Federal 

Maritime 

Commission

Performance and 

Accountability Report 

Fiscal Year 2014 
Federal Maritime Commission 

This Performance and Accountability Report (PAR) can be downloaded at 

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

Only Federal employees participated in the preparation of the performance and 

financial information contained in this report. 

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 17, 2014 
i 

Introduction 

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

Federal Maritime Commission’s (FMC or Commission) program and financial management 

process for fiscal year (FY) 2014, 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 covers the Commission’s activities from October 1, 2013 

through September 30, 2014. 

ABOUT THIS REPORT

The Performance and Accountability Report is the year-end progress report of the Federal Maritime Commission. 

The FMC reviews its strategic goals, objectives, and performance measures and 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 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 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 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 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 Government Management Reform Act of 1994 requires the submission of audited financial statements. 

 The Improper Payments Elimination and Recovery Act of 2010 provides for estimates and reports of improper 

payments by Federal agencies. 
ii

HOW THIS REPORT IS ORGANIZED

This report includes four major sections. 

1. Management’s Discussion and Analysis (MD&A) provides an overview of the Commission, financial 

results, a high-level discussion of program performance, management assurances on internal controls and 

financial management systems compliance; and other management information, initiatives, and issues. 

2. Program Performance Information provides data on the agency’s progress toward meeting its strategic 

goals and targets during fiscal year 2014. 

3. Financial Information provides financial details including a message from the Chief Financial Officer, the 

independent auditor’s report, and the audited financial statements. 

4. Other Information includes a statement prepared by the Inspector General (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 

Introduction .................................................................................................................................. i

MESSAGE FROM THE CHAIRMAN ..................................................................................... iii

Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS 1

Mission and Organization ........................................................................................................... 2

Regulatory Responsibility and Oversight ................................................................................... 5

Agency Mission Challenges ........................................................................................................ 7

Program Performance Overview ................................................................................................. 9

Financial Performance Overview .............................................................................................. 13

Financial Statement Highlights ................................................................................................. 16

Controls, Systems, and Legal Compliance ................................................................................ 19

Chairman's FMFIA Statement of Assurance ............................................................................. 23

Chapter Two PROGRAM PERFORMANCE INFORMATION 24

Annual Performance Report ...................................................................................................... 25

Chapter Three FINANCIAL INFORMATION 31

Message from the Chief Financial Officer ................................................................................ 32

Principal Financial Statements .................................................................................................. 33

Independent Auditor's Report .................................................................................................... 34

FMC Notes to the Financial Statements .................................................................................... 62

Chapter Four OTHER INFORMATION 74

Office of Inspector General - Fiscal Year 2014 Management Challenges ............................... 76

Comments on IG-Identified Management and Performance Challenges .................................. 79

Improper Payments Information Act ......................................................................................... 81

Summary of Financial Statement Audit .................................................................................... 83
iii

MESSAGE FROM THE CHAIRMAN 

I am pleased to submit the Federal Maritime Commission’s

Performance and Accountability Report for fiscal year 2014. In FY 

2014, the FMC continued to exemplify good government, fostering 

an equitable, secure and reliable ocean transportation system. The 

report illustrates how the FMC manages resources, provides an 

analysis of program performance and financial activities, and 

addresses the Commission’s plans to meet the challenges ahead. 

The Commission continues to have a critical role to ensure 

competition, facilitate commerce, and encourage reliable service to 

U.S. exporters and importers. The Commission regulates virtually all 

entities involved in liner shipping, receiving, handling, and 

transporting cargo and passengers in foreign commerce. A fair, efficient, and adequate ocean 

transportation system depends on the FMC’s ability to evaluate carrier and terminal agreements 

for anti-competitive impact and to license ocean transportation intermediaries to protect the 

shipping public and facilitate international trade. 

The FMC strives to execute its statutory responsibilities while minimizing government 

intervention and costs. It oversees important, statutorily-mandated programs by focusing on two 

broad strategic goals: (1) maintaining an efficient and competitive international ocean 

transportation system; and (2) protecting the public from unlawful, unfair and deceptive ocean 

transportation practices. The Commission achieved the referenced goals in FY 2014. It 

administered its agreement oversight responsibilities in a rapidly evolving container shipping 

industry that has seen new global operational networks through vessel sharing alliances, 

balancing potential benefits for cost savings and environmental efficiency with potential harm 

resulting from such alliance's concentrated decision-making which can affect capacity, sailing 

schedules and port calls. In addition, the FMC continued to serve an important role in balancing 

the facilitation of commerce with enforcement of the regulation of ocean carriers and other 

entities involved in ocean trade. 

The Commission regulates U.S. oceanborne foreign commerce valued at $944.5 billion and 

accounting for 30.3 million twenty-foot equivalent units (TEUs) of containerized import and 

export cargo. The FMC’s mission directly supports the President’s commitment to economic 

growth and job creation. Commission programs related to monitoring international oceanborne 

trade conditions support the President’s National Export Initiative by promoting access to foreign 

markets for American exports and efficient supply chains for the importation of goods for 

domestic production and consumption. 

The FMC’s Strategic Plan for 2014-2018 embraces our statutory mandate and agency objectives 

referenced above. Fiscal year 2014 was the sixth year in which there has been a 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 Strategic 

Plan. For the eleventh straight year, the FMC received an unqualified/unmodified ("clean") 

opinion on its financial statements. In the Management Assurances section (see page 23), I 
iv

confirm that the FMC has no material weaknesses, significant deficiencies, or instances of noncompliance with laws and regulations to report. The performance data described in this PAR 

was compiled and evaluated using the techniques described in this report for achieving the 

required level of credibility for the verification and validation of performance data relative to its 

intended use, and I have no reason to doubt the completeness or reliability of our performance 

data. Additionally, the 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. 

Thank you for your interest in the FMC. I salute Commission staff and each of my fellow 

Commissioners for their outstanding work. The Commission’s mandates can only be achieved 

through diligence and high-performance leadership. I look forward to working with my fellow 

Commissioners and staff to continue to serve the needs of the American public in the coming 

years. 

Sincerely, 

_______/s/___________________ 

Mario Cordero 

Chairman 

November 17, 2014 
Chapter One 

MANAGEMENT’S DISCUSSION

and ANALYSIS 

Fiscal Year 2014 
One Chapter Management’s Discussion and Analysis 

2

Mission and Organization 

The FMC: Our Purpose and History 

In 1961, the FMC was founded as an independent agency, charged with regulating U.S. foreign 

ocean commerce. Since its founding, the FMC has worked to ensure that neither the activities of 

liner shipping groups nor foreign government laws or regulations impose unfair costs on 

American exports, or on American consumers of imported goods. At the time it was founded, 

the Kennedy Administration and Congress decided that the tasks of regulating the activities of 

international liner shipping companies and promoting a healthy U.S. merchant marine should be 

pursued by separate agencies. By executive order (titled Reorganization Plan No. 7), two 

agencies were established: the Federal Maritime Commission and the Maritime Administration 

(MARAD). As an independent agency, the FMC was charged with regulating U.S. ocean 

commerce, and MARAD was formed to promote America’s merchant marine and oversee an 

emergency reserve of cargo ships for use in 

times of conflict. 

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 

Shipping Act of 1984 (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 Merchant Marine Act, 1920 or Foreign Shipping 

Practices Act of 1988 (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. 

Our Mission

To foster a fair, efficient, and 

reliable international ocean 

transportation system and to 

protect the public from unfair 

and deceptive practices.

Our Vision

Fairness and Efficiency in the 

U.S. Maritime Commerce
One Chapter Management’s Discussion and Analysis 

3

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 (PVOs) demonstrate adequate financial 

responsibility to indemnify passengers in the event of nonperformance of voyages or passenger 

injury or death. 

Our Organization 

The FMC is headed by a Commission composed of five commissioners nominated by the 

President and confirmed by the Senate, each serving a staggered five-year term. No more than 

three members of the Commission may be from the same political party. The President 

designates one commissioner to serve as Chairman. The post is currently held by Chairman 

Mario Cordero, a commissioner since 2011, who was designated Chairman on April 1, 2013. 

The Chairman serves as the Chief Executive and Administrative Officer of the agency. The 

commissioners of the FMC are Rebecca F. Dye, Richard A. Lidinsky, Jr., Michael A. Khouri and 

William P. Doyle. 

The FMC has a small workforce of highly experienced economists, attorneys and experts in 

ocean transportation, along with a small, efficient support staff. The FMC’s organizational units 

consist of: 

Offices of the Commissioners Office of the Inspector 

General (OIG)

Bureau of Certification and 

Licensing (BCL)

Office of the General Counsel 

(OGC)

Office of the Managing 

Director (OMD)

Bureau of Enforcement (BOE)

Office of the Secretary (OS) Office of Budget and Finance 

(OBF)

Bureau of Trade Analysis 

(BTA)

Office of Consumer Affairs 

and Dispute Resolution 

Services (CADRS)

Office of Human Resources 

(OHR)

Area Representatives (ARs)

Office of the Administrative 

Law Judges (OALJ)

Office of Information 

Technology

(OIT)

Office of Equal Opportunity 

Employment (EEO)

Office of Management 

Services (OMS)

The majority of FMC personnel are located in Washington, D.C., with additional personnel 

stationed in major U.S. seaport locations at Houston, Los Angeles, New York/New Jersey, New 

Orleans, Seattle/Tacoma, and South Florida. 
One Chapter Management’s Discussion and Analysis 

4

COMMISSIONER 

DYE

COMMISSIONER 

LIDINSKY

COMMISSIONER 

DOYLE

CHAIRMAN 

CORDERO

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 

Los Angeles 

New Orleans 

New York/New Jersey 

Seattle/Tacoma 

South Florida

FEDERAL MARITIME COMMISSION 

ORGANIZATION CHART 

as of 

SEPTEMBER 30, 2014

Administrative 

Direction

Technical Direction
One Chapter Management’s Discussion and Analysis 

5

Regulatory Responsibility and Oversight 

The FMC meets its primary regulatory responsibilities and ensures the integrity of the U.S. ocean 

transportation system by: 

• licensing qualified OTIs in the U.S. and 

ensuring that all OTIs (including 

foreign OTIs) are bonded or maintain 

other evidence of financial 

responsibility,

• processing and reviewing agreements, 

service contracts, and service 

arrangements pursuant to the 1984 

Act for compliance with statutory 

requirements; and reviewing common 

carriers’ privately published tariff 

systems for accessibility, accuracy, 

and reasonable terms,

• monitoring the activities of ocean 

common carriers, MTOs, ports and 

OTIs who operate in the U.S. foreign 

commerce to ensure just and 

reasonable practices,

• reviewing competitive activities of rate 

discussion agreements, carrier 

alliances, and other agreements 

among common carriers and/or 

MTOs,

• maintaining trade monitoring, 

enforcement, and dispute resolution 

programs to assist regulated entities in 

achieving compliance and to detect 

and remedy malpractices and 

violations of the prohibited acts set 

forth in section 10 of the 1984 Act,

• providing dispute resolution services to 

the industry and consumers,

• monitoring the laws and practices of 

foreign governments for any 

discriminatory or otherwise adverse 

impact on shipping conditions in U.S. 

trades, and imposing appropriate 

remedial action pursuant to section 19 

of the 1920 Act or FSPA,

• enforcing special regulatory requirements 

applicable to carriers owned or 

controlled by foreign governments, 

and 

• ensuring that PVOs demonstrate adequate 

financial responsibility to indemnify 

passengers in the event of 

nonperformance of voyages or 

passenger injury or death pursuant to 

46 U.S.C. §§ 44102 and 44103.

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 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. 
One Chapter Management’s Discussion and Analysis 

6

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, pursuant to 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 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 requires all carriers to make their rates, charges, and 

practices available in automated tariff systems available electronically to the public. Non-vesseloperating common carriers (NVOCCs) may assess the rates and charges published in their tariffs 

or may offer service arrangements or negotiated rate agreements 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 1984 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 oversees more than 6,600 regulated entities (PVOs, vessel-operating common carriers 

(VOCCs), MTOs, conferences, OTIs, etc.). The FMC ensures that all OTIs operating in the 

foreign commerce of the U.S. have established the required financial responsibility to protect 

shippers from financial loss. Additionally, the FMC licenses all U.S. OTIs and requires 

registration of all foreign NVOCCs serving U.S. trades. 

