Federal Maritime

Commission

Audited Financial Statements

A11‐02

FY

2010

Audited Financial Statements

FEDERAL MARITIME COMMISSION

FY 2010
FEDERAL MARITIME COMMISSION 

FINANCIAL STATEMENTS 

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2010 AND 2009 

TABLE OF CONTENTS 

INSPECTOR GENERAL TRANSMITTAL LETTER 

INDEPENDENT AUDITOR'S REPORT 

FINANCIAL SECTION 

 BALANCE SHEET..................................................................................................1 

 STATEMENT OF NET COST....................................................................................2 

 STATEMENT OF CHANGES IN NET POSITION...........................................................3 

 STATEMENT OF BUDGETARY RESOURCES.............................................................4 

 STATEMENT OF CUSTODIAL ACTIVITY..................................................................5 

 NOTES TO THE FINANCIAL STATEMENTS...............................................................6 
FEDERAL MARITIME COMMISSION

Office of Inspector General 

Washington, DC 20573-0001 

November 10, 2010 

 

Office of Inspector General 

 

The Honorable Richard A. Lidinsky, Jr. 

Chairman 

Federal Maritime Commission 

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

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

Federal Maritime Commission’s (FMC) FY 2010 financial statements. The audit results 

indicate that FMC has established an internal control structure that facilitates the 

preparation of reliable financial and performance information. We commend FMC for the 

noteworthy accomplishment of attaining an unqualified (clean) opinion for the seventh 

consecutive year. 

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

accounting firm of Dembo Jones Healy Pennington & Marshall, P.C. (DJHPM) to 

perform the audit of the FMC’s financial statements for the fiscal year ended 

September 30, 2010. The contract required that the audit be done in accordance with U.S. 

generally accepted government auditing standards and Office of Management and Budget 

(OMB) audit guidance. 

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

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

with U.S. generally accepted accounting principles; 

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

(including safeguarding assets) and compliance with laws and regulations; and 

• no reportable noncompliance with laws and regulations tested. 

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

of the audit work performed, we monitored DJHPM’s audit of FMC’s FY 2010 financial 

statements by: 

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

• evaluating the qualifications and independence of its auditors; 
2 

• monitoring the progress of the audit at key points; 

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

control, and substantive testing; 

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

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

• coordinating the issuance of the audit report; and 

• performing other procedures we deemed necessary. 

Our review disclosed no instances where DJHPM did not comply, in all material respects, 

with U.S. generally accepted government auditing standards. However, our review cannot 

be construed as an audit in accordance with U.S. generally accepted government auditing 

standards. It was not intended to enable us to express, and we do not express, any opinion 

on FMC’s financial statements, conclusions about the effectiveness of internal control, or 

conclusions on compliance with laws and regulations. DJHPM is solely responsible for 

the attached auditor’s report dated November 10, 2010, and the conclusions expressed in 

the report. 

We appreciate the cooperation and courtesies extended to both DJHPM and OIG staff 

during the audit. 

Sincerely, 

/Adam R. Trzeciak/ 

Inspector General 

 

Attachment 

cc: Commissioners 

 Managing Director 

 
Chairman Lidinsky: 

We have audited the accompanying balance sheet of the Federal Maritime Commission (FMC) 

as of September 30, 2010 and 2009, and the related statements of net cost, changes in net 

position, budgetary resources, and custodial activity for the years then ended. In our audits of 

the Federal Maritime Commission for the fiscal years September 30, 2010 and 2009, we found 

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

U.S. generally accepted accounting principles, 

• no material weaknesses or significant deficiencies in internal control over financial 

reporting (including safeguarding assets), 

• no reportable noncompliance with laws and regulations we tested. 

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

Management's Discussion and Analysis (MD&A) and other accompanying information, and (3) 

our audit objectives, scope, and methodology. 

Opinion on Financial Statements

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

material respects, in conformity with U.S. generally accepted accounting principles, the Federal 

Maritime Commission's assets, liabilities, and net position as of September 30, 2010 and 2009; 

and net costs; changes in net position; budgetary resources; and custodial activity for the years 

then ended. 

Consideration of Internal Control

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

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

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

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

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

MD&A. Accordingly, we do not express an opinion on internal control over financial reporting 

and compliance or on management's assertion on the effectiveness of the entity’s internal control 

over financial reporting or on management’s assertion on internal control included in the 

MD&A. 

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

described in the preceding paragraph and would not necessarily identify all deficiencies in 

internal control over financial reporting that might be significant deficiencies or material 

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

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

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

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

process, or report financial data reliably in accordance with generally accepted accounting 

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

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

entity’s internal control. 

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

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

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

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

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

in the internal control that might be material weaknesses or significant deficiencies. We did not 

identify any deficiencies in internal control over financial reporting that we consider to be 

material weaknesses or significant deficiencies, as defined above. 

We noted other non-reportable matters involving internal control and its operation that we will 

communicate in a separate management letter to FMC management. 

Compliance With Laws and Regulations

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

regulations for fiscal year 2010 disclosed no instances of noncompliance that would be 

reportable under U.S. generally accepted government auditing standards or OMB audit guidance. 

