FEDERAL MARITIME COMMISSION 

Office of Inspector General

Semiannual Report to Congress 

Covering the Period 

 

October 1, 2013 – March 31, 2014 
 

TABLE OF CONTENTS 

Transmittal Letter
 

EXECUTIVE SUMMARY .......................................................................................................... 1
 

TABLE I – Summary of Audit Reports with Corrective Actions Outstanding for 

FEDERAL MARITIME COMMISSION................................................................................... 2
 

OFFICE OF INSPECTOR GENERAL...................................................................................... 2
 

OFFICE OF INSPECTOR GENERAL ACTIVITIES ............................................................. 3
 

Completed Audits and Evaluations ............................................................................................. 3
 

On-going Audits and Evaluations............................................................................................... 5
 

Hotline and Investigations .......................................................................................................... 6
 

Other Activities........................................................................................................................... 6
 

SUMMARY OF INSPECTOR GENERAL REPORTING REQUIREMENTS ............................ 9
 

More than 1 Year ................................................................................................ 10
 

TABLE II – Listing of Audit Reports Issued ........................................................................... 10
 

TABLE III – Reports with Questioned Costs ........................................................................... 11
 

TABLE IV – Recommendations that Funds be Put to Better Use ............................................ 12 

Appendix A – Peer Review Activity ........................................................................................... 13 
EXECUTIVE SUMMARY 

This semiannual report summarizes the activities and accomplishments of the Federal 

Maritime Commission (FMC or Commission), Office of Inspector General (OIG) for the 

reporting period October 1, 2013 through March 31, 2014. The most significant activities of the 

OIG during the first half of fiscal year (FY) 2014 are summarized below. Additional details 

pertaining to each activity can be found in subsequent sections of this report. 

During this reporting period, the FMC OIG was led by an Interim Inspector General (IG), 

due to the resignation of the last permanent IG in January 2013. After the departure of a 

previous Interim IG, the Commission designated Jon Hatfield in August 2013 to serve as Interim 

IG while a search for a permanent IG was conducted. Mr. Hatfield is concurrently serving as the 

Deputy IG for the Federal Election Commission (FEC) OIG. The Commission concluded the 

recruitment process to select a new IG during the latter part of this reporting period and the OIG 

expects a permanent IG to be in place early in the next reporting period. In addition to the IG 

vacancy, the OIG’s Assistant IG for Audits resigned in December 2013. The OIG is working to 

obtain contract audit services to provide audit coverage in the interim until the permanent IG is 

hired and is able to staff the office appropriately. 

During this reporting period, the OIG issued the following reports: the Evaluation of the 

FMC’s Compliance with the Federal Information Security Management Act FY 2013 (A14-02); 

the Independent Auditors’ Report of the FMC’s FY 2013 Financial Statements (A14-01); and the 

FY 2013 Financial Statement Management Letter (A14-01A). The OIG also determined that the 

Commission is compliant with the Improper Payments Elimination and Recovery Act of 2010. 

In addition to the completed audit and evaluation, the OIG had two audits open as of the 

end of this reporting period. These include the OIG’s Audit of Expenditures for Furnishing or 

Re-decorating Commissioners’ Offices and the Audit of FMC’s Physical Security – Datawatch. 

These audits were on-hold as of the end of the reporting period due to higher priority 

assignments. The OIG anticipates continuation of these audit assignments during the next 

reporting period. 

October 1, 2013 – March 31, 2014 Page 1 
During this reporting period, the OIG received two hotline complaints through its 

anonymous webmail; the complaints were forwarded to the appropriate FMC program areas for 

disposition. One administrative investigation was in progress and two hotline complaints were 

pending at the close of this reporting period. The OIG opened no new investigations and 

referred no matters to prosecutorial authorities during this period. 

The FMC OIG completed an audit peer review of the Consumer Product Safety 

Commission (CPSC) OIG during this reporting period and issued a pass rating in the final 

system review report dated March 14, 2014. 

In addition to these activities, the OIG continued to work with the agency’s Office of the 

General Counsel to revise Commission Order 113, which pertains to OIG reporting 

responsibilities and protections for whistleblowers with access to classified information. 

FEDERAL MARITIME COMMISSION 

The FMC is an independent agency responsible for the regulation of ocean borne 

transportation in the foreign commerce of the United States. 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; the Foreign Shipping Practices Act of 1988; and Section 

19 of the Merchant Marine Act of 1920. 

