FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 5. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

The liabilities on FMC’s Balance Sheet as of September 30, 2008 and 2007 include liabilities not
covered by budgetary resources, which consist of unfunded leave balances of $1,030,319 and
$1,012,520 and FECA balances of $1,968 and zero, respectively. 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.

NOTE 6. LEASES

FMC occupies office space in seven locations, of which only five of the lease agreements are required
to be accounted for as operating leases. The lease locations and terms are listed below:

LOCATION TERM LEASE EXPIRATON DATE
Hollywood, FL 23 months 05/31/2010
San Pedro, CA 5 years 09/30/2011
Washington DC 10 years 10/31/2012
Jamaica, New York 5 years 07/01/2013
Houston, TX. 10 years 08/31/2018

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:

Operating Leases

Fiscal Year Lease Payments
2009 $ 2,877,886
2010 2,892,828
2011 2,897,671
2012 2,913,050
2013 289,816
Thereafter 64,674

Total Future Payments $ 11,935,925

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

13


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 principals of 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. 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. These financial statements were prepared
following accrual accounting. 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.

D. 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 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).

There are no earned revenues for the periods ended September 30, 2008 and 2007.


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 14. RECONCILIATION OF NET COST OF OPERATIONS TO BUDGET

The Federal Maritime Commission has reconciled its budgetary obligations and non-budgetary

resources available with its net cost of operations.

Resources Used to Finance Activities:
Budgetary Resources Obligated
Obligations Incurred
Less: Spending Authority from Offsetting Collections
And Recoveries
Obligations Net of Offsetting Collections and Recoveries
Less: Offsetting Receipts
Net Obligations
Other Resources
Imputed Financing from Costs Absorbed by Others
Net Other Resources Used to Finance Activities

Total Resources Used to Finance Activities

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
Resources that Fund Expenses Recognized in Prior Periods

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

Total Resources Used to Finance the Net Cost of Operations

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
Other
Total Components of Net Cost of Operations that will
Require or Generate Resources in Future Periods
Components Not Requiring or Generating Resources:
Depreciation and Amortization
Revaluation of Assets or Liabilities
Other
Total Components of Net Cost of Operations that will Not
Require or Generate Resources
Total Components of Net Cost of Operations that will Not
Require or Generate Resources in the Current Period
Net Cost of Operations

17

2008 2007
$ 21,690,849  $ 20,536,495
210,984 220,175
21,479,865 20,316,320
21,479,865 20,316,320
1,084,367 1,178,255
1,084,367 1,178,255
$ 22,564,232 $21,494,575
$ 573,393 $ 59,250
: 48,731
573,393 107,981
$ 21,990,839 $21,386,594
$ 17,799 $ -
1,968 -
19,767
4,989 9,373
- 13,879
(163), -
4,826 23,252
24,593 23,252
$ 22,015,432 $21,409,846



oe

Dembo, Jones, Healy, Pennington & Marshall, P.C.

Certified Public Accountants and Consultants

To the Federal Maritime Commission:

In accordance with the Office of Management and Budget (OMB) Bulletin No. 07-04, "Audit
Requirements for Federal Financial Statements", we are responsible for conducting audits of the
financial statements of the Federal Maritime Commission. In our audits of the Federal
Maritime Commission for the fiscal years September 30, 2008 and 2007, we found

° the financial statements are presented fairly, in all material respects, in conformity with
USS. generally accepted accounting principles,

° no material weaknesses in internal control over financial reporting (including
safeguarding assets) and compliance with laws and regulations,

° 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 and other supplementary information, and (3) our audit
objectives, scope, and methodology.

