Office                of Inspector Inspector General General
 

Semiannual Report 


to the Congress 


Covering the Period 

April 1, 2011 — September 30, 2011
 

FEDERAL MARITIME COMMISSION 

FEDERAL MARITIME COMMISSION

Washington, DC 20573 

October 31, 2011 

Office of Inspector General

Dear Chairman Lidinsky and Commissioners: 

The attached report is submitted in accordance with Section 5 of the Inspector General Act of 

1978, as amended. It summarizes the activities of the Office of Inspector General (OIG) for the period 

April 1, 2011, to September 30, 2011. The Act requires that you transmit the report to the appropriate 

Congressional committees within 30 days of receipt. Your transmittal should also include any comments 

you consider appropriate and other statistical tables and reports required by law. 

During this period we issued one program evaluation and began four audits / evaluations of 

agency programs or operations. We also updated the OIG’s annual audit plan for FY 2012 and beyond 

and completed a peer review of the audit operations at another federal OIG. 

Also during this reporting period, the OIG received nine complaints: We responded to four of the 

complaints and forwarded five complaints to the appropriate FMC program area for disposition. The OIG 

opened no new investigations and referred no matters to prosecutorial authorities during this period. 

In addition to these audit and investigative activities and outcomes, the OIG began quarterly 

meetings with other Designated Federal Entity OIGs to discuss issues, outcomes and solutions endemic to 

smaller IG offices. We continue to respond to consumers victimized as part of an internet scam operation 

using FMC indicia, selected a new information security contract evaluation team and began substantive 

revisions to the office’s Investigations Manual in anticipation of an investigations peer review. 

AS of September 30, 2011, there were 21 recommendations between 13 and 66 months old. The 

oldest recommendation, to implement a paperless bill-paying process, is a “green” alternative to the 

current paper based process that would be more efficient for agency staff and its customers. 

I appreciate management’s support and I look forward to working with you in our ongoing efforts 

to promote economy and efficiency in agency programs. 

 Respectfully submitted, 

 /Adam R. Trzeciak/ 

 Inspector General 
TABLE OF CONTENTS 

Transmittal Letter 

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

BACKGROUND ............................................................................................................................ 1

AUDITS/EVALUATIONS............................................................................................................. 3

Summary of Audits and Reviews Issued During the Current Period ......................................... 3

Planned Audits or Reviews ......................................................................................................... 4

INVESTIGATIVE ACTIVITIES ................................................................................................... 5

OTHER OIG ACTIVITIES ............................................................................................................ 6

SUMMARY OF INSPECTOR GENERAL REPORTING REQUIREMENTS .......................... 11

TABLE I – Inspector General Issued Reports with Questioned Costs ..................................... 12

TABLE II – Inspector General Issued Reports with Recommendations tht Funds be Put to 

Better Use ............................................................................................................ 13
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 1 

EXECUTIVE SUMMARY

This Semiannual Report to the Congress summarizes the activities and accomplishments 

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

or Office), for the period April 1, 2011, through September 30, 2011. During this period we 

issued one program evaluation and began four audits / evaluations of agency programs or 

operations. We also updated the OIG’s annual audit plan for FY 2012 and beyond and completed 

a peer review of the audit operations at another federal OIG. 

Also during this reporting period, the OIG received nine complaints: We responded to 

four of the complaints and forwarded five complaints to the appropriate FMC program area for 

disposition. The OIG opened no new investigations and referred no matters to prosecutorial 

authorities during this period. 

In addition to these audit and investigative activities and outcomes, the OIG began 

quarterly meetings with other Designated Federal Entity OIGs to discuss issues, outcomes and 

solutions endemic to smaller IG offices. We responded to a congressional request for 

information on open OIG recommendations and participated in a Government Accountability 

Office survey on the independence, effectiveness and expertise of inspectors general, as required 

by the Dodd-Frank Reform Act (Pub. L. 111-203, 124 Stat. 1376, July 21, 2010). We continue 

to respond to consumers who were victimized as part of an internet scam operation using FMC 

indicia, selected a new information security contract evaluation team and began substantive 

revisions to the office’s Investigations Manual in anticipation of an investigations peer review. 

BACKGROUND

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. 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 2 

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

the Senate, each serving five-year terms. For Fiscal Year (FY) 2011, the Commission operated 

under a continuing resolution at FY 2010 levels. The FY 2010 appropriation was $24.1 million. 

