Federal Maritime Commission

Performance and 

Accountability Report

Fiscal Year 2012
The United States

Federal Maritime Commission

Our Mission

__________________________________________

To foster a fair, efficient, and reliable 

international ocean transportation system 

and to protect the public 

from unfair and deceptive practices
This Fiscal Year 2012 Performance and Accountability Report is 

published by the Federal Maritime Commission

An electronic version of this report can be found at

http://www.fmc.gov/about/performance_and_accountability_reports.aspx 

Please refer any questions concerning this report to the

Office of the Managing Director

Federal Maritime Commission 

at (202) 523-5800

Published in Washington, D.C. 

November 15, 2012
ABOUT THIS REPORT

The Federal Maritime Commission’s Performance and 

Accountability Report provides program and financial 

information that enables the President, Congress, and 

the public to assess the performance of the agency 

relative to its mission and the resources entrusted to it. 

This PAR satisfies the following legislation:

• The Federal Manager’s Financial Integrity Act of 

1982 requires continuous evaluations and reporting 

of the adequacy of the systems of internal 

accounting and administrative controls. The Act 

can be found at the following URL:

http://www.whitehouse.gov/omb/financial/fmfia1

982.html

• The Chief Financial Officers Act of 1990 provides for 

the production and submission of complete, 

reliable, timely, and consistent financial 

information for the use of the Executive Branch of 

the government and the Congress in the financing, 

management and evaluation of Federal programs. 

The Act can be found at the following URL:

http://www.gao.gov/special.pubs/af12194.pdf

• The Reports Consolidation Act of 2000 authorizes 

agencies to consolidate several reports in order to 

provide performance, financial and other related 

information in a more useful manner. The Act can 

be found at the following URL:

http://www.gpo.gov/fdsys/pkg/PLAW106publ531/html/PLAW-106publ531.htm 

• The Inspector General Reform Act of 2008 amends 

the Inspector General Act of 1978 to enhance the 

independence of the Inspectors General, to create 

a Council of the Inspectors General on Integrity and 

Efficiency, and for other purposes. The Act can be 

found at the following URL:

http://www.govtrack.us/congress/billtext.xpd?bill=

s110-2324 

• The Government Performance and Results 

Modernization Act of 2010 (GPRA Modernization 

Act) requires an annual report that measures the 

performance results of the agency against the 

established agency goals. The Act can be found at 

the following URL:

http://www.whitehouse.gov/omb/performance/gp

rm-act

• The Government Management Reform Act of 1994 

requires the submission of audited financial 

statements. The Act can be found at the following 

URL:

http://govinfo.library.unt.edu/npr/library/misc/s21

70.html 

• The Improper Payments Elimination and Recovery 

Act of 2010 provides for estimates and reports of 

improper payments by Federal agencies. The Act

can be found at the following URL:

http://www.govtrack.us/congress/billtext.xpd?bill=

h111-3393 

There are four chapters in this report. The first, 

Management’s Discussion and Analysis (MD&A), 

provides an overview of financial results, a high-level 

discussion of program performance, management

assurances on internal control and financial

management systems compliance; and other

management information, initiatives, and issues. The 

second chapter, Program Performance Information, 

provides data on the agency’s progress toward meeting 

its strategic goals and targets during fiscal year 2012. 

The third, Financial Information, provides financial 

details including a message from the Chief Financial 

Officer, the independent auditor’s report, and the 

audited financial statements. The fourth chapter, Other 

Accompanying Information, includes a statement

prepared by the IG summarizing what the Office of the 

Inspector General considers to be the most serious 

management and performance challenges facing the 

Agency; a report on improper payments, and a table 

summarizing the financial statement audit.
TABLE OF CONTENTS

A Message from the Chairman

Chapter One: Management’s Discussion and Analysis 

Introduction ................................................................................................................ 1 

Regulatory Responsibility ........................................................................................... 4 

Future Challenges ....................................................................................................... 6 

Program Performance Overview ................................................................................ 7 

President’s Management Agenda............................................................................... 9 

Financial Performance Overview................................................................................ 11 

Financial Statement Highlights................................................................................... 14 

Systems, Controls, and Legal Compliance .................................................................. 17 

Chairman’s FMFIA Statement of Assurance ............................................................... 20

Chapter Two: Program Performance Information

Annual Performance Report....................................................................................... 22 

Performance Measure Summary Tables..................................................................... 24 

Chapter Three: Financial Information

A Message from the Chief Financial Officer ............................................................... 31 

Principal Statements - Limitations of the Financial Statements................................. 32 

Independent Auditor’s Report ................................................................................... 33 

Balance Sheet.............................................................................................................. 41

Statement of Net Cost ................................................................................................ 42

Statement of Changes in Net Position........................................................................ 43 

Statement of Budgetary Resources ........................................................................... 44 

Statement of Custodial Activity .................................................................................. 45 

Notes to the Financial Statements.............................................................................. 46 

Chapter Four: Other Accompanying Information

Inspector General-Identified Management and Performance Challenges................. 60

Comments on Management and Performance Challenges Identified 

by the Inspector General ............................................................................... 64 

Improper Payments Information Act.......................................................................... 65 

Summary of Financial Statement Audit ..................................................................... 67 
A MESSAGE FROM THE CHAIRMAN

I am pleased to submit this Performance and Accountability Report 

for Fiscal Year 2012. It is the role of the Federal Maritime

Commission, through its regulatory authority, to assist all segments 

of our waterborne commerce, especially U.S. importers and 

exporters, in regaining their vitality and creating jobs as the 

economy rebounds. The economic benefits and foreign trade impact 

of strong shipping lines, ports, support industries, on-board and 

dockside labor, truckers and railroads, cannot be overstated. 

The ocean transportation system is the lifeline of U.S. foreign trade, 

and the highway for transporting the nation’s foreign trade to and 

from other continents. During fiscal year 2012, the FMC continued 

to strive to maintain a viable ocean highway for efficiently 

transporting U.S. imports and exports. We continued to meet legislative mandates, overseeing 

dominant and emerging ocean shipping trades and monitoring the impact on the United States of 

actions by other nations in regulating their ocean carriers. We continued to ensure that shippers and 

regulated entities such as ocean common carriers, ocean transportation intermediaries, ports, and 

other participants involved in the entire maritime logistics chain were provided with an efficient and 

reliable ocean transportation system. 

As reflected in our Strategic Plan for 2010-2015, the FMC has a twofold strategic focus, on both 

maintaining an efficient and competitive international ocean transportation system and protecting 

the public from unlawful, unfair and deceptive ocean transportation practices. The accomplishment 

of these strategic goals is critical to the President’s goals to encourage economic growth, invest in the 

future, and responsibly govern the nation, and is especially important to the National Export 

Initiative. The smooth flow of international commerce is vital to the national economy in both 

providing access to foreign markets for our exports and ensuring the availability of imported goods 

for domestic production and consumption. 

As the economy’s growth slowed in fiscal year 2012, so too did the demand for ocean transportation. 

However, capacity adjustments implemented by carriers did not cause the vessel capacity shortages 

experienced in fiscal year 2010. For much of the fiscal year, shippers were able to ship their goods at 

much lower cost than in 2011. Meanwhile, liner vessel operators reported sharply lower earnings, 

resulting from lower rates across the board, In the latter part of fiscal year 2012, however, carriers 

began implementing a series of general rate increases that generated increased revenue. 

Looming over the industry at the end of fiscal year 2012 was the possibility of a strike by U.S. east 

coast dockworkers. That possibility led most carriers to publish significant congestion surcharges. 

As the fiscal year came to a close, the parties agreed to renew talks to avoid a strike, and extended 

the existing contract through December 31, 2012. 

Fiscal year 2012 was an active year at the Commission, as we continued facilitating U.S. exporters’ 

access to foreign markets via ocean transportation, supporting the economic recovery, protecting 

American consumers, encouraging a sustainable ocean transportation industry, enhancing safety and 

security, and monitoring foreign practices to protect American jobs. Of significant note, the 

Commission’s Bureau of Trade Analysis issued its Study of the 2008 Repeal of the Liner Conference 
Exemption from European Union Competition Law. The study collected and analyzed data on the 

impact of the October 2008 European Union repeal of its block competition law exemption for liner 

conferences. Data analyzed included information regarding changes in carrier market structures, 

competition, services, vessel capacity, rates, and surcharges. 

During fiscal year 2012, exported goods continued to grow, on pace to exceed the National Export 

Initiative’s goal of doubling U.S. exports by 2015. While vessel capacity and container availability 

met demand, the Commission continued to utilize Rapid Response Teams to provide prompt 

solutions for commercial disputes between carriers and their customers. 

The Commission assisted the U.S. Department of Agriculture’s Agricultural Marketing Service 

(AMS) with its exporters’ project to give more transparency and visibility to the chronic problem of 

locating empty containers for exports. AMS’ Ocean Shipping Container Availability Report is 

published weekly and shows container availability at 18 U.S. port and inland locations, using data 

provided by nine leading ocean carriers. The report assists U.S. exporters in determining container 

availability each week, and contains projections two weeks in the future. 

We have seen environmental issues become increasingly central to the agreements and shipping 

practices we monitor. The Commission’s Marine Environmental Committee reviews filings at the 

agency for best environmental practices which can be put forward as models for adoption by other 

ports and companies. We have created a webpage to serve as an environmental issues clearinghouse 

for information on maritime environmental issues, news, resources, laws and regulations, and best 

practices.

As a result of requests from two U.S. senators and several members of the House of Representatives, 

the Commission conducted a study of the impacts and the extent to which the Harbor Maintenance 

Tax (HMT), other U.S. policies, and other factors may incentivize inbound container cargo to shift 

from U.S. seaports to competing ports located in Canada and Mexico. Accordingly, the Commission 

published an inquiry soliciting public views and information concerning the factors that may cause or 

contribute to such a shift in cargo. The Commission’s report was issued in the fourth quarter of fiscal 

year 2012. 

We have upgraded our website to provide improved public information, including better assistance to 

customers shopping for international shipping options; entered into a formal Memorandum of 

Understanding with the Federal Motor Carrier Safety Administration (FMCSA) to conduct joint 

investigative operations against international and interstate movers with a history of chronic 

complaints and violations and to engage Commission ombuds support in resolving problems for 

consumers; developed relationships for enhanced cooperation with trade associations representing 

household goods movers; developed information for ocean transportation intermediaries to distribute 

to consumers moving household goods; targeted outreach to local communities, particularly certain 

ethnic communities that regularly ship household goods overseas; and encouraged household goods 

movers to link their websites to the FMC’s website for consumer information. 

In furtherance of the Commission’s policy to largely rely on the marketplace, we continued to place 

greater emphasis on timely and cost effective dispute resolution. The Commission’s Office of 

Consumer Affairs and Dispute Resolution Services (CADRS) provided alternative dispute resolution 

in a growing number of increasingly complex matters, facilitating the continued flow of ocean 

commerce. 
Area Representatives complement the activities of CADRS by providing information and resolving 

disputes where practical within their areas. Area Representatives also continued their efforts to 

investigate and prevent practices that are unfair and deceptive, working closely with the legal staff of 

the Commission’s Bureau of Enforcement. Targeted violations focused on misdescription of cargo 

shipments that not only act as a deceptive practice to obtain lower transportation prices, but also may 

pose a serious safety and security risk by preventing vessel operators and port officials from knowing 

whether dangerous goods are being transported on vessels into the United States. During fiscal year 

2012, the Bureau of Enforcement settled 18 enforcement cases by collecting $820,000 in penalties 

for such violations. 

The Commission also was vigorous in carrying out its charge to monitor and prevent practices by 

foreign governments or entities that adversely affect American commerce. I hosted a visit from the 

Shanghai Shipping Exchange (SSE) to jointly discuss regulatory issues of China and the U.S. and 

create a climate of cooperation to overcome any barriers to international trade with China. We 

continue to follow developments in China closely to ensure that no unreasonable conditions exist that 

would impair U.S. commerce. 

This Report covers our efforts during this fiscal year to foster an equitable, secure, and market-driven 

ocean transportation industry. Fiscal year 2012 was the fourth year in which we undertook 

quantitative measurement of performance goals, employing measures and targets. The 

Commission’s actual performance is compared with the targeted levels of performance established in 

the agency’s Strategic Plan for Fiscal Years 2010-2015. During the year, we focused on eight 

performance goals, while continuing our various ongoing day-to-day activities.

The fiscal year 2012 independent financial audit resulted in our ninth consecutive unqualified 

opinion. No material weaknesses were identified, nor were any significant deficiencies or instances 

of non-compliance with laws and regulations. In the Management Assurances section (see page 20), 

I provide my assurance that the FMC has no material weaknesses to report. I am also pleased to 

report that the FMC financial and performance data presented in this Report are complete, reliable, 

and accurate in keeping with the guidance from the Office of Management and Budget. 

I look forward to continuing to work with our dedicated staff, my fellow Commissioners, and 

shippers, ocean transportation intermediaries, ocean carriers, terminals, and ports, as well as my 

government counterparts in other nations to continue our tradition of ensuring an efficient and 

reliable ocean transportation system that supports a sustained recovery in trade and the global 

economy. 

Sincerely,

Richard A. Lidinsky, Jr. 