However, the objective of our audit was not to provide an opinion on overall compliance with 

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

Objectives, Scope, and Methodology

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

statements in conformity with U.S. generally accepted accounting principles, (2) establishing, 

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

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

applicable laws and regulations. 

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

presented fairly, in all material respects, in conformity with U.S. generally accepted accounting 

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

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

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

statements and laws for which OMB audit guidance requires testing. 
In order to fulfill these responsibilities, we 

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

financial statements; 

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

• evaluated the overall presentation of the financial statements; 

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

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

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

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

the design and operating effectiveness of internal control; 

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

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

• tested compliance with selected provisions of laws and regulations. 

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

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

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

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

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

and not be detected. We also caution that projecting our evaluation to future periods is subject to 

the risk that controls may become inadequate because of changes in conditions or that the degree 

of compliance with controls may deteriorate. In addition, we caution that our internal control 

testing may not be sufficient for other purposes. 

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

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

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

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

statements for the fiscal year ended September 30, 2010. We caution that noncompliance may 

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

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

States; the standards applicable to the financial audits contained in Government Auditing

Standards, issued by the Comptroller General of the United States; and OMB guidance. 

Rockville, Maryland 

November 10, 2010 
FINANCIAL SECTION 
The accompanying notes are an integral part of these statements. 

1 

2010 2009

Assets:

Intragovernmental

Fund Balance With Treasury (Note 2) 4,862,018 $ 4,777,674 $ 

Total Intragovernmental 4,862,018 4,777,674 

Accounts Receivable, Net (Note 3) 114 70,222 

Property, Equipment, and Software, Net (Note 4) 629,719 202,500 

Other (Note 5) 1,728 - 

Total Assets 5,493,579 $ 5,050,396 $ 

Liabilities:

Intragovernmental

Accounts Payable (Note 6) 687,333 $ 309,177 $ 

Employer Contributions and Payroll Taxes Payable 181,479 138,468 

Unfunded FECA Liability (Note 7) 1,741 1,968 

Custodial Liability 114 69,236 

Total Intragovernmental 870,667 518,849 

Accounts Payable (Note 6) 273,306 231,925 

Accrued Payroll and Leave 1,051,210 865,970 

Employer Contributions and Payroll Taxes Payable 22,613 17,568 

Unfunded Leave (Note 7) 1,217,002 1,075,533 

Actuarial FECA Liability (Note 7) 11,821 5,249 

Total Liabilities 3,446,619 $ 2,715,094 $ 

Net Position:

Unexpended Appropriations 2,647,804 $ 3,214,566 $ 

Cumulative Results of Operations (600,844) (879,264) 

Total Net Position 2,046,960 $ 2,335,302 $ 

Total Liabilities and Net Position 5,493,579 $ 5,050,396 $ 

FEDERAL MARITIME COMMISSION

BALANCE SHEET

AS OF SEPTEMBER 30, 2010 AND 2009

(In Dollars)
The accompanying notes are an integral part of these statements. 

2 

2010 2009

Program Costs:

Operational and Administrative (Note 10)

Gross Costs 17,931,656 $ 16,541,546 $ 

Net Program Costs 17,931,656 $ 16,541,546 $ 

Formal Proceedings (Note 10)

Gross Costs 7,227,972 $ 6,082,905 $ 

Less: Earned Revenue (118,744) - 

Net Program Costs 7,109,228 $ 6,082,905 $ 

Office of Inspector General (Note 10)

Gross Costs 679,070 $ 529,935 $ 

Less: Earned Revenue (3,285) - 

Net Program Costs 675,785 $ 529,935 $ 

Office of Equal Employment Opportunity (Note 10)

Gross Costs 206,652 $ 151,287 $ 

Net Program Costs 206,652 $ 151,287 $ 

Net Cost of Operations 25,923,321 $ 23,305,673 $ 

FEDERAL MARITIME COMMISSION

STATEMENT OF NET COST

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2010 AND 2009

(In Dollars)
The accompanying notes are an integral part of these statements. 

3 

2010 2009

Cumulative Results of Operations:

Beginning Balances (879,264) $ (1,029,189) $ 

Budgetary Financing Sources:

Appropriations Used 24,626,223 22,258,507 

Other Financing Sources (Non-Exchange):

Imputed Financing Sources (Note 11) 1,575,518 1,197,091 

Total Financing Sources 26,201,741 23,455,598 

Net Cost of Operations (25,923,321) (23,305,673) 

Net Change 278,420 149,925 

Cumulative Results of Operations (600,844) $ (879,264) $ 

Unexpended Appropriations:

Beginning Balances 3,214,566 $ 2,706,788 $ 

Budgetary Financing Sources:

Appropriations Received 24,135,000 22,800,000 

Other Adjustments (75,539) (33,715) 

Appropriations Used (24,626,223) (22,258,507) 

Total Budgetary Financing Sources (566,762) 507,778 

Total Unexpended Appropriations 2,647,804 $ 3,214,566 $ 

Net Position 2,046,960 $ 2,335,302 $ 

FEDERAL MARITIME COMMISSION

STATEMENT OF CHANGES IN NET POSITION

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2010 AND 2009

(In Dollars)
The accompanying notes are an integral part of these statements. 