The FMC carries out its regulatory responsibilities by conducting informal and formal 

investigations, holding hearings, considering evidence, rendering decisions, issuing appropriate 

orders, and implementing regulations. A vigorous enforcement program is carried out – 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 activities are supported by the FMC’s management and support functions of 

information technology, financial management, human resources, and management services. 
One Chapter Management’s Discussion and Analysis 

7

Agency Mission Challenges 

The FMC is prepared to respond to the challenges facing the U.S. ocean transportation system 

and the Commission will continue to center its efforts on fostering a viable and vibrant liner 

shipping environment critical to the nation’s international trade and economic growth. As a small 

agency with a broad mandate, we manage our resources to enforce the Commission’s governing 

statutes and regulations when necessary to protect the shipping public, but stress voluntary 

compliance and use of dispute resolution techniques to resolve issues quickly with minimal cost. 

The Commission remains mindful of the importance of investing in information technology to 

improve efficiency and provide greater public access, while reducing costs over time. 

Improvement of, and investment in, the FMC’s information technology capability is currently the 

urgent priority for the Commission. 

Regulatory Review 

The FMC continues to review its regulatory processes to respond to new technology and 

changing economic conditions that alter the state of U.S. trades. As part of an ongoing Plan for 

Retrospective Review of Existing Rules, the FMC is in the process of reviewing, evaluating, and 

making recommendations concerning the filing and processing of agreements, quarterly 

monitoring reports, agreement meeting minutes, regulations governing service contracts, and 

NVOCC service arrangements. In fiscal years 2014 and 2015, the Commission will implement 

the recent rule changes to the passenger vessel program and seek alternative ways to enhance 

PVO monitoring procedures. The FMC is reviewing its User Fees and considering revisions that 

will update fees to realign them to current agency costs and, when warranted, remove or reduce 

fees. A review of Marine Terminal Operator Schedule regulations is planned to begin in FY 

2015. 

The FMC is moving forward with a Notice of Proposed Rulemaking (NOPR) for regulations 

regarding OTI licensing and financial responsibility requirements in light of changed industry 

circumstances. The NOPR has been issued after the Commission issued an Advance Notice of 

Proposed Rulemaking and received significant public comment from industry stakeholders. The 

FMC’s NOPR is the result of weighing public comments and industry and regulatory needs, and 

seeks to streamline OTI licensing, making licenses more easily verifiable and providing value to 

the shipping public. 

Alliance and Vessel Sharing Agreements 

The FMC monitors key trade lanes and reviews and analyzes the competitive impact of 

agreements with particular emphasis on issues of adequate vessel capacity and equipment 

availability. The difficult economic environment has caused significant developments with 

respect to the complexity and scope of agreements among vessel operating carriers that have 

been filed with the Commission. These agreements include highly coordinated alliance 

agreements and vessel sharing agreements among the largest container vessel operators in the 

world. The Commission weighs the potential benefits of cost savings and efficiencies for the 

agreement parties that result from coordinated deployment of new, larger vessels with potential 

harm from concentration of agreement control of matters such as ports of call and vessel 

schedules. Recent agreements filed with the Commission have cleared its review but with the 
One Chapter Management’s Discussion and Analysis 

8

imposition of specifically tailored reporting requirements. These monitoring reports will help 

ensure that the Commission can quickly identify conditions under an agreement that result in a 

reduction in competition that unreasonably reduces services or unreasonably raises shipping 

rates. 

Port Congestion and Security Initiatives 

In fostering an efficient ocean transportation system that promotes the growth of U.S. exports, 

the FMC is concerned about the growing problem of widespread congestion at U.S. ports and 

inland locations. The Commission is conducting forums on the issue at four major port gateways, 

with the goal of facilitating discussion among port representatives, industry stakeholders, and 

other interested parties and addressing the underlying causes of port congestion. 

The FMC continues to expand its participation in security initiatives as they relate to U.S. ocean 

commerce, specifically working to coordinate the use of available database systems with other 

agencies engaged in homeland security to improve identification of entities providing and 

utilizing maritime transportation services. The FMC will work with its Federal counterparts to 

monitor ocean commerce to protect the American public. 

Enforcement, Dispute Resolution and Public Information 

With the increasing pressure of industry consolidation, environmental concerns, port congestion 

and rising energy costs, the Commission is particularly sensitive to the impact on the nation’s 

exporters and their need for efficient ocean transportation in reaching foreign markets. The FMC 

will continue to monitor service contracts and tariffs in key trades as barometers of market cycles 

and shifts in the balance of supply and demand. The FMC will continue to expand and promote 

its compliance-focused program to monitor and audit ocean common carrier, NVOCC, and ocean 

freight forwarder operations. 

The FMC acts as an Alternate Dispute Resolution (ADR) provider in the event of disputes. The 

Commission will continue its efforts to further expand awareness of the Commission’s ADR 

services through internal and external education programs, training, and other appropriate 

methods. Use of mediation will be promoted to assist in resolving formal proceedings, service 

contract matters, and other significant disputes. Further, the Commission has participated in 

external consumer education webinars and is developing an educational webinar series to 

educate consumers and regulated entities regarding regulations, shipping trends and best 

practices, and the effective use of FMC services to resolve shipping disputes. 

The use of technology and dissemination of public information is increasingly important; webbased and social media-based accessibility to Commission services and information will 

facilitate public interaction, while adding greater efficiencies to internal business processes. 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. 
One Chapter Management’s Discussion and Analysis 

9

Encouraging Economic Growth 

Accomplishing the Commission’s strategic goals is critical to the President’s mission 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. Overall, the Commission will focus on actions that will facilitate 

and support the President’s National Export Initiative by promoting access to foreign markets for 

American exports and efficient supply chains for the importation of goods for domestic 

production and consumption. 

Program Performance Overview 

The FMC, like other Federal agencies, provides a 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 2014-2018 (Revised)

is available on the FMC’s website. The complete FY 2014 Program Performance Report is 

contained in Chapter 2, Program Performance.

During FY 2014, the Commission continued to refine its business practices. As economic 

conditions alter the state of our trades, regulations are revised to respond to new conditions. As 

part of an ongoing Plan for Retrospective Review of Existing Rules, the FMC reviewed, 

evaluated, and made recommendations concerning the filing and processing of agreements, 

quarterly monitoring reports, and agreement meeting minutes. A review of the regulations 

governing service contracts and NVOCC service arrangements continued in FY 2014. 

Achieving Strategic Goal Results 

The FMC has a specific process in place for measuring performance. Performance goals were 

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

to achieve the goals were identified. The agency then specified the outcome it believes will result 

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

performance. Fiscal year 2014 was the sixth year in which the FMC undertook to quantify and 

measure performance goals. The Commission’s actual performance in FY 2014 is compared 

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

2014-2018 (Revised). Taken together, performance measures and targets under each strategic 

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

closer to full achievement of its strategic goals. Our experience in the years 2010 through 2013 

enabled us to set realistic targets for FY 2014 in the revised strategic plan. 
One Chapter Management’s Discussion and Analysis 

10

Historical Performance of Strategic Goals and Objectives

Strategic Goal Objective Performance Measures 2012 2013 2014

Goal 1. Maintain an 

efficient and 

competitive 

international ocean 

transportation system.

1.Enhance efficiency 

in the trades through 

the use of asset 

sharing authority 

under the Shipping 

Act of 1984.*

Percentage share of U.S.

containerized cargo moving on 

other agreement parties' vessels in 

major U.S. trades.**

TARGET

19% 19.5% 39.5%

ACTUAL

18.7% 19.5% 45.6%

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

74% 76% 76.5%

ACTUAL

88% 78.9% 83.8%

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

70% 75% 75%

ACTUAL

90.2% 87.6% 71.3%

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.

TARGET

92% 93% 94%

ACTUAL

100% 100% 96.7%

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

74% 76% 76%

ACTUAL

79% 86% 93%

4. Impartially 

resolve international 

shipping disputes 

through ADR and 

adjudication.

Number of cases opened and 

closed each fiscal year using 

ombuds and ADR services to assist 

consumers in recovering goods or 

funds.

TARGET

700 800 825

ACTUAL

893 800 994

Percentage of formal complaints or 

Commission initiated orders of 

investigation completed within 2 

years of filing or Commission 

initiation.

TARGET

54% 56% 58%

ACTUAL

73% 91% 88%

* This objective was revised for FY 2014-2018. In FY 2013, the objective was: Identify and take action to address 

substantially anti-competitive conduct or unfavorable conditions in U. S. trades. The target for FY2013 was 19.5%.

** This measure was revised for FY 2014-2018. In FY 2013, the measure was: Percentage share of total U.S. 

International oceanborne trade moved by containership, as an indicator of liner shipping efficiency. The target for 

FY 2013 was 19.5%.
One Chapter Management’s Discussion and Analysis 

11

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

Strategic Management of Human Capital –The FMC continues to implement the strategic 

goals, strategies, and measures of results outlined in the 2012-2017 Human Capital Plan, 

Workforce Plan, and Accountability Plan in accordance with OPM’s Human Capital Assessment 

and Accountability Framework during FY 2014.

The 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 

incorporates organizational needs based on the annual OPM Federal Employee Viewpoint 

Survey results. 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.

Leadership is recognized as a critical asset, and at the close of FY 2014, three-fourths of the 

FMC’s executives were eligible for optional retirement. A systematic succession management 

process will be followed to allow the projection of our needs, prepare individuals to assume 

greater levels of responsibility, and to allow the agency to continue to maintain talented and 

knowledgeable leadership to meet the challenges of the future. As funds become available, 

training and development in leadership competencies within a technical context will be provided 

to prepare the next generation of leaders at the Commission. 

Competitive Sourcing - The FMC submitted its FY 2014 Federal Activities Inventory Reform 

Act (FAIR Act) Inventory to OMB in June 2014. The Inventory identified 68 of the agency’s 

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

been received. 

Improved Financial Performance - The FMC received an unqualified/unmodified (“clean’) 

opinion on its financial statements in FY 2014. The FMC will continue to strive to achieve 

unqualified/unmodified audit opinions. 