Chairman 

November 15, 2012
FEDERAL MARITIME COMMISSION 

Chapter One 

MANAGEMENT’S DISCUSSION and ANALYSIS 

Fiscal Year 2012 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

1

Introduction 

 

This Performance and Accountability Report (Report or PAR) represents the completion of the 

Federal Maritime Commission’s program and financial management process for fiscal year (FY) 

2012, which began with mission and program planning, continued with the formulation and 

justification of FMC’s budget submission to the President and Congress, through budget 

execution, and ended with a report of our program performance and the use of resources. This 

report was prepared pursuant to the requirements of the Chief Financial Officers Act, as 

amended by the Reports Consolidation Act, and the Office of Management and Budget (OMB) 

Circular No. A-136, Financial Reporting Requirements (Revised August 3, 2012), and covers the 

Commission’s activities from October 1, 2011 through September 30, 2012. 

 

Chapter One provides an overview of the Commission. It consists of nine sections: Introduction

describes the agency, its mission and structure; Regulatory Responsibility describes its regulatory 

mandate; Future Challenges includes information about the changes in the maritime industry; 

Program Performance Overview reports on the FMC’s success in achieving its strategic goals; 

President’s Management Agenda describes activities related to the relevant initiatives; Financial 

Performance Overview discusses the FMC’s financial position and audit results; Financial 

Statement Highlights gives an overview of the major financial statements; Systems, Controls, and 

Legal Compliance discloses the FMC’s compliance with certain legal and regulatory 

requirements; and the Chairman’s FMFIA Statement of Assurance, which provides assurance 

that the FMC’s financial management system conforms to applicable financial systems 

requirements, and that no material weaknesses were found in the design or operation of internal 

controls.

 

About the FMC

The Federal Maritime Commission (FMC, agency or Commission) is an independent agency 

which regulates oceanborne transportation in the foreign commerce of the United States. The 

Commission administers the Shipping Act of 1984 (1984 Act) as amended by the Ocean 

Shipping Reform Act of 1998 (OSRA); section 19 of the Merchant Marine Act, 1920 (1920 Act); 

the Foreign Shipping Practices Act of 1988 (FSPA); and sections 2 and 3 of Public Law (P.L.) 

89-777 (46 U.S.C. §§ 44102 and 44103). The Commission monitors the activities of ocean 

common carriers, marine terminal operators (MTOs), ports and ocean transportation 

intermediaries (OTIs) (non-vessel-operating common carriers and ocean freight forwarders) who 

operate in the U.S. foreign commerce to ensure that 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; reviews competitive 

activities of common carrier alliances and other agreements among common carriers and/or 

terminal operators; 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 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

2

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, accuracy, and reasonable terms. The 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, pursuant to 46 U.S.C. §§ 44102 and 44103, ensures that 

passenger vessel operators (PVO) demonstrate adequate financial responsibility to indemnify 

passengers in the event of nonperformance of voyages or passenger injury or death. 

Organization 

 

The FMC is composed of five Commissioners appointed for five-year terms by the President 

with the advice and consent of the Senate. No more than three members of the Commission may 

belong to the same political party. The President designates one Commissioner to serve as 

Chairman, the Chief Executive and Administrative Officer of the agency. 

The FMC’s organizational units consist of: Offices of the Commissioners; Offices of the General 

Counsel (OGC); Secretary (OS); Consumer Affairs and Dispute Resolution Services (CADRS); 

Administrative Law Judges (OALJ); Equal Employment Opportunity (EEO); Inspector General 

(OIG); the Managing Director (OMD), Budget and Finance (OBF), Human Resources (OHR),

Information Technology (OIT), and Management Services (OMS), the Bureaus of Certification 

and Licensing (BCL), Enforcement (BOE), and Trade Analysis (BTA); and Area 

Representatives (ARs). The majority of FMC personnel are located in Washington, D.C., with

ARs stationed in New York, New Orleans, Los Angeles, Seattle, Houston and South Florida. 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

3

COMMISSIONER 

DYE

COMMISSIONER 

BRENNAN

COMMISSIONER 

CORDERO

CHAIRMAN 

LIDINSKY

Office of the 

Inspector 

General

Office of Equal 

Employment 

Opportunity

Office of the 

Managing 

Director

COMMISSIONER 

KHOURI

Office of the 

General 

Counsel

Office of the 

Secretary

Office of 

Administrative 

Law Judges

Office of Consumer 

Affairs and Dispute 

Resolution Services

Office of 

Budget and 

Finance

Office of 

Human 

Resources

Office of 

Management 

Services

Office of 

Information 

Technology

Bureau of 

Certification 

and 

Licensing

Bureau of 

Enforcement

Bureau of 

Trade 

Analysis

Area Representatives 

Houston, TX 

Los Angeles, CA 

New Orleans, LA 

New York, NY 

Seattle, WA 

South Florida

FEDERAL MARITIME COMMISSION 

ORGANIZATION CHART 

as of 

SEPTEMBER 30, 2012

Administrative Direction

Technical Direction
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

4

Regulatory Responsibility

The Commission’s principal regulatory responsibilities include:

• Reviewing agreements among ocean common carriers and marine terminal operators (MTOs) 

relating to service in the U.S. foreign oceanborne trades, to ensure that they do not cause 

substantial increases in transportation costs or decreases in transportation services.

• Reviewing service contracts between ocean common carriers and shippers to guard against 

detrimental effects to shipping in the U.S. foreign trades.

• Ensuring that common carriers’ tariff rates and charges are accessible to the shipping public 

in private, electronically accessible systems.

• Regulating rates, charges, and rules of government-owned or -controlled carriers to ensure 

that they are just and reasonable.

• Issuing passenger vessel certificates evidencing financial responsibility of vessel owners or 

charterers to pay judgments for personal injury or death, or to refund passenger fares for the 

nonperformance of a voyage or cruise.

• Licensing OTIs in the U.S. to protect the public from unqualified, insolvent, or dishonest 

companies.

• Ensuring that OTIs maintain sufficient financial responsibility to protect the shipping public 

from financial loss.

• Protecting the shipping public against economic harm by investigating rates, charges, 

classifications, and practices of common carriers, MTOs, and OTIs operating in the foreign 

commerce of the U.S.

• Taking action to address unfavorable conditions arising out of foreign government or 

business practices in the U.S. foreign shipping trades.

The FMC is authorized by the FSPA, the 1920 Act, and 1984 Act as amended by OSRA to take 

action to ensure that the foreign commerce of the U.S. is not burdened by non-market barriers to 

ocean shipping. The FMC may take countervailing action to correct unfavorable shipping 

conditions in U.S. foreign commerce and may impose penalties. The FMC may address actions 

by carriers or foreign governments that adversely affect shipping in the U.S. foreign oceanborne 

trades including the intermodal operations of carriers or the operations of OTIs, or that impair 

access of U.S.-flag vessels to ocean trade between foreign ports.
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

5

The 1984 Act is applicable to the operations of common carriers and other persons engaged in 

U.S. foreign commerce. It exempts agreements that have become effective under the 1984 Act 

from the U.S. antitrust laws, as contained in the Sherman and Clayton Acts. The FMC reviews 

and evaluates agreements to ensure that they do not exploit the grant of antitrust immunity, and 

to ensure that agreements do not otherwise violate the 1984 Act or result in an unreasonable 

increase in transportation cost or unreasonable reduction in service.

 

In addition to monitoring relationships among carriers, the FMC is also responsible for ensuring

that individual carriers, as well as those permitted by agreement to act in concert, fairly treat 

shippers and other members of the shipping public in accordance with the 1984 Act’s prohibition 

against undue discrimination. The 1984 Act also requires all carriers to make their rates, charges 

and practices available in automated tariff systems that must be available electronically to the 

public. Non-vessel-operating common carriers (NVOCCs) may assess the rates and charges 

published in their tariffs or may offer service arrangements with shipping customers. Ocean 

common carriers are permitted to enter into service contracts with their shipper customers. Such 

contracts are filed electronically with the FMC in an Internet-based system, and are provided 

confidential treatment by the FMC as required by the Act. The FMC does not have the authority 

to approve or disapprove general rate increases (GRIs) or individual commodity rate levels in the 

U.S. foreign commerce, except with regard to certain foreign government-owned or -controlled 

carriers.

Sections 2 and 3 of P.L. 89-777 require the operators of passenger vessels with 50 or more berths 

who embark passengers at U.S. ports to establish financial coverage to indemnify passengers in 

cases of death, injury, or nonperformance of transportation. The FMC certifies such operators 

upon the submission of satisfactory evidence of financial responsibility. 

The FMC ensures that all OTIs operating in the foreign commerce of the U.S. have established 

sufficient financial responsibility to protect shippers from financial loss. Additionally, the FMC 

licenses all U.S. OTIs.

The FMC carries out its regulatory responsibilities in various ways. It conducts informal and 

formal investigations, holds hearings, considers evidence and renders decisions, and issues 

appropriate orders and implementing regulations. It carries out a vigorous enforcement program 

– assessing civil penalties for Shipping Act violations. The FMC also adjudicates and mediates 

disputes involving the regulated community, the general shipping public, and other affected 

individuals or interest groups.

All of the above are supported by the FMC’s management and support functions of information 

technology, financial management, human resources, and management services.

The FMC oversees more than 6,500 regulated persons (passenger vessel operators, vesseloperating common carriers, marine terminal operators, conferences, OTIs, etc.).
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

6

Future Challenges

In the coming fiscal years, the Commission’s policy and funding priorities will continue to center 

on fostering a viable and vibrant liner shipping environment critical to the nation’s international 

trade and economic growth. We will emphasize the recently established Ready Response 

Teams and the Commission’s role as an honest broker to resolve issues faced by exporters and 

importers alike. We will use myriad tools in order to protect the shipping public, stressing 

voluntary dispute resolution techniques to resolve issues quickly with minimal cost, but 

vigorously enforcing the Commission’s governing statutes and regulations when necessary. In 

the current climate of budgetary constraints, the Commission is mindful of the importance of 

investing in information technology that can improve efficiency and provide greater public 

access, while reducing costs over time. 

The regulatory scheme now in place at the FMC is under constant review, and as economic 

conditions alter the state of our trades, the FMC’s regulations must continue to respond to those 

conditions. We have initiated a review of Commission regulations to ascertain their continued 

need and relevance to changing market conditions while also responding to public requests for 

review of regulations on issues such as tariff publication and agreements.

Evolving business models requiring Commission attention in the coming years are likely to 

include the increased use of MTO discussion agreements and OTI freight networks, and their 

impact on the shipping public. In protecting the public from harm, we will use an integrated 

approach, stressing industry compliance with licensing and other requirements, providing a 

variety of services for quick, fair resolution of disputes, and, where necessary, vigorously 

enforcing the Commission’s governing statutes and regulations. The use of technology and 

dissemination of public information is of major importance; web-based and social media-based 

accessibility to Commission services and information will increasingly facilitate public 

interaction, while adding greater efficiencies to internal business processes. Overall emphasis 

will be placed on facilitating the commercial flow of exports and imports, and the FMC will 

continue to provide services and outreach to the shipping public to assist in the implementation 

of industry practices that can improve the ocean transportation system. These actions and more 

will provide the means for the FMC to accomplish its stated mission to foster a fair, efficient, 

and reliable international ocean transportation system and to protect the public from unfair and 

deceptive practices.

The accomplishment of the Commission’s strategic goals is critical to the President’s goals to 

encourage economic growth, invest in the future, and responsibly govern the nation. The smooth 

flow of international commerce is vital to the national economy in both providing access to 

foreign markets for our exports and ensuring the availability of imported goods for domestic 

production and consumption.

Future challenges for the Commission include: (1) increasing assistance to importers and 

exporters through the Commission’s Area Representatives and CADRS; (2) modernizing the 

Commission’s technology to enhance the efficiency of Commission operations; 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

7

(3) implementing the agency’s Human Capital Management Plan, particularly with respect to 

succession planning for the departure of highly skilled personnel; (4) increasing the use of 

enhanced dispute resolution mechanisms to quickly address industry disputes; (5) continuing to 

refine and enhance agency administrative programs and operations; and (6) reviewing and 

updating Commission regulations governing OTIs and passenger vessel operators.

Overall, the Commission will focus on actions that will facilitate efficient international 

transportation of the nation’s exports and imports, to provide goods to U.S. consumers, while 

enabling the nation’s exporters to compete in global markets. The Commission is especially 

concerned that the ocean transportation system fully supports the President’s National Export 

Initiative.

Program Performance Overview

The FMC, like other Federal agencies, provides an annual performance plan to Congress, 

pursuant to the Government Performance and Results Act (GPRA). The FMC has organized its 

performance goals to achieve its strategic goals. The FMC’s Strategic Plan Fiscal Years 2010-

2015 (Revised) is available on the FMC’s website. The complete FY 2012 Program Performance 

Report is contained in Chapter 2, Program Performance. In FY 2012, the Commission 

continued to refine the agency’s business practices, specifically on revising and updating internal 

procedures in line with the amendment of Commission regulations. This includes facilitating the 

use and dissemination of filed material in order to improve analysis of required filings and 

responsiveness to inquiries, and implementation of procedural changes to enhance the 

effectiveness of agency operations. We broadened our efforts to implement the President’s 

Management Agenda initiative to expand electronic government by increasing transparency and 

improving the management of information through the more effective use of available 

technologies. We also streamlined the delivery of services and information to regulated entities, 

other government agencies and the public, and further automated agency systems and enhanced 

the use of agency databases to allow staff to discharge program responsibilities more effectively. 

