Federal Maritime

Commission

Audited Financial Statements

A12‐01

FY

2011

Audited Financial Statements

FEDERAL MARITIME COMMISSION

FY 2011
FEDERAL MARITIME COMMISSION 

FINANCIAL STATEMENTS 

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2011 AND 2010 

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 9, 2011 

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 2011 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 eighth 

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 performed 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, the OIG monitored DJHPM’s audit of FMC’s FY 2011 

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 8, 2011, 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 
Certified Public Accountants and Consultants

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

Chairman Lidinsky: 

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

as of September 30, 2011 and 2010, 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, 2011 and 2010, 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, and (2) 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, 2011 and 2010; 

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. 

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. 

6010 Executive Boulevard ∙ Suite 900 ∙ Rockville, Maryland 20852

301 770‐5100 ∙ 888 283‐5472 ∙ Fax 301 770‐5202 ∙ djhpm@djhpm.com

MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 

DJHPM IS A MEMBER FIRM OF THE PKF INTERNATIONAL LIMITED NETWORK OF LEGALLY INDEPENDENT FIRMS AND DOES NOT ACCEPT 

ANY RESPONSIBILITY OR LIABILITY FOR THE ACTIONS OR INACTIONS ON THE PART OF ANY OTHER INDIVIDUAL MEMBER FIRM OR FIRMS
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 2011 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. 

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

Certified Public Accountants and Consultants
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, 2011. We caution that noncompliance may 

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

purposes. 

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

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

Certified Public Accountants and Consultants

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 8, 2011 
The accompanying notes are an integral part of these financial statements

 1

FEDERAL MARITIME COMMISSION

BALANCE SHEET

AS OF SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

Assets:

Intragovernmental

Fund Balance With Treasury (Note 2) $ 3,792,671 $ 4,862,018

Total Intragovernmental 3,792,671 4,862,018

Accounts Receivable, Net (Note 3) 979 114

Property, Equipment, and Software, Net (Note 4) 525,021 629,719

Other (Note 5) 300 1,728

Total Assets $ 4,318,971 $ 5,493,579

Liabilities:

Intragovernmental

Accounts Payable (Note 6) $ 146,636 $ 687,333

Employer Contributions and Payroll Taxes Payable 188,998 181,479

` 1,956 1,741

Other 870 -

Custodial Liability 979 114

Total Intragovernmental 339,439 870,667

Accounts Payable (Note 6) 103,362 273,306

Accrued Payroll and Leave 951,116 1,051,210

Employer Contributions and Payroll Taxes Payable 24,546 22,613

Unfunded Leave (Note 7) 1,229,110 1,217,002

Actuarial ctuarial FECA Liabilit FECA Liability (Note 7) 5,910 11,821

Total Liabilities $ 2,653,483 $ 3,446,619

Net Position:

Unexpended Appropriations $ 2,378,313 $ 2,647,804

Cumulative Results of Operations (712,825) (600,844)

Total Net Position $ 1,665,488 $ 2,046,960

Total Liabilities and Net Position $ 4,318,971 $ 5,493,579
FEDERAL MARITIME COMMISSION

STATEMENT OF NET COST

FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

Program Costs:

Operational and Administrative (Note 10)

Gross Costs $ 17,474,598 $ 17,931,656

Net Program Costs $ 17,474,598 $ 17,931,656

Formal Proceedings (Note 10)

Gross Costs $ 7,576,489 $ 7,227,972

Less: Earned Revenue (39,856) (118,744)

Net Program Costs $ 7,536,633 $ 7,109,228

Office of Inspector General (Note 10)

Gross Costs $ 721,109 $ 679,070

Less: Earned Revenue (19,336) (3,285)

Net Program Costs $ 701,773 $ 675,785

Office of Equal Employment Opportunity (Note 10)

Gross Costs $ 198,706 $ 206,652

Net Program Costs $ 198,706 $ 206,652

Net Cost of Operations $ 25,911,710 $ 25,923,321

The accompanying notes are an integral part of these financial statements

 2
The accompanying notes are an integral part of these financial statements

 3

Total

FEDERAL MARITIME COMMISSION

STATEMENT OF CHANGES IN NET POSITION

FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

ulative Results of Operations:

nning Balances $ (600,844) $ (879,264)

etary Financing Sources:

propriations Used 24,236,436 24,626,223

r Financing Sources (Non-Exchange):

puted Financing Sources (Note 11) 1,563,293 1,575,518

 Financing Sources 25,799,729 26,201,741

ost of Operations (25,911,710) (25,923,321)

hange (111,981) 278,420

ulative Results of Operations $ (712,825) $ (600,844)

pended Appropriations:

nning Balances $ 2,647,804 $ 3,214,566

etary Financing Sources:

propriations Received 24,135,000 24,135,000

er Adjustments (168,055) (75,539)

propriations Used (24,236,436) (24,626,223)