Although the majority of the Commission’s personnel are located in Washington, D.C., it 

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. 

The FMC/OIG was established in 1989 as required 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 Inspector General (IG) who reports directly to the Commissioners of the FMC. To aid the 

FMC in accomplishing its mission, the OIG was provided three full-time staff and a budget of 

$714,000. 

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. 

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

employees and individuals, or entities having contracts 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 facilitates and helps to ensure the 

independence of the Office. 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 3 

AUDITS/EVALUATIONS

During this semiannual period, the OIG issued a program review of the Commission’s 

Ocean Transportation Intermediary bond program, and began fieldwork on the annual (i) 

financial statement audit and (ii) information security evaluation. We also began planning 

activities associated with our review of the Bureau of Enforcement’s (BOE) Compliance Audit 

Program. 

Issued Audits and Reviews

Audit Report Number Subject of Audit

OR11-02 Review of the Federal Maritime Commission’s 

Office of Transportation Intermediaries, 

Financial Responsibility Program 

Summary of Audits and Reviews Issued During the Current Period

In OR11-02, Review of the Federal Maritime Commission’s Office of Transportation 

Intermediaries, Financial Responsibility Program, the objectives were to assess agency controls 

in place to ensure that ocean transportation intermediaries (OTI) (i) obtain a bond prior to licensing, 

(ii) maintain a bond while providing OTI services, and (iii) are inactivated in public databases 

maintained by the FMC when bonds are terminated or cancelled. We also reviewed whether OTI 

status information maintained on the Commission’s website is accurate and up to date. 

The Office of Transportation Intermediaries gets high marks for its management of the 

“bond” program. Licenses are conditionally approved pending receipt of bond information. The 

office sends out notices to new applicants timely alerting them to approaching deadlines for bond 

submissions. We also found that termination notices are timely sent to OTIs whose bonds were 

cancelled and that licensees are removed from the OTI List on the agency’s website when bonds are 

revoked or terminated. 

On the other hand, we identified several discrepancies between two databases maintained on 

the agency’s website: the OTI List and the Links to Tariffs databases. Both links are used by the 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 4 

public and industry to obtain important information regarding OTI license status and tariff location, 

respectively. These two databases should reconcile, but they do not. Besides presenting confusing 

and contradictory information to the public and industry, the users could erroneously conclude that 

an Non Vessel Operating Common Carrier (NVOCC) meets all Commission regulations by 

appearing on the Links to Tariffs list. Procedures to streamline removal of organizations from Links 

to Tariffs should be implemented. 

The bond and tariff programs would benefit from enhanced automated processes. Currently, 

the programs are administered in two different bureaus on two separate applications. The problem 

cited above would be addressed if the systems were merged into a larger enterprise-wide database 

system. The OIG recommended that a link be established that would rely on technology to maintain 

consistency between the databases. Relying more on automation and less on manual processes should 

have a material and immediate impact on database consistency without requiring new technologies to 

be purchased. 

Planned Audits and Reviews

Audit Report Number Subject of Audit

A12-XX Audit of FMC’s FY 2011 Financial Statements 

A12-XX Management Letter to the FY 2011 Audited 

Financial Statements 

OR12-XX Independent Evaluation of FMC’s 

Implementation of the Federal Information 

Security Management Act for FY 2011 

OR12-XX Review of the Bureau of Enforcement’s 

Compliance Audit Program 

In A12-XX, Audit of FMC’s FY2011 Financial Statements, the audit objective is to 

opine on whether the FMC’s FY 2011 financial statements follow Generally Accepted Accounting 

Principles and present fairly the financial position of the agency. The OIG will also review internal 

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

be audited are the Balance Sheets as of September 30, 2011 and 2010, and the related Statements of 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 5 

Net Cost, Statements of Changes in Net Position, Statements of Budgetary Resources, Statements of 

Financing and Statements of Custodial Activity. This will be the eighth consecutive year that the 

FMC prepared financial statements for audit. 

The OIG will also prepare a Management Letter that presents findings arising from the 

review of the statements that are not material to the financial statements in the current year, but if not 

addressed, could materially affect future statements. 