Achieving Strategic Goal Results

The FMC has a distinct process for measuring performance. Performance goals are developed to 

promote both of the FMC’s strategic goals, and the processes or activities required to achieve the 

goals are identified. The agency then specifies the outcomes it believes will result from 

accomplishing each stated goal, and agrees on performance indicators as the quantifiers of 

performance. Fiscal year 2012 was the fourth year in which the FMC undertook to quantify and 

measure performance goals. The Commission’s actual performance in FY 2012 is compared 

with the targeted levels of performance established in the agency’s Strategic Plan Fiscal Years 

2010-2015 (Revised). Taken together, performance measures and targets under each strategic 

goal are designed to enhance and further those goals each fiscal year, bringing the agency closer 

to its ideal of full achievement of its strategic goals. Our experience in establishing 2010 and 

2011 goals enabled us to set more realistic targets for fiscal year 2012 in the revised strategic 

plan.
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

8

Historical Performance of Strategic Goals and Objectives

Strategic Goal Objective Performance Measures 2010 2011 2012

Goal 1. Maintain an 

Efficient and 

Competitive 

International Ocean 

Transportation System

1. Identify and take 

action to address 

substantially anticompetitive conduct or 

unfavorable conditions 

in U.S. trades. 

Percentage share of total U.S. 

international ocean-borne trade 

moved by containership, as an 

indicator of liner shipping 

efficiency. 

TARGET

18% 18.5% 19%

ACTUAL

17.4% 17.9% 18.7%

Goal 2. Protect the 

public from unlawful, 

unfair and deceptive 

ocean transportation 

practices and resolve 

shipping disputes.

1. Identify and take 

action to end unlawful, 

unfair and deceptive 

practices.

Percentage of enforcement 

actions taken under the 1984

Act successfully resolved 

through favorable judgment, 

settlement, issuance of default 

judgment, or compliance letter 

or notice.

TARGET

70% 72% 74%

ACTUAL

72.9% 82% 88%

2. Prevent public harm 

through licensing and 

financial responsibility 

requirements.

Percentage of decisions on 

completed OTI license applications rendered within 60 

calendar days of receipt, facilitating lawful operation of OTIs 

with the appropriate character

and experience requirements.

TARGET

55% 60% 70%

ACTUAL

65% 77% 90.2%

Percentage of cruise line 

operators examined during the 

year that have the full financial 

coverage required by regulation 

to protect against loss from nonperformance or casualty.

TARGET

90% 91% 92%

ACTUAL

90% 91% 100%

3. Enhance public 

awareness of agency 

resources, remedies 

and regulatory requirements through education and outreach.*

Percentage of key Commission 

issuances, orders and reports 

are available through the 

Commission’s website within 5 

working days of receipt.

TARGET

70% 72% 74%

ACTUAL

77.1% 72% 79%

4. Impartially resolve 

international shipping 

disputes through ADR 

and adjudication.

Number of cases opened and 

closed each fiscal year using 

ombuds and ADR services 

assisting consumers to recover 

goods or funds.

TARGET

550 625 700

ACTUAL

556 631 893**

Percentage of formal complaints 

or Commission initiated orders 

of investigation completed 

within 2 years of filing or 

Commission initiation.

TARGET

50% 52% 54%

ACTUAL

56% 60% 73%

* This measure was revised for FY 2011-2015. In FY 2010, the measure was: Percentage of decisions on completed 

OTI license applications rendered within 90 business days, facilitating lawful operation of OTIs with the appropriate 

character and experience requirements. The target for FY 2010 was 55%.

** The FY 2012 actual number of cases includes cases resolved by the Commission’s Area Representatives. This is a 

new adjustment for this fiscal year.
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

9

President’s Management Agenda

The President’s Management Agenda (PMA) is intended to make government more citizencentered, results-oriented, and market-based. The five initiatives are: (1) Strategic Management 

of Human Capital; (2) Competitive Sourcing; (3) Improved Financial Performance; 

(4) Expanded E-Government; and (5) Performance Improvement. The FMC has achieved some 

successes in its agenda to address these initiatives. Chapter Two, Program Performance,

discusses our activities in these important areas in more detail.

A brief overview of the agency’s successes includes the following:

Strategic Management of Human Capital – The Commission finalized its Human Capital 

Plan, Workforce Plan, and Accountability and Succession Management Plans in accordance with 

OPM’s Human Capital Assessment and Accountability Framework during FY 2010, and has 

continued to refine that plan, focusing on workforce and succession planning during FY 2012.

The FMC’s Human Capital and Workforce Plans include strategies to recruit and retain a highly 

qualified and diverse workforce. The Human Capital Plan includes improved marketing of the 

FMC; streamlining of the application process in alignment with Hiring Reform; targeting 

recruitment pools and areas of consideration to increase the diversity of applicants; and the 

potential use of recruitment and retention incentives. The Workforce Plan incorporates 

workforce diversity and succession planning strategies and goals. In order to meet mission 

objectives, the FMC is actively working to define and plan for the workforce of the future, 

consistent with the current Administration’s programs and reform initiatives.

In the last few years, the Commission made a significant transition in its approach to achieving 

its mission. In addition to traditional regulatory methods, the Commission became more 

involved in facilitation of major shipping issues and mediation of disputes. In pursuit of its new 

strategy, the Commission has restructured to give the Office of Consumer Affairs and Dispute 

Resolution Services (CADRS) heightened priority. It has established a new mission critical 

occupation (MCO), Dispute Resolution Specialist, and it has re-deployed some staff resources.

Budget reductions have also led the agency to use Voluntary Early Retirement Authority as a 

means to free up some resources that can be shifted to higher priority work.

Serious workforce succession problems are anticipated in the very near future due to the 

potential loss of retirement eligible individuals from the workforce. To address loss of critical 

leadership and technical skills, the FMC is utilizing strategic workforce planning as a tool to 

assess whether organizational elements have adequate staff and employees’ skills align to critical 

job requirements. An SES Candidate Development Program class was launched late in FY 2010 

in anticipation of the loss of individuals in senior leadership positions. The program was 

completed in FY 2012, and has resulted in increased bench strength to facilitate continuity of 

leadership. With regard to recruitment for technical skills, FMC management officials 

participated in various data collection processes to provide information identifying mission 

priorities, current workforce skills, mission critical occupations and skills needed to support 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

10

mission accomplishment, mission and workforce trends, recruitment strategies, and 

communication issues. The resulting workforce and succession plans help define and shape 

FMC’s overall present and future recruitment strategies.

Competitive Sourcing - The FMC submitted its FY 2012 Federal Activities Inventory Reform 

Act (FAIR Act) Inventory to OMB in June 2012. The Inventory identified 73 of the agency’s 

132 FTEs as commercial activity FTEs. No challenges to its commercial inventories have ever 

been received.

Improved Financial Performance - For the ninth straight year, the FMC received an 

unqualified opinion on its financial statements in FY 2012. The FMC will continue to strive to 

achieve unqualified audit opinions.

Expanded E-Government - The FMC continues to expand electronic government (egovernment). During FY 2012, a large scale scanning project was completed and now the entire 

body of historical Commission decisions is available on the FMC website, a useful and cost 

effective resource for the public as well as attorneys practicing before the Commission. 

Senior managers are aware of the requirements and benefits of e-government, and continue to 

plan and initiate program changes to expand the use of e-government in daily activities. 

Employees are required to complete on-line information technology security refresher training 

on an annual basis. In FY 2012, the Commission’s website was redesigned. The new graphic 

design and layout significantly improved content organization to render a more citizen-centered 

website, enhanced navigation, adding more social networking/communications capabilities, and 

further improving search engine optimization to improve public visibility of the Commission’s 

website and services. The redesign followed a process of gathering valuable input from 

representatives of the shipping industry, intermediaries, the public, and the media, in an effort to 

improve the quality, clarity, and accessibility of information that the Commission provides to the 

shipping public. This upgrade supports the goals of the agency’s Plain Writing Act of 2010 Plan 

and President Obama’s directive that government should be transparent, participatory, and 

collaborative. 

Performance Improvement – The Strategic Plan continues to represent the fundamental 

framework for the agency’s planning and budgeting activities. Funding and Full- time Equivalent 

(FTE) levels are integrated into the agency’s performance planning document by strategic goal, 

to identify clearly the budgetary and staff resources that are committed to each goal.
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

11

Financial Performance Overview

The FMC’s financial condition as of September 30, 2012 is sound, and the Commission has 

sufficient internal controls in place to ensure its budget authority is not exceeded and that funds 

are utilized efficiently and effectively. The FMC’s accounting services provider, the Bureau of 

the Public Debt (BPD), prepared the agency’s financial statements as required by 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 Generally Accepted Accounting 

Principles (GAAP) recognized in the United States of America, standards approved by the 

Federal Accounting Standards Advisory Board (FASAB), and OMB Circular A-136, Financial 

Reporting Requirements.

Source of Funds 

The FMC has a single source of funds, Salaries and Expenses, funded by an annual appropriation 

that is available for commitments and obligations incurred during the fiscal year in which the 

authority was granted. The FMC’s appropriation level for FY 2012 was $24,100,000, an increase

of $13,270 above the FY 2011 funding level. Additionally, the Commission had reimbursable 

budget authority of $54,660 for work performed by FMC staff for other government entities. 

Although the FMC collects remittances for user fees and penalties, the agency is not authorized 

to offset any of its budget authority by utilizing these funds. The collections are deposited 

directly into the Treasury General Fund, and captured in the Statement of Custodial Activity 

which can be found in Chapter Three, Auditor’s Reports and Financial Statements. 

Appropriation History

16,477 16,591

18,362 19,340 20,294 20,427 22,072

22,800 24,135 24,087 24,100

0 

5,000

10,000

15,000

20,000

25,000

30,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

FISCAL YEAR

APPROPRIATION HISTORY 

FISCAL YEARS 2002 - 2012
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

12

Full-time Equivalent History

The FMC’s Full-time Equivalent (FTE) level is largely driven by our annual appropriation level; 

however, some years unanticipated vacancies in such offices as the Offices of the 

Commissioners have remained unfilled. The FMC acquired a full complement of Commissioners 

in June, 2011. Modest FTE growth was experienced from 2002 through 2004. This was 

followed by annual declines through 2008, with increases in 2009 through 2011. In 2012, the 

Commission’s FTE level dropped to 123. The agency has endeavored to develop the appropriate

mix of staffing and other available means to ensure effective accomplishment of our mission. 

 

127 129 129 124 121 119 115 120 127 128 123

0 

75

150

225

300

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

FISCAL YEAR

FULL-TIME EQUIVALENT HISTORY 

FISCAL YEARS 2002 - 2012

Uses of Funds by Expense Category

Congress approved FY 2012 appropriations for the FMC in the amount of $24,100,000 through 

P.L. 112-74. During FY 2012, obligations against the appropriation totaled $24,013,347, 

representing 99.64% of the approved funding level. The Commission spent $24.013 million as 

follows: 73.14% for salaries and benefits, .85% for official travel expenses, and 26.01% for 

administrative expenses (e.g., rent, government and commercial contracts, furniture, printing, 

and equipment maintenance). The unobligated balance of $86,652 will remain available for 

legitimate increases to existing FY 2012 obligations. 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

13

17,564

204

6,245

17,885

208

5,968

$0

$5,000

$10,000

$15,000

$20,000

FY 2012 FY 2011

 Salaries & Expenses Travel Administrative

Utilization of Funds by Expense Categories ($000s)

Audit Results

The FMC again received an unqualified opinion on its FY 2012 financial statements from the 

auditing firm of Regis & Associates, P.C. under contract through the FMC’s OIG. Comparative 

statements are located in Chapter Three, Auditor’s Reports and Financial Statements.

 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

14

Financial Statement Highlights

The financial statements have been prepared to report the financial position and results of 

operations of the Commission pursuant to the requirements of 31 U.S.C. 3515(b). While the 

statements have been prepared from the books and records of the Commission in accordance 

with the formats prescribed by OMB, the statements are in addition to the financial reports used 

to monitor and control budgetary resources which are prepared from the same books and records. 

The statements should be read with the realization that they are for a component of the U.S. 

Government, a sovereign entity. One implication of this is that liabilities cannot be liquidated 

without legislation that provides resources to do so. 

The FMC’s financial statements summarize the financial position and financial activity of the 

agency. The financial statements, footnotes, and the remainder of the required supplementary 

information appear in their entirety in Chapter Three, Auditor’s Report and Financial 

Statements. A brief analysis of the principal statements follows.

Summary of Assets

The FMC’s assets were $4,678,998 as of 

September 30, 2012. This represents an 

increase over FY 2011 of $360,027. The 

FMC’s assets reported in the balance sheet 

are summarized in the accompanying table. 

The Fund Balance with Treasury of 

$4,254,644 represents the FMC’s largest 

asset and represents 90.9% of the agency’s 

total assets. This is an increase of $461,973 over FY 2011. The Fund Balance with Treasury is 

comprised only of annual appropriations maintained by the Department of the Treasury to 

address current liabilities. 

Accounts Receivable as of September 30, 2011 was $4,031 for outstanding receivables billed to 

non-Federal entities and FMC employees. This accounts for less than 1% of the FMC’s total 

assets. 

Capital Assets, also known as Property, Equipment and Software, accounts for 9% of the FMC’s 

total assets as of September 30, 2012. The net value of $420,323 accounts for the depreciation of 

all assets and represents the current book value of those assets.

FY 2012 FY 2011

Fund Balance with Treasury $4,254,644 $3,792,671

Accounts Receivable $4,031 $979

Capital Assets $420,323 $525,021

Other $0 $300

Total Assets $4,678,998 $4,318,971

Summary of Assets as of 

September 30, 2012
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

15

Summary of Liabilities

The FMC’s Liabilities totaled $2,778,854 as 

of September 30, 2012, an increase of 

$125,371 total liabilities from FY 2011. 