4 

2010 2009

Budgetary Resources:

Unobligated Balance Brought Forward, October 1 $ 747,665 867,458 $ 

Recoveries of Prior Year Unpaid Obligations 582,606 171,489 

Budget Authority

Appropriation 24,135,000 22,800,000 

Spending Authority From Offsetting Collections

Earned

Collected 122,029 - 

Subtotal 24,257,029 22,800,000 

Permanently Not Available (75,539) (33,715) 

Total Budgetary Resources 25,631,554 $ 23,685,439 $ 

Status of Budgetary Resources:

Obligations Incurred (Note 13)

Direct 24,205,598 $ 22,817,981 $ 

Reimbursable 122,029 - 

Subtotal 24,327,627 22,817,981 

Unobligated Balance

Apportioned 10,273 66,284 

Unobligated Balance Not Available 1,293,654 801,174 

Total Status of Budgetary Resources 25,631,554 $ 23,685,439 $ 

Change in Obligated Balance:

Obligated Balance, Net

Unpaid Obligations, Brought Forward, October 1 3, $ 3,314,469 910,216 $ 

Obligations Incurred Net 24,327,627 22,817,981 

Gross Outlays (24,097,146) (22,050,745) 

Recoveries of Prior Year Unpaid

Obligations, Actual (582,606) (171,489) 

Total, Unpaid Obligated Balance, Net, End of Period 3,558,091 $ 3,910,216 $ 

Net Outlays:

Gross Outlays 24,097,146 $ 22,050,745 $ 

Offsetting Collections (122,029) - 

Net Outlays 23,975,117 $ 22,050,745 $ 

FEDERAL MARITIME COMMISSION

STATEMENT OF BUDGETARY RESOURCES

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2010 AND 2009

(In Dollars)
The accompanying notes are an integral part of these statements. 

5 

2010 2009

Revenue Activity:

Sources of Cash Collections:

Miscellaneous 1,250,668 $ 1,115,241 $ 

Total Cash Collections (Note 15) 1,250,668 1,115,241 

Accrual Adjustments (69,122) 5,643 

Total Custodial Revenue 1,181,546 1,120,884 

Disposition of Collections:

Transferred to Others 1,250,668 1,115,241 

Increase/(Decrease) in Amounts Yet to be Transferred (69,122) 5,643 

Total Disposition of Collections 1,181,546 1,120,884 

Net Custodial Activity $ - - $ 

(In Dollars)

FEDERAL MARITIME COMMISSION

STATEMENT OF CUSTODIAL ACTIVITY

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2010 AND 2009
FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

6 

NOTE 1. SUMMARY OF SIGNIFICANT 

ACCOUNTING POLICIES 

A. Reporting Entity 

The Federal Maritime Commission (FMC) was 

established as an independent regulatory 

agency on August 12, 1961. FMC is 

responsible for the regulation of ocean borne 

transportation in the foreign commerce of the 

United States (U.S.). The principal statutes or 

statutory provisions administered by the 

Commission are the Shipping Act of 1984, the 

Foreign Practices Act of 1988, and section 19 

of the Merchant Marine Act of 1920, and 

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

Most of these statutes were modified by the 

passage of the Ocean Shipping Reform Act of 

1998, which took effect in 1999. 

The Commission: monitors the activities 

of ocean common carriers, marine terminal 

operators (MTOs), conferences, ports and 

ocean transportation intermediaries (nonvessel-operating common carriers and 

ocean freight forwarders) who operate in 

the U.S. foreign commerce to ensure they 

maintain just and reasonable practices; 

maintains trade monitoring, enforcement 

and dispute resolution programs designed 

to assist regulated entities in achieving 

compliance and to detect and appropriately 

remedy malpractices and violations of the 

prohibited acts set forth in section 10 of the 

1984 Act; monitors the laws and practices 

of foreign governments which could have a 

discriminatory or otherwise adverse impact 

on shipping conditions in U.S. trades, and 

imposes remedial action, as appropriate, 

pursuant to section 19 of the 1920 Act or 

FSPA; enforces special regulatory 

requirements applicable to carriers owned 

or controlled by foreign governments; 

processes and reviews agreements, service 

contracts, and service arrangements 

pursuant to the 1984 Act for compliance 

with statutory requirements; and reviews 

common carriers’ privately published tariff 

systems for accessibility and accuracy, as 

required by OSRA. The Commission also 

issues licenses to qualified ocean 

transportation intermediaries (OTIs) in the 

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

maintain other evidence of financial 

responsibility, and ensures that passenger 

vessel operators (PVOs) demonstrate 

adequate financial responsibility in case of 

nonperformance of voyages or injury to 

passengers.

FMC is composed of five Commissioners 

appointed for five-year terms by the President 

with the advice and consent of the Senate. The 

President designates one of the Commissioners 

to serve as Chairman, who is also the chief 

executive and administrative officer of FMC. 