Opinion on Financial Statements

The financial statements including the accompanying notes present fairly, in all material
respects, in conformity with U.S. generally accepted accounting principles, Federal Maritime
Commission's assets, liabilities, and net position as of September 30, 2008 and 2007; 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 Federal Maritime Commission's internal
control over financial reporting and compliance. We did this to determine our procedures for
auditing the financial statements and to comply with OMB audit guidance, not to express an
opinion on internal control. Accordingly, we do not express an opinion on internal control over
financial reporting and compliance or on management's assertion on internal control included in
Management's Discussion and Analysis. However, for the controls we tested, we found no
material weaknesses in internal control over financial reporting (including safeguarding assets)
and compliance. A material weakness is a control deficiency that results in more than a remote
likelihood that the design or operation of one or more internal controls will not allow
management or employees, in the normal course of performing their duties, to promptly detect or
prevent errors, fraud, or noncompliance in amounts that would be material to the financial
statements. Our internal control work would not necessarily disclose all deficiencies in internal
control that might be material weaknesses or other significant deficiencies.

6010 Executive Boulevard * Suite 900 * Rockville, Maryland 20852
301 770-5100 * 888 283-5472 * Fax 301 770-5202 + dijhpm@djhpm.com

MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AND PKF INTERNATIONAL



FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 7. INTRAGOVERNMENTAL COSTS

Intragovernmental costs 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:

2008 2007
Office of Administration:
Intragovernmental Costs $ 2,844,453 $ 5,641,709
Public Costs 3,243,979 3,227,832
Total Office of Administration Costs $6,088,432 $ 8,869,541
Office of Operations:
Intragovernmental Costs $ 3,005,774 $ 1,155,565
Public Costs 6,534,273 6,047,768
Total Office of Operations $ 9,540,047 $ 7,203,333
Formal Proceedings:
Intragovernmental Costs $ 1,785,954 $ 753,220
Public Costs 3,841,297 4,047,865
Total Formal Proceedings $ 5,627,251 $ 4,801,085
Office of Inspector General
Intragovernmental Costs $ 165,737 $ 43,570
Public Costs 432,062 350,724
Total Office of Inspector General $ 597,799 $ 394,294
Office of EEO:
Intragovernmental Costs $ 71,152 $ 18,754
Public Costs 90,751 122,839
Total Office of EEO $ 161,903 $ 141,593
Total Intragovernmental costs $ 7,873,070 $ 7,612,818
Total Public costs 14,142,362 __13,797,028
Total Net Cost $ 22,015,432 $ 21,409,846

FMC had no earned revenues.

14


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 12. 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 periods ended September 30, 2008 and 2007, undelivered orders amounted to
$1,959,123 and $1,385,730, respectively.

NOTE 13. CUSTODIAL ACTIVITY

FMC is an administrative agency collecting for the General Fund. As a collecting entity, FMC
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 (OTIs)
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:

2008 2007
Fines, Penalties and Forfeitures $ 182,513 $ 1,372,037
General Fund Proprietary Receipts (license fees) 299,947 587,738
Refund of Moneys Erroneously Received and Covered (4,210) (8,664)
Total Custodial Collections $ 478,250 $ 1,951,111

16


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Q. 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 2008 and 2007 to the extent directed by OMB.

R. 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 they are 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. There are no contingencies that require disclosure.

S. 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 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.

T. Reclassification

Certain fiscal year 2007 balances may have been reclassified, retitled, or combined with other
financial statement line items for consistency with the current year presentation.

11


FEDERAL MARITIME COMMISSION
STATEMENT OF CHANGES IN NET POSITION
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

Cumulative Results of Operations:
Beginning Balances

Budgetary Financing Sources:
Appropriations Used

Other Financing Sources (Non-Exchange):

Imputed Financing Sources (Note 11)

Total Financing Sources
Net Cost of Operations (Notes 7 and 8)

Net Change

Cumulative Results of Operations

Unexpended Appropriations:
Beginning Balances

Budgetary Financing Sources:
Appropriations Received
Other Adjustments
Appropriations Used

Total Budgetary Financing Sources
Total Unexpended Appropriations
Net Position

The accompanying notes are an integral part of these statements.