The majority of the increase is related to 

increased accounts payables for rent and 

capitalized leasehold improvements, including obligations for IT-related contracts and 

systems and relocation allowances for an 

FMC employee.

The FMC’s accounts payable as of September 30, 2012 was $378,498. This represents the funds 

owed for goods and services received from vendors. Federal employee benefits represents 

accrued salaries and liabilities that are not funded by budgetary resources. These liabilities 

represent future workers’ compensation and accrued annual leave that remains on the books. The 

Federal budget process does not recognize future benefits for today’s employees; however, these 

liabilities will be recognized in future budget cycles as they are paid.

Analysis of Changes in Net Position Summary

The Changes in Net Position Summary reports the change in the agency’s net position during the 

reporting period. The statement is a summary of two factors, unexpended appropriations and 

cumulative results in operations. The total net position for FY 2012 is an increase of $234,656 

over FY 2011. The increase can be attributed to expenses for new IT-related contracts and 

systems.

Unexpended Appropriations represents the total authority granted by Congress that the FMC has 

not expended as of September 30, 2012. Cumulative results of operations represents the net 

results of all operations of the FMC.

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 are the net result of FMC’s operations since inception.

FY 2012 FY 2011

Accounts Payable $378,498 $249,998

Payroll Taxes $215,623 $213,544

Federal Employee Benefits $6,234 $8,736

Custodial Liabilities $256 $979

Accrued Liabilities $2,178,243 $2,180,226

Total Liabilities $2,778,854 $2,653,483

Summary of Liabilities as of 

September 30, 2012

FY 2012 FY 2011

Unexpended Appropriations $2,759,038 $2,378,313

Cumulative Results of 

Operation 11/6/2012 ($712,825)

Total Net Position $2,800,257 $1,665,488

Changes in Net Position Summary as of 

September 30, 2012
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

16

Analysis of Net Cost Summary

The analysis of Net Cost Summary presents the 

net cost of FMC’s Programs as identified in the 

Annual Report. The four agency programs are 

Operational and Administrative, Formal 

Proceedings, Inspector General and Equal 

Employment Opportunity. The Statement of 

Net Costs shows the net cost of operations for 

the agency as a whole and its sub-organizations 

and/or programs. Net Costs compared to

Budgetary Resources can be found in Chapter 

Three, Auditor’s Report and Financial 

Statements. 

Analysis of the Statement of 

Budgetary Resources

The Statement of Budgetary Resources (SBR) 

shows the source of the agency’s budgetary 

resources and the status of those resources at 

the end of the reporting period. The statement 

also shows the relationship between budgetary 

resources and the status of those resources. 

Total budgetary resources must be equal to the 

status of budgetary resources at all times. A 

more detailed SBR can be found in Chapter 

Three, Auditor’s Report and Financial 

Statements. For FY 2012, the FMC had total budgetary resources available of $25,423,734. This 

represents a decrease of $9,915. The FMC incurred total obligations of $24,138,684 in FY 2012. 

FY 2012 FY 2011

Operational and Administrative $16,866,478 $17,474,598

Formal Proceedings $7,374,383 $7,536,633

Office of the Inspector General $730,573 $701,773

Office of Equal Employment 

Opportunity $193,612 $198,706

Net Cost of Program Services $25,165,046 $25,911,710

Net Cost Summary as of 

September 30, 2012

FY 2012 FY 2011

Total Budgetary Resources $25,423,734 $25,433,649

Obligations Incurred $24,138,684 $24,187,745

Unobligated Balance Unavailable $1,198,398 $1,220,529

Unobligated Balance Available $86,652 $25,375

Total Status of Budgetary Resources $25,423,734 $25,433,649

Statement of Budgetary Resources as of

September 30, 2012
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

17

Systems, Controls, and Legal Compliance

This section provides information on FMC’s compliance with the:

Federal Managers’ Financial Integrity Act

Prompt Payment Act

Debt Collection Improvement Act

Biennial Review of User Fees

Performance Measure Summary

Inspector General Act

 

Federal Managers’ Financial Integrity Act

The Federal Managers’ Financial Integrity Act (FMFIA) requires that agencies establish controls 

that reasonably ensure that obligations and costs comply with applicable law; assets are 

safeguarded against waste, loss, unauthorized use, or misappropriation; and revenues and 

expenditures are properly recorded and accounted for. It requires the agency head to provide an 

assurance statement of the adequacy of management controls and conformance of financial 

systems with Government standards.

The Chairman has provided his annual assurance statement on the following page. This 

statement was based on various sources and included management knowledge gained from the

daily operation of agency programs and reviews, discussions with the Managing Director and the 

Directors of the Office of Budget and Finance and Management Services, audits of financial 

statements, annual performance plans, and OIG reports, among other sources. Additionally, the 

Chairman meets regularly with, and receives regular reports from, the FMC’s OIG. 

Management control deficiencies, when identified, are addressed at the highest management 

levels within the agency. For instance, corrective actions for significant deficiencies identified in 

the agency’s information technology area are overseen directly by the agency’s Chief 

Information Officer (CIO).

During the fiscal year, the IG identified no significant deficiencies and there were no significant 

management decisions made on which the IG disagreed. Management and the OIG reached 

agreement on all recommendations made. At the conclusion of the fiscal year, management and 

the OIG agreed as to the actions that management needs to take on 22 recommendations from 

2012 and prior years, but management has not yet taken the action to close the recommendations.

Debt Collection Improvement Act of 1996

The Debt Collection Improvement Act enhances the ability of the government to service and 

collect debts. The Act centralized the collection of non-tax delinquent debt owed to the 

government. The collection of delinquent debts is conducted by the Financial Management 

Service through the Treasury Offset Program where the names and taxpayer identification 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

18

numbers (TIN) are matched against the TINs of recipients of government payments. The balance 

owed the government is deducted or offset from the payment to the entity to satisfy the debt. All 

Office of Personnel Management (OPM) retirement, vendor, Internal Revenue Service refunds, 

Social Security benefits, and some Federal salary payments are being offset. Federal agencies are 

required to refer delinquent accounts in excess of 180 days to Treasury for collection. The goal 

of the FMC is to minimize the amount of delinquent debt owed to the agency. 

Prompt Payment Act of 1982

The Prompt Payment Act requires agencies to make timely payments to vendors for supplies and 

services, to pay interest penalties when payments are made after the due date, and to take cash 

discounts when they are economically justified. In FY 2012, the FMC maintained a percentage 

of on-time payments of over 99.3%. This is a slight improvement over FY 2011.

In FY 2012, the FMC paid interest payments in the amount of $7.00. The two late payments 

were due to COR certification delays. The FMC will continue to strive towards 100% on-time 

vendor payments in future years, to match our 100% on-time credit card payment to vendors. 

Biennial Review of User Fees

The Chief Financial Officers Act requires agencies to conduct biennial reviews of fees and other 

charges imposed by agencies, and to make revisions to cover program and administrative costs 

incurred. During FY 2008, the Commission completed its biennial review of user fees. The OIG 

subsequently conducted a review of the methodology used to calculate the updated user fees.

A revised methodology for calculating user fees was developed in FY 2011. The cost of the user 

fees will be re-calculated based upon final FY 2012 costs and implementation of the new fees 

will begin in FY 2013.

Performance Measure Summary

The FMC does not have an in-house financial accounting system, and as a small agency does not 

receive a Performance Measure Summary from the Department of the Treasury. The agency 

acquires travel, procurement, accounting and financial services from Treasury’s Bureau of Public 

Debt. The Commission verifies and reconciles all financial statements and reports prior to 

submission, and has remained in compliance with all reporting thresholds.
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

19

Inspector General Act of 1978, as amended in 1988, and 

the Inspector General Reform Act of 2008

The FMC continues to have a good record in resolving and implementing audit 

recommendations presented in its OIG reports. Section 5(b) of the Inspector General Act of 

1978 requires agencies to report on final actions taken on OIG audit recommendations. 

Briefly, during FY 2012, the Inspector General completed the following audits and reviews:

• FY 2011 Audited Financial Statements

• FY 2011 Financial Statements Management Letter

• FY 2011 Implementation of FISMA

• Review of BOE’s Compliance Program

• Review of the Controls Over the Procurement, Lease and Use of the 

Agency’s Vehicle

The Inspector General’s reviews disclosed no instances of questioned costs. The agency 

addressed a number of recommendations from these reviews, and it is expected that the 

remaining open recommendations will be resolved during FY 2013. 

During FY 2012, no significant deficiencies were identified. 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

20

CHAIRMAN’S FMFIA STATEMENT OF ASSURANCE

The Federal Maritime Commission’s (FMC) management is responsible for establishing and 

maintaining effective internal control and financial management systems that meet the 

objectives of the Federal Managers’ Financial Integrity Act of 1982 (FMFIA).

In accordance with the requirements of the Office of Management and Budget (OMB) Circular 

A-123, Management’s Responsibility for Internal Control, the FMC conducted its annual 

assessment of the effectiveness of the organization’s internal controls to support effective and 

efficient programmatic operations, reliable financial reporting, and compliance with applicable 

laws and regulations; and whether the financial management system conforms to applicable 

financial systems requirements.

Based on the results of this assessment, the FMC provides reasonable assurance, as of 

September 30, 2012, that its internal controls over the effectiveness and efficiency of 

operations, reliable financial reporting and compliance with applicable laws and regulations 

were operating effectively and that no material weaknesses were found in the design or 

operation of our internal controls.

Further, based on our assessment, we determined that the FMC financial management system 

conforms to applicable financial systems requirements.

Signed ______________________

 Richard A. Lidinsky, Jr.

 November 15, 2012
Chapter Two

PROGRAM PERFORMANCE

INFORMATION 
Chapter Two PROGRAM PERFORMANCE INFORMATION 

22

Annual Performance Report

Introduction

The FMC’s performance management system includes specific strategic goals, performance 

measures, and targets. The strategic goals represent the FMC’s mission and reflect the overall 

outcomes and objectives the agency is working to achieve. This report describes progress 

towards performance targets in 2012 in furtherance of the Commission’s mission to foster a 

fair, efficient and reliable international ocean transportation system and to protect the public 

from unfair and deceptive practices. The FMC’s strategic goals and objectives are as follows:

• Maintain an Efficient and Competitive International Ocean Transportation System.

• Identify and take action to address substantially anti-competitive conduct or 

unfavorable conditions in U.S. trades.

• Protect the Public from Unlawful, Unfair and Deceptive Ocean Transportation Practices 

and Resolve Shipping Disputes.

• Identify and take action to end unlawful, unfair and deceptive practices.

• Prevent public harm through licensing and financial responsibility requirements.

• Enhance public awareness of agency resources, remedies and regulatory requirements 

through education and outreach.

• Impartially resolve international shipping disputes through alternative dispute 

resolution and adjudication.

The FMC quantitatively measured seven performance goals during the fiscal year. Five 

measures reached and exceeded FY 2012 targets. Each measure, target, and actual result is 

reported in the summary table below (Table 1) and includes a description of the data used to 

measure performance along with an explanation of the measures in place to validate and 

ensure integrity of the reported result.

Trend data for measures in place since 2010 is reflected in a Table 2 below. This data reflects 

continuous increases in agency efficiency and productivity – a result of both improved and 

streamlined processes, and enhanced focus on the critical processes being measured. Table 3 

provides a status update on unmet targets for FY 2009 through FY 2012.
Chapter Two PROGRAM PERFORMANCE INFORMATION 

23

The Strategic Plan was revised in FY 2011 to remove a third strategic goal and its associated

objectives and measures. The third goal was established for administrative support functions 

such as human resources, information technology and financial management. Each of these 

important functions is subject to its own stringent planning and measuring regimes pursuant to 

various laws and executive mandates. Those related plans support the strategic plan and are 

referenced and described therein.

The agency has forwarded this report to the President, with a copy to the Director, OMB, and 

appropriate Congressional committees. Additionally, this report has been placed on the FMC’s 

Internet website to ensure that it is accessible to interested parties. All Commission employees 

have been advised to review this report.
Chapter Two PROGRAM PERFORMANCE INFORMATION 

24

Table 1: Summary of Performance Measure Results – FY 2012

Targeted performance compared to actual results.

Strategic Goal No. 1: Maintain an efficient and competitive

international ocean transportation system.

Performance Measure FY 2012

Target

FY 2012

Actual

Measure: Percentage share of total U.S. international oceanborne trade 

moved by containership as an indicator of liner shipping efficiency.

2012 Target: 19%

2012 Target Unmet: This target was first established on the basis of two 

components – a baseline figure plus a projected constant annual gain on 

top of that baseline. At the time the plan’s annual targets were 

established, liner shipping’s share of US international oceanborne trade 

moved by container ship (as an indicator of liner efficiency) stood at 

17.5% (FY 2009). This data point became the target’s baseline figure. The 

annual target in each subsequent year of the five-year plan was based on 

an anticipated incremental annual gain in this share of 0.5%. However, in 

FY 2010 no increment occurred; in fact liner’s share of US international 

oceanborne trade contracted slightly by 0.1%. In the following year, FY 

2011, although our incremental target of a 0.5% increase in share was 

achieved, the magnitude of this gain wasn’t sufficient to make up for the 

ground lost in the previous fiscal year as a result of the global recession. 

This year’s incremental gain of 0.8% exceeds our target incremental gain 

of 0.5% per year by a good margin which has helped move liner’s absolute 

share of US oceanborne trade closer to the original target set for the 

sector.

