obligated funds remaining on contracts in completed or closeout status can be 

easily identified, de-obligated, and re-programmed, as may be considered necessary. 

During our fieldwork, we noted that OMS did not maintain a database at a level necessary to 

fully support the requirements of FAR, as discussed in the preceding paragraph. Although 

OMS currently tracks open contracts and obligations, manually; the manual process does not 

allow for timely identification of contracts that meet the criteria for funds de-obligation or 

closeout. 

Recommendation: We recommend that the Director of OMS develop a comprehensive contract 

database to facilitate tracking of open contracts/obligations, for timely funds de-obligation or 

closeout. 

# 4: The Commission has not developed a contingency plan to ensure continuity of operations 

in cases of emergency. 

In planning and performing our audit of the financial statements of the Commission, we 

obtained and reviewed reports issued by other agencies to enable us to adequately assess risks 

related to the audit. During this process, we reviewed an FMC Office of Inspector General 

report titled “Evaluation of the FMC’s Compliance with the Federal Information Security 

Management Act FY 2012,” report number A13-03, December 2012. Comments therein from 

the Commission’s Office of Inspector General indicated that a disaster recovery plan has not 

been developed and put into operation by the Commission. Inquiry of management during our 

audit confirmed that the condition, as noted in the report, still exists and is unresolved. 

Information technology (IT) and automated information systems are vital elements in most 

business processes. Because these IT resources are so essential to an organization’s success, it is 

3
 
critical that the services provided by these systems are able to operate effectively, without 

excessive interruption. Contingency planning supports this requirement, by establishing thorough 

plans and procedures, and technical measures that can enable a system to be recovered quickly 

and effectively following a service disruption or disaster. Contingency planning refers to interim 

measures to recover IT services following an emergency or system disruption. Interim measures 

may include the relocation of IT systems and operations to an alternate site; the recovery of IT 

functions, using alternate equipment; or the performance of IT functions, using manual methods. 

National Institute of Standards and Technology (NIST) Special Publication 800-34, Rev. 1, 

Contingency Planning Guide for Federal Information Systems, provides instructions, 

recommendations, and considerations for government IT contingency planning, as noted in the 

report. 

Recommendation: We recommend that the Director, Office of Information Technology, follow 

the recommendation of the Office of Inspector General and develop and put into operation, a 

contingency plan that is consistent with the requirements of NIST 800-34. 

While this report is intended solely for the information and use of the management of the 

Federal Maritime Commission, it is also a matter of public record; and its distribution is, 

therefore, not restricted. 

Regis & Associates, PC 

Washington, DC 

4
 
 

 

 

 

 

UNITED STATES GOVERNMENT FEDERAL MARITIME COMMISSION 

Memorandum 

TO : Inspector General DATE: January 29, 2014 

FROM : Managing Director 

SUBJECT : Management Letter on the FY 2013 Financial Statement Audit 

This is offered in response to the Management Letter on the FY 2013 Financial 

Statement Audit of the Federal Maritime Commission prepared by Regis & Associates, 

PC, dated December 30, 2013. Regis & Associates states that “the matters described in 

this management letter are not considered significant deficiencies,” yet “these matters are 

still important in the overall internal control structures of the Commission and require 

management’s attention.” 

FMC management has reviewed and considered each of the four comments 

offered. Comment number 2 did not include a recommendation and is not responded to 

herein. Comments 1, 3, and 4, and their recommendations, are responded to below. 

Comment #1: The auditor commented that the Commission’s Office of Budget and 

Finance (OBF) does not have access to the Internet Payment Platform (IPP) in order to 

monitor invoice and payment approval activities of the Contracting Officer’s 

Representatives (CORs) and the Bureau of the Public Debt’s Administrative Resource 

Center. It was recommended that the Director, OBF, establish a procedure to routinely 

monitor the payment approval activities of the CORs, prior to payments being made by 

the Commission. 

Response: FMC management is of the opinion that monitoring of payment approval 

activities by the OBF prior to payments being made is unnecessary. IPP system and 

process controls are in place to prevent payments from exceeding the amount of funds 

obligated for specific purchase orders. Agency CORs receive training and certification in 

such areas as invoice review and approval prior to receiving their COR delegation letter 

from the agency Contracting Officer. Further, payments for commercial vendors only are 

processed through the IPP. At the FMC, less than 5% of our annual appropriation is 

typically spent on commercial procurements. Additionally, FMS (formerly BPD) will 

soon begin a post payment audit process where they will be auditing a sample of FMC 

invoices each month and issuing result findings. This will provide useful information on 

the performance of the FMC’s CORs. 
 

Comment #3: The auditor commented that a comprehensive contract database was not 

maintained to facilitate tracking of open contracts / obligations for timely contract / 

obligation closeout. It was recommended that the Director, OMS, develop a 

comprehensive contract database to facilitate the tracking of open contracts and/or 

obligations for timely funds deobligation or closeout. 

Response: Currently, the agency Contract Specialist maintains a status report in the form 

of an Excel spreadsheet of all contract actions, including purchase orders, contracts and 

interagency agreements, which includes close-out dates and notes on OMS/Procurement 

contact with CORs and program offices. It is understood by OMS that a comprehensive 

database could facilitate obligation closeouts and enhance the ability to prepare for 

upcoming obligation requirements, such as the exercising of contract options and 

obligation of additional funds after a period of temporary funding, such as the Continuing 

Resolution. However, until such a database is created, OMS will continue to provide 

status of all contract actions via the spreadsheet. As the agency develops and implements 

its Enterprise Content Management system (ECM), an appropriate application will be 

prepared to electronically facilitate and monitor the contracting requirements of the 

agency. No immediate modification to the current system is projected. 

Comment #4: The auditor commented that the Commission has not developed a 

contingency plan to ensure continuity of operations in cases of emergency. It was 

recommended that the Director, OIT, follow the Office of Inspector General’s 

recommendation to develop and put into operation a contingency plan consistent with the 

requirements of NIST 800-34. 

Response: Management is aware of this requirement and, as indicated in the agency’s 

response to the FY 2013 FISMA audit, necessary documentation will be completed 

during FY 2014 to acknowledge and accept this risk. Management is aware of the need 

for a finalized contingency plan (COOP) and will make efforts to effectuate such a plan 

as resources are made available. This matter will be addressed in the future with the 

development and implementation of the agency’s Disaster Recovery Plan. 

 Vern W. Hill 

cc: Office of Budget and Finance 

Office of Management Services 

Office of Information Technology 

Office of the Chairman