(In Dollars)

3

2008 2007
(1,004,596) $ (1,030,074)
20,906,472 20,257,069
1,084,367 1,178,255
21,990,839 21,435,324
22,015,432 21,409,846
(24,593) 25,478
(1,029,189) $ (1,004,596)
1,596,624 $ 1,453,216
22,072,000 20,427,910
(55,364) (27,433)
(20,906,472) (20,257,069)
1,110,164 143,408
2,706,788 $ 1,596,624
1,677,599 $ 592,028



° 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;

° 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, 2008. 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 with U.S. generally accepted government auditing
standards and OMB audit guidance.

‘Lome, ye Heke, Benn vurefirs Meuslall, Ko.

Rockville, Maryland
November 6, 2008

Dembo, Jones, Healy, Pennington & Marshall, P.C.
Certified Public Accountants and Consultants


Compliance With Laws and Regulations

Our tests of the Federal Maritime Commission's compliance with selected provisions of laws
and regulations for fiscal year 2008 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.

Consistency of Other Information

The Federal Maritime Commission's Management's Discussion and Analysis, and other
accompanying information contain a wide range of information, some of which is not directly
related to the financial statements. We do not express an opinion on this information. However,
we compared this information for consistency with the financial statements and discussed the
methods of measurement and presentation with Federal Maritime Commission's officials.
Based on this limited work, we found no material inconsistencies with the financial statements,
U.S. generally accepted accounting principles, or OMB guidance.

Objectives, Scope, and Methodology

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, and (3) performing limited
procedures with respect to certain other information appearing in the Annual Financial
Statement.

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 entity 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);

Dembo, Jones, Healy, Pennington & Marshall, P.C.
Certified Public Accountants and Consultants.


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007
NOTE 2. FUND BALANCE WITH TREASURY

Fund balance with Treasury as of September 30, 2008 and 2007 consisted of:

2008 2007
Fund Balances
Appropriated Funds $ 4,062,134 $ 2,843,269
Total Fund Balance $ 4,062,134 $ 2,843,269
Status of Fund Balance with Treasury
Unobligated Balance
Available $ 447,579 $ 4,511
Unavailable 300,086 206,383
Obligated Balance not yet Disbursed 3,314,469 2,632,375
Total $ 4,062,134 $ 2,843,269

The unavailable unobligated fund balances represents the amount of appropriations for which the
period of availability for obligation has expired. This balance is 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.

NOTE 3. ACCOUNTS RECEIVABLE, NET

Net accounts receivable balances as of September 30, 2008 and 2007 are $64,579 and $66,144,
respectively.

The accounts receivable is primarily made up of a balance from one non-federal vendor for $56,421
that represents an amount due from a contractor for unsupported claims that were paid by the agency.

NOTE 4. GENERAL PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment account balances as of September 30, 2008 and 2007 were as follows:

Schedule of Property, Plant and Equipment as of September 30, 2008

Acquisition Accumulated Net
Cost Depreciation Book Value
Description
Office Equipment 5 yrs. $ 291,938 $ 289,826 $ 2,112

Schedule of Property, Plant and Equipment as of September 30, 2007

Acquisition Accumulated Net
Cost Depreciation Book Value
Description
Office Equipment 5 yrs. $ 350,588 $ 343,486 $ 7,102

12


FEDERAL MARITIME COMMISSION

STATEMENT OF NET COST
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007
(In Dollars)
2008 2007

Program Costs:

Office of Administration $ 6,088,432 8,869,541

Office of Operations 9,540,047 7,203,333

Formal Proceedings 5,627,251 4,801,085

Office of Inspector General 597,799 394,294

Office of EEO 161,903 141,593
Net Cost of Operations (Notes 7 and 8) $ 22,015,432 21,409,846

The accompanying notes are an integral part of these statements.