Validation: This outcome goal is measured by using data received from 

the United States Census Bureau’s trade database, USA Trade Online, at 

www.usatradeonline.gov . Monthly aggregates of “Containerized Vessel” 

and “Total Vessel” standard weight in Kg for Imports and Exports were run 

and downloaded into MS Excel from the Harmonized System (HS) Portlevel Data. The monthly values for Imports and Exports were then 

combined and aggregated for FY 2012. The percentage share of total U.S. 

international oceanborne trade moved by containership is calculated as 

the “Containerized Vessel” weight divided by “Total Vessel” weight, 

multiplied by 100.

19% 18.7%
Chapter Two PROGRAM PERFORMANCE INFORMATION 

25

Strategic Goal No. 2: Protect the public from unlawful, unfair and deceptive ocean 

transportation practices and resolve shipping disputes.

Performance Measure FY 2012

Target

FY 2012

Actual

Measure: Percentage of enforcement actions taken under the Shipping Act of 

1984 successfully resolved through favorable judgment, settlement, issuance of 

default judgment, or compliance letter or notice.

2012 Target: 74%

Validation: This outcome goal is measured by examining enforcement case 

inventory and physically counting the number of cases resolved. The inventory 

is maintained for case load management, and monthly and quarterly reporting 

purposes. The data is constantly under review and frequently updated.

74% 88%

Measure: Percentage of decisions on completed OTI license applications 

rendered within 60 calendar days of receipt, facilitating lawful operation of OTIs 

with the appropriate character and experience requirements.

2012 Target: 70%

Validation: This outcome goal is measured by comparing data fields in an 

internal database that contains, among other data points, the date the OTI 

license application is accepted for processing and the date a licensing 

determination is made or the application process has been completed. The 

difference between these two dates is the length of time to render a decision on 

an OTI application accepted for processing. The database is maintained for daily 

case load management, and monthly and quarterly reporting purposes. The 

data is constantly under review and frequently updated.

70% 90.2%

Measure: Percentage of cruise line operators examined during the year that 

have the full financial coverage required by regulation to protect against loss 

from non-performance or casualty.

2012 Target: 92%

Validation: This outcome goal is measured by comparing reported financial 

coverage amounts against required coverage amounts. Approximately 200 

cruise vessels are registered in and monitored by the Commission’s Passenger 

Vessel (Cruise) Operator program. Operators covered by this program file semiannual, monthly, and weekly unearned passenger revenue reports. This 

information is used to compare reported coverage against required coverage 

amounts.

92% 100%
Chapter Two PROGRAM PERFORMANCE INFORMATION 

26

Measure: Percentage of key Commission issuances, orders and reports that are 

available through the Commission’s website within 5 working days of receipt.

2012 Target: 74%

Validation: This outcome goal is measured by reviewing the workflow processes 

for posting documents to the Commission’s website docket activity logs. The 

date that each docket activity log is updated with new filings or issuances is 

compared to the date the document is filed with or issued by the Commission in 

a particular proceeding. The case logs are used on a daily basis by agency staff 

and by the public, and as such, any discrepancies are discovered and remedied 

quickly.

74% 79%

Measure: Number of cases opened and closed each fiscal year using ombuds

and ADR services assisting consumers to recover goods or funds.

2012 Target: 700

Note: The FY 2012 actual number of cases includes cases resolved by the 

Commission’s Area Representatives. This is a new adjustment for this fiscal year.

Validation: This outcome goal is measured using data maintained by the 

Commission on each such case opened and closed.

700 893

Measure: Percentage of formal complaints or Commission initiated orders of 

investigation completed within two years of filing or Commission initiation.

2012Target: 54%

Validation: This outcome goal is measured using docket activity logs maintained 

by the Commission. The docket logs are used on a daily basis by agency staff 

and by the public, and as such, any discrepancies are discovered and remedied 

quickly.

54% 73%
Chapter Two PROGRAM PERFORMANCE INFORMATION 

27

Table 2: Performance Measure Trends FY 2010-2012

Strategic Goal No. 1: Maintain an efficient and competitive international ocean transportation system.

Performance Measure FY 2010

Target

FY 2010

Actual

FY 2011

Target

FY 2011

Actual

FY 2012

Target

FY 2012

Actual

Measure: Percentage share of total U.S. 

international ocean borne trade moved by 

containership as an indicator of liner shipping 

efficiency.

18% 17.4% 18.5% 17.9% 19% 18.7%

Strategic Goal No. 2: Protect the public from unlawful, unfair and deceptive ocean transportation practices

and resolve shipping disputes.

Measure: Percentage of enforcement actions 

taken under the Shipping Act of 1984 successfully 

resolved through favorable judgment, settlement, 

issuance of default judgment, or compliance letter 

or notice.

70% 72.9% 72% 82% 74% 88%

Measure: Percentage of decisions on completed 

OTI license applications rendered within 60 

calendar days of receipt, facilitating lawful 

operation of OTIs with the appropriate character 

and experience requirements.

55% 65% 60% 77% 70% 90.2%

Measure: Percentage of cruise line operators 

examined during the year that have the full 

financial coverage required by regulation to 

protect against loss from non-performance or 

casualty.

90% 90 % 91% 91% 92% 100%

Measure: Percentage of attendees at agency 

sponsored outreach presentations that rate the 

program as “Useful” or “Extremely Useful” in their 

compliance efforts.

70% 100% 75% N/A* N/A* N/A*

Measure: Percentage of key Commission 

issuances, orders and reports that are available 

through the Commission’s website within 5 

working days of receipt.

70% 77.1% 72% 72% 74% 79%

Measure: Number of cases opened and closed 

each fiscal year using ombuds and ADR services 

assisting consumers to recover goods or funds.

550 556 625 631 700 893

Measure: Percentage of formal complaints or 

Commission initiated orders of investigation 

completed within two years of filing or Commission 

initiation.

50% 56% 52% 60% 54% 73%

* In consultation with OMB, this outcome goal was removed for FY 2011 – 2015: “Percentage of attendees at agency sponsored 

outreach presentations that rate the program as ‘Useful’ or ‘Extremely Useful’ in their compliance efforts.” The measure is not 

reflective of current agency outreach practices. It also proved logistically difficult to execute because most outreach is 

performed by FMC staff as invitees at non-FMC sponsored events.
Chapter Two PROGRAM PERFORMANCE INFORMATION 

28

Table 3: Status of 2009 - 2012 Unmet Targets

Performance Measure (2009) FY 2009

Target

FY 2009

Actual

Measure: Percentage of complaints or investigations completed within two years of filing or 

Commission initiation beginning with cases filed or initiated in FY 2007. Strategic Goal 1: Efficient 

Regulatory Process (2009) Report Status Update: This measure is no longer tracked. A similar 

measure tracking successful resolution of enforcement actions has exceeded targets in 2010 and 

2011.

60% 55%

Measure: Percentage of Active Electronic Docket Logs updated within 72 hours of receipt of key 

documents issued or filed in Commission proceedings. Strategic Goal 1: Efficient Regulatory Process 

(2009) Report Status Update: This measure is no longer tracked, but a similar measure tracking web 

accessibility of filings and issuances has met targets in both 2010 and 2011.

85% 55%

Measure: Percentage of minutes and monitoring reports received within regulatory deadlines or 

formal extension. Strategic Goal 2: Compliance (2009) 2009 Report Status Update: This measure is 

no longer tracked.

95% 72-91%

Measure: Percentage of new and amended OTI applications that are processed with 45 days.

Strategic Goal 2: Compliance (2009) Report Status Update: The measure of the percentage of OTI 

applications completed within 45 calendar days for FY 2009 was updated in the FY 2010 – 2015 

Strategic Plan to 90 business days. The measure exceeded the target in FY 2010. BCL is now tracking 

OTI licensing with a target of 60 calendar days and exceeded that target in FY 2011.

80% 5%

Measure: Number of investigations opened to address alleged harm to the public as a result of 

Shipping Act violations. Strategic Goal 2: Compliance (2009) Status Report Update: This measure is 

no longer tracked.

50 34

Measure: The number of technology solutions that are designed and implemented and used by the 

Commission to facilitate process improvement through the use of databases and record keeping 

systems. Strategic Goal 4: Technological Efficiencies (2009) Report Status Update: This measure is 

no longer tracked by this report.

6 0

Measure: Cumulative number of technology solutions that are designed and implemented and used 

by the Commission to facilitate process improvement through the use of databases and record 

keeping systems since FY 2007 (including current fiscal year). Strategic Goal 4: Technological 

Efficiencies (2009) Report Status Update: This measure is no longer tracked by this report.

12 0

Measure: Number of technology-related programs and systems developed or implemented that 

achieve full compliance with Federal information security mandates. Strategic Goal 4: Technological 

Efficiencies (2009) Report Status Update: This measure is no longer tracked by this report. 12 2

Measure: Number of awareness, recruitment, training, new-employee orientation, workforce 

development, and quality of life initiatives offered to agency employees. Strategic Goal 5: 

Management Capabilities (2009) Report Status Update: This measure is no longer tracked. 250 216

Measure: Percent of payments (user fees, penalties, etc.) received electronically via Pay.gov versus 

older technologies (e.g., checks). Strategic Goal 5: Management Capabilities (2009) Report Status 

Update: This measure is no longer tracked.

25% 0

Measure: Received “unqualified opinion” from financial statement auditors with respect to the 

current fiscal year. Strategic Goal 5: Management Capabilities (2009) Report Status Update: FY 

2009, the audit was complete in November 2009 and received “unqualified audit opinion”. This 

measure is no longer tracked by this report.

Yes Not 

available
Chapter Two PROGRAM PERFORMANCE INFORMATION 

29

Performance Measure (2010) FY 2010

Target

FY 2010

Actual

Measure: Percentage share of total U.S. international ocean borne trade moved by containership as 

an indicator of liner shipping efficiency. Strategic Goal No. 1: Maintain An Efficient Competitive 

International Ocean Transportation System (2010)

18% 17.4%

Performance Measure (2011) FY 2011

Target

FY 2011

Actual

Measure: Percentage share of total U.S. international ocean borne trade moved by containership as 

an indicator of liner shipping efficiency. Strategic Goal No. 1: Maintain An Efficient Competitive 

International Ocean Transportation System (2011)

18.5% 17.9%

Performance Measure (2012) FY 2012

Target

FY 2012

Actual

Measure: Percentage share of total U.S. international ocean borne trade moved by containership as 

an indicator of liner shipping efficiency. Strategic Goal No. 1: Maintain An Efficient Competitive 

International Ocean Transportation System (2012)

19% 18.7%
Chapter Three 

FINANCIAL INFORMATION 
Chapter Three FINANCIAL INFORMATION

31

Message from the Chief Financial Officer

I am pleased to report that in fiscal year 2012, the FMC maintained its 

record of strong fiscal stewardship on behalf of the American people. For 

the ninth consecutive year, independent auditors gave us an unqualified 

(clean) opinion on our financial statements. Our auditors also stated for the 

controls they tested, they found no material weaknesses, significant control 

deficiencies, or nonconformances with the Federal Managers’ Financial 

Integrity Act and other applicable laws and regulations. 

This unqualified opinion on the FMC’s financial statements highlights for 

the President, the Congress and the American people the continuing 

commitment of this agency to maintain sound financial management of the 

resources entrusted to us. This attests to the FMC’s high standards and 

commitment to high quality financial management. The FMC’s financial 

condition is sound, and the Commission has sufficient internal controls in 

place to ensure its budget authority is not exceeded and that funds are utilized efficiently and effectively. 

 

During FY 2012, the FMC continued its focus on internal controls, as mandated by OMB Circular A-123. 

Our financial management staff is to be highly commended for consistently finding ways to provide 

budget information in concise, reliable, and understandable formats. In 2012, other notable 

accomplishments include completing corrective actions on a number of audit recommendations, 

maintaining an internal control environment through developing and maintaining appropriate guidance 

and training for staff, sustaining a green rating from the Department of the Treasury on the accuracy and 

timeliness of financial reporting practices involving Fund Balance with Treasury transactions, and paying 

99.3 percent of all invoices received from vendors on time. Quarterly financial statements were issued 15 

days after the end of each quarter, and our FY 2012 PAR is being published on November 15, 2012.

I wish to acknowledge the diligent efforts of our staff and financial service provider for their dedication to 

the FMC’s mission and their efforts in maintaining an unqualified opinion on our financial statements. 

Even as financial oversight and accountability requirements grow more complex and challenging, the 

FMC is steadfastly committed to improving financial management and producing accurate and reliable 

financial statements. While pleased with our FY 2012 accomplishments, we will strive to improve all 

aspects of financial performance and to maintain high financial management standards in FY 2013. We 

are committed to promoting effective internal controls and resolving any impediments to assure fairly 

presented financial statements and improve the auditor’s ability to issue an unqualified audit opinion next 

year.

 

Sincerely,

Ronald D. Murphy

Chief Financial Officer

November 15, 2012
Chapter Three FINANCIAL INFORMATION

32

PRINCIPAL STATEMENTS

LIMITATIONS OF THE FINANCIAL STATEMENTS

The principal statements have been prepared to report the financial position and results of 

operations of the FMC, pursuant to the requirements of the Chief Financial Officers Act of 1990, 

as amended by the Government Management Reform Act of 1994. These statements have been 

prepared from the books and records of the FMC in accordance with the formats prescribed by 

the Office of Management and Budget. However, these statements differ from the financial 

reports used to monitor and control budgetary resources that are prepared from the same books 

and records. The principal statements should be read with the realization they are for a 

component of the U.S. government, a sovereign entity. Liabilities not covered by budgetary 

resources cannot be liquidated without the enactment of an appropriation, and the payment of all 

liabilities other than for contracts can be abrogated by the sovereign entity. Other limitations are 

included in the footnotes to the principal statements. The accompanying notes are an integral 

part of these statements.