Expanded E-Government - During FY 2014, the FMC continued to expand and improve our 

public websites. Public feedback was used to increase the quality, clarity, and accessibility of 

content provided to the shipping public. Achievements in FY 2014 include: 

 Introducing an online payment option for paying fees and invoices through the 

Department of the Treasury's Pay.gov service;

 Launching a new OTI Licensing Updates webpage to provide quicker delivery of OTI 

notices. Publishing this information on our website saves the Commission Federal 

Register publication costs and allows the FMC to improve the formatting and 

organization of this information; and 
One Chapter Management’s Discussion and Analysis 

12

 Implementing a web services filing option for service contracts and NVOCC Service 

Arrangements (NSAs) that allows vessel-operating common carriers and non-vesseloperating common carriers to incorporate the filing of service contracts and amendments 

or NSAs into their contract management systems (CMS).

The FMC information technology capabilities have been enhanced in a number of areas. The 

multiyear transition to use Enterprise Content Management (ECM) technology for managing 

business activities and information needs is continuing to progress. FMC backup and recovery 

architecture was redesigned to a disk-based solution and has been implemented. Other FY 2014 

IT achievements include: 

 Initiated User Experience Modernization (UEM) of FMC desktop hardware and operating 

systems while simultaneously migrating/converting staff to a new cloud-based email and 

collaboration service; 

 Received a project start date of December 2014 from the Department of Homeland 

Security (DHS) for the DHS Continuous Diagnostics and Mitigation (CDM) project in 

accordance with OMB M-14-03/04; 

 Awarded a multi-year Enterprise Software Agreement with Microsoft; 

 Initiated modernization of the agency's network and server infrastructure; 

 Modernized the agency's copy/scan/print/fax infrastructure; and 

 Initiated upgrades to the agency's mobile phone hardware and capabilities. 

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 budget planning document by strategic 

goal to identify clearly the budgetary and staff resources that are committed to each goal. 
One Chapter Management’s Discussion and Analysis 

13

Financial Performance Overview

The FMC’s financial condition as of September 30, 2014 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 Fiscal Services (BFS), prepared the 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 USA, standards approved by the Federal Accounting Standards Advisory 

Board (FASAB), and OMB Circular A-136, Financial Reporting Requirements.

Source of Funds 

The FMC has single source funding, Salaries and Expenses, funded by an annual appropriation 

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

was granted. Congress approved FY 2014 appropriations for the FMC in the amount of 

$24,669,000 through P.L. 113-76, which is an increase of $1,829,575 above the FY 2013 final 

appropriation level. Additionally, the Commission had reimbursable budget authority of $29,030 

for work performed by FMC staff at 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. Collections are deposited directly 

into the Treasury General Fund. This information is captured in the Statement of Custodial 

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

Appropriation History 
One Chapter Management’s Discussion and Analysis 

14

Full-time Equivalent History 

The FMC’s FTE level is largely driven by our annual appropriation level; however, 

unanticipated vacancies in such offices as the Offices of the Commissioners have sometimes 

remained unfilled for lengthy periods of time, awaiting Presidential and Congressional action. 

The FMC has maintained a full complement of Commissioners since June 2011. 

The FTE level declined annually from 2004 through 2008, followed by increases in 2009 

through 2011. In 2013, the Commission’s FTE level dropped, and in 2014, it dropped further to 

the lowest level since the late 1970s. The agency experienced a number of unanticipated 

retirements and separations in 2014, resulting in a lower than anticipated FTE level. The agency 

has endeavored to develop the appropriate mix of staffing and other available means to ensure 

effective accomplishment of our mission. 
One Chapter Management’s Discussion and Analysis 

15

Uses of Funds by Expense Category 

During FY 2014, obligations against the FMC’s appropriation totaled $24,650,789, representing 

99.93% of the funding level. The Commission spent $24.651 million as follows: 68.5% for 

salaries and benefits, .5% for official travel expenses, and 31% for administrative expenses (e.g., 

rent, government and commercial contracts, telephones, printing, and supplies). The unobligated 

balance of $18,211 will remain available for legitimate increases to existing FY 2014 

obligations. 

16,878

134

7,639

17,254

103

5,472

$ 0

$5,000

$10,000

$15,000

$20,000

FY 2014 FY 2013

Salaries & Benefits Travel Administrative Expenses

Utilization of Funds by Expense Categories

($000s)

Audit Results 

The FMC again received an unqualified/unmodified opinion on its FY 2014 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. 
One Chapter Management’s Discussion and Analysis 

16

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 $4,511,354 as of 

September 30, 2014. This represents an increase 

from FY 2013 of $1,580,177. The FMC’s assets 

reported in the balance sheet are summarized in 

the accompanying table. 

The Fund Balance with Treasury of $4,105,128 

represents the FMC’s largest asset and 

represents 91% of the agency’s total assets. This 

is an increase of $1,484,381 from FY 2013. 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, 2014 was $1,520 for outstanding receivables billed to 

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

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

total assets as of September 30, 2014. The net value of $404,706 accounts for the depreciation of 

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

FY 2014 FY 2013

Fund Balance with Treasury $4,105,128 $2,620,747

Accounts Receivable $1,520 $273

Capital Assets $404,706 $345,626

Other $0 $0

Total Assets $4,511,354 $2,966,646

Summary of Assets as of 

September 30, 2014
One Chapter Management’s Discussion and Analysis 

17

Summary of Liabilities 

The FMC’s Liabilities totaled $2,101,645 

as of September 30, 2014, an increase of 

$44,526 total liabilities from FY 2013. 

The majority of the increase is related to 

additional obligations where the goods 

and/or services have yet to be received or 

vendor(s) have not submitted billings for 

delivered orders.

The FMC’s accounts payable as of September 30, 2014 was $529,765. This represents the funds 

owed for goods and services received from vendors. Federal employee benefits represent 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 - the amount of 

spending authority that remains unused at the end of 

the fiscal year and Cumulative Results of Operations 

- the cumulative excess of financing resources over 

expenses. The total net position for FY 2014 is an 

increase of $1,500,182 from FY 2013. The increase 

is attributed to obligations where the deliverables have not been received and/or vendors have 

not submitted invoices for delivered orders. 

Net position is the residual difference between assets and liabilities and is comprised of 

Unexpended Appropriations and Cumulative Results of Operations. Unexpended Appropriations 

represent the amount of unobligated and unexpended budget authority. Unobligated balances are 

the amount of appropriations or other authority remaining after deducting the cumulative 

obligations from the amount available for obligation. The Cumulative Results of Operations is

the net result of FMC’s operations for all active fiscal years. 

FY 2014 FY 2013

Accounts Payable $529,765 $383,966

Payroll Taxes $96,301 $104,709

Federal Employee Benefits $787 $7,112

Custodial Liabilities $1,753 $273

Accrued Liabilities $1,473,039 $1,561,059

Total Liabilities $2,101,645 $2,057,119

Summary of Liabilities as of 

September 30, 2014

FY 2014 FY 2013

Unexpended Appropriations $3,129,440 $1,820,115

Cumulative Results of Operation ($719,731) ($910,588)

Total Net Position $2,409,709 $909,527

Changes in Net Position Summary as of

September 30, 2014
One Chapter Management’s Discussion and Analysis 

18

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, 

the status of those resources at the 

end of the reporting period, and the 

relationship between the two. 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. During FY 2014, the FMC had total budgetary resources 

available of $25,181,530, representing an increase of $1,588,349 over 2013. The FMC incurred 

total obligations during FY 2014 of $24,794,326. The budgetary resources represent financial 

activity during the accounting period for the five active fiscal years.

FY 2014 FY 2013

Operational and Administrative $16,120,903 $16,102,932

Formal Proceedings $7,476,772 $7,603,646

Office of the Inspector General $314,541 $614,320

Office of Equal Employment 

Opportunity $193,139 $195,312

Total Net Cost $24,105,355 $24,516,210

Net Cost Summary as of 

September 30, 2014

FY 2014 FY 2013

Total Budgetary Resources $25,181,530 $23,593,181

Obligations Incurred $24,794,326 $23,007,870

Unobligated Balance Unavailable $368,993 $575,060

Unobligated Balance Available $18,211 $10,251

Total Status of Budgetary Resources $25,181,530 $23,593,181

September 30, 2014

Statement of Budgetary Resources as of
One Chapter Management’s Discussion and Analysis 

19

Controls, Systems, and Legal Compliance 

Internal controls are fundamental to the systems and processes that the FMC utilizes in managing 

its operations and achieving its strategic goals. As noted in the Chairman’s Statement of 

Assurance in the following section, the FMC does not have any material weaknesses or 

nonconformance to report for FY 2014. 

 

Federal Managers’ Financial Integrity Act 

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

controls that reasonably ensure that: (i) obligations and costs comply with applicable laws; (ii) 

assets are safeguarded against waste, loss, unauthorized use, or misappropriation; and (iii) 

revenues and expenditures are properly recorded and accounted for. This act encompasses 

program, operational, and administrative areas as well as accounting and financial management. 

The FMFIA requires the Chairman to provide an assurance statement of the adequacy of 

management controls and conformance of financial systems with Government wide standards, 

FMC managers are held accountable for efficient and effective performance of their duties in 

compliance with applicable laws and regulations, and for maintenance of the integrity of their 

activities through the use of controls. 

The Chairman has provided his annual assurance statement in this report. 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 Offices 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, any corrective actions for significant deficiencies 

identified in the agency’s information technology area would be 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 previously 

reached agreement on 13 OIG audit recommendations. During FY 2014, management took 

action with respect to all recommendations and remedied 11. These actions are pending review 

before OIG closure. 

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. Federal agencies are required to refer delinquent accounts in excess of 180 days to 

Treasury for collection. The collection of delinquent debts is conducted by the Bureau of Fiscal 
One Chapter Management’s Discussion and Analysis 

20

Services through the Cross-Servicing Program and Treasury Offset Program where the names 

and taxpayer identification numbers (TIN) are matched against the TINs of recipients of 

government payments. The balance owed to the government is deducted or offset from the 

payment to the entity to satisfy the debt. The goal of the FMC is to minimize the amount of 

delinquent debt owed to the government. 

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 2014, the FMC maintained a percentage 

of on-time payments of 97.7%. 

In FY 2014, the FMC paid $92.00 in interest payments as a result of four late payments. The 

FMC will continue to strive towards maintaining 100% on-time vendor payments in future years. 

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. Performance goals 

and processing times for completion of certain user fee activities changed dramatically since the 

review was performed, and in FY 2012, management requested updated information from 

bureaus and offices on current processing times for all user fee activities in order to calculate 

user fees which accurately reflected the agency’s costs. In FY 2014, the fees were updated based 

upon actual FY 2013 costs. The user fee working group is concluding its review and providing 

its recommendations for Commission consideration in early FY 2015. 

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 Fiscal 

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

submission, and has remained in compliance with all reporting thresholds. 
One Chapter Management’s Discussion and Analysis 

21

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

of 2008 

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 2014, the Inspector General completed the following audits and reviews: 

• Evaluation of FMC’s Compliance with the Federal Information Security 

Management Act FY 2013,

• Independent Auditors’ Report of FMC’s FY 2013 Financial Statements,

• FY2013 Financial Statement Management Letter, and

• Improper Payments Elimination and Recovery Act of 2010 (IPERA).