2


FY 2008 FMC
Audited Financial Statements
AO9-01

sRITIME |

November 2008


FEDERAL MARITIME COMMISSION

STATEMENT OF CUSTODIAL ACTIVITY
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

(In Dollars)

Revenue Activity:
Total Cash Collections (Note 13) $
Accrual Adjustments

Total Custodial Revenue

Disposition of Collections:
Transferred to Others (by Recipient)
Increase/(Decrease) in Amounts Yet to be Transferred

Total Disposition of Collections

Net Custodial Activity $

0: 2007

478,250 $ 1,951,111
(1,728) 64,041
476,522 2,015,152
478,250 1,951,088
(1,728) 64,064
476,522 2,015,152

= =

The accompanying notes are an integral part of these statements.

5


FEDERAL MARITIME COMMISSION
STATEMENT OF BUDGETARY RESOURCES
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

(In Dollars)
2008 2007

Budgetary Resources:
Unobligated Balance Brought Forward, October 1 $ 210,894 $ 126,737
Recoveries of Prior Year Unpaid Obligations 210,984 220,175
Budget Authority

Appropriation 22,072,000 20,427,910
Less: Permanently Not Available 55,364 27,433
Total Budgetary Resources $ 22,438,514 $ 20,747,389
Status of Budgetary Resources:
Obligations Incurred

Direct (Note 9) $ 21,690,849 $ 20,536,495
Unobligated Balance

Apportioned 447,579 4,511
Unobligated Balance Not Available 300,086 206,383
Total Status of Budgetary Resources $ 22,438,514 $ 20,747,389
Change in Obligated Balance:
Obligated Balance, Net

Unpaid Obligations, Brought Forward, October 1 $ 2,632,375 $ 2,549,426
Total Unpaid Obligated Balance, Net 2,632,375 2,549,426
Obligations Incurred Net 21,690,849 20,536,495
Less: Gross Outlays 20,797,771 20,233,371
Less: Recoveries of Prior Year Unpaid

Obligations, Actual 210,984 220,175
Obligated Balance, Net, End of Period

Unpaid obligations 3,314,469 2,632,375

Total, Unpaid Obligated Balance, Net, End of Period $ 3314469 2,632,375
Net Outlays:
Net Outlays:

Gross Outlays $ 20,797,771 $ 20,233,371

Less: Offsetting Collections - -

Less: Distributed Offsetting Receipts : :

Net Outlays $ 20,797,771 $ 20,233,371

The accompanying notes are an integral part of these statements.

4


FEDERAL MARITIME COMMISSION

BALANCE SHEET
AS OF SEPTEMBER 30, 2008 AND 2007
(In Dollars)
2008 2007
Assets:
Intragovernmental:

Fund Balance With Treasury (Note 2) $ 4,062,134 2,843,269
Total Intragovernmental 4,062,134 2,843,269
Accounts Receivable, Net (Note 3) 64,579 66,144
General Property, Plant and Equipment, Net (Note 4) 2,112 7,102

Total Assets $ 4,128,825 2,916,515
Liabilities (Note 5):
Intragovernmental:

Accounts Payable $ 36,647 22,201

Employer Contributions and Payroll Taxes Payable 118,028 99,376

Unfunded FECA Liability 1,968 _

Custodial Liability 63,593 65,321
Total Intragovernmental 220,236 186,898
Accounts Payable 273,627 293,478
Accrued Payroll 914,920 820,051
Employer Contributions and Payroll Taxes Payable 12,124 11,540
Unfunded Leave 1,030,319 1,012,520
Total Liabilities 2,451,226 2,324,487

Net Position:
Unexpended Appropriations - Other Funds 2,706,788 1,596,624
Cumulative Results of Operations - Other Funds (1,029,189) (1,004,596)
Total Net Position 1,677,599 592,028
Total Liabilities and Net Position $ 4,128,825 2,916,515

The accompanying notes are an integral part of these statements.