The FMC reporting entity is comprised of 

General Funds and General Miscellaneous 

Receipts. 

General Funds are accounts used to record 

financial transactions arising under 

congressional appropriations or other 

authorizations to spend general revenues. 

General Fund miscellaneous receipts are 

accounts established for receipts of nonrecurring activity, such as fines, penalties, fees 

and other miscellaneous receipts for services 

and benefits. 
7 

FMC makes custodial collections and holds 

custodial receivables that are non-entity assets 

and are transferred to Treasury at fiscal year 

end. 

B. Basis of Presentation 

The financial statements have been prepared to 

report the financial position, net cost of 

operations, changes in net position, and the 

status and availability of budgetary resources 

of the FMC. The statements are a requirement 

of the Accountability of Tax Dollars Act of 

2002. They have been prepared from, and are 

fully supported by, the books and records of 

FMC in accordance with the hierarchy of 

accounting principles generally accepted in the 

United States of America, standards approved 

by the Federal Accounting Standards Advisory 

Board (FASAB), OMB Circular A-136, 

Financial Reporting Requirements and FMC 

accounting policies which are summarized in 

this note. These statements, with the exception 

of the Statement of Budgetary Resources, are 

different from financial management reports, 

which are also prepared pursuant to OMB 

directives that are used to monitor and control 

FMC’s use of budgetary resources. 

The statements consist of the Balance Sheet, 

Statement of Net Cost, Statement of Changes 

in Net Position, Statement of Budgetary 

Resources, and the Statement of Custodial 

Activity. In accordance with OMB Circular 

A-136, the financial statements and associated 

notes are presented on a comparative basis. 

Unless specified otherwise, all amounts are 

presented in dollars. 

C. Budgets and Budgetary Accounting 

Congress usually enacts appropriations to 

permit FMC to incur obligations for specified 

purposes. In fiscal years 2010 and 2009, the 

FMC was accountable for General Fund 

appropriations. The agency recognizes 

budgetary resources as assets when cash (funds 

held by the U.S. Treasury) is made available 

through the Department of Treasury General 

Fund warrants. 

D. Basis of Accounting 

Transactions are recorded on both an accrual 

accounting basis and a budgetary basis. Under 

the accrual method, revenues are recognized 

when earned, and expenses are recognized 

when a liability is incurred, without regard to 

receipt or payment of cash. Budgetary 

accounting facilitates compliance with legal 

requirements on the use of federal funds. 

Balances on these statements may therefore 

differ from those on financial reports prepared 

pursuant to other OMB directives that are 

primarily used to monitor and control FMC's 

use of budgetary resources. 

E. Revenues & Other Financing Sources 

Congress enacts annual appropriations to be 

used, within statutory limits, for operating and 

capital expenditures. Additional revenues are 

obtained from service fees and reimbursements 

from other government entities and the public, 

but these revenues are not available to the 

agency to fund operating expenses. 

Appropriations are recognized as a financing 

source when expended. Revenues from 

service fees associated with reimbursable 

agreements are recognized concurrently with 

the recognition of accrued expenditures for 

performing the services. Appropriations 

expended for capitalized property and 

equipment are recognized as expenses when an 

asset is consumed in operations. 

FMC recognizes as an imputed financing 

source the amount of accrued pension and 

post-retirement benefit expenses for current 

employees paid on its behalf by the Office of 

Personnel Management (OPM). 

F. Taxes 

FMC, as a Federal entity, is not subject to 

federal, state, or local income taxes, and, 

accordingly, no provision for income taxes has 

been recorded in the accompanying financial 

statements. 
8 

G. Fund Balance with Treasury 

The U.S. Treasury processes cash receipts and 

disbursements. Funds held at the Treasury are 

available to pay agency liabilities. FMC does 

not maintain cash in commercial bank 

accounts or foreign currency balances. 

H. Accounts Receivable 

Accounts receivable consists of amounts owed 

to FMC by other Federal agencies, its 

employees and the general public. Accounts 

receivable in the Salaries and Expense Fund 

represent employee-related receivables. An 

allowance for uncollectible accounts 

receivable from the public is established when, 

based upon a review of outstanding accounts, 

management determines that collection is 

unlikely to occur considering the debtor’s 

ability to pay. Debts six months or more past 

due are referred to the Department of Treasury 

for follow-up collection efforts in keeping with 

the Debt Collection Improvement Act of 1996 

(DCIA). Treasury’s Debt Management 

Services (DMS) administers the program and 

deducts 18 percent from amounts ultimately 

collected for its fee. Collections, net of fees, 

are returned to the FMC for remittance to the 

general fund of the Treasury. 

I. Property, Equipment, and Software 

Property, equipment and software represent 

furniture, fixtures, equipment, and information 

technology (IT) hardware and software which 

are recorded at original acquisition cost and are 

depreciated or amortized using the straight-line 

method over their estimated useful lives. 

Major alterations and renovations are 

capitalized, except wherein the tenant 

improvement allowance specified in lease 

agreements covers the costs of certain 

renovations. Maintenance and repair costs are 

expensed as incurred. FMC's capitalization 

threshold is $25,000 for individual purchases. 