 Budgetary Financin Financing Sources Sources (269,491) (566,762)

 Unexpended Appropriations $ 2,378,313 $ 2,647,804

osition $ 1,665,488 $ 2,046,960

Cum

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The accompanying notes are an integral part of these financial statements

 4

FEDERAL MARITIME COMMISSION

STATEMENT OF BUDGETARY RESOURCES

FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

Budgetary Resources:

Unobligated Balance:

Unobligated Balance Brought Forward, October 1 $ 1,303,927 $ 867,458

Recoveries of Prior Year Unpaid Obligations 103,585 582,606

Budget Authority

Appropriation 24,135,000 24,135,000

Spending Authority From Offsetting Collections

Earned

Collected 59,192 122,029

Subtotal 24,194,192 24,257,029

Permanently Not Available (168,055) (75,539)

Total Budgetary Resources $ 25,433,649 $ 25,631,554

Status of Budgetary Resources:

Obligations Incurred

Direct $ 24,128,553 $ 24,205,598

Reimbursable 59,192 122,029

Subtotal 24,187,745 24,327,627

Unobligated Balance

Apportioned 25,375 10,273

Unobligated Balance Not Available 1,220,529 1,293,654

Total Status of Budgetary Resources $ 25,433,649 $ 25,631,554

Change in Obligated Balance:

Obligated Balance, Net d B l N

Unpaid Obligations, Brought Forward, October 1 $ 3,558,091 $ 3,910,216

Obligations Incurred Net (Note 13) 24,187,745 24,327,627

Gross Outlays (25,095,485) (24,097,146)

Recoveries of Prior Year Unpaid

Obligations, Actual (103,585) (582,606)

Total, Unpaid Obligated Balance, Net, End of Period $ 2,546,766 $ 3,558,091

Net Outlays:

Gross Outlays $ 25,095,485 $ 24,097,146

Offsetting Collections (59,192) (122,029)

Distributed Offsetting Receipts 2,430,482 1,250,668

Net Outlays $ 27,466,775 $ 25,225,785
FEDERAL MARITIME COMMISSION

STATEMENT OF CUSTODIAL ACTIVITY

FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

Revenue Activity:

Sources of Cash Collections:

Miscellaneous 2,430,482 1,250,668

Total Cash Collections (Note 15) 2,430,482 1,250,668

Accrual Adjustments 865 (69,122)

Total Custodial Revenue 2,431,347 1,181,546

Disposition of Collections:

Transferred to Others (by Recipient) 2,430,482 1,250,668

Retained by the Reporting Entity 865 (69,122)

Total Disposition of Collections 2,431,347 1,181,546

Net Custodial Activity $ - $ -

The accompanying notes are an integral part of these financial statements

 5
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. 

The 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. 

The 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 

the 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 the FMC to incur obligations for 

specified purposes. In fiscal years 2011 and 

2010, 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 the 

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. 

The 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 

The 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. 

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 

7 
not maintain cash in commercial bank 

accounts or foreign currency balances. 

H. Accounts Receivable 

Accounts receivable consists of amounts owed 

to the 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 

adds a fee equal to 28 percent of the amount of 

debt that is less than 2 years delinquent or 30 

percent of debts delinquent by 2 years or more. 

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. The 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 

the 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, 

such as leases, utilities, telecommunications 

and consulting and support services. 

8 
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. 

The 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. 

The FMC does not report on its financial 

statements information pertaining to the 

retirement plans covering its employees. 

9 
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 the 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 2011 and 2010 to the extent directed by 

OMB. 

T. Contingencies 

The FMC recognizes contingent liabilities 

when a past event or exchange transaction has 

occurred, a future outflow or other sacrifice of 

resources is probable, and the future outflow or 

sacrifice of resources is measurable. 