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 progress will 

be made to address the remaining open recommendations during FY 2015. 

During FY 2014, no significant deficiencies were identified. 

Treasury Assurance Statement - USA Spending Reconciliation

The FMC has a plan for the regular and appropriate input of data into the USA Spending 

repository. During FY 2014, data had been under-reported via USA Spending due to a staffing 

shortage and ramifications of sequestration, resulting in an error rate of 10%. However, the error 

rate and obligations unreported declined significantly throughout the fiscal year. The FMC's 

goal is to achieve 100% data input and, thus, a zero percent error rate. 
One Chapter Management’s Discussion and Analysis 

22

Freeze the Footprint 

Section 3 of OMB Memorandum 12-12, Promoting Efficient Spending to Support Agency 

Operations and OMB Management Procedures Memorandum 2013-02, the “Freeze the 

Footprint” policy implementing guidance, require agencies to report the total square footage 

associated with agency assets and the annual operating costs. While the FMC is not a CFO Act 

agency, it is committed to working in partnership with the General Services Administration to 

act as steward to government resources and better align the size of Federal real property assets 

with actual program needs. In FY 2014, the FMC relocated a field office from New York City to 

New Jersey. That move resulted in an increase from 839 square feet to 1,161 square feet, 

however it netted a cost savings due to the cost of the respective leases. During the same period, 

the FMC released approximately 570 square feet of headquarters space to GSA.1

 The FMC

identified further reductions and cost savings and will continue to evaluate its space needs going 

forward into FY 2015. 

Agency FY 2014 Square Footage 

Headquarters: 54,419 (53,132 with an additional 1,287 in joint use space) 

Houston: 463 

Los Angeles: 838 

New Orleans: 250 (space is provided at no cost by DHS-CBP) 

New York/New Jersey: 1,161 

Seattle/Tacoma: 383 

South Florida: 1,016

Total 58,530

Footprint Baseline Comparison 

FY 2012 (Baseline) FY 2013 FY 2014

Total Square Footage 58,208 58,208 58,5302

Reporting of O&M Costs – Owned and Direct Lease Buildings 

FY 2012 Reported 

Cost

FY 2013 Reported 

Cost

FY 2014 Reported 

Cost

Change in 

Baseline 2012-

2014

Operation and 

Maintenance Costs 

$2,994,981 $3,191,702 $3,234,499 $239,5183

 

1

 The FMC did not receive a credit for the release of HQ space from GSA in FY 2014. It is anticipated that the 

credit will be received in FY 2015. 

2

 This increase reflects the relocation of the NY/NJ field office to a more affordable location yielding a cost savings 

for the agency. 

3

 The FMC executed a new 10-year lease agreement, effective on November 1, 2012, accounting for increased 

leasing costs. The FMC did not acquire additional headquarter space. 
One Chapter Management’s Discussion and Analysis 

23

CHAIRMAN’S FMFIA STATEMENT OF ASSURANCE

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

maintaining an effective internal control and financial management system that meets 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 to determine whether the financial management system conforms to 

applicable financial systems requirements. 

Based on the results of this assessment, the FMC provides reasonable assurance that its internal 

controls over the effectiveness and efficiency of operations, reliable financial reporting and 

compliance with applicable laws and regulations as of September 30, 2014, 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 financial management system acquired 

from the Bureau of Fiscal Services, an integrated, internet-based financial system using Oracle 

Federal Financials, conforms to applicable financial systems requirements. 

________/s/_________________ 

Mario Cordero 

November 17, 2014 
Chapter Two 

PROGRAM PERFORMANCE 

INFORMATION 
Chapter Two Program Performance Information

25

Annual Performance Report

Introduction to Performance 

This report describes progress towards performance targets in 2014 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 Performance Section 

presents detailed information on the performance results of the FMC’s programs. The 

Performance Section is organized by the FMC’s strategic goals. The strategic goals represent the 

FMC’s mission and reflect the overall outcomes and objectives the agency is working to achieve. 

The strategic goals are then divided by objectives. The objectives are supported by performance 

measures. These measures track activities and determine if a program met targets for the fiscal 

year. When a performance target is unmet, an explanation is provided. The FMC’s strategic 

goals and objectives are as follows: 

Strategic Goal 1: Maintain an Efficient and Competitive International Ocean 

Transportation System. 

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

unfavorable conditions in U.S. trades. 

Strategic Goal 2: Protect the Public from Unlawful, Unfair and Deceptive Ocean 

Transportation Practices and Resolve Shipping Disputes. 

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

Objective: Prevent public harm through licensing and financial responsibility 

requirements. 

Objective: Enhance public awareness of agency resources, remedies, and regulatory 

requirements through education and outreach. 

Objective: Impartially resolve international shipping disputes through alternative dispute 

resolution and adjudication. 

The FMC quantitatively measured seven performance goals during the fiscal year. Six out of 

seven measures reached and/or exceeded FY 2014 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 procedures 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 improving the critical processes being measured. 

Table 3 provides a status update on unmet targets for FY 2010 through FY 2014. 
Chapter Two Program Performance Information

26

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 

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

have been advised to review this report. 

Table 1: Summary of Performance Measure Results – FY 2014 

Targeted performance compared to actual results. 

Strategic Goal No. 1: Maintain an efficient and competitive 

international ocean transportation system.

Performance Measure FY 2014

Target

FY 2014

Actual

Measure: Percentage share of U.S. containerized cargo moving on other agreement 

parties’ vessels in major U.S. trades.1

2014 Target: 39.5%

Validation: This outcome goal is measured by using information from several different 

commercial sources that collectively provide the number of loaded containers (TEUs) 

carried by vessels operating in selected major U.S. trade lanes, while separately 

enumerating the number of TEUs carried by each vessel for the ship operator's own 

account and the number of TEUs carried by the vessel on behalf of other vessel operating 

common carriers (i.e., on behalf of third-parties). The vessels' data are aggregated, and the 

total number of TEUs carried on behalf of third-parties is divided by the total number of 

TEUs carried in the trades selected. The measure is applied to the transpacific and 

transatlantic liner trades, which together account for about two-thirds of all U.S. container 

cargo. 

39.5% 45.6%

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

resolve shipping disputes.

Performance Measure FY 2014

Target

FY 2014

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.

2014 Target: 76.5%

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.

76.5% 83.8%

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.

2014 Target: 75%

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 

75% 71.3%
Chapter Two Program Performance Information

27

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. 

In FY 2014, the Commission achieved an overall completion rate of 71.3%. During 

the 1st quarter, the Commission processed 81.7% of applications received within the 

60-day target goal, exceeding the yearly target goal of 75%. As a direct result of the 

2 1⁄2 week long government-wide shutdown during the 1st quarter, a significant 

backlog of applications was generated at the initial processing stage that negatively 

impacted 2nd quarter completion rates. Applications completed during the 2nd

quarter declined to 48.5%. By the 3rd and 4th quarters, processing time improved, 

resulting in 82.8% and 70.6%, respectively, of applications processed. Absent the 

shutdown and the resulting disruption in processing OTI applications, the 

Commission was on track to meet or exceed its year-end target of 75%.

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.

2014 Target: 94%

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 semi-annual, monthly, and weekly 

unearned passenger revenue reports. This information is used to compare reported 

coverage against required coverage amounts.

94% 96.7%

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

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

2014 Target: 76%

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.

76% 93%

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

services assisting consumers to recover goods or funds.

2014 Target: 825

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

each such case opened and closed.

825 994

Measure: Percentage of formal complaints or Commission-initiated orders of 

investigation completed within two years of filing or Commission initiation.

2014 Target: 58%

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.

58% 88%

1 In consultation with OMB, beginning in FY 2014, this performance measure replaced the previous measure: 

“Percentage share of total U.S. international oceanborne trade moved by containership as an indicator of liner 

shipping efficiency.”
Chapter Two Program Performance Information

28

Table 2: Performance Measure Trends FY 2010-2014 

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

FY 

2013

Target

FY 

2013

Actual

FY 

2014

Target

FY201

4

Actual

Measure: Percentage share of 

total U.S. international 

oceanborne trade moved by 

containership as an indicator of 

liner shipping efficiency.1

18% 17.4% 18.5% 17.9% 19% 18.7% 19.5% 19.5% N/A N/A

Measure: Percentage share of 

U.S. containerized cargo 

moving on other agreement 

parties’ vessels in major U.S. 

trades.1

N/A N/A N/A N/A N/A N/A N/A N/A 39.5% 45.6%

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% 76% 78.9% 76.5% 83.8%

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% 75% 87.6% 75% 71.3%

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% 93% 100% 94% 96.7%

Measure: Percentage of 

attendees at agency sponsored 

outreach presentations that rate 

the program as “Useful” or 

“Extremely Useful” in their 

compliance efforts.2

70% 100% 75% N/A N/A N/A N/A 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% 76% 86% 76% 93%
Chapter Two Program Performance Information

29

Measure: Number of cases 

opened and closed each fiscal 

year using ombuds and ADR 

services assisting consumers to 

recover goods or funds.

550 556 625 631 700 893 800 800 825 994

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% 56% 91% 58% 88%

1

In consultation with OMB, beginning in FY 2014, this performance measure was replaced with a new measure: “Percentage share of 

total U.S. international oceanborne trade moved by containership as an indicator of liner shipping efficiency.” This new measure is a 

more accurate indicator and measure of the FMC’s strategic goal to maintain an efficient and competitive international ocean 

transportation system. 

2 In consultation with OMB, this performance measure 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

30

Table 3: Status of 2010 – 2014 Unmet Targets

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) Report Status Update: This measure is no 

longer tracked as it was replaced in FY 2014 with a new measure.

19% 18.7%

Performance Measure (2013) FY 2013

Target

FY 2013

Actual

Measure: Strategic Goal No. 1: Maintain An Efficient Competitive International Ocean 

Transportation System (2013)

All Targets All Targets 

Reached

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

transportation practices and resolve shipping disputes (2013)

All Targets All Targets 

Reached

Performance Measure (2014) FY 2014

Target

FY 2014

Actual

Measure: Strategic Goal No. 1: Maintain An Efficient Competitive International Ocean 

Transportation System (2014)

All Targets All Targets 

Reached

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

deceptive ocean transportation practices and resolve shipping disputes (2014)

75% 71.3%
Chapter Three 

FINANCIAL INFORMATION 
Chapter Three Financial Information

32

Message from the Chief Financial Officer 

I am pleased to present the financial section of this PAR. The accompanying financial statements 

and related notes fairly present the Commission’s financial position and were prepared in 

conformity with accounting principles generally accepted in the U.S., and requirements set forth 

in Office of Management and Budget (OMB) Circular No, A-136, Financial Reporting 

Requirements. 

During FY 2014, the FMC maintained its record of strong fiscal stewardship on behalf of the 

American people while achieving its mission to protect the shipping public and maintain a fair 

and competitive ocean transportation system. FY 2014 marks the 11th consecutive year that the 

FMC received an unqualified/unmodified (clean) opinion on our financial statements. This 

unqualified/unmodified 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. 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. 