Applicable standard governmental guidelines 

regulate the disposal and convertibility of 

agency property, equipment and software. The 

useful life classifications for capitalized assets 

are as follows: 

Description Useful Life (years)

Leasehold Improvements 5 

Office Furniture 5 

Computer Equipment 5 

Office Equipment 5 

IT Software 5 

J. Advances and Prepaid Charges 

Advance payments are generally prohibited by 

law. There are exceptions, such as some 

reimbursable agreements, subscriptions, and 

payments to contractors and employees. 

Payments made in advance of the receipt of 

goods and services are recorded as advances or 

prepaid charges at the time of prepayment and 

recognized as expenses when the related goods 

and services are received. 

K. Liabilities

Liabilities represent the amount of monies or 

other resources likely to be paid by the FMC as 

a result of transactions or events that have 

already occurred. No liability can be paid, 

however, absent an appropriation or other 

funding. Liabilities covered by budgetary or 

other resources are those liabilities for which 

Congress has appropriated funds or funding is 

otherwise available to pay amounts due. 

Liabilities for which an appropriation has not 

been enacted or other funds received are, 

therefore, classified as not covered by 

budgetary resources. The liquidation of 

liabilities not covered by budgetary or other 

resources is dependent on future congressional 

appropriations or other funding. There is no 

certainty that the appropriation will be enacted. 

Intragovernmental liabilities are claims against 

FMC by other federal agencies. Additionally, 

the government, acting in its sovereign 

capacity, can abrogate liabilities. 

L. Accounts Payable 

Accounts payable consists primarily of 

amounts owed to other Federal agencies and 

the public for contracts for goods or services, 
9 

such as leases, utilities, telecommunications 

and consulting and support services. 

M. Annual, Sick, and Other Leave 

Annual leave is accrued as it is earned, and the 

accrual is reduced as leave is taken. The 

balance in the accrued leave account is 

adjusted to reflect current pay rates. Liabilities 

associated with other types of vested leave, 

including compensatory, restored leave, and 

sick leave in certain circumstances, are accrued 

at year-end, based on latest pay rates and 

unused hours of leave. Funding will be 

obtained from future financing sources to the 

extent that current or prior year appropriations 

are not available to fund annual and other 

types of vested leave earned but not taken. 

Nonvested leave is expensed when used. Any 

liability for unused sick leave that is accrued 

but not taken by a Civil Service Retirement 

System (CSRS)-covered employee is 

transferred to the OPM upon the retirement of 

that individual. Credit is given for sick leave 

balances in the computation of annuities upon 

the retirement of Federal Employees 

Retirement System (FERS)-covered employees 

effective at 50% beginning FY2010 and 100% 

in 2014. 

N. Accrued and Actuarial Workers’ 

Compensation 

The Federal Employees' Compensation Act 

(FECA) administered by the U.S. Department 

of Labor (DOL) addresses all claims brought 

by FMC employees for on-the-job injuries. 

The DOL bills each agency annually as its 

claims are paid, and the actual costs incurred 

are reflected as a liability to the agency. 

Payment of these bills is deferred for two years 

to allow for funding through the budget 

process. Similarly, employees that the FMC 

terminates without cause may receive 

unemployment compensation benefits under 

the unemployment insurance program also 

administered by the DOL, which bills each 

agency quarterly for paid claims. Future 

appropriations will be used for the 

reimbursement to DOL. The liability consists 

of (1) the net present value of estimated future 

payments calculated by the DOL, and (2) the 

unreimbursed cost paid by DOL for 

compensation to recipients under the FECA. 

O. Retirement Plans 

FMC employees participate in either the CSRS 

or the FERS. The employees who participate 

in CSRS are beneficiaries of FMC's 

contribution, equal to seven percent of pay, 

distributed to their annuity account in the Civil 

Service Retirement and Disability Fund. 

Prior to December 31, 1983, all employees 

were covered under the CSRS program. From 

January 1, 1984 through December 31, 1986, 

employees had the option of remaining under 

CSRS or joining FERS and Social Security. 

Employees hired as of January 1, 1987 are 

automatically covered by the FERS program. 

All employees are eligible to contribute to the 

Thrift Savings Plan (TSP). For those 

employees participating in the FERS, a TSP 

account is automatically established and FMC 

makes a mandatory one percent contribution to 

this account. In addition, FMC makes 

matching contributions, ranging from one to 

four percent, for FERS eligible employees who 

contribute to their TSP accounts. Matching 

contributions are not made to the TSP accounts 

established by CSRS employees. For FERS 

participants, FMC also remits the employer's 

share of the required contribution. 

FERS employees and certain CSRS 

reinstatement employees are eligible to 

participate in the Social Security program after 

retirement. 

FMC recognizes the imputed cost of pension 

and other retirement benefits during the 

employees’ active years of service. OPM 

actuaries determine pension cost factors by 

calculating the value of pension benefits 

expected to be paid in the future and 

communicate these factors to FMC for current 

period expense reporting. OPM also provides 

information regarding the full cost of health 

and life insurance benefits. FMC recognized 

the offsetting revenue as imputed financing 
10 

sources to the extent these expenses will be 

paid by OPM. 