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 

fiscal years, the expired account is available 

10 
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, 2011 and 2010 were as 

follows: 

2011 2010

Fund Balances:

Appropriated Funds $ 3,792,671 $ 4,862,018 

Total $ 3,792,671 $ 4,862,018 

Status of Fund Balance with Treasury:

Unobligated Balance

 Available $ 25,375 $ 10,273 

 Unavailable 1,220,529 1,293,654 

Obligated Balance Not Yet Disbursed 2,546,767 3,558,091 

Total $ 3,792,671 $ 4,862,018 

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. (See also Undelivered Orders at the End of the Period, Note 14.) 

 

11 
NOTE 3. ACCOUNTS RECEIVABLE 

Accounts receivable balances as of September 30, 2011 and 2010 were as follows: 

2011 2010

With the Public

Contractor/Vendor Receivables $ 979 $ 114

Total Accounts Receivable $ 979 $ 114

The accounts receivable is primarily made up of custodial collections. 

Historical experience has indicated that the majority of the receivables are collectible. There are 

no material uncollectible accounts as of September 30, 2011 and 2010. 

NOTE 4. PROPERTY, EQUIPMENT, AND SOFTWARE 

Schedule of Property, Equipment, and Software as of September 30, 2011: 

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 $ $ 112,500 $ 112,500

Furniture & Equipment 520,566 288,624 231,942

Software-in-Development 180,579 - 180,579

Total $ 926,145 $ 401,124 $ 525,021

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 - 180,579

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

NOTE 5. OTHER ASSETS 

Other asset account balances as of September 30, 2011 and 2010 were as follows: 

2011 2010

With the Public

Advances and Prepayments $ 300 $ 1,728

Total Public Other Assets $ 300 $ 1,728

FMC has one travel-related advance remaining at fiscal year end.

 

12 
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, services of 

other agencies and leasehold improvements. In FY10, intragovernmental accounts payable also 

includes liabilities incurred for a video conferencing system and a telephone system. For the 

years ending September 30, 2011 and 2010, intragovernmental accounts payable totals $146,636 

and $687,333, 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 years 

ending September 30, 2011 and 2010, the non-Federal accounts payable totals $103,362 and 

$273,306, respectively. 

NOTE 7. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

The liabilities for FMC as of September 30, 2011 and 2010 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. 

13 

2011 2010

Intragovernmental – FECA $ 1,956 $ 1,741

Intragovernmental – Unemployment Insurance 870 -

Unfunded Leave 1,229,110 1,217,002

Actuarial FECA 5,910 11,821

Total Liabilities Not Covered by Budgetary Resources 1, $ 237,846 $ 1,230,564

Accounts Payable 249,998 960,639

Accrued Funded Payroll and Leave 951,116 1,051,210

Employer Contributions and Payroll Taxes Payable 213,544 204,092

Custodial Liability 979 114

Total Liabilities Covered by Budgetary Resources 1, $ 415,637 $ 2,216,055

Total Liabilities $ 2,653,483 $ 3,446,619

FECA and the Unemployment Insurance liabilities represent 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. 
NOTE 8. OPERATING LEASES 

FMC occupies office space in seven locations, of which 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

Washington DC 10 years 10/31/2012

Jamaica, NY 5 years 07/01/2013

Houston, TX 10 years 09/14/2018

Tacoma, WA 10 years 06/30/2019

Hollywood, FL 10 years 05/31/2020

San Pedro, CA 10 years 09/30/2021

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: 

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. 

Fiscal Year Totals

2012 $ 2,970,399

2013 347,931

2014 71,819

2015 73,070

2016 74,665

Thereafter 264,886

Total Future Payments $ 3,802,770

NOTE 9. CONTINGENCIES 

FMC recognizes contingent liabilities when a past event or exchange transaction has occurred, a 

future outflow or other sacrifice of resources is probable and the future outflow or sacrifice of 

resources is measurable. There is one legal action 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 the case would not have a material impact on the Financial Statements. No 

loss accrual has been made for the case outstanding at September 30, 2011. 