FY 2014 included the following key accomplishments that demonstrate the effectiveness and 

efficiency of the FMC’s acquisition and financial functions: 

 Continuous record of no material weaknesses, significant control deficiencies, or 

nonconformance with the Federal Managers’ Financial Integrity Act and other applicable 

laws and regulations, 

 Collecting, in civil enforcement proceedings and user fees, more than $3,188,549 on 

behalf of the American public, 

 Continued focus on internal controls, as mandated by OMB Circular A-123, providing 

budget information in concise and reliable formats, and 

 Accurate and timely issuance of financial statements as required by the Accountability of 

Tax Dollars Act of 2002, which are prepared from, and fully supported by, the books and 

records of FMC in accordance with Generally Accepted Accounting Principles (GAAP), 

standards approved by the Federal Accounting Standards Advisory Board (FASAB), and 

OMB Circular A-136, Financial Reporting Requirements.

The FMC’s Office of Budget and Finance, and the entire agency, are committed to exemplary 

financial management and the enhancement of operational efficiency. This report demonstrates 

our commitment to fulfill our fiduciary responsibilities. I am proud of the role the FMC has 

played in being effective stewards protecting the interest of the American public. We will 

continue to strive to make improvements and maintain high financial management standards in 

FY 2015. 

Sincerely, 

_______/s/_________________ 

Vern W. Hill 

Chief Financial Officer 

November 17, 2014
Chapter Three Financial Information

33

PRINCIPAL FINANCIAL STATEMENTS 

The principal financial statements presented include: 

 Balance Sheet – Presents the combined amounts the agency had to use or distribute 

(assets) versus the amounts the agency owed (liabilities), and the difference between the 

two (new position), 

 Statement of Net Cost – Presents the annual cost of agency operations. The gross cost 

less any offsetting revenue is used to determine the net cost, 

 Statement of Changes in Net Position – Reports the accounting activities that caused the 

change in net position during the reporting period, 

 Statement of Budgetary Resources – Reports how budgetary resources were made 

available and the status of those resources at fiscal year-end, and 

 Statement of Custodial Activity – Reports collections and their disposition by the agency 

on behalf of the Treasury General Fund and one other federal agency. The FMC acts as 

custodian and does not have use of these funds. 

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

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

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

GAAP for Federal entities and 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. 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. 
34

 FEDERAL MARITIME COMMISSION

Washington, DC 20573 

November 14, 2014 

Office of Inspector General

Dear Chairman Cordero and Commissioners:

I am pleased to provide the attached audit report required by the Accountability for Tax 

Dollars Act of 2002 (ATDA), which presents an unmodified (clean) opinion on the Federal

Maritime Commission’s (FMC) fiscal year (FY) 2014 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. The Office of Inspector General (OIG) 

commends the FMC for the noteworthy accomplishment of attaining an unmodified opinion. 

The OIG contracted with 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, 2014; consider internal control over financial reporting; and test the 

agency’s compliance with certain provisions of applicable laws, regulations, and contracts that 

could have a direct and material effect on the financial statements. 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 FMC, 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 or significant deficiencies in internal control over financial 

reporting; and no reportable noncompliance issues with the laws and regulations tested. 

In connection with the contract, the OIG reviewed Regis & Associates’ report and 

related documentation and inquired of its representatives. Our review, as differentiated from an 

audit in accordance with U.S. generally accepted government auditing standards, was not 

intended to enable the OIG to express, and we do not express, opinions on FMC's financial 

statements or internal control; or conclusions on compliance with laws and regulations. Regis & 

Associates is responsible for the attached auditors' report dated November 12, 2014 and the 

conclusions expressed in the report. However, our review disclosed no instances where Regis & 

Associates did not comply, in all material respects, with generally accepted government 

auditing standards. 
35

The OIG would like to thank FMC staff; especially the Office of Budget and Finance, 

for their assistance in helping Regis & Associates and the OIG meet the audit objectives. 

 

Respectfully submitted, 

Jon Hatfield

Inspector General 

Attachment 

cc: Vern W. Hill, Managing Director and Chief Financial Officer 

Tyler J. Wood, Deputy General Counsel 

Karon E. Douglass, Director, Office of Budget and Finance 

Leonard L. Ballard, Senior Financial Specialist 
36

REPORT ON THE 

FINANCIAL STATEMENTS AUDIT 

OF FEDERAL MARITIME COMMISSION 

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2014 and 2013 

 MANAGEMENT CONSULTANTS & 

 CERTIFIED PUBLIC ACCOUNTANTS
37

REPORT ON THE 

FINANCIAL STATEMENTS AUDIT 

OF FEDERAL MARITIME COMMISSION 

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2014 and 2013 

TABLE OF CONTENTS 

Independent Auditors' Report ...................................................................................... 38-40 

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 Financial Statements ...................................................................................... 46-59 

Agency Comments on Draft Audit Report (Appendix A) .................................................60 
MANAGEMENT CONSULTANTS &

CERTIFIED PUBLIC ACCOUNTANTS

38

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

INDEPENDENT AUDITORS' REPORT 

The Honorable Mario Cordero 

Chairman 

Federal Maritime Commission 

Washington, DC 

Report on the Financial Statements 

We have audited the accompanying Financial Statement Report of the Federal Maritime 

Commission, which comprise the Balance Sheet as of September 30, 2014 and 2013, and the 

related Statement of Net Cost, Statement of Changes in Net Position, Statement of Budgetary 

Resources, Statement of Custodial Activity, and the related notes to the financial statements as of 

September 30, 2014 and 2013. 

Management's Responsibility for the Financial Statements 

Management is responsible for the preparation and fair presentation of these financial statements, 

in accordance with U.S. generally accepted accounting principles. This includes the design, 

implementation, and maintenance of internal control relevant to the preparation and fair 

presentation of the financial statements that are free from material misstatement, whether due to 

fraud or error. 

Auditor's Responsibility 

Our responsibility is to express an opinion on these financial statements, based on our audits. We 

conducted our audits in accordance with auditing standards generally accepted in the United 

States of America; the standards applicable to financial audits contained in U.S. Government 

Auditing Standards, issued by the Comptroller General of the United States; and Office of 

Management and Budget (OMB) Bulletin No. 14-02, Audit Requirements for Federal Financial 

Statements. Those standards and OMB Bulletin No. 14-02 require that we plan and perform the 

audit to obtain reasonable assurance about whether the financial statements are free from 

material misstatement. An audit involves performing procedures to obtain audit evidence about 

the amounts and disclosures in the financial statements. The procedures selected depend on the 

auditor's judgment, including the assessment of the risks of material misstatement of the 

financial statements, whether due to fraud or error. In making those risk assessments, the auditor 

considers internal control relevant to the agency's preparation and fair presentation of the 

financial statements, in order to design audit procedures that are appropriate in the 

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 

agency's internal control. Accordingly, we express no such opinion. An audit also includes 

evaluating the appropriateness of accounting policies used, and the reasonableness of significant 

estimates made by management, as well as evaluating the overall presentation of the financial 

statements. We believe that the audit evidence we have obtained is sufficient and appropriate to 

provide a basis for our opinion. 

Opinion 

In our opinion, the financial statements referred to above present fairly, in all material respects, 

the financial position of the Federal Maritime Commission as of September 30, 2014 and 2013;
MANAGEMENT CONSULTANTS &

CERTIFIED PUBLIC ACCOUNTANTS

39

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

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

then ended, in accordance with U.S. generally accepted accounting principles. 

Other Accompanying Information 

Required Supplementary Information 

U.S. generally accepted accounting principles require that the information in the other 

accompanying information be presented to supplement the basic financial statements. Such 

information, although not a part of the basic financial statements, is required by the Federal 

Accounting Standards Advisory Board, which considers it to be an essential part of financial 

reporting for placing the basic financial statements in an appropriate operational, economic, or 

historical context. We have applied certain limited procedures to the required supplementary 

information, in accordance with auditing standards generally accepted in the United States of 

America, which consisted of inquiries of management about the methods of preparing the 

information, and comparing the information for consistency with management's responses to our 

inquiries, the financial statements, and other knowledge we obtained during our audits of the 

financial statements. We do not express an opinion or provide any assurance on the information 

because the limited procedures do not provide us with sufficient evidence to express an opinion 

or provide any assurance. 

Restriction on Use of the Report on the Financial Statements 

This report is intended solely for the information and use of the management of the Federal 

Maritime Commission, the U.S. Department of the Treasury, OMB, and the U.S. Government 

Accountability Office, in connection with the preparation and audit of the Financial Report of the 

U.S. Government, and is not intended to be, and should not be, used by anyone other than these 

specified parties. 

Internal Control over Financial Reporting Specific to the Financial Statements

In planning and performing our audit of the financial statements as of, and for the years ended 

September 30, 2014 and 2013, we also considered Federal Maritime Commission' s internal 

control over the financial reporting (internal control) to determine the audit procedures that are 

appropriate in the circumstances, for the purpose of expressing our opinion on the financial 

statements, but not for the purpose of expressing an opinion of the effectiveness of Federal 

Maritime Commission's internal control. Accordingly, we do not express an opinion on the 

effectiveness of Federal Maritime Commission's internal control. 

Our consideration of internal control was for the limited purpose described in the preceding 

paragraph, and was not designed to identify all deficiencies in internal control that might be 

material weaknesses or significant deficiencies and; therefore, material weaknesses or 

significant deficiencies may exist that were not identified. We did not identify any deficiencies 

in internal control that we consider to be material weaknesses or significant deficiencies. 

A deficiency in internal control exists when the design or operation of a control does not allow 

management or employees, in their normal course of performing their assigned functions, to 

prevent, or detect and correct, misstatements on a timely basis. A material weakness is a 

deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable 
MANAGEMENT CONSULTANTS &

CERTIFIED PUBLIC ACCOUNTANTS

40

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

possibility that a material misstatement of the entity's financial statements will not be prevented, 

or detected and corrected, on a timely basis. 

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that 

is less severe than a material weakness, yet important enough to merit the attention by those 

charged with governance. There were no deficiencies in the accompanying financial statements 

considered to be significant deficiencies. 

Compliance and Other Matters Specific to the Financial Statements 

As part of obtaining reasonable assurance about whether Federal Maritime Commission's 

financial statements are free from material misstatement, we also performed tests of its 

compliance with certain provisions of laws, regulations, contracts, and agreements. However, 

we limited our tests of compliance to these provisions, and did not test compliance with all laws, 

regulations, and contracts applicable to the Federal Maritime Commission. 

The results of our tests of compliance disclosed no instances of non-compliance with laws, 

regulations, contracts, and agreements; or other matters that are required to be reported herein, 

under Government Auditing Standards and OMB Bulletin No. 14-02. 

Providing an opinion on compliance with laws, regulations and contracts was not an objective of 

our audit, and accordingly, we do not express such an opinion. 

Purpose of the Other Reporting Required by Government Auditing Standards 

The purpose of the communication provided in the Other Reporting Required by Government 

Auditing Standards section is solely to describe the scope of our testing of internal control and 

compliance, and the results of that testing, and not to provide an opinion on the effectiveness of 

the agency's internal control or on compliance. This communication is an integral part of an audit 

performed in accordance with U.S. generally accepted government auditing standards in 

considering internal control and compliance with provisions of laws, regulations, contracts, and 

agreements that have a material effect on the financial statements. Accordingly, this 

communication is not suitable for any other purpose. 