The FMC is headed by five Commissioners nominated by the President and confirmed by 

the Senate, each serving five-year terms. Although the majority of FMC personnel are located in 

Washington, D.C., the FMC also maintains a presence in Los Angeles, Seattle, New York, New 

Orleans, Houston, and South Florida through area representatives who serve the major ports and 

transportation centers within their respective geographic areas. In addition, one at-large area 

representative operates from Washington, D.C. 

OFFICE OF INSPECTOR GENERAL 

The OIG was established in 1989 by the Inspector General Act of 1978, as amended (5 

U.S.C. app.). The OIG is an independent audit and investigative unit headed by an IG who 

October 1, 2013 – March 31, 2014 Page 2 
     

reports to the FMC Commissioners. To aid the FMC in accomplishing its mission, the OIG is 

provided three full-time positions. 

The OIG is responsible for conducting audits and investigations relating to the programs 

and operations of the FMC. Audits are conducted for the purpose of finding and preventing 

fraud, waste and abuse, and promoting economy, efficiency and effectiveness within the agency. 

The OIG investigations seek out facts related to allegations of wrongdoing on the part of FMC 

employees and individuals, or entities contracting with, or obtaining benefits from, the agency. 

The Inspector General Act provides that the OIG shall have access to all agency records and may 

subpoena records from entities outside of the agency in connection with an audit or investigation. 

The IG is required by law to prepare a report summarizing OIG audits and investigations 

during the immediately preceding six-month period. The report is sent to the FMC 

Commissioners, the President of the Senate, the Speaker of the House and FMC’s appropriating 

and authorizing committees. This dual reporting requirement helps to ensure the independence 

of the OIG. 

OFFICE OF INSPECTOR GENERAL ACTIVITIES 

Completed Audits and Evaluations

Evaluation of FMC’s Compliance with the Federal Information Security Management 

Act FY 2013, A14-02. This evaluation report was issued on January 3, 2014. The objectives of 

this independent evaluation of the FMC’s information security program were to evaluate its 

security posture by assessing compliance with the Federal Information Security Management Act 

(FISMA) and related information security policies, procedures, standards, and guidelines. The 

scope of our testing focused on the FMC General Support Systems (GSS) and Major 

Applications. More specifically, our testing covered a sample of controls as listed in the National 

Institute of Standards and Technology (NIST) 800-53, Recommended Security Controls for 

Federal Information Systems and Organizations, Revision 4. For example, testing covered 

system security plans, access controls, risk assessments, configuration management, contingency 

planning, security awareness and auditing. Our scope also included a vulnerability assessment 

for the overall network and workstations that connect to the network. 

October 1, 2013 – March 31, 2014 Page 3 
 

During the FY 2013 evaluation, the evaluator noted that FMC has taken steps to improve 

the information security program and to remediate some prior year deficiencies. For example, the 

FMC has deployed complexity settings on the servers supporting the major applications. The 

OIG did not find any new deficiencies in the FY 2013 FISMA evaluation. 

FMC management reported in a letter to the OIG dated March 11, 2014 that additional 

corrective action has occurred on outstanding recommendations from the FY 2012 and prior year 

FISMA evaluations, and the OIG’s Evaluation of the FMC’s FY 2012 Privacy and Data 

Protection. The OIG plans to evaluate these corrective actions during the FY 2014 FISMA 

evaluation to verify the weaknesses have been remediated. 

Independent Auditors’ Report of FMC’s FY 2013 Financial Statements, A14-01. This 

audit report was issued on December 12, 2013. The audit objectives were to opine on whether 

the FMC’s FY 2013 financial statements follow U.S. Generally Accepted Accounting Principles 

(GAAP) and present fairly the financial position of the agency. The auditors also reviewed 

internal controls over financial reporting and agency compliance with laws and regulations. The 

statements audited were the balance sheets as of September 30, 2013 and 2012, and the related 

statements of net cost, statements of changes in net position, statements of budgetary resources 

and statements of custodial activity. 

The independent auditor opined that the FMC’s financial statements were fairly 

presented, in all material respects, in conformity with GAAP; 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. 

Therefore, there were no findings or recommendations in the audit report. 