The Federal Maritime Commission’s financial statements were audited by Regis & Associates, 

PC, under contract to the FMC’s Office of the Inspector General.
Chapter Three FINANCIAL INFORMATION

33

FEDERAL MARITIME COMMISSION

Office of Inspector General

Washington, DC 20573-0001

November 14, 2012

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 2012 financial statements. The audit results indicate that the FMC has established an internal control 

structure that facilitates the preparation of reliable financial and performance information. We 

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

the ninth consecutive year.

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

& Associates, P.C. (Regis) to perform the audit of the FMC’s financial statements for the fiscal year ended 

September 30, 2012. 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, Regis 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 Regis’s audit of FMC’s FY 2012 financial statements by:

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

• evaluating the qualifications and independence of its auditors;
Chapter Three FINANCIAL INFORMATION

34

• monitoring the progress of the audit at key points;

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

and substantive testing;

• reviewing Regis’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 Regis 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 the FMC’s financial statements, conclusions 

about the effectiveness of internal control, or conclusions on compliance with laws and regulations. 

Regis is solely responsible for the attached auditor’s report dated November 9, 2012, and the conclusions 

expressed in the report.

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

 Sincerely, 

Adam R. Trzeciak

Inspector General

 

Attachment

cc: Commissioners

 Managing Director
Chapter Three FINANCIAL INFORMATION

35

MANAGEMENT CONSULTANTS &

CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

The Honorable Richard A. Lidinsky, Jr.

Chairman

Federal Maritime Commission

Washington, DC

In accordance with the Accountability of Tax Dollars Act of 2002, we have audited the 

accompanying balance sheets of the Federal Maritime Commission as of September 30, 2012 

and 2011, and the related statements of net cost, changes in net position, budgetary resources, 

and custodial activity for the years then ended. In our audit of the Federal Maritime 

Commission’s financial statements for fiscal years ended September 30, 2012 and 2011, we 

found:

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

U.S. Generally Accepted Accounting Principles;

• no material weaknesses in internal control over financial reporting (including 

safeguarding assets), and compliance with laws and regulations; and

• no reportable noncompliance with the laws, and regulations we tested.

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

scope and methodology, (3) agency comments, and our evaluation.

Opinion on Financial Statements

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

material respects, the Federal Maritime Commission's assets, liabilities, and net position as of 

September 30, 2012 and 2011; and net costs; changes in net position; budgetary resources; and 

custodial activity for the years then ended, in conformity with accounting principles generally 

accepted in the United States of America.

1400 Eye Street, NW, Suite 425, Washington, DC 20005 Tel 202-296-7101 Fax 202-296-7284
Chapter Three FINANCIAL INFORMATION

36

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 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 the 

Management’s Discussion and Analysis (MD&A) section of the Federal Maritime Commission's 

Performance and Accountability Report for Fiscal Year 2012. 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. However, 

for the controls we tested, we found no material weakness in internal control over financial 

reporting (including safeguarding assets) and compliance.

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 and compliance was for the limited 

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

deficiencies in internal control over financial reporting that might be deficiencies, significant 

deficiencies, or material weaknesses. 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.

Compliance with Laws and Regulations

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

and regulations for fiscal year 2012 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. 
Chapter Three FINANCIAL INFORMATION

37

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, (3) performing limited 

procedures with respect to certain other information appearing in the Annual Financial 

Statements, and (4) expressing an opinion on these financial statements based on our audit.

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 caution that our internal control testing may not be sufficient for other 

purposes and 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.
Chapter Three FINANCIAL INFORMATION

38

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, 2012. 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 auditing standards generally accepted in the United 

States and OMB audit guidance. 

Agency Comments and Our Evaluation 

The Federal Maritime Commission concurred with the facts and conclusions in our report. See 

Appendix A. 

Regis & Associates, PC

Washington, DC 

November 9, 2012 
Chapter Three FINANCIAL INFORMATION

39

APPENDIX A -

FEDERAL MARITIME COMMISSION COMMENTS ON

DRAFT AUDIT REPORT
Chapter Three FINANCIAL INFORMATION

40

FEDERAL MARITIME COMMISSION

Office of Inspector General

Washington, DC 20573-0001

November 14, 2012 

 

Office of Inspector General 

 

Regis & Associates, PC

Lateef Abassi, CPA

1400 Eye Street, NW Suite 425 

Washington DC 20005 

Dear Mr. Abassi,

I have reviewed the draft audit report provided to me relating to your audit of the Federal 

Maritime Commission for the fiscal year ended September 30, 2012. I concur with the facts and 

conclusions in the draft report.

Sincerely,

Adam R. Trzeciak

Inspector General

 

Attachment

cc: Commissioners

 Managing Director 
Chapter Three FINANCIAL INFORMATION

41

FEDERAL MARITIME COMMISSION

BALANCE SHEET

AS OF SEPTEMBER 30, 2012 AND 2011

2012 2011

Assets:

Intragovernmental

Fund Balance With Treasury (Note 2) $ 4,254,644 $ 3,792,671 

Total Intragovernmental 4,254,644 3,792,671 

Accounts Receivable, Net (Note 3) 4,031 979 

Property, Equipment, and Software, Net (Note 4) 420,323 525,021 

Other - 300 

Total Assets $ 4,678,998 $ 4,318,971 

Liabilities:

Intragovernmental

Accounts Payable $ 201,490 $ 146,636 

Employer Contributions and Payroll Taxes Payable 191,260 188,998 

Unfunded FECA Liability (Note 6) 324 1,956 

Custodial Liability (Note 6) 256 979 

Other - 870 

Total Intragovernmental 393,330 339,439 

Accounts Payable 177,008 103,362 

Federal Employee and Veterans' Benefits (Note 6) 5,910 5,910 

Accrued Liabilities 901,485 951,116 

Employee Contributions and Payroll Taxes Payable 24,363 24,546 

Unfunded Leave (Note 6) 1,276,758 1,229,110 

Total Liabilities $ 2,778,854 $ 2,653,483 

Net Position:

Unexpended Appropriations - Other Funds 2,759,038 2,378,313 

Cumulative Results of Operations - Other Funds (858,894) (712,825)

Total Net Position $ 1,900,144 $ 1,665,488 

Total Liabilities and Net Position $ 4,678,998 $ 4,318,971 

The accompanying notes are an integral part of these financial statements
Chapter Three FINANCIAL INFORMATION

42

FEDERAL MARITIME COMMISSION

STATEMENT OF NET COST

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011

2012 2011

Program Costs:

Operational and Administrative

Gross Costs $ 16,908,154 $ 17,474,598 

Less: Earned Revenue (41,676) -

Net Program Costs $ 16,866,478 $ 17,474,598 

Formal Proceedings

Gross Costs $ 7,374,383 $ 7,576,489 

Less: Earned Revenue - (39,856)

Net Program Costs $ 7,374,383 $ 7,536,633 

Office of Inspector General

Gross Costs $ 743,557 $ 721,109 

Less: Earned Revenue (12,984) (19,336)

Net Program Costs $ 730,573 $ 701,773 

Office of Equal Employment Opportunity

Gross Costs $ 193,612 $ 198,706 

Net Program Costs $ 193,612 $ 198,706 

Net Cost of Operations (Note 8) $ 25,165,046 $ 25,911,710 

The accompanying notes are an integral part of these financial statements
Chapter Three FINANCIAL INFORMATION

43

FEDERAL MARITIME COMMISSION

STATEMENT OF CHANGES IN NET POSITION

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011

2012 2011

Cumulative Results of Operations:

Beginning Balances $ (712,825) $ (600,844)

Budgetary Financing Sources:

Appropriations Used 23,560,395 24,236,436 

Other Financing Sources (Non-Exchange):

Imputed Financing Sources (Note 11) 1,458,582 1,563,293 

Total Financing Sources 25,018,977 25,799,729 

Net Cost of Operations (25,165,046) (25,911,710)

Net Change (146,069) (111,981)

Cumulative Results of Operations $ (858,894) $ (712,825)

Unexpended Appropriations:

Beginning Balances $ 2,378,313 $ 2,647,804 

Budgetary Financing Sources:

Appropriations Received 24,100,000 24,135,000 

Other Adjustments (158,880) (168,055)

Appropriations Used (23,560,395) (24,236,436)

Total Budgetary Financing Sources 380,725 (269,491)

Total Unexpended Appropriations $ 2,759,038 $ 2,378,313 

Net Position $ 1,900,144 $ 1,665,488 

The accompanying notes are an integral part of these financial statements
Chapter Three FINANCIAL INFORMATION

44

FEDERAL MARITIME COMMISSION

STATEMENT OF BUDGETARY RESOURCES

FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011

2012 2011

Budgetary Resources:

Unobligated Balance Brought Forward, October 1 $ 1,245,904 $ 1,303,927 

Recoveries of Prior Year Unpaid Obligations 182,051 103,585 

Unobligated balance from prior year budget authority, net 1,269,074 1,287,727 

Appropriations 24,100,000 24,086,730 

Spending authority from offsetting collections 54,660 59,192 

Total Budgetary Resources $ 25,423,734 $ 25,433,649 

Status of Budgetary Resources:

Obligations Incurred (Note 12) $ 24,138,684 $ 24,187,745 

Unobligated balance, end of year:

 Apportioned 86,652 25,375 

 Unapportioned 1,198,398 1,220,529 

Total unobligated balance, end of year 1,285,050 1,245,904 

Total Status of Budgetary Resources $ 25,423,734 $ 25,433,649 

Change in Obligated Balance:

Unpaid Obligations, Brought Forward, October 1 $ 2,546,766 $ 3,558,091 

Adjustment to obligated balance, start of year (2,969,594) (2,546,766)

Obligated balance, start of year, as adjusted (422,828) 1,011,325 

Obligations Incurred 24,138,684 24,187,745 

Outlays (gross) (23,533,805) (25,095,485)

Recoveries of Prior Year Unpaid Obligations (182,051) (103,585)

Obligated balance, end of year

 Unpaid obligations, end of year 2,969,594 2,546,766 

Obligated balance, end of year $ 2,969,594 $ 2,546,766 

Budget Authority and Outlays, Net:

Budget authority, gross $ 24,154,660 $ 24,145,922 

Actual offsetting collections (54,660) (59,192)

Budget Authority, net $ 24,100,000 $ 24,086,730 

Outlays, gross $ 23,533,806 $ 25,095,485 

Actual offsetting collections (54,660) (59,192)

Outlays, net 23,479,146 25,036,293 

Distributed Offsetting Receipts 664,935 2,430,482 

Agency outlays, net 24,144,081 27,466,775 

The accompanying notes are an integral part of these financial statements
Chapter Three FINANCIAL INFORMATION

45

FEDERAL MARITIME COMMISSION

AS OF SEPTEMBER 30, 2012 AND 2011

STATEMENT OF CUSTODIAL ACTIVITY

2012 2011

Revenue Activity:

Sources of Cash Collections:

Miscellaneous $ 1,006,298 $ 2,430,482 

Total Cash Collections (Note 13) 1,006,298 2,430,482 

Accrual Adjustments - 865 

Total Custodial Revenue $ 1,006,298 $ 2,431,347 

Disposition of Collections:

Transferred to Others (by Recipient) $ 1,006,298 $ 2,430,482

Retained by the Reporting Entity 865 

Net Custodial Activity $ - $ -

The accompanying notes are an integral part of these financial statements
Chapter Three FINANCIAL INFORMATION

46

FEDERAL MARITIME COMMISSION

NOTES TO THE FINANCIAL STATEMENTS

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. The FMC is responsible for 

the regulation of oceanborne 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, as amended by the Ocean Shipping 

Reform Act of 1998 (OSRA), the Foreign 

Shipping Practices Act of 1988 (FSPA), section 

19 of the Merchant Marine Act of 1920, and 

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

The Commission monitors the activities of ocean 

common carriers, marine terminal operators 

(MTOs), ports and ocean transportation 

intermediaries (OTIs) (non-vessel-operating 

common carriers and freight forwarders) who 

operate in the U.S. foreign commerce to ensure 

that 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; reviews competitive 

activities of common carrier alliances and other 

agreements among common carriers and/or 

terminal operators; 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, accuracy, and reasonable terms. The 

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, 

pursuant to 46 U.S.C. §§ 44102 and 44103, 

ensures that passenger vessel operators (PVO) 

demonstrate adequate financial responsibility to 

indemnify passengers in the event of 

nonperformance of voyages or passenger injury or 

death. 

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 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 non-recurring activity, 

such as fines, penalties, fees and other 

miscellaneous receipts for services and benefits.
Chapter Three FINANCIAL INFORMATION

47

The FMC makes custodial collections and holds OMB directives that are primarily used to

custodial receivables that are non-entity assets monitor and control the FMC's use of budgetary 

and are transferred to Treasury at fiscal year end. resources.