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 12, 2014 
41

The accompanying notes are an integral part of these financial statements 

FEDERAL MARITIME COMMISSION

BALANCE SHEET

AS OF SEPTEMBER 30, 2014 AND 2013

(IN DOLLARS)

2014 2013

Assets:

Intragovernmental:

Fund Balance With Treasury (Note 2) $ 4,105,128 $ 2,620,747

 Total Intragovernmental 4,105,128 2,620,747

 Accounts Receivable, Net (Note 3) 1,520 273

 Property, Equipment, and Software, Net (Note 4) 404,706 345,626

Total Assets $ 4,511,354 $ 2,966,646

Liabilities:

Intragovernmental:

Accounts Payable $ 104,117 $ 150,929

Employer Contributions and Payroll Taxes Payable 84,279 74,318

Unfunded FECA Liability (Note 5) - 200

Custodial Liability 1,753 273

 Total Intragovernmental $ 190,149 $ 225,720

 Accounts Payable 425,648 233,037

 Employee Contributions and Payroll Taxes Payable 12,022 30,391

 Unfunded Leave (Note 5) 1,123,416 1,249,227

 Federal Employee and Veterans' Benefits (Note 5) 787 6,912

 Accrued Liabilities 349,623 311,832

Total Liabilities $ 2,101,645 2,057,119

Net Position:

 Unexpended Appropriations - Other Funds $ 3,129,440 $ 1,820,115

Cumulative Results of Operations - Other Funds (719,731) (910,588)

Total Net Position $ 2,409,709 $ 909,527

Total Liabilities and Net Position $ 4,511,354 $ 2,966,646
42

The accompanying notes are an integral part of these financial statements 

FEDERAL MARITIME COMMISSION

STATEMENT OF NET COST

FOR THE YEARS ENDED SEPTEMBER 30, 2014 AND 2013

(IN DOLLARS)

2014 2013

Gross Program Costs:

Operational and Administrative 

 Gross Costs $ 16,120,903 $ 16,102,932

 Net Program Costs $ 16,120,903 $ 16,102,932

Formal Proceedings

 Gross Costs $ 7,505,802 $ 7,603,646

 Less: Earned Revenue (29,030) -

 Net Program Costs $ 7,476,772 $ 7,603,646

Office of Inspector General 

Gross Costs $ 314,541 $ 634,730

 Less: Earned Revenue - (20,410)

 Net Program Costs $ 314,541 $ 614,320

Office of Equal Employment Opportunity 

 Gross Costs $ 193,139 $ 195,312

 Net Program Costs $ 193,139 $ 195,312

Net Cost of Operations (Note 8) $ 24,105,355 $ 24,516,210
43

The accompanying notes are an integral part of these financial statements 

FEDERAL MARITIME COMMISSION

STATEMENT OF CHANGES IN NET POSITION

FOR THE YEARS ENDED SEPTEMBER 30, 2014 AND 2013

(IN DOLLARS)

2014 2013

Cumulative Results of Operations: 

 Beginning Balances $ (910,588) $ (858,894)

Budgetary Financing Sources:

 Appropriations Used 22,988,907 - 

23,046,477

Other Financing Sources (Non-Exchange):

 Imputed Financing Sources (Note 9) 1,307,305 - 

1,418,039

 Total Financing Sources 24,296,212 24,464,516

 Net Cost of Operations (24,105,355) (24,516,210)

 Net Change 190,857 (51,694)

Cumulative Results of Operations $ (719,731) $ (910,588)

Unexpended Appropriations:

 Beginning Balances $ 1,820,115 $ 2,759,038

Budgetary Financing Sources:

 Appropriations Received 24,669,000 24,100,000

 Other Adjustments (370,768) (1,992,446)

 Appropriations Used (22,988,907) (23,046,477)

Total Budgetary Financing Sources 1,309,325 (938,923)

Total Unexpended Appropriations $ 3,129,440 $ 1,820,115

Net Position $ 2,409,709 $ 909,527
44

The accompanying notes are an integral part of these financial statements 

FEDERAL MARITIME COMMISSION

STATEMENT OF BUDGETARY RESOURCES

FOR THE YEARS ENDED SEPTEMBER 30, 2014 AND 2013

(IN DOLLARS)

2014 2013

Budgetary Resources:

Unobligated Balance Brought Forward, October 1 $ 585,311 $ 1,285,050

Recoveries of Prior Year Unpaid Obligations 268,870 228,121

Other changes in unobligated balance (370,768) (783,029)

 Unobligated balance from prior year budget authority, net 483,413 730,142

 Appropriations (discretionary and mandatory) 24,669,000 22,839,425

 Spending authority from offsetting collections 29,117 23,614

Total Budgetary Resources $ 25,181,530 $ 23,593,181

Status of Budgetary Resources:

 Obligations Incurred (Note 11) $ 24,794,326 $ 23,007,870

 Unobligated balance, end of year:

Apportioned 18,211 10,251

Unapportioned 368,993 575,060

 Total unobligated balance, end of year 387,204 585,311

Total Budgetary Resources $ 25,181,530 $ 23,593,181

Change in Obligated Balance

 Unpaid Obligations:

 Unpaid Obligations, Brought Forward, October 1 $ 2,035,436 $ 2,969,594

 Obligations Incurred (Note 11) 24,794,326 23,007,870

 Outlays (gross) (22,842,968) (23,713,907)

 Recoveries of Prior Year Unpaid Obligations (268,870) (228,121)

Obligated Balance, End of Year $ 3,717,924 $ 2,035,436

Budget Authority and Outlays, Net:

 Budget authority, gross $ 24,698,117 $ 22,863,039

 Actual offsetting collections (29,117) (23,614)

 Budget Authority, net $ 24,669,000 $ 22,839,425

 Outlays, gross $ 22,842,968 $ 23,713,907

 Actual offsetting collections (29,117) (23,614)

 Outlays, net 22,813,851 23,690,293

 Distributed Offsetting Receipts (220,316) (219,812)

 Agency Outlays, net $ 22,593,535

 

, 

70

,4

81

$ 23,470,481
45

The accompanying notes are an integral part of these financial statements 

FEDERAL MARITIME COMMISSION

STATEMENT OF CUSTODIAL ACTIVITY 

AS OF SEPTEMBER 30, 2014 AND 2013

(IN DOLLARS)

2014 2013

Revenue Activity:

Sources of Cash Collections:

Miscellaneous

Fines, Penalties and Forfeitures $ 2,968,132 $ 3,102,188

User Fees 221,665 217,393

Total Cash Collections 3,189,797 3,319,581

Accrual Adjustments (1,248) (15)

Total Custodial Revenue (Note 13) 3,188,549 3,319,566

Disposition of Collections:

Transferred to Others (by Recipient) 3,188,414 3,321,712

 Increase/(Decrease) in Amounts Yet to be Transferred 1,480 -

 Refunds and Other Payments (2,825) (2,419)

 Retained by the Reporting Entity 1,480 273

Total Disposition of Collections 3,188,549 3,319,566

Net Custodial Activity $ - $ -
46

The accompanying notes are an integral part of these financial statements 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

SEPTEMBER 30, 2014

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 ocean borne transportation in 

the foreign commerce of the United States (U.S.). The principal statutes or statutory provisions 

administered by the FMC are the Shipping Act of 1984, as amended by the Ocean Shipping 

Reform Act (OSRA) of 1998; 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 FMC monitors the activities of ocean common carriers, marine terminal operators (MTOs), 

agreements among ocean common carriers and/or MTOs, ports and ocean transportation 

intermediaries (OTI), and (non vessel-operating common carriers and ocean freight forwarders) 

operating 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 remedy malpractices and 

violations of the 1984 Act; monitors the laws and practices of foreign governments, which could 

have a discriminatory or otherwise adverse impact on shipping conditions in U.S. trades; and 

imposes remedial action, as appropriate, pursuant to section 19 of the 1920 Act or FSPA; 

enforces special regulatory requirements applicable to carriers owned or controlled by foreign 

governments; processes and reviews agreements, service contracts, and service arrangements, 

pursuant to the 1984 Act, for compliance with statutory requirements; and reviews common 

carriers’ privately published tariff systems for accessibility and accuracy, as required by OSRA. 

The FMC also issues licenses to qualified OTIs in the U.S.; ensures that all OTIs are bonded or 

maintain other evidence of financial responsibility; and ensures that passenger vessel operators 

(PVOs) demonstrate adequate financial responsibility in case of nonperformance of voyages, or 

death or injury occurring to passengers. 

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

with the advice and consent of the Senate. The President designates one of the Commissioners to 

serve as Chairman, who is the chief executive and administrative officer of the FMC. 

The FMC reporting entity is comprised of General Funds and General Miscellaneous Receipts. 

General Funds are accounts used to record financial transactions arising under congressional 

appropriations or other authorizations to spend general revenues. 

General Fund Miscellaneous Receipts are accounts established for receipts of nonrecurring 

activity, such as fines, penalties, fees, and other miscellaneous receipts for services and benefits. 
47

The accompanying notes are an integral part of these financial statements 

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cont’d

The FMC makes custodial collections, and holds custodial receivables that are non-entity assets, 

which are transferred to Treasury at fiscal year end. 

The FMC has rights and ownership of all assets reported in these financial statements. FMC does 

not possess any non-entity assets. 

B. Basis of Presentation 

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

operations of FMC. The Balance Sheet presents the financial position of the agency. 

The Statement of Net Cost presents the agency’s operating results. The Statement of Changes in 

Net Position displays the changes in the agency’s equity accounts. The Statement of Budgetary 

Resources presents the sources, status, and uses of the agency’s resources; and follows the rules 

for the Budget of the United States Government. 

The statements are a requirement of the Chief Financial Officers Act of 1990, the Government 

Management Reform Act of 1994, and the Accountability of Tax Dollars Act of 2002. They have 

been prepared from, and are fully supported by, the books and records of FMC, in accordance 

with the hierarchy of accounting principles generally accepted in the United States of America; 

standards issued by the Federal Accounting Standards Advisory Board (FASAB); Office of 

Management and Budget (OMB) Circular A-136, Financial Reporting Requirements, as 

amended; and FMC accounting policies, which are summarized in this note. These statements, 

with the exception of the Statement of Budgetary Resources, are different from financial 

management reports, which are also prepared pursuant to OMB directives that are used to 

monitor and control FMC’s use of budgetary resources. The financial statements and associated 

notes are presented on a comparative basis. Unless specified otherwise, all amounts are presented 

in dollars. 

C. Basis of Accounting 

Transactions are recorded on both an accrual accounting basis and a budgetary basis. Under the 

accrual method, revenues are recognized when earned, and expenses are recognized when a 

liability is incurred, without regard to receipt or payment of cash. Budgetary accounting 

facilitates compliance with legal requirements on the use of Federal funds. 