Management Letter for Fiscal Year 2013 Audit of the Federal Maritime Commission 

Financial Statements, A14-01A. The independent auditor, under contract with the OIG, 

reviewed FMC’s internal controls over financial reporting and, for FY 2013, did not find any 

matters that were considered a material weakness in the systems and processes tested. When 

October 1, 2013 – March 31, 2014 Page 4 
performing the annual audit of the agency’s financial systems and accounting processes, auditors 

may detect deficiencies in internal controls that do not rise to a level of seriousness to be 

reported in the annual financial statement audit report. Instead, these deficiencies are 

communicated to the agency in a management letter. As a result of the FY 2013 financial 

statement audit, the auditors identified four internal control issues; one of which was resolved 

prior to the release of the management letter. FMC management generally concurred with the 

weaknesses and agreed to implement corrective action. 

Improper Payments Elimination and Recovery Act of 2010 (IPERA). Each agency 

inspector general is required to review improper payment reporting in their agency’s annual 

Performance and Accountability Report (PAR) to determine if the agency is in compliance with 

IPERA. The purpose of IPERA is to improve the federal government’s efforts to reduce and 

recover improper payments. Improper payments are payments that should not have been made 

or that were made in an incorrect amount (including overpayments or underpayments); and 

includes any payment to an ineligible recipient, any payment for an ineligible good or service not 

received, and any payment that does not account for credit for applicable discounts. In a letter to 

the Commission dated April 11, 2014, the OIG concluded the FMC is compliant with the IPERA 

and applicable guidance. 

On-going Audits and Evaluations 

Audit of Expenditures for Furnishing or Re-decorating Commissioners’ Offices. In a 

prior reporting period, the OIG decided to initiate this review after the FMC received a request, 

on May 9, 2012, from the Committee on Oversight and Government Reform to provide a 

complete account for all purchases made for the previous Chairman. The objectives of the audit 

were to determine whether the Commission complies with applicable laws and regulations 

regarding expenses associated with furnishing, redecorating, or making improvements to 

Commissioners’ offices. Specifically, we performed this review to determine whether the 

Commissioners stayed within their $5,000 statutory spending limit and to determine whether 

these expenses are recorded and tracked during the term, reappointment or hold over of office for 

each Presidential-appointee. 

October 1, 2013 – March 31, 2014 Page 5 
   

 

Fieldwork has been completed and an exit conference will be scheduled during the next 

reporting period to discuss the results of the audit and issue the draft audit report to FMC 

management. The final audit report will then be issued after review and comment by FMC 

management. 

Audit of FMC’s Physical Security – Datawatch. This audit was incorporated into the 

OIG’s 2013 annual audit plan. The objective of the audit is to determine the effectiveness of the 

Datawatch security system, assess the cost efficiency of the program and review the internal 

controls regarding the security information generated from the system. Due to higher priority 

assignments, this assignment was put on-hold during this reporting period. The audit is expected 

to be continued during the next reporting period. 

Hotline and Investigations

The Inspector General Act of 1978, as amended, provides that the IG may receive and 

investigate complaints or information concerning possible allegations of fraud, waste and abuse 

occurring within FMC programs and operations by employees or contractors. Matters of 

possible wrongdoing are referred to the OIG in the form of allegations or complaints from a 

variety of sources, including FMC employees, other government agencies and the general public. 

During this reporting period, the OIG received two complaints through its anonymous 

webmail; the complaints were forwarded to the appropriate FMC program areas for disposition. 

One administrative investigation was in progress and two hotline complaints were pending at the 

close of this reporting period. The OIG opened no new investigations and referred no matters to 

prosecutorial authorities during this period. 

Other Activities

Peer Review 

Federal offices of inspectors general are required by the IG Act to have an audit peer 

review performed once every three years. These reviews are to be performed only by federal 

October 1, 2013 – March 31, 2014 Page 6 
 

auditors. A committee of the Council of Inspectors General on Integrity and Efficiency (CIGIE) 

schedules the review to ensure that resources are available to perform the review and that OIGs 

do not conduct reciprocal reviews. The objectives of a peer review are to determine, for the 

audit function, whether an effective quality control system has been established in the office and 

if policies, procedures and applicable government auditing standards are being followed. 

The FMC OIG completed an audit peer review of the Consumer Product Safety 

Commission (CPSC) OIG during this reporting period and issued a pass rating in the final 

system review report dated March 14, 2014. There were no deficiencies or recommendations 

included in the report. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Public Law 

111-203, requires federal offices of inspectors general to include in their semiannual reports to 

Congress an appendix containing the results of any peer review conducted by another OIG 

during the reporting period, or, if no peer review was conducted within that reporting period, a 

statement identifying the date of the last peer review conducted by another OIG. Please see 

appendix A for additional information. 