14 
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 other Federal agencies for personnel benefits ($4,662,227 in FY2011), rent 

($3,319,260 in FY2011), utilities, and other services. Payments made to non-Federal entities (the 

public) are comprised primarily of employee salaries and benefits ($14,842,054 in FY2011) and 

other services. Such costs are summarized as follows: 

15 

 

2011 2010

Operational and Administrative

 Intragovernmental Costs $ 5,107,709 $ 6,782,806

 Public Costs 12,366,889 11,148,850

 Total Program Costs 17,474,598 17,931,656

 Net Program Costs 17,474,598 17,931,656

Formal Proceedings

 Intragovernmental Costs 1,553,388 2,145,204

 Public Costs 6,023,101 5,082,768

 Total Program Costs 7,576,489 7,227,972

 Less: Intragovernmental Earned Revenue (39,856) (118,744)

 Net Program Costs 7,536,633 7,109,228

Office of Inspector General

 Intragovernmental Costs 129,943 185,426

 Public Costs 591,166 493,644

 Total Program Costs 721,109 679,070

 Less: Intragovernmental Earned Revenue (19,336) (3,285)

 Net Program Costs 701,773 675,785

Office of Equal Employment Opportunity

 Intragovernmental Costs 33,614 55,943

 Public Costs 165,092 150,709

 Total Program Costs 198,706 206,652

 Net Program Costs 198,706 206,652

Total Intragovernmental Costs 6,824,654 9,169,379

Total Public Costs 19,146,248 16,875,971

 Total Costs 25,970,902 26,045,350

Less: Total Intragovernmental Earned Revenue (59,192) (122,029)

 Total Net Cost $ 25,911,710 $ 25,923,321
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 years ended September 30, 2011 and 2010 imputed financing was as follows: 

2011 2010

Office of Personnel Management $ 1,563,293 $ 1,575,518 

Total Imputed Financing Sources $ 1,563,293 $ 1,575,518 

NOTE 12. BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE 

UNITED STATES GOVERNMENT 

The President’s Budget that will include FY11 actual budgetary execution information has not yet 

been published. The President’s Budget is scheduled for publication in February 2012 and can be 

found at the OMB Web site: http://www.whitehouse.gov/omb/. The 2012 Budget of the United 

States Government, with the "Actual" column completed for 2010, 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, 

2011 and 2010 consisted of the following: 

Category A apportionments distribute budgetary resources by fiscal quarters. 

2011 2010

Direct Obligations, Category A $ 24,128,553 $ 24,205,598

Reimbursable Obligations, Category A 59,192 122,029

Total Obligations Incurred $ 24,187,745 $ 24,327,627

NOTE 14. UNDELIVERED ORDERS AT THE END OF THE PERIOD 

Undelivered orders represent goods and services which have been ordered but not yet received at 

fiscal year end. 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 years ending September 30, 2011 and 2010, 

respectively, undelivered orders amounted to the following: 

 

2011 2010

Undelivered Orders $ 1,132,410 $ 1,343,878 

Total Undelivered Orders $ 1,132,410 $ 1,343,878 

16 
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 application fees by ocean 

transportation intermediaries. 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: 

 

2011 2010

Fines and Penalties $ 2,097,500 $ 1,041,250 

License Fees 336,252 213,492 

User Fees, Net of Refunds (3,270) (4,074)

Total Custodial Collections $ 2,430,482 $ 1,250,668 

17 
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. 

2011 2010

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations Incurred $ 24,187,745 $ 24,327,627

Spending Authority From Offsetting Collections and Recoveries (162,777) (704,635)

Obligations Net of Offsetting Collections and Recoveries 24,024,968 23,622,992

Offsetting Receipts 2,430,482 1,250,668

Net Obligations 26,455,450 24,873,660

Other Resources

Imputed Financing From Costs Absorbed By Others 1,563,293 1,575,518

Net Other Resources Used to Finance Activities 1,563,293 1,575,518

Total Resources Used to Finance Activities 28,018,743 26,449,178

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 211,467 1,003,229

Resources That Fund Expenses Recognized In Prior Periods 1,086 759

Budgetary Offsetting Collections and Receipts That Do

Not Affect Net Cost of Operations

Other (2,430,482) (1,250,668)

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

Total Resources Used to Finance Items Not Part of Net Cost of Operations (2,217,929) (725,746)

Total Resources Used to Finance the Net Cost of Operations 25,800,814 25,723,432

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 12,109 141,469

Other (5,911) 6,572

Total Components of Net Cost of Operations That Will Require or

Generate Resources In Future Periods 6,198 148,041

Components Not Requiring or Generating Resources

Depreciation and Amortization 104,698 51,848

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

Generate Resources 104,698 51,848

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

Generate Resources In The Current Period 110,896 199,889

Net Cost of Operations $ 25,911,710 $ 25,923,321

18