FMC does not report on its financial 

statements information pertaining to the 

retirement plans covering its employees. 

Reporting amounts such as plan assets, 

accumulated plan benefits, and related 

unfunded liabilities, if any, is the responsibility 

of the OPM. 

P. Other Post-Employment Benefits 

FMC employees eligible to participate in the 

Federal Employees Health Benefits Plan 

(FEHBP) and the Federal Employees Group 

Life Insurance Program (FEGLIP) may 

continue to participate in these programs after 

their retirement. The OPM has provided FMC 

with certain cost factors that estimate the true 

cost of providing the post-retirement benefit to 

current employees. FMC recognizes a current 

cost for these and Other Retirement Benefits 

(ORB) at the time the employee's services are 

rendered. The ORB expense is financed by 

OPM, and offset by FMC through the 

recognition of an imputed financing source. 

Q. Use of Estimates 

The preparation of the accompanying financial 

statements in accordance with generally 

accepted accounting principles requires 

management to make certain estimates and 

assumptions that affect the reported amounts 

of assets and liabilities and disclosure of 

contingent assets and liabilities at the date of 

the financial statements and the reported 

amounts of revenues and expenses during the 

reporting period. Actual results could differ 

from those estimates. 

R. Net Position 

Net position is the residual difference between 

assets and liabilities and is comprised of 

unexpended appropriations and cumulative 

results of operations. Unexpended 

appropriations represent the amount of 

unobligated and unexpended budget authority. 

Unobligated balances are the amount of 

appropriations or other authority remaining 

after deducting the cumulative obligations 

from the amount available for obligation. The 

cumulative results of operations is the net 

result of FMC’s operations since inception. 

S. Imputed Costs/Financing Sources 

Federal Government entities often receive 

goods and services from other Federal 

Government entities without reimbursing the 

providing entity for all the related costs. In 

addition, Federal Government entities also 

incur costs that are paid in total or in part by 

other entities. An imputed financing source is 

recognized by the receiving entity for costs 

that are paid by other entities. FMC 

recognized imputed costs and financing 

sources in fiscal years 2010 and 2009 to the 

extent directed by OMB. 

T. Contingencies 

Liabilities are deemed contingent when the 

existence or amount of the liability cannot be 

determined with certainty pending the outcome 

of future events. FMC recognizes contingent 

liabilities, in the accompanying balance sheet 

and statement of net cost, when it is both 

probable and can be reasonably estimated. 

FMC discloses contingent liabilities in the 

notes to the financial statements when the 

conditions for liability recognition are not met 

or when a loss from the outcome of future 

events is more than remote. In some cases, 

once losses are certain, payments may be made 

from the Judgment Fund maintained by the 

U.S. Treasury rather than from the amounts 

appropriated to FMC for agency operations. 

Payments from the Judgment Fund are 

recorded as an “Other Financing Source” when 

made. 

U. Expired Accounts and Cancelled 

Authority 

Unless otherwise specified by law, annual 

authority expires for incurring new obligations 

at the beginning of the subsequent fiscal year. 

The account in which the annual authority is 

placed is called the expired account. For five 
11 

fiscal years, the expired account is available 

for expenditure to liquidate valid obligations 

incurred during the unexpired period. 

Adjustments are allowed to increase or 

decrease valid obligations incurred during the 

unexpired period but not previously reported. 

At the end of the fifth expired year, the expired 

account is cancelled. 

NOTE 2. FUND BALANCE WITH TREASURY

Fund balance with Treasury account balances as of September 30, 2010 and 2009 were as 

follows: 

2010 2009

Fund Balances:

Appropriated Funds $ 4,862,018 $ 4,777,674 

Total $ 4,862,018 $ 4,777,674 

Status of Fund Balance with Treasury:

Unobligated Balance

 Available $ 10,273 $ 66,284 

 Unavailable 1,293,654 801,174 

Obligated Balance Not Yet Disbursed 3,558,091 3,910,216 

Total $ 4,862,018 $ 4,777,674 

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

obligation or commitment. At the start of the next fiscal year, this amount will become part of the 

unavailable balance as described in the following paragraph. 

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

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

adjustments of obligations incurred only during the period for which the appropriation was 

available for obligation or for paying claims attributable to the appropriations. 

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

undelivered orders that have reduced unexpended appropriations but have not yet decreased the 

cash balance on hand. 
12 

NOTE 3. ACCOUNTS RECEIVABLE 

Accounts receivable balances as of September 30, 2010 and 2009 were as follows: 

2010 2009

With the Public

Accounts Receivable $ 70,222 114 $ 

Total Accounts Receivable $ 70,222 114 $ 

FMC has one receivable from a non-federal source remaining at fiscal year end that 

represents an amount due for administrative research. 