Memorandum of Understandings 

The FEC OIG signed a Memorandum of Understanding (MOU) with the Commission 

under which the FEC’s Deputy Inspector General serves as the Commission’s Interim Inspector 

General while the IG position remains open. 

Review of Legislation 

As required by the Inspector General Act of 1978, as amended, the OIG routinely reviews 

proposed legislation and regulations. The purpose of these reviews is to assess whether the 

proposed legislation or regulation: (1) impacts the economy and efficiency of FMC programs 

and operations; and (2) contains adequate internal controls to prevent and detect fraud and abuse. 

October 1, 2013 – March 31, 2014 Page 7 
Review of FMC Policies 

During this semiannual period, the OIG continued to work with the agency’s Office of 

the General Counsel to revise Commission Order (CO) 113, which pertains to OIG reporting 

responsibilities and protections for whistleblowers with access to classified information. The 

OIG expects the FMC to issue the final CO 113 during the next reporting period. 

Council of Inspectors General on Integrity and Efficiency Activities 

The Council of Inspectors General on Integrity and Efficiency (CIGIE) was established 

by law as an independent entity by the Inspector General Reform Act of 2008 (P.L. 110-409) to: 

 address integrity, economy and effectiveness issues that transcend individual government 

agencies; and 

 increase the professionalism and effectiveness of personnel by developing policies, 

standards, and approaches to aid in the establishment of a well-trained and highly skilled 

workforce in the Office of Inspectors General. 

The CIGIE is comprised of all inspectors general that are Presidentially-appointed / 

Senate confirmed and those that are appointed by agency heads -- designated federal entities. 

The FMC OIG remains active in CIGIE operations. Specifically, the Interim Inspector General 

is a member of CIGIE and participates in the monthly CIGIE meetings. The Counsel to the IG 

participates in the Council of Counsels to the Inspector General (“CCIG”) activities. The CCIG 

consists of senior counsel from agency OIGs who discuss various legal issues that affect the OIG 

community. As Chief Investigator, the OIG Counsel also attends the Assistant Inspector General 

for Investigations Committee quarterly meetings, where issues concerning OIG investigative 

matters are discussed. 

October 1, 2013 – March 31, 2014 Page 8 
 

 

 

 

 

 

SUMMARY OF INSPECTOR GENERAL
 

REPORTING REQUIREMENTS
 

IG Act Reference Reporting Requirement Pages 

Section 4(a)(2) Review of legislation and regulations 7 

Section 5(a)(1) Significant problems, abuses and deficiencies None 

Section 5(a)(2) Recommendations with respect to significant 

problems, abuses, or deficiencies 

None 

Section 5(a)(3) Prior significant recommendations on which 

corrective actions have not been completed 

10 

Section 5(a)(4) Matters referred to prosecutive authorities None 

Section 5(a)(5) Summary of instances where information was 

refused 

None 

Section 5(a)(6) List of audit reports by subject matter None 

Section 5(a)(7) Summary of each particularly significant report None 

Section 5(a)(8) Statistical table Reports with questioned costs 11 

Section 5(a)(9) Statistical table recommendations that funds be put to 

better use 

12 

Section 5(a)(10) Summary of each audit issued before this reporting 

period for which no management decision was made 

by the end of the reporting period 

None 

Section 5(a)(11) Description and explanation of significant revised 

management decisions 

None 

Section 5(a)(12) Significant management decisions with which the 

inspector general disagrees 

None 

Section 5(a)(13) Information under Section 5(b) of the Federal 

Management Improvement Act (FFMIA) of 1996 None 

Section 5(a)(14) Peer Review Activity 6, App. A 

October 1, 2013 – March 31, 2014 Page 9 
 

 

 

TABLE I – Summary of Audit Reports with 

Corrective Actions Outstanding for More than 1 Year 

Recommendations 

Report Title Report 

Number 

Issue 

Date Number Open Closed 

FY 2012 Implementation 

of FISMA 

A13-03 12/21/12 2 2 0 

FY 2012 Privacy and Data 

Protection 

A13-02 12/6/12 5 5 0 

FY 2011 Implementation 

of FISMA 

A12-02 1/17/12 20 9 11 

Review of FMC’s User 

Fee Calculations 

OR10-03 5/27/10 1 1 0 

FY 2009 Implementation 

of FISMA 

A10-02 1/28/10 19 1 18 

TABLE II - Listing of Audit Reports Issued 

Report 

Number 

Issue 

Date 

Report Title Questioned 

Costs 

Unsupported 

Costs 

Funds Put to 

Better Use 

NONE $0 $0 $0 

October 1, 2013 – March 31, 2014 Page 10 
TABLE III 

Reports with Questioned Costs
 

Number 

of 

Reports 

Questioned 

Costs 

Unsupported 

Costs 

A. For which no management decision has been 

made by the commencement of the reporting 

period. 