1


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 8. OPERATING/PROGRAM COSTS

Costs by major budgetary object classification as of September 30, 2008 and 2007 are as follows:

Budgetary Object Classifications 2008 2007

Personnel and Benefits $ 15,476,038 $ 15,530,048
Travel and Transportation 226,734 186,959
Rents, Communication & Utilities 3,217,133 3,290,761
Printing and Contractual Services 2,439,076 1,930,738
Supplies and Materials 164,779 227,805
Equipment 491,672 243,821
Miscellaneous - (286)
Total $__ 22,015,432 $21,409,846

NOTE 9. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

At September 30, 2008, FMC has $21,690,849 of direct obligations incurred against amounts
apportioned under Category A funds, and $20,536,495 at September 30, 2007. Category A
apportionments distribute budgetary resources by fiscal quarters. FMC has no reimbursable
obligations incurred or any balance in exempt from apportionment.

NOTE 10. BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE
UNITED STATES GOVERNMENT

Statement of Federal Financial Accounting Standards No. 7, Accounting for Revenue and Other
Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, calls for
explanations of material differences between amounts reported in the Statement of Budgetary
Resources (SBR) and the actual balances published in the Budget of the United States Government
(President’s Budget). However, the President’s Budget that will include FY08 actual budgetary
execution information has not yet been published. The President’s Budget is scheduled for
publication in February 2009 and can be found at the OMB Web site:
http:/Avww.whitehouse.gov/omb. The 2009 Budget of the United States Government, with the
Actual column completed for 2007, has been reconciled to the Statement of Budgetary Resources and
there were no material differences.

NOTE 11. IMPUTED FINANCING SOURCES

FMC recognizes as imputed financing the amount of accrued pension and post-retirement benefit
expenses for current employees. The assets and liabilities associated with such benefits are the
responsibility of the administering agency, the Office of Personnel Management. For the periods
ended September 30, 2008 and 2007, respectively, imputed financing from OPM was $1,084,367 and
$1,178,255.

15


FEDERAL MARITIME COMMISSION
FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

TABLE OF CONTENTS

OPINION LETTER

BALANCE SHEET

STATEMENT OF NET COST

STATEMENT OF CHANGES IN NET POSITION
STATEMENT OF BUDGETARY RESOURCES
STATEMENT OF CUSTODIAL ACTIVITY

NOTES TO THE FINANCIAL STATEMENTS

6-17


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. 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.

F. 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.

G. Accounts Receivable

Accounts receivable consists of amounts owed to FMC by 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.

H. Property, Plant and Equipment, Net

FMC’s property, plant and equipment is recorded at original acquisition cost and is depreciated using
the straight-line method over the estimated useful life of the asset. 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, plant and
equipment. The useful life classification for capitalized equipment assets is 5 years.

I. 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.


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

N. Retirement Plans

FMC employees participate in either the Civil Service Retirement System (CSRS) or the Federal
Employees’ Retirement System (FERS). FERS was established by the enactment of Public Law 99-
335. Pursuant to this law, FERS and Social Security automatically cover most employees hired after
December 31, 1983. Employees hired before January 1, 1984 elected to join either FERS and Social
Security, or remain in CSRS. 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 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.

O. Use of Estimates

Management has made certain estimates when reporting assets, liabilities, revenue, and expenses, and
in the note disclosures. The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make 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.

P. 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.

10


FEDERAL MARITIME COMMISSION
800 North Capitol Street, N.W.
Washington, DC 20573

November 6, 2008

Tel: (202) 523-5863
Office of Inspector General Fax: — (202) 566-0043
E-mail: oig@fme.gov

Mr. Anthony Haywood

Acting Chief Financial Officer
Federal Maritime Commission
Washington DC 20573

Dear Mr. Haywood,

| am pleased to provide you with the attached audit report required by the Accountability of Tax
Dollars Act of 2002, which presents an unqualified opinion on the Federal Maritime
Commission's FY 2008 financial statements. The audit results indicate that the Commission has
established an internal control structure that facilitates the preparation of reliable financial
information. We commend the Commission for the noteworthy accomplishment of attaining an
unqualified opinion for the Sth consecutive year.