NOTE 4. PROPERTY, EQUIPMENT, AND SOFTWARE 

Schedule of Property, Equipment, and Software as of September 30, 2010 

Major Class

Acquisition 

Cost

Accumulated 

Amortization/ 

Depreciation

Net Book 

Value

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

Furniture & Equipment 520,566 228,926 291,640 

Software-in-Development 180,579 N/A 180,579 

Total 926,145 $ 296,426 $ 629,719 $ 

Schedule of Property, Equipment, and Software as of September 30, 2009 

Major Class

Acquisition 

Cost

Accumulated 

Amortization/ 

Depreciation

Net Book 

Value

Leasehold Improvements 225,000 $ 22,500 $ 202,500 $ 

Furniture & Equipment 291,938 291,938 - 

Total 516,938 $ 314,438 $ 202,500 $ 

NOTE 5. OTHER ASSETS

Other assets account balances as of September 30, 2010 and 2009, were as follows: 

2010 2009

With the Public

Advances and Prepayments 1,728 $ - $ 

Total Public Assets 1,728 $ - $ 

FMC has two travel-related advances remaining at fiscal year end.
13 

NOTE 6. ACCOUNTS PAYABLE 

Liabilities include both intragovernmental accounts payable and other accounts payable. 

Intragovernmental liabilities are owed to other federal entities for rent, printing costs, and 

services of other agencies. In FY10, intragovernmental accounts payable also includes liabilities 

incurred for leasehold improvements made to FMC offices, a video conferencing system, and a 

telephone system. For the fiscal years ending September 30, 2010 and 2009, intragovernmental 

accounts payable totals $687,333 and $309,177, respectively. Other accounts payable are owed 

to non-federal sources or to the general public, and includes liabilities for general supplies, 

training, studies, analysis, and/or evaluations, miscellaneous services, and operation and 

maintenance of equipment. For the fiscal years ending September 30, 2010 and 2009, the nonfederal accounts payable totals $273,306 and $231,925, respectively. 

NOTE 7. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

The liabilities for FMC as of September 30, 2010 and 2009, include liabilities not covered by 

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

Although future appropriations to fund these liabilities are likely and anticipated, it is not certain 

that appropriations will be enacted to fund these liabilities. 

2010 2009

Intragovernmental – FECA 1,741 $ 1,968 $ 

Unfunded Leave 1,217,002 1,075,533 

Actuarial FECA 11,821 5,249 

Total Liabilities Not Covered by Budgetary Resources 1,230,564 $ 1,082,750 $ 

Total Liabilities Covered by Budgetary Resources 2,216,055 1,632,344 

Total Liabilities 3, $ 2,715,094 446,619 $ 

FECA liability represents the unfunded liability for actual workers compensation claims paid on 

FMC's behalf and payable to DOL. FMC also records an actuarial liability for future workers 

compensation claims based on the liability to benefits paid (LBP) ratio provided by DOL and 

multiplied by the average of benefits paid over three years. 

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

balance in the accrued annual leave account is reviewed quarterly and adjusted as needed to 

accurately reflect the liability at current pay rates and leave balances. Accrued annual leave is 

paid from future funding sources and, accordingly, is reflected as a liability not covered by 

budgetary resources. Sick and other leave is expensed as taken. 
14 

NOTE 8. OPERATING LEASES 

FMC occupies office space in seven locations, of which only six of the lease agreements are 

required to be accounted for as operating leases. Lease payments are increased annually based on 

the adjustments for operating cost and real estate tax escalations. The lease locations and terms 

are listed below: 

Location Term Lease Expiration Date

San Pedro, CA 5 years 9/30/2011

Washington DC 10 years 10/31/2012

Jamaica, NY 5 years 7/1/2013

Houston, TX 10 years 9/14/2018

Tacoma, WA 10 years 6/30/2019

Hollywood, FL 10 years 5/31/2020

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

payments for the term of the leases is as follows: 

Fiscal Year Totals

2011 $ 2,943,374

2012 2,959,243

2013 336,514

2014 60,130

2015 61,099

Thereafter 261,136

Total Future Payments 6,621,496 $ 

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

options. Real estate taxes included in the Washington DC lease may escalate depending on the 

market during the year they are due. 

NOTE 9. CONTINGENCIES 

There are legal actions pending against FMC in which claims have been asserted that may be 

based on action taken by FMC. Management intends to vigorously contest all such claims. 

Management believes, based on information provided by legal counsel, that losses, if any, for 

these cases would not have a material impact on the Financial Statements. No loss accrual has 

been made for these cases outstanding at September 30, 2010. 
15 

NOTE 10. INTRAGOVERNMENTAL COSTS AND EXCHANGE REVENUE 

Intragovernmental costs and exchange revenue represent goods and services exchange 

transactions made between two reporting entities within the Federal government, and are in 

contrast to those with non-federal entities (the public). Intragovernmental costs include payments 

to federal vendors for personnel benefits, rent, utilities, and other services. Payments made to 

non-federal entities (the public) are comprised primarily of employee salaries and other services. 