The FMC has rights and ownership of all assets D. Fund Balance with Treasury reported in these financial statements. FMC 

does not possess any non-entity assets. Fund Balance with Treasury is the aggregate 

amount of the FMC’s funds with Treasury in 

B. Basis of Presentation expenditure and receipt, accounts. Appropriated 

funds recorded in expenditure accounts are

available to pay current liabilities and finance The financial statements have been prepared to authorized purchases. report the financial position, net cost of 

operations, changes in net position, and the FMC does not maintain bank accounts of its status and availability of budgetary resources of own, has no disbursing authority and does not the FMC. The statements are a requirement of maintain cash held outside of Treasury. the Accountability of Tax Dollars Act of 2002. Treasury disburses funds for FMC on demand. They have been prepared from, and are fully 

supported by, the books and records of FMC in 

accordance with the hierarchy of accounting E. Accounts Receivable

principles generally accepted in the United 

States of America, standards approved by the Accounts receivable consists of amounts owed 

Federal Accounting Standards Advisory Board to the FMC by other Federal agencies, its (FASAB), OMB Circular A-136, Financial employees and the general public. Accounts Reporting Requirements, as amended, and FMC receivable in the Salaries and Expense Fund 

accounting policies which are summarized in represent employee-related receivables. An

this note. These statements, with the exception allowance for uncollectible accounts receivable 

of the Statement of Budgetary Resources, are from the public is established when, based upon different from financial management reports, a review of outstanding accounts, management which are also prepared pursuant to OMB determines that collection is unlikely to occur directives that are used to monitor and control considering the debtor’s ability to pay. Debts the FMC’s use of budgetary resources. The six months or more past due are referred to the financial statements and associated notes are Department of Treasury for follow-up collection presented on a comparative basis. Unless efforts in keeping with the Debt Collection specified otherwise, all amounts are presented in Improvement Act of 1996 (DCIA). Treasury’s dollars. 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 

C. Basis of Accounting delinquent or 30 percent of debts delinquent by 2 

years or more. Collections, net of fees, are 

Transactions are recorded on both an accrual returned to the FMC for remittance to the

accounting basis and a budgetary basis. Under general fund of the Treasury. 

the accrual method, revenues are recognized 

when earned, and expenses are recognized when F. Property, Equipment, and Software a liability is incurred, without regard to receipt 

or payment of cash. Budgetary accounting Property, equipment and software represent

facilitates compliance with legal requirements furniture, fixtures, equipment, and information 

on the use of Federal funds. Balances on these technology (IT) hardware and software which 

statements may therefore differ from those on are recorded at original acquisition cost and are 

financial reports prepared pursuant to other depreciated or amortized using the straight-line 

 
Chapter Three FINANCIAL INFORMATION

48

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

G. 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.

H. Liabilities

Liabilities represent the amount of funds likely 

to be paid by the FMC as a result of transactions 

or events that have already occurred. 

The FMC reports its liabilities under two 

categories, Intragovernmental and With the 

Public. Intragovernmental liabilities represent 

funds owed to another government agency. 

Liabilities With the Public represents funds 

owed to any entity or person that is not a federal 

agency, including private sector firms and 

federal employees. Each of these categories 

may include liabilities that are covered by 

budgetary resources and liabilities not covered 

by budgetary resources.

Liabilities covered by budgetary resources are 

liabilities funded by a current appropriation or 

other funding source. These consist of accounts 

payable and accrued payroll and benefits. 

Accounts payable represent amounts owed to 

another entity for goods ordered and received 

and for services rendered except for employees. 

Accrued payroll and benefits represent payroll 

costs earned by employees during the fiscal year 

which are not paid until the next fiscal year.

Liabilities not covered by budgetary resources 

are liabilities that are not funded by any current 

appropriation or other funding source. These 

liabilities consist of accrued annual leave, 

actuarial FECA, and the amounts due to 

Treasury for collection and accounts receivable 

of civil penalties. 

I. 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 
Chapter Three FINANCIAL INFORMATION

49

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.

J. 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.

K. 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. 

Reporting amounts such as plan assets, 

accumulated plan benefits, and related unfunded 

liabilities, if any, is the responsibility of the 

OPM.

L. 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 
Chapter Three FINANCIAL INFORMATION

50

employees. FMC recognizes a current cost for entity for costs that are paid by other entities. 

these and Other Retirement Benefits (ORB) at FMC recognized imputed costs and financing 

the time the employee's services are rendered. sources in fiscal years 2012 and 2011 to the 

The ORB expense is financed by OPM, and extent directed by OMB.

offset by FMC through the recognition of an 

imputed financing source. 

O. Contingencies

M. Use of Estimates The FMC recognizes contingent liabilities when 

a past event or exchange transaction has 

The preparation of the accompanying financial occurred, a future outflow or other sacrifice of 

statements in accordance with generally resources is probable, and the future outflow or 

accepted accounting principles requires sacrifice of resources is measurable. Liabilities 

management to make certain estimates and are deemed contingent when the existence or 

assumptions that affect the reported amounts of amount of the liability cannot be determined 

assets and liabilities and disclosure of contingent with certainty pending the outcome of future 

assets and liabilities at the date of the financial events. FMC recognizes contingent liabilities, in

statements and the reported amounts of revenues the accompanying balance sheet and statement 

and expenses during the reporting period. of net cost, when it is both probable and can be 

Actual results could differ from those estimates. reasonably estimated. FMC discloses contingent 

liabilities in the notes to the financial statements 

when the conditions for liability recognition are N. Imputed Costs/Financing Sources not met or when a loss from the outcome of 

future events is more than remote. In some Federal Government entities often receive goods cases, once losses are certain, payments may be and services from other Federal Government made from the Judgment Fund maintained by entities without reimbursing the providing entity the U.S. Treasury rather than from the amounts for all the related costs. In addition, Federal appropriated to FMC for agency operations. Government entities also incur costs that are paid Payments from the Judgment Fund are recorded in total or in part by other entities. An imputed as an “Other Financing Source” when made. financing source is recognized by the receiving 
Chapter Three FINANCIAL INFORMATION

51

NOTE 2. FUND BALANCE WITH TREASURY

Fund balance with Treasury account balances as of September 30, 2012 and 2011 were as follows:

2012 2011

Fund Balances:

Appropriated Funds $ 4,254,644 $ 3,792,671 

Total $ 4,254,644 $ 3,792,671 

Status of Fund Balance with Treasury:

Unobligated Balance

 Available $ 86,652 $ 25,375 

 Unavailable 1,198,398 1,220,529 

Obligated Balance Not Yet Disbursed 2,969,594 2,546,767 

Total $ 4,254,644 $ 3,792,671 

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 10.)
Chapter Three FINANCIAL INFORMATION

52

NOTE 3. ACCOUNTS RECEIVABLE

Accounts receivable balances as of September 30, 2012 and 2011 were as follows:

2012 2011

With the Public

Accounts Receivable $ 4,031 $ 979

Total Accounts Receivable $ 4,031 $ 979

The accounts receivable is primarily made up of employee receivables and custodial collections.

Historical experience has indicated that the majority of the receivables are collectible. There are no 

material uncollectible accounts as of September 30, 2012 and 2011. 

NOTE 4. PROPERTY, EQUIPMENT, AND SOFTWARE

Schedule of Property, Equipment, and Software as of September 30, 2012:

Major Class

Acquisition 

Cost

Accumulated 

Amortization/

Depreciation

Net Book 

Value

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

Furniture & Equipment 315,250 143,006 172,244

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

Total $ 720,829 $ 300,506 $ 420,323

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

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
Chapter Three FINANCIAL INFORMATION

53

NOTE 5. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

The liabilities for FMC as of September 30, 2012 and 2011 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. 

2012 2011

Intragovernmental – FECA $ 324 $ 1,956

Intragovernmental – Unemployment Insurance - 870

Actuarial FECA 5,910 5,910

Unfunded Leave 1,276,758 1,229,110

Total Liabilities Not Covered by Budgetary Resources $ 1,282,992 $ 1,237,846

Accounts Payable 378,498 249,998

Accrued Funded Payroll and Leave 901,485 951,116

Employer Contributions and Payroll Taxes Payable 215,623 213,544

Custodial Liability 256 979

Total Liabilities $ 2,778,854 $ 2,653,483

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.
Chapter Three FINANCIAL INFORMATION

54

NOTE 6. 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:

Fiscal Year Totals

2013 $ 347,931

2014 71,819

2015 73,070

2016 74,665

2017 75,665

Thereafter 189,221

Total Future Payments $ 832,371

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

Real estate taxes included in the Washington, DC lease may escalate depending on the market during the 

year they are due. 

NOTE 7. CONTINGENCIES

FMC did not have any material commitments or contingencies that met disclosure requirements as of 

September 30, 2012. FMC records commitments and contingent liabilities for legal cases in which 

payment has been deemed probable and the amount of potential liability has been estimated. 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. In FY2012, based on information 

provided by legal counsel, FMC estimates a possible liability of $300,000 in connection with this lawsuit. 

There were no contingent liabilities as of September 30, 2012. 
Chapter Three FINANCIAL INFORMATION

55

NOTE 8. 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 nonFederal entities (the public). Such costs are summarized as follows:

2012 2011

Operational and Administrative

 Intragovernmental Costs $ 4,811,649 $ 5,107,709

 Public Costs 12,096,505 12,366,889

 Total Program Costs 16,908,154 17,474,598

 Less: Intragovernmental Earned Revenue (41,676) -

 Net Program Costs 16,866,478 17,474,598

Formal Proceedings

 Intragovernmental Costs 1,529,477 1,553,388

 Public Costs 5,844,906 6,023,101

 Total Program Costs 7,374,383 7,576,489

 Less: Intragovernmental Earned Revenue - (39,856)

 Net Program Costs 7,374,383 7,536,633

Office of Inspector General

 Intragovernmental Costs 129,247 129,943

 Public Costs 614,311 591,166

 Total Program Costs 743,558 721,109

 Less: Intragovernmental Earned Revenue (12,984) (19,336)

 Net Program Costs 730,574 701,773

Office of Equal Employment Opportunity

 Intragovernmental Costs 28,549 33,614

 Public Costs 165,063 165,092

 Total Program Costs 193,612 198,706

 Net Program Costs 193,612 198,706

Total Intragovernmental costs 6,498,922 6,824,654

Total Public costs 18,720,784 19,146,248

 Total Costs 25,219,706 25,970,902

Less: Total Intragovernmental Earned Revenue (54,660) (59,192)

 Total Net Cost $ 25,165,046 $ 25,911,710
Chapter Three FINANCIAL INFORMATION

56

NOTE 9. 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, 2012 and 2011 imputed financing was as follows:

2012 2011

Office of Personnel Management $ 1,458,582 $ 1,563,293 

Total Imputed Financing Sources $ 1,458,582 $ 1,563,293 

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

GOVERNMENT

The President’s Budget that will include FY12 actual budgetary execution information has not yet been 

published. The President’s Budget is scheduled for publication in February 2013 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 2011, has been reconciled to the Statement of Budgetary 

Resources and there were no material differences. 

NOTE 11. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

Obligations incurred and reported in the Statement of Budgetary Resources as of September 30, 2012 and 

2011 consisted of the following:

2012 2011

Direct Obligations, Category A $ 24,084,024 $ 24,128,553

Reimbursable Obligations, Category A 54,660 59,192

Total Obligations Incurred $ 24,138,684 $ 24,187,745

Category A apportionments distribute budgetary resources by fiscal quarters. 
Chapter Three FINANCIAL INFORMATION

57

NOTE 12. 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, 2012 and 2011, respectively, undelivered orders amounted 

to the following: 

2012 2011

Undelivered Orders $ 1,473,988 $ 1,132,410 

Total Undelivered Orders $ 1,473,988 $ 1,132,410 

NOTE 13. 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:

2012 2011

Fines, Penalties, and Forfeitures $ 665,000 $ 2,097,500 

General Fund Proprietary Receipts (user fees) 341,673 336,252 

Refund of User Fees (375) (3,270)

Total Custodial Collections $ 1,006,298 $ 2,430,482 
Chapter Three FINANCIAL INFORMATION

58

NOTE 14. 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.

2012 2011

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations Incurred $ 24,138,684 24,187,745

Spending Authority From Offsetting Collections and Recoveries $ (236,711) (162,777)

Obligations Net of Offsetting Collections and Recoveries 23,901,973 24,024,968

Offsetting Receipts 664,935 2,430,482

Net Obligations 24,566,908 26,455,450

Other Resources

Imputed Financing From Costs Absorbed By Others 1,458,582 1,563,293

Net Other Resources Used to Finance Activities 1,458,582 1,563,293

Total Resources Used to Finance Activities 26,025,490 28,018,743

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 (341,579) 211,467

Resources That Fund Expenses Recognized In Prior Periods (2,502) 1,086

Other (664,935) (2,430,482)

Total Resources Used to Finance Items Not Part of Net Cost of Operations (1,009,016) (2,217,929)

Total Resources Used to Finance the Net Cost of Operations 25,016,474 25,800,814

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 47,648 12,109

Other - (5,911)

Total Components of Net Cost of Operations That Will Require or

Generate Resources In Future Periods 47,648 6,198

Components Not Requiring or Generating Resources

Depreciation and Amortization 104,698 104,698

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

Generate Resources 100,924 104,698

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

Generate Resources In The Current Period 148,572 110,896

Net Cost of Operations $ 25,165,046 $ 25,911,710
Chapter FOUR

Other Accompanying Information 
Chapter Four OTHER ACCOMPANYING INFORMATION

60

FEDERAL MARITIME COMMISSION

800 North Capitol Street, N.W.

Washington, DC 20573 

October 18, 2012

Office of Inspector General

TO: Chairman Lidinsky 

Commissioner Brennan

Commissioner Cordero

Commissioner Dye 

Commissioner Khouri 

FROM: Inspector General

SUBJECT: Inspector General’s Statement on the Federal Maritime Commission’s 

Management and Performance Challenges

On November 22, 2000, the President signed the Reports Consolidation Act of 2000 (Public Law 

106-531), an amendment to the Chief Financial Officers (CFO) Act of 1990. The Reports 

Consolidation Act requires inspectors general to provide a summary and assessment of the most 

serious management and performance challenges facing Federal agencies and their progress in 

addressing these challenges. The attached document responds to the requirements and provides 

the annual statement on Commission challenges to be included in the Federal Maritime 

Commission’s (FMC) Performance and Accountability Report (PAR) for Fiscal Year 2012. 