In OR12-XX, Independent Evaluation of FMC’s Implementation of the Federal 

Information Security Management Act (FISMA) for FY 2011, the objectives are to (1) evaluate the 

agency’s information systems security program and assess compliance with FISMA and related 

information security policies, procedures, standards and guidelines; (2) evaluate responses to prior 

recommendations, and (3) review agency activities associated with its responsibilities under the 

Privacy Act. This year the OIG will issue an independent evaluation of the agency’s information 

security program and submit a report to the Office of Management and Budget in response to specific 

security-related questions provided to all federal departments and agencies subject to FISMA. 

In OR12-XX, Review of the Bureau of Enforcement’s Compliance Audit Program, the 

review objectives are to assess the overall effectiveness of the program. Specifically, we will 

evaluate controls in place to ensure the accuracy of responses from industry on questionnaires 

used by BOE in the audit process, review program performance measures and document program 

accomplishments. Finally, we will assess BOE’s follow-up processes to validate corrective 

action. 

INVESTIGATIVE ACTIVITIES

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. 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 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 6 

OIG received nine complaints. We responded to four of the complaints and forwarded five 

complaints to the appropriate FMC program area for disposition. The OIG opened no new 

investigations and referred no matters to prosecutorial authorities during this period. 

Additionally, the OIG continues to work with the agency’s Office of General Counsel 

concerning an ongoing Internet scam that attempts to defraud the public by, among other things, 

using the agency’s official insignia. 

OTHER OIG ACTIVITIES

Review of Legislation

As required by the Inspector General Act of 1978, as amended, the Office of Inspector 

General 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. 

Council of Inspectors General on Integrity and Efficiency Activities

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

the Inspector General Reform Act of 2008 (P.L. 110-409) as an independent entity 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 offices of the inspectors general. 

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

confirmed and those that are appointed by agency heads. 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 7 

The OIG remains active in the CIGIE operations. For example, the IG is a member of 

CIGIE’s Legislation and Integrity Committees. The Legislation Committee is a centralized pointof-contact and liaison for CIGIE to ensure regular and ongoing communication with 

Congressional committees, committee staff and the Government Accountability Office regarding 

issues of common interest, and provides input to, and receives feedback from, the Congress on 

legislation affecting the IG community as a whole. The Integrity Committee is charged with 

receiving, reviewing, and referring for investigation, where appropriate, allegations of administrative 

(non-criminal) misconduct against inspectors general and designated senior staff members of the OIG. 

The Committee's membership consists of the Federal Bureau of Investigation's representative to the 

CIGIE, who serves as its Chairperson; the Special Counsel of the Office of Special Counsel, the 

Director of the Office of Government Ethics; and four federal inspectors general.

The Assistant Inspector General for Audits participates in Federal Audit Executive 

Council (FAEC) activities. The FAEC is comprised of senior audit staff from agency OIGs that 

discuss and coordinate issues affecting the Federal audit community - with special emphasis on 

audit policy and operations of common interest to FAEC members. The Counsel to the Inspector 

General 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. 

Also, during the reporting period, in accordance with the Inspector General Reform Act, 

FMC/OIG provided legal services, on a reimbursable basis, to the Architect of the Capitol, OIG, 

pursuant to a Memorandum of Understanding. 

Peer Review Activities

Federal Offices of Inspector General are required by the IG Act to have a peer review 

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

A committee of the CIGIE schedules the review to ensure that resources are available to perform 

them and that OIGs do not conduct reciprocal reviews. 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 8 

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 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. The last peer 

review of the FMC OIG was issued on March 12, 2010, outside of this reporting period. There 

are no unimplemented recommendations from this or any previous peer review. The March 

2010 peer review opinion and report are available on the OIG’s webpage at 

www.fmc.gov/bureaus_offices/office_of_inspector_general.aspx. 

During this reporting period, the OIG completed a peer review of the Office of Inspector 

General at the Federal Election Commission (FEC/OIG) pursuant to Government Auditing 

Standards requirements. A final report was issued to the FEC/IG on May 5, 2011. 

Significant Management Decisions

If the IG disagrees with any significant management decision, Section 5(a)(12) of the 

Inspector General Act requires that such disagreement be reported in the semiannual report. 

Further, Section 5(a)(11) of the Act requires that any decision by management to change its 

response to a significant resolved audit finding must also be disclosed in the semiannual report. 