D. Fund Balance with Treasury 

Fund Balance with Treasury is the aggregate amount of the FMC’s funds with Treasury, in 

expenditure and receipt accounts. Appropriated funds recorded in expenditure accounts are 

available to pay current liabilities and finance authorized purchases. 

FMC does not maintain bank accounts of its own, has no disbursing authority, and does not 

maintain cash held outside of Treasury. Treasury disburses funds for FMC, on demand. 
48

The accompanying notes are an integral part of these financial statements 

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cont’d

E. Accounts Receivable 

Accounts receivable consists of amounts owed to FMC by other Federal agencies and the general 

public. Amounts due from Federal agencies are considered fully collectible. An allowance for 

uncollectible accounts receivable from the public is established when, based upon a review of 

outstanding accounts and the failure of all collection efforts, management determines that 

collection is unlikely to occur, considering the debtor’s ability to pay. 

F. Property, Equipment, and Software 

Property, equipment, and software represent furniture, fixtures, equipment, and information 

technology hardware and software, which are recorded at original acquisition cost, and are 

depreciated or amortized using the straight-line method over their estimated useful lives. Major 

alterations and renovations are capitalized, while maintenance and repair costs are expensed as 

incurred. FMC’s capitalization threshold is $25,000 for individual purchases. Property, 

equipment, and software acquisitions that do not meet the capitalization criteria are expensed 

upon receipt. 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

Software 5

G. Advances and Prepaid Charges 

Advance payments are generally prohibited by law. There are some exceptions, such as 

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 represent 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 
49

The accompanying notes are an integral part of these financial statements 

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cont’d

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 by 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 

Federal Employees’ Compensation Act (FECA), 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. Non-vested leave is expensed when used. Any liability for sick leave that is accrued, but 

not taken by a Civil Service Retirement System (CSRS)-covered employee is transferred to the 

Office of Personnel Management (OPM) upon the retirement of that individual. Credit is given 

for sick leave balances in the computation of annuities upon the retirement of Federal Employees 

Retirement System (FERS)-covered employees, effective at 50%, beginning FY 2010; and 100% 

in 2014. 

J. Accrued and Actuarial Workers’ Compensation 

The 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, but 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. 
50

The accompanying notes are an integral part of these financial statements 

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cont’d

K. Retirement Plans 

FMC employees participate in either the CSRS, or the FERS. The employees who participate in 

CSRS are beneficiaries of FMC matching contribution, equal to 7% 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. Both CSRS and FERS employees may participate 

in the Federal Thrift Savings Plan (TSP). FERS employees receive an automatic agency 

contribution equal to 1% of pay, and FMC matches any employee contribution up to an 

additional 4% of pay. For FERS participants, FMC also contributes the employer’s matching 

share of Social Security. 

FERS employees and certain CSRS reinstatement employees are eligible to participate in the 

Social Security program after retirement. In these instances, FMC remits the employer’s share of 

the required contribution. 

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 recognizes the offsetting revenue as imputed financing 

sources to the extent these expenses will be paid by OPM. 

FMC does not report on its financial statements, information pertaining to the retirement plans 

covering its employees. Reporting amounts, such as plan assets, accumulated plan benefits, and 

related unfunded liabilities, if any, are the responsibility of the OPM, as the administrator. 

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 the FMC with certain 

cost factors that estimate the true cost of providing the post-retirement benefit to current 

employees. The FMC recognizes a current cost for these and Other Retirement Benefits (ORB) 

at the time the employee's services are rendered. The ORB expense is financed by OPM, and 

offset by the FMC, through the recognition of an imputed financing source. 
51

The accompanying notes are an integral part of these financial statements 

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cont’d

M. Use of Estimates 

The preparation of the accompanying financial statements in accordance with Generally 

Accepted Accounting Principles requires management to make certain estimates and 

assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual 

results could differ from those estimates. 

N. Imputed Costs/Financing Sources 

Federal government entities often receive goods and services from other Federal government 

entities without reimbursing the providing entity for all of the related costs. In addition, Federal 

government entities also incur costs that are paid, in total or in part, by other entities. An imputed 

financing source is recognized by the receiving entity for costs that are paid by other entities. 

FMC recognized imputed costs and financing sources in fiscal years 2014 and 2013 to the extent 

directed by accounting standards. 

O. Contingencies 

Liabilities are deemed contingent when the existence or amount of the liability cannot be 

determined with certainty, pending the outcome of future events. FMC recognizes contingent 

liabilities in the accompanying balance sheet and statement of net cost, when it is both probable 

and can be reasonably estimated. FMC discloses contingent liabilities in the notes to the financial 

statements when the conditions for liability recognition are not met, or when a loss from the 

outcome of future events is more than remote. In some cases, once losses are certain, payments 

may be made from the Judgment Fund maintained by the U.S. Treasury, rather than from the 

amounts appropriated to FMC for agency operations. Payments from the Judgment Fund are 

recorded as an “Other Financing Source” when made. 

P. Reclassifications 

Certain fiscal year 2013 balances have been reclassified, re-titled, or combined with other 

financial statement line items for consistency with the current year presentation. 
52

The accompanying notes are an integral part of these financial statements 

NOTE 2- FUND BALANCE WITH TREASURY

Fund Balance With Treasury account balances as of September 30, 2014 and 2013 are as 

follows: 

 2014 2013

Fund Balances: 

 General Funds $ 4,105,128 $ 2,620,747

Total $ 4,105,128 $ 2,620,747

Status of Fund Balance with Treasury:

 Unobligated Balance

 Available $ 18,211 $ 10,251

 Unavailable 368,993 575,060

 Obligated Balance Not Yet Disbursed 3,717,924 2,035,436

Total $ 4,105,128 $ 2,620,747

No discrepancies exist between the Fund Balance reflected on the Balance Sheet, and the 

balances in the Treasury accounts. 

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 

fund balance on hand (see also Note 12). 
53

The accompanying notes are an integral part of these financial statements 

NOTE 3- ACCOUNTS RECEIVABLE 

Accounts receivable balances as of September 30, 2014 and 2013, are as follows: 

2014 2013

With the Public

 Miscellaneous Accounts Receivable $ 1,389 $ 233

 Interest Receivable - 6

 Penalties and Fines Receivable 131 34

Total Accounts Receivable $ 1,520 $ 273

The accounts receivable is primarily made up of fines and penalties assessed for violations of 

shipping regulations. Historical experience has indicated that the majority of the receivables are 

collectible. There are no material uncollectible accounts as of September 30, 2014 and 2013. 

NOTE 4- PROPERTY, EQUIPMENT, AND SOFTWARE 

The Schedule of Property, Equipment, and Software as of September 30, 2014 is as follows: 

Major Class

Acquisition

Cost

Accumulated

Amortization/

Depreciation

Net Book

Value

Software-in-Development $ 325,307 $ - $ 325,307

Leasehold Improvements 225,000 225,000 -

Furniture & Equipment 341,800 262,401 79,399

Total $ 892,107 $ 487,401 $ 404,706

Schedule of Property, Equipment, and Software as of September 30, 2013 is as follows: 

Major Class

Acquisition

Cost

Accumulated

Amortization/

Depreciation

Net Book

Value

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

Furniture & Equipment 315,251 202,704 112,547

Software-in-Development 210,579 - 210,579

Total $ 750,830 $ 405,204 $ 345,626
54

The accompanying notes are an integral part of these financial statements 

NOTE 5- LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

The liabilities of FMC as of September 30, 2014 and 2013 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. 

 2014 2013

Intragovernmental – FECA $ - $ 200

Unfunded Leave 1,123,416 1,249,227

Actuarial FECA 788 6,912

Custodial Liabilities 1,753 273

Total Liabilities Not Covered by Budgetary Resources $ 1,125,957 $ 1,256,612

Total Liabilities Covered by Budgetary Resources 975,688 800,507

Total Liabilities $ 2,101,645 $ 2,057,119

FECA and the Unemployment Insurance liabilities represent the unfunded liability for actual 

workers’ compensation claims, and unemployment benefits paid on FMC’s behalf and payable to 

the DOL. FMC also records an actuarial liability for future workers’ compensation claims, based 

on the liability to benefits paid (LBP) ratio provided by DOL, and multiplied by the average of 

benefits paid over three years. 

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

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

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

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

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

NOTE 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 total operating lease expense 

for fiscal years 2014 and 2013 were $3,433,323 and $2,985,156, respectively. The lease 

locations and terms are listed below: 

Location Term Lease Expiration Date

Washington, DC 10 years 10/31/2022 

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 

Iselin, New Jersey 10 years 03/15/2024 
55

The accompanying notes are an integral part of these financial statements 

NOTE 6- OPERATING LEASES Cont'd 

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

options. The schedule of future minimum payments for the term of the leases are as follows: 

Fiscal Year Totals

2015 $ 3,279,642

2016 3,313,304

2017 3,347,341

2018 3,552,070

2019 3,589,939

Thereafter 10,939,500

Total Future Minimum Payments $ 28,021,796

NOTE 7- CONTINGENT LIABILITIES 

FMC records commitments and contingent liabilities for legal cases in which payment has been 

deemed probable, and for which the amount of potential liability has been estimated, including 

certain judgments that have been issued against the agency. There was one legal action pending 

against FMC, with an estimated possible liability of $300,000 in FY 2013. The FMC has no 

knowledge of lawsuits/investigations arising from FMC operations in FY 2014. 
56

The accompanying notes are an integral part of these financial statements 

NOTE 8- INTRAGOVERNMENTAL COSTS AND EXCHANGE REVENUE 

Intragovernmental costs and revenue represent exchange transactions between FMC and other 

Federal government entities, and are in contrast to those with non-Federal entities (the public). 

Such costs and revenue are summarized as follows: 

 2014 2013

Operational and Administrative 

 Intragovernmental Costs $ 3,793,654 $ 4,592,510

 Public Costs 12,327,249 11,510,422

Net Program Costs 16,120,903 16,102,932

Formal Proceedings

Intragovernmental Costs 1,021,862 1,304,358

Public Costs 6,483,940 6,299,288

Total Program Costs 7,505,802 7,603,646

Less: Intragovernmental Earned Revenue (29,030) -

Net Program Costs 7,476,772 7,603,646

Office of Inspector General

Intragovernmental Costs 67,586 115,130

Public Costs 246,955 519,600

Total Program Costs 

Costs

314,541 634,730

Less: Intragovernmental Earned Revenue - (20,410)

Net Program Costs 314,541 614,320

Office of Equal Employment Opportunity

Intragovernmental Costs 20,323 19,624

Public Costs 172,816 175,688

Net Program Costs 193,139 195,312

Total Intragovernmental Costs 4,903,425 6,031,622

Total Public Costs 19,230,960 18,504,998

Total Costs 24,134,385 24,536,620

Less: Total Intragovernmental Earned Revenue (29,030) (20,410)

Net Cost of Operations $ 24,105,355 $ 24,516,210
57

The accompanying notes are an integral part of these financial statements 

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 fiscal years ended September 30, 2014 and 2013, imputed financing was as 

follows: 

 2014 2013

Office of Personnel Management $ 1,307,305 $ 1,418,039

 Total Imputed Financing Sources $ 1,307,305 $ 1,418,039

NOTE 10- BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE 

UNITED STATES GOVERNMENT 

The President’s budget that will include fiscal year 2014 actual budgetary execution information 

has not yet been published. The President’s budget is scheduled for publication in February 

2015, and will be found at the OMB Web site: http://www.whitehouse.gov/omb/. The 2015 

Budget of the United States Government, with the "Actual" column completed for 2014, 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 in 2014 and 2013 

consisted of the following: 

 2014 2013

Direct Obligations, Category A $ 24,765,296 $ 22,987,460

Reimbursable Obligations, Category A 29,030 20,410

 Total Obligations Incurred $ 24,794,326 $ 23,007,870

Category A apportionments distribute budgetary resources by fiscal quarters. 