Such costs are summarized as follows: 

2010 2009

Operational and Administrative

 Intragovernmental Costs 6,782,806 $ 6,379,667 $ 

 Public Costs 11,148,850 10,161,879 

 Net Program Costs 17,931,656 16,541,546 

Formal Proceedings

 Intragovernmental Costs 2,145,204 1,961,167 

 Public Costs 5,082,768 4,121,738 

 Total Program Costs 7,227,972 6,082,905 

 Intragovernmental Earned Revenue (118,744) - 

 Net Program Costs 7,109,228 6,082,905 

Office of Inspector General

 Intragovernmental Costs 185,426 150,600 

 Public Costs 493,644 379,335 

 Total Program Costs 679,070 529,935 

 Intragovernmental Earned Revenue (3,285) - 

 Net Program Costs 675,785 529,935 

Office of Equal Employment Opportunity

 Intragovernmental Costs 55,943 43,579

 Public Costs 150,709 107,708

 Net Program Costs 206,652 151,287

Total Intragovernmental costs 9,169,379 8,535,013 

Total Public costs 16,875,971 14,770,660 

 Total Costs 26,045,350 23,305,673 

 Total Intragovernmental Earned Revenue (122,029) - 

Total Net Cost 25,923,321 $ 23,305,673 $ 
16 

NOTE 11. IMPUTED FINANCING SOURCES 

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

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

and liabilities associated with such benefits are the responsibility of the administering agency, 

OPM. For the fiscal years ended September 30, 2010 and 2009, respectively, imputed financing 

was as follows. 

2010 2009

Office of Personnel Management $ 1,575,518 $ 1,197,091 

Total Imputed Financing Sources $ 1,575,518 $ 1,197,091 

NOTE 12. BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE 

UNITED STATES GOVERNMENT 

The President’s Budget that will include FY10 actual budgetary execution information has not yet 

been published. The President’s Budget is scheduled for publication in February 2011 and can be 

found at the OMB Web site: http://www.whitehouse.gov/omb/. The 2011 Budget of the United 

States Government, with the "Actual" column completed for 2009, has been reconciled to the 

Statement of Budgetary Resources and there were no material differences. 

NOTE 13. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED 

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

2010 and 2009 consisted of the following: 

2010 2009

Direct Obligations, Category A 24,205,598 $ 22,817,981 $ 

Reimbursable Obligations, Category A 122,029 - 

Total Obligations Incurred 24,327,627 $ 22,817,981 $ 

Category A apportionments distribute budgetary resources by fiscal quarters. 

NOTE 14. UNDELIVERED ORDERS AT THE END OF THE PERIOD 

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

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

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

should be disclosed. For the fiscal years ended September 30, 2010 and 2009, respectively, 

undelivered orders amounted to the following: 

2010 2009

Undelivered Orders $ 1,343,878 $ 2,347,107 

Total Undelivered Orders $ 1,343,878 $ 2,347,107 
17 

NOTE 15. CUSTODIAL ACTIVITY 

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

measures and reports cash collections and refunds as custodial activity on the Statement of 

Custodial Activity. Cash collections result primarily from FMC regulatory activities to include 

the assessment of fines and penalties and the payment of license fees by qualified ocean 

transportation intermediaries in the U.S. A small portion of amounts collected is for interest on 

past due fines, petitions, status changes and special permission fees. 

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

Fund 2010 2009

Fines, Penalties and Forfeitures $ 1,041,250 $ 843,000 

General Fund Proprietary Receipts (user fees) 213,492 273,218 

Refund of User Fees (4,074) (977)

Total Custodial Collections $ 1,250,668 $ 1,115,241 
18 

NOTE 16. RECONCILIATION OF NET COST OF OPERATIONS TO BUDGET 

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

cost of operations. 

2010 2009

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations Incurred 24,327,627 $ 22,817,981 $ 

Spending Authority From Offsetting Collections and Recoveries (704,635) (171,489) 

Obligations Net of Offsetting Collections and Recoveries 23,622,992 22,646,492 

Offsetting Receipts - - 

Net Obligations 23,622,992 22,646,492 

Other Resources

Imputed Financing From Costs Absorbed By Others 1,575,518 1,197,091 

Net Other Resources Used to Finance Activities 1,575,518 1,197,091 

Total Resources Used to Finance Activities 25,198,510 23,843,583 

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

Change In Budgetary Resources Obligated For Goods,

Services and Benefits Ordered But Not Yet Provided 1,003,229 (387,985) 

Resources That Fund Expenses Recognized In Prior Periods 759 - 

Resources That Finance the Acquisition of Assets (479,066) (225,000) 

Total Resources Used to Finance Items Not Part of Net Cost of Operations 524,922 (612,985) 

Total Resources Used to Finance the Net Cost of Operations 25,723,432 23,230,598 

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

Generate Resources in the Current Period:

Components Requiring or Generating Resources in Future Periods

Increase In Annual Leave Liability 141,469 45,214 

Other 5,249 6,572 

Total Components of Net Cost of Operations That Will Require or

Generate Resources In Future Periods 148,041 50,463 

Components Not Requiring or Generating Resources

Depreciation and Amortization 51,848 24,612 

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

Generate Resources 51,848 24,612 

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

Generate Resources In The Current Period 199,889 75,075 

Net Cost of Operations 25,923,321 $ 23,305,673 $