For this reporting period, there were no significant management decisions made on which 

the IG disagreed, and management did not revise an earlier decision on an OIG audit 

recommendation.

Access to Information

The IG is to be provided with ready access to all agency records, information or 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 9 

assistance when conducting an investigation or audit. Section 6(b)(2) of the IG Act requires the 

IG to report to the agency head, without delay, if the IG believes that access to required 

information, records or assistance has been unreasonably refused, or otherwise has not been 

provided. A summary of each report submitted to the agency head in compliance with Section 

6(b)(2) must be provided in the semiannual report in accordance with Section 5(a)(5) of the Act. 

During the reporting period, the OIG did not encounter any difficulties in obtaining 

assistance or access to agency records. Consequently, no report was issued by the IG to the 

agency head in accordance with Section 6(b)(2) of the IG Act. 

Audit Resolution

As of the end of this reporting period, all OIG audit recommendations for reports issued 

in prior periods have been resolved. That is, management and the OIG have reached agreement 

on what actions need to be taken. As noted below, 21 of these recommendations remain open 

past one year. 

Short Title

Report 

Issue Date

Open 

Rec.(s)

Elapsed Months 

(as of 9/30/11)

1 Helpdesk Satisfaction Survey 8/6/10 4 13 

2 User Fee Calculations 5/27/10 1 16 

3 T&A – Capping Report 5/14/10 2 16 

4 FISMA Evaluation for 2009 1/28/10 8 20 

5 Bureau Timekeeping Practices 6/30/09 1 27 

6 Agency Checkout Process 1/12/09 1 32 

7 Privacy & Data Protection 9/22/08 1 36 

8 FISMA Evaluation for 2008 9/22/08 1 36 

9 FISMA Evaluation for 2006 10/2/06 1 59 

10 Accuracy of Enforcement Databases 3/31/06 1 66 

The agency closed eight recommendations from the prior reporting period. The oldest 

recommendation (66 months) involves “Pay.gov,” a payment system available to all federal 

agencies that enables agency customers to make secure electronic payments to the agency 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 10 

directly from their bank accounts or by credit/debit cards. The FMC still processes the majority 

of its transactions with customers, including regulated entities, by bank check. In recent updates, 

management told the OIG that it will implement Pay.gov with other information technology 

modernization projects. However, in its October 27, 2011, update on open recommendations, 

management informed that it has continued to work with Treasury to develop agency 

applications and to choose an agency interface. Management anticipates that it will phase in 

Pay.gov by March 2012. 

Contacting the Office of Inspector General

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. The OIG 

telephone number is (202) 523-5863. To report suspected wrongdoing, employees or the public 

may call the OIG Hotline on (202) 523-5865. A confidential or anonymous message can be left 

24 hours a day. Complaints or allegations of fraud, waste or abuse can also be emailed to 

oig@fmc.gov or to https://www2.fmc.gov/oigcomplaints/ (if the complainant wishes to remain 

anonymous). 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 11 

SUMMARY OF INSPECTOR GENERAL REPORTING REQUIREMENTS

IG Act 

Reference Reporting Requirement Page(s)

Section 4(a)(2) Review of legislation and regulations 6 

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

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

corrective actions have not been made 

9 

Section 5(a)(4) Matters referred for prosecution None 

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

refused 

8 

Section 5(a)(6) List of audit reports by subject matter 3 

Section 5(a)(7) Summary of each particularly significant report 3 

Section 5(a)(8) Statistical tables showing number of reports and 

dollar value of questioned costs 

12 

Section 5(a)(9) Statistical tables showing number of reports and 

dollar value of recommendations that funds be put 

to better use 

13 

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) Significant revised management decisions None 

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

inspector general disagrees 

8 

 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 12 

TABLE I

INSPECTOR GENERAL ISSUED REPORTS WITH QUESTIONED COSTS

 Dollar Value

Number

Questioned 

Cost

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 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 

 
Inspector General’s Semiannual Report to Congress

April 1, 2011 – September 30, 2011 Page 13 

TABLE II

INSPECTOR GENERAL ISSUED REPORTS WITH RECOMMENDATIONS 

THAT FUNDS BE PUT TO BETTER USE

Number 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 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 
HOTLINE COMPLAINTS

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

depends on the cooperation of FMC employees and the public. 

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

(202) 523-5865 

E-MAIL ADDRESS: 

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