This year, the Office of Inspector General (OIG) has identified three management and 

performance challenges for inclusion in the FMC’s FY 2012 PAR. These assessments are based 

on information derived from a combination of sources, including OIG audit and inspection work, 

Commission reports, and a general knowledge of the Commission’s programs. 

The Reports Consolidation Act of 2000 permits agency comment on the inspector general’s 

statements. Agency comments, if applicable, are to be included in the final version of the PAR 

that is due on November 15, 2012. 

 

 Adam R. Trzeciak

Attachment
Chapter Four OTHER ACCOMPANYING INFORMATION

61

Office of Inspector General

FY 2012 Management Challenges 

1. The Management Challenge: Financial Issues

For the last several years, agency programs have competed with each other for scarce 

resources to meet all needs and priorities. Like most federal agencies, the FMC’s appropriations 

have fallen below budget requests, necessitating tough choices. Added to the challenge faced by 

all agencies is the threat of sequestration, where millions of dollars may be slashed from agency 

budgets, leaving each agency to make even more difficult choices regarding how best to serve 

the public and what programs to curtail or eliminate.

Agencies must manage their resources in such a way that prioritizes needs while closely 

monitoring spending. Often, estimates made in the beginning of the year, especially for 

contracts and other services provided by external organizations, result in leftover funds that, if 

timely spotted, can be used to address other agency needs. In a recent audit of the agency’s 

transit subsidy program, the OIG found that the FMC has taken steps to monitor funds to identify 

surpluses early enough in the fiscal year to reallocate them into other areas. This is an 

improvement over just a few years ago where the agency only learned of surplus program funds 

in the last days of the fiscal year, making planning to use them inefficient and difficult. 

Agency Progress in Addressing the Challenge 

In the FY 2012 financial statement audit, the OIG found that the agency has made 

improvements from prior years to close out contracts, but the agency’s goal should be to close all 

contacts once the Contracting Officer’s Representative (COR) verifies that services have been 

rendered or products delivered. When services have been provided or deliverables met, it is the 

responsibility of the COR to notify the contracting officer to request that the remaining funds be 

deobligated. If done timely, the funds can be reallocated into other areas. When contracts remain 

open unnecessarily, the agency is missing the opportunity to use excess funds in other priority 

areas. 

The Challenge Ahead 

The agency does not issue so many contracts that additional staffing resources are 

required to ensure funds are managed closely and contracts are closed timely. But the agency 

must make doing so a priority to enable early reallocation of funds and deter improper payment. 
Chapter Four OTHER ACCOMPANYING INFORMATION

62

2. The Management Challenge: Information Technology 

To remediate prior years’ information technology (IT) deficiencies and security 

vulnerabilities, both agency and OIG- identified, resulting from the Federal Information Security 

Management Act (FISMA) evaluation and other assessment efforts.

Agency Progress in Addressing the Challenge

While the agency has made some progress in remediating IT-related deficiencies, the 

number and severity of prior year IT deficiencies remains unacceptably high. For example, the 

OIG’s follow up on prior year unimplemented recommendations identified 16 prior year 

recommendations agreed to by management that remain unimplemented. Some of these date 

back to 2007. The OIG estimates that the cost to address these recommendations is, in most 

cases, minimal: 14 of the 16 deficiencies require no new equipment and minimal investment of 

Office of Information Technology (OIT) staff hours to remediate or correct. 

The OIG believes that management has not prioritized fixing vulnerabilities that, for the 

most part, have not resulted in performance problems. On the other hand, the OIG’s repeated 

admonitions regarding the agency’s failure to adequately test Continuity of Operations Planning 

procedures, instead relying on verbal assurances from IT personnel, led to a multiple-day hiatus 

in the agency’s email and other vital internet businesses processes in June 2011. In short, 

vulnerabilities can lead to problems when least expected. The OIT needs to clearly review each 

deficiency and make a firm commitment to remediate the deficiencies as soon as possible. It is 

almost always far less expensive to address vulnerabilities before problems arise than it is to 

repair the resulting damage.

The Challenge Ahead 

While the number and sophistication of threats continue to increase almost on a daily 

basis, the agency should not turn its back on prior year vulnerabilities to focus on current 

security challenges. Both are important. FISMA implicitly recognizes that not all vulnerabilities 

can be addressed. Rather, agencies are called to prioritize their vulnerabilities and weaknesses, 

and to address those vulnerabilities considered to be the most serious. In the OIG’s FY 2011 

security evaluation, we began to include broad estimates of resources needed to implement the 

recommendations and close vulnerabilities. This should assist OIT staff to budget its resources 

to close these recommendations. But in the one year since employing this new approach, little 

has changed. OIT faces two related challenges: to make security a priority equivalent with 

operations, and to remediate vulnerabilities timely. The best practice would be to identify 

deadlines and focus on remediation in the first few months after the FISMA evaluation when 

security is paramount on staff’s mind. 
Chapter Four OTHER ACCOMPANYING INFORMATION

63

3. The Management Challenge: Information Technology 

The FMC, like all government agencies, has increased its dependence on information 

systems and on interconnectivity with the public and other external organizations, both foreign 

and domestic. With the increased dependence comes an increase in the number and severity of 

threats that can have adverse impacts on operations, assets and individuals. Given the potential 

for harm that can arise from purposeful attacks by hostile entities and other threats, the agency 

must place greater emphasis on performing monthly vulnerability scans of agency network and 

workstations. 

Agency Progress in Addressing the Challenge 

Network scans are commonplace among government agencies and are generally run 

several times a year. Scans provide useful information to network administrators, such as virus 

identification, whether the latest patch information and service packs for servers are running, as 

well as the existence of open ports, protocols, and services. The scans help agencies guard 

against vulnerabilities that can bring down a network and/or destroy data.

The FMC has excluded network scans from its information security toolbox. The last 

scan performed by OIT occurred in 2008. 

In the OIG’s FY 2012 FISMA evaluation, the OIG performed a vulnerability scan and 

identified multiple technical vulnerabilities that require little OIT resources to remediate. OIG 

attempts to run an internal scan during the FY 2011 FISMA exercise were rebuffed by senior 

management who were uncertain of the scan’s impact on the network, fearing that the network 

would “crash” or suffer other unnamed negative effects. It should be noted that the Chief 

Information Officer favored the scan and supported the OIG’s efforts to perform the scan.

The FMC should not rely on the OIG to perform annual scans, primarily because OIG 

scans are run, at most, annually. This is a far too infrequent schedule. 

The Challenge Ahead 

IT threats are changing daily and vulnerabilities arise on a constant basis. Attacks are 

made on the IT resources of government organizations hourly, many by “thrill seekers” with 

little or no need or desire for data. The challenge for IT managers is to identify those threats as 

they arise and then remediate them immediately. 

The agency should make the investment to purchase and maintain current, appropriate 

vulnerability scanning software. Furthermore, the agency should devote IT resources to run the 

scans, which usually occur after hours, as well as analyze the results of those scans. Lastly, IT 

personnel will also be required to remediate the vulnerabilities noted from the scans in a timely 

manner. Thus, the agency’s challenge will be to make the investment in both IT resource time 

and funding.
Chapter Four OTHER ACCOMPANYING INFORMATION

64

Comments on IG-Identified Management and Performance Challenges

The Inspector General identifies three management and performance challenges facing the FMC, as 

outlined below:

I Financial Issues

Management agrees that tough budget choices must be made under the current fiscal 

climate and that the agency’s programs are competing for scarce resources. Our goal is always 

to carefully prioritize and manage spending throughout the fiscal year so that all funds are put to 

the best use. We will continue to closely monitor expenditures in order to reallocate funds where 

needed throughout the year. 

II Information Technology 

The Commission has recently awarded several contracts to address a number of IT 

needs, including Disaster Recovery/Continuity of Operations issues. We plan to migrate our 

email and certain other applications to a cloud environment, saving money while at the same 

time providing recovery capability. We also are developing an Enterprise Content Management/

Enterprise Platform Solution over a multi-year period, which will address many of the remaining 

FMC system vulnerabilities. We are also working to address remaining open FISMA issues. 

III Information Technology

The Commission recently hired a new Director of IT with significant security expertise. 

We are committed to developing a security plan that provides optimum security and tests, within 

available resources. 
Chapter Four OTHER ACCOMPANYING INFORMATION

65

Improper Payments Information Act

Narrative Summary of Implementation Efforts for FY 2012

I. The Federal Maritime Commission has not identified any program that in and of itself constitutes 

a high-risk for improper payments. Therefore, the FMC considers all of its payments to fall 

within the realm of low-risk. As such, the FMC has instituted a separation of duties concerning 

payments that has been very successful in curtailing any improper payments. The National 

Finance Center (NFC) became the agency’s payroll provider in 2002 and is responsible for 

monitoring and reporting on any payroll-related payments. Any overpayments made to an FMC 

employee by the NFC on behalf of the FMC would be offset by NFC. In FY 2012, the FMC had 

no overpayments. The FMC did not identify any improper collections through Intergovernmental 

Payments and Collections (IPAC) collections. 

II. The FMC did not use a statistical sample to conduct its improper payment rate. The sample 

contains 100 percent of all disbursements made by the FMC. This was the case for all programs.

III. The FMC will continue to monitor all payments to maintain a zero dollar improper payment 

figure. To this end, the FMC will ensure that there is sufficient segregation of duties pertaining to 

payments concomitantly with closer scrutiny of all IPAC collections made against the 

Commission. The FMC will continue to monitor all disbursements made on its behalf to ensure 

payments are valid and proper.

IV. The table below represents the improper payments made by the FMC in FY 2012 with percentage 

forecasts through FY 2015. 

Improper Payments Information Act Reduction Outlook FY 2012 - 2015

(millions)

 Program FY 12

 Outlays

 FY12

 IP %

 FY12

 IP $

 FY13

 %

 FY14

 %

 FY15

 %

 Formal Proceedings $0.00 0.00 $0.00 0.00 0.00 0.00

 Inspector General $0.00 0.00 $0.00 0.00 0.00 0.00

 Equal Employment Opportunity $0.00 0.00 $0.00 0.00 0.00 0.00

 Operations and Administrative $0.00 0.00 $0.00 0.00 0.00 0.00

Totals $0.00 0.00 $0.00 0.00 0.00 0.00

V. The FMC has in place a segregation of duties to ensure that all invoices processed for payment 

are legitimate expenses of the agency. As of October 1, 2006, original accounts payable invoices 

have been received by BPD and forwarded to OBF via electronic media for internal processing 

and payment authorization. When an invoice is received, it is first verified as a valid invoice 

belonging to the agency. OBF matches the invoice to documentation provided by the COTR 

indicating that goods/services have been received by the Commission and approves the invoice 
Chapter Four OTHER ACCOMPANYING INFORMATION

66

for payment. BPD is advised of the purchase order the invoice is being paid against and the 

payment amount. OBF also ensures that sufficient funds have been obligated to make the 

payment and provides BPD with the period of performance. Once the payment authorization has 

been processed by OBF, the payment information is verified by a second staff member of OBF. 

At that point, the invoice is electronically returned to BPD for processing. When the payment is 

loaded into the Oracle database, a final funds availability check is made by the financial system 

against the fund controls set for the FMC and a third OBF staff member audits the payment 

information posted in the financial system. 

 

The receipt of an invalid IPAC collection must be processed as a payment, as the funds have 

already been moved from the Treasury General Fund as a disbursement against the FMC’s 

Agency Location Code (ALC). Invalid IPACs are then charged back to the billing agency to 

reverse the transaction. The internal controls in place remain unchanged, with close scrutiny of

all invoices and subsequent payments. 

 

VI. The Chairman, as the Chief Administrative Officer of the FMC, is ultimately responsible for the 

efficient and effective utilization of the authority granted the agency by Congress. The Chairman

is responsible for designating a Chief Financial Officer and has delegated financial responsibility 

to the Director, OBF. The Director of OBF has the responsibility to ensure that all disbursements 

made by BPD on behalf of the FMC are legitimate expenses of the agency and that there are 

sufficient funds available to pay the agency’s expenses. The OBF is responsible for reducing and 

recovering improper payments, and keeps senior agency officials apprised of all relevant 

activities.

 

VII. a. The FMC does not have an in-house information system to help reduce improper payments. 

The agency utilizes the infrastructure and financial system maintained in Parkersburg, WV 

by BPD.

 

b. In FY 2012, the FMC requested funding to maintain the contract between the FMC and BPD 

for financial support and platform access to the Oracle database through Oracle’s Discoverer 

portal. 

 

VII. There are no statutory or regulatory barriers that limit the agency’s ability to take corrective 

actions to address any improper payments.

 

VIII. The current IPAC system does not allow an agency to refuse a collection against its ALC through 

the General Fund it deems improper. The end result is a requirement to make the payments during 

the accounting period in which the collection was made and reverse the collection at a later date. 

The ability to challenge the collection would reduce the number of improper collections made 

against the agency. 
Chapter Four OTHER ACCOMPANYING INFORMATION

67

Summary of Financial Statement Audit

Summary of Financial Statement Audit

Audit opinion Unqualified

Restatement No

Material Weakness Beginning 

Balance New Resolved Consolidated Ending Balance

None 0 0 0 0 0