0 $0 $0 

B. Which were issued during the reporting period. 0 $0 $0 

Subtotal (A + B) 0 $0 $0 

C. For which a management decision was made 

during the reporting period. 

0 $0 $0 

(i) dollar value of disallowed costs; and 0 $0 $0 

(ii) dollar value of costs not disallowed 0 $0 $0 

D. For which no management decision has been 

made by the end of the reporting period. 

0 $0 $0 

E. Reports for which no management decision 

was made within six months of issuance. 

0 $0 $0 

October 1, 2013 – March 31, 2014 Page 11 
 

TABLE IV 

Recommendations That Funds Be Put To Better Use 

Number 

of 

Reports Dollar Value 

A. For which no management decision has been made 

by the commencement of the reporting period. 0 $0 

B. Which were issued during the reporting period. 0 $0 

Subtotal (A + B) 0 $0 

C. For which a management decision was made during 

the reporting period. 0 $0 

(i) dollar value of recommendations that were 

agreed to by management; and 

0 $0 

(ii) dollar value of recommendations that were not 

agreed to by management 

0 $0 

D. For which no management decision has been made 

by the end of the reporting period. 0 $0 

E. Reports for which no management decision was 

made within six months of issuance 0 $0 

October 1, 2013 – March 31, 2014 Page 12 
Appendix A 

Peer Review Activity 

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 

2010 (Section 989C of P.L. 111-203), which amended Section 5 of the Inspector General Act of 

1978, OIGs are required to include in their semiannual reports (SAR) to Congress the results of 

peer reviews of their offices, as well as outstanding and not fully implemented recommendations 

from peer reviews the OIG received from another OIG, and outstanding and not fully 

implemented recommendations the OIG made in any peer review it performed for another OIG. 

The FMC OIG completed an audit peer review of the Consumer Product Safety 

Commission (CPSC) OIG during this reporting period and issued a pass rating in the final 

system review report dated March 14, 2014. There were no deficiencies or recommendations 

included in the report. Consistent with the requirements of Section 989C of P.L. 111-203, the 

FMC OIG is required to include in our semiannual report a list of any outstanding and not fully 

implemented recommendations by the CPSC OIG; there are none. 

In accordance with the Council of Inspectors General on Integrity and Efficiency (CIGIE) 

Audit Peer Review schedule, the Postal Regulatory Commission (PRC) OIG conducted an audit 

peer review of the FMC OIG in a prior reporting period. A final system review report was 

issued to the FMC OIG on March 28, 2013; this office received a pass rating. There were no 

weaknesses or recommendations identified in the system review report. 

October 1, 2013 – March 31, 2014 Page 13 
 

HOTLINE COMPLAINTS
 

The success of the OIG mission to prevent fraud, waste and abuse 

depends on the cooperation of FMC employees and the public. 

Employees and the public are encouraged to contact the OIG 

regarding any incidents of possible waste, fraud or abuse occurring 

within FMC programs and operations. 

A COMPLAINT CAN BE REPORTED BY CALLING OUR 24-HR DIRECT LINE: 

(202) 523-5865 

E-MAIL ADDRESS: OIG@FMC.GOV 

OR 

https://www2.fmc.gov/oigcomplaints/ 

TO PLACE A COMPLAINT IN WRITING PLEASE MAIL TO: 

Federal Maritime Commission 

Office of Inspector General 

Room 1054 

800 North Capitol Street, NW 

Washington, DC 20573 

To Be Opened By the IG Only 

THE INFORMATION YOU PROVIDE IS CONFIDENTIAL AND YOU CAN BE ANONYMOUS. 

HOWEVER, CALLERS ARE ENCOURAGED TO ASSIST THE INSPECTOR GENERAL BY 

SUPPLYING INFORMATION AS TO HOW THEY MAY BE CONTACTED FOR ADDITIONAL 

INFORMATION.