The independent public accounting firm of Dembo Jones Healy Pennington & Marshall, P.C.
(DJHPM) performed the audit of the Commission's financial statements for the year ended
September 30, 2008. The contract required that the audit be done in accordance with U.S.
generally accepted government auditing standards and Office of Management and Budget
Bulletin 07-04, Audit Requirements for Federal Financial Statements.

In its audit, DJHPM found that the financial statements were fairly presented in all material
respects and in conformity with U.S. generally accepted accounting principles. There were no
material weaknesses in internal control and no reportable noncompliance with laws and
regulations tested.

The Office of Inspector General (OIG) oversaw the audit performance and delivery. We
reviewed DJHPM's report and related documentation and made inquiries of its representatives.
Our review disclosed no instances where DJHPM did not comply, in all material respects, with
U.S. generally accepted government auditing standards.

We appreciate the cooperation and courtesies the agency extended to both DJHPM and OIG
staff during the audit.

’ yk 3s v\

Inspector General


FEDERAL MARITIME COMMISSION

FINANCIAL STATEMENTS

FOR THE YEARS ENDED
SEPTEMBER 30, 2008 AND 2007


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

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.

FMC monitors the activities of ocean common carriers, marine terminal operators, conferences, ports
and ocean transportation intermediaries (OTIs) (non-vessel-operating common carriers and ocean
freight forwarders) who operate in the foreign commerce of the U.S. to ensure they maintain just and
reasonable practices. FMC maintains a trade monitoring and enforcement program designed to detect
and appropriately remedy malpractices and violations. FMC monitors the laws and practices of
foreign governments which could be potentially restrictive and identifies carriers owned or controlled
by foreign governments; processes and reviews agreements and service contracts for compliance with
statutory requirements; and reviews common carriers’ privately published tariff systems for
accessibility and accuracy as required by the Ocean Shipping Reform Act of 1998. FMC also issues
licenses to qualified OTIs in the U.S., ensures that all OTIs are bonded or maintain other evidence of
financial responsibility, and ensures that passenger vessel operators demonstrate adequate financial
responsibility for casualty and nonperformance.

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.

Congress enacts appropriations to permit FMC to incur obligations for authorized purposes. In fiscal
years 2008 and 2007, FMC was accountable for General Fund appropriations. FMC 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.

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 non-recurring activity,
such as fines, penalties, fees and other miscellaneous receipts for services and benefits.

FMC makes custodial collections and holds custodial receivables that are non-entity assets and are
transferred to Treasury at fiscal year end.


FEDERAL MARITIME COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
J. Liabilities

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 not covered by budgetary or other resources represent amounts owed in excess of available
congressionally appropriated funds or other amounts. The liquidation of liabilities not covered by
budgetary or other resources is dependent on future congressional appropriations or other funding.
Intragovernmental liabilities are claims against FMC by other federal agencies. Liabilities not
covered by budgetary resources on the Balance Sheet are equivalent to amounts reported as
components requiring or generating resources on the Reconciliation of Net Cost to Budget.
Additionally, the Government, acting in its sovereign capacity, can abrogate liabilities.

K. Accounts Payable

Accounts payable consists of amounts owed to other federal agencies and the public.

L. 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 by a Civil Service Retirement System
(CSRS)-covered employee is transferred to the Office of Personnel Management upon the retirement
of that individual. No credit is given for sick leave balances upon the retirement of Federal
Employee’s Retirement System (FERS)-covered employees.

M. Accrued and Actuarial Workers’ Compensation

A liability is recorded for actual and estimated future payments to be made for workers’
compensation pursuant to the Federal Employees’ Compensation Act (FECA). The actual costs
incurred are reflected as a liability because FMC will reimburse the Department of Labor (DOL) two
years after the actual payment of expenses. 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.