NOTE 12- UNDELIVERED ORDERS AT THE END OF THE PERIOD 

For the fiscal years ended September 30, 2014 and 2013, budgetary resources obligated for 

undelivered orders amounted to $2,742,237 and $1,234,929, respectively. 
58

The accompanying notes are an integral part of these financial statements 

NOTE 13- CUSTODIAL ACTIVITY 

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

collecting entity, FMC measures and reports cash collections and refunds. These collections are 

reported as custodial activity on the “Statement of Custodial Activity”. The type of cash 

collected is for fines, penalties, and administrative fees. A small portion is for interest on the past 

due fines. Another part of the custodial activity is application for licenses issued to qualified 

Ocean Transportation Intermediaries (OTI’s) in the U.S., Commission reviews, petitions, status 

changes, and special permission fees. 

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

 2014 2013

Fines, Penalties, and Forfeitures $ 2,968,132 $ 3,102,188

General Fund Proprietary Receipts (user fees) 221,665 217,393

Accrual Adjustments (1,248) (15)

 Total Custodial Collections $ 3,188,549 $ 3,319,566

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. 

2014 2013

Resources Used to Finance Activities

Budgetary Resources Obligated

Obligations Incurred

Spending Authority from Offsetting Collections and Recoveries

$ 24,794,326

(297,987)

$ 23,007,870

(251,735)

Offsetting Receipts (220,316) (219,812)

Obligations Net of Offsetting Collections and Recoveries 24,276,023 22,536,323

Other Resources

Imputed Financing from Costs Absorbed by Others 1,307,305 1,418,039

Net Other Resources Used to Finance Activities 1,307,305 1,418,039

Total Resources Used to Finance Activities

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

 Operations

25,583,328

(1,560,406)

 23,954,632

 404,990

Total Resources Used to Finance the Net Cost of Operations 24,022,922 24,359,352

 Components of Net Cost of Operations that will not Require or 

 Generate Resources in the Current Period 82,433 156,858

Net Cost of Operations $ 24,105,355 $ 24,516,210
59

The accompanying notes are an integral part of these financial statements 

NOTE 15- SUBSEQUENT EVENTS 

In preparing these financial statements, management has evaluated events and transactions for 

potential recognition or disclosure through November 12, 2014, which is the date the financial 

statements are available to be issued. 
60

The accompanying notes are an integral part of these financial statements 

APPENDIX A - 

FEDERAL MARITIME COMMISSION COMMENTS ON 

DRAFT AUDIT REPORT
61

The accompanying notes are an integral part of these financial statements 
Chapter Three Financial Information

62

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 ocean borne 

transportation in the foreign commerce of the 

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

statutory provisions administered by the 

Commission are the Shipping Act of 1984, as 

amended by the Ocean Shipping Reform Act 

of 1998, 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), agreements among ocean 

common carriers and/or MTOs, ports and 

ocean transportation intermediaries (nonvessel-operating common carriers and ocean 

freight forwarders) operating in the U.S. 

foreign commerce to ensure they maintain just 

and reasonable practices; maintains trade 

monitoring, enforcement and dispute 

resolution programs designed to assist 

regulated entities in achieving compliance and 

to detect and remedy malpractices and 

violations of the 1984 Act; monitors the laws 

and practices of foreign governments which 

could have a discriminatory or otherwise 

adverse impact on shipping conditions in U.S. 

trades, and imposes remedial action, as 

appropriate, pursuant to section 19 of the 1920 

Act or FSPA; enforces special regulatory 

requirements applicable to carriers owned or 

controlled by foreign governments; processes 

and reviews agreements, service contracts, and 

service arrangements pursuant to the 1984 Act 

for compliance with statutory requirements; 

and reviews common carriers’ privately 

published tariff systems for accessibility and 

accuracy, as required by OSRA. 

The Commission also issues licenses to 

qualified ocean transportation intermediaries 

(OTIs) in the U.S., ensures that all OTIs are 

bonded or maintain other evidence of financial 

responsibility, and ensures that passenger 

vessel operators (PVOs) demonstrate adequate 

financial responsibility in case of 

nonperformance of voyages or death or injury 

occurring to passengers. 

The FMC is composed of five Commissioners 

appointed for five-year terms by the President 

with the advice and consent of the Senate. The 

President designates one of the Commissioners 

to serve as Chairman, who is the chief 

executive and administrative officer of the 

FMC. 
Chapter Three Financial Information

63

The FMC reporting entity is comprised of 

General Funds and General Miscellaneous 

Receipts. 

General Funds are accounts used to record 

financial transactions arising under 

congressional appropriations or other 

authorizations to spend general revenues. 

General Fund Miscellaneous Receipts are 

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

and other miscellaneous receipts for services 

and benefits. 

The FMC makes custodial collections and 

holds custodial receivables that are non-entity 

assets and are transferred to Treasury at fiscal 

year end. 

The FMC has rights and ownership of all 

assets reported in these financial statements. 

FMC does not possess any non-entity assets. 

B. Basis of Presentation 

The financial statements have been prepared to 

report the financial position and results of 

operations of FMC. The Balance Sheet 

presents the financial position of the agency. 

The Statement of Net Cost presents the 

agency’s operating results; the Statement of 

Changes in Net Position displays the changes 

in the agency’s equity accounts. The Statement 

of Budgetary Resources presents the sources, 

status, and uses of the agency’s resources and 

follows the rules for the Budget of the United 

States Government. 

The statements are a requirement of the Chief 

Financial Officers Act of 1990, the 

Government Management Reform Act of 1994 

and the Accountability of Tax Dollars Act of 

2002. They have been prepared from, and are 

fully supported by, the books and records of 

FMC in accordance with the hierarchy of 

accounting principles generally accepted in the 

United States of America, standards issued by 

the Federal Accounting Standards Advisory 

Board (FASAB), Office of Management and 

Budget (OMB) Circular A-136, Financial 

Reporting Requirements, as amended, and 

FMC accounting policies which are 

summarized in this note. These statements, 

with the exception of the Statement of 

Budgetary Resources, are different from 

financial management reports, which are also 

prepared pursuant to OMB directives that are 

used to monitor and control FMC’s use of 

budgetary resources. The financial statements 

and associated notes are presented on a 

comparative basis. Unless specified 

otherwise, all amounts are presented in dollars. 

C. Basis of Accounting 

Transactions are recorded on both an accrual 

accounting basis and a budgetary basis. Under 

the accrual method, revenues are recognized 

when earned, and expenses are recognized 

when a liability is incurred, without regard to 

receipt or payment of cash. Budgetary 

accounting facilitates compliance with legal 

requirements on the use of federal funds. 

D. Fund Balance with Treasury 

Fund Balance with Treasury is the aggregate 

amount of the FMC’s funds with Treasury in 

expenditure and receipt accounts. 

Appropriated funds recorded in expenditure 

accounts are available to pay current liabilities 

and finance authorized purchases. 

E. Accounts Receivable 

Accounts receivable consists of amounts owed 

to FMC by other Federal agencies and the 

general public. Amounts due from Federal 

agencies are considered fully collectible. An 

allowance for uncollectible accounts 

receivable from the public is established when, 

based upon a review of outstanding accounts 

and the failure of all collection efforts, 

management determines that collection is 

unlikely to occur considering the debtor’s 

ability to pay. 
Chapter Three Financial Information

64

F. Property, Equipment, and Software 

Property, equipment and software represent 

furniture, fixtures, equipment, and information 

technology hardware and software which are 

recorded at original acquisition cost and are 

depreciated or amortized using the straightline method over their estimated useful lives. 

Major alterations and renovations are 

capitalized, while maintenance and repair costs 

are expensed as incurred. FMC’s 

capitalization threshold is $25,000 for 

individual purchases. Property, equipment, and 

software acquisitions that do not meet the 

capitalization criteria are expensed upon 

receipt. 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

Software 5

G. Advances and Prepaid Charges 

Advance payments are generally prohibited by 

law. There are some exceptions, such as 

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 represent 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 Federal Employees’ 

Compensation Act (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 
Chapter Three Financial Information

65

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 sick leave that is accrued but not 

taken by a Civil Service Retirement System 

(CSRS)-covered employee is transferred to the 

Office of Personnel Management (OPM) upon 

the retirement of that individual. Credit is 

given for sick leave balances in the 

computation of annuities upon the retirement 

of Federal Employees Retirement System 

(FERS)-covered employees effective at 50% 

beginning FY 2010 and 100% in 2014. 

J. Accrued and Actuarial Workers’ 

Compensation 

The FECA administered by the U.S. 

Department of Labor (DOL) addresses all 

claims brought by the FMC employees for onthe-job injuries. The DOL bills each agency 

annually as its claims are paid, but 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 matching 

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. 

Both CSRS and FERS employees may 

participate in the federal Thrift Savings Plan 

(TSP). FERS employees receive an automatic 

agency contribution equal to one percent of 

pay and FMC matches any employee 

contribution up to an additional four percent of 

pay. For FERS participants, FMC also 

contributes the employer’s matching share of 

Social Security.

FERS employees and certain CSRS 

reinstatement employees are eligible to 

participate in the Social Security program after 

retirement. In these instances, FMC remits the 

employer’s share of the required contribution. 

FMC recognizes the imputed cost of pension 

and other retirement benefits during the 

employees’ active years of service. OPM 

actuaries determine pension cost factors by 

calculating the value of pension benefits 

expected to be paid in the future and 

communicate these factors to FMC for current 

period expense reporting. OPM also provides 

information regarding the full cost of health 

and life insurance benefits. FMC recognized 

the offsetting revenue as imputed financing 

sources to the extent these expenses will be 

paid by OPM. 

FMC does not report on its financial 

statements information pertaining to the 

retirement plans covering its employees. 

Reporting amounts such as plan assets, 

accumulated plan benefits, and related 

unfunded liabilities, if any, is the responsibility 

of the OPM, as the administrator.

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 the 
Chapter Three Financial Information

66

FMC with certain cost factors that estimate the 

true cost of providing the post-retirement 

benefit to current employees. The FMC 

recognizes a current cost for these and Other 

Retirement Benefits (ORB) at the time the 

employee's services are rendered. The ORB 

expense is financed by OPM, and offset by the 

FMC through the recognition of an imputed 

financing source.

M. Use of Estimates 

The preparation of the accompanying financial 

statements in accordance with generally 

accepted accounting principles requires 

management to make certain estimates and 

assumptions that affect the reported amounts 

of assets, liabilities, revenues, and expenses. 

Actual results could differ from those 

estimates. 

N. Imputed Costs/Financing Sources 

Federal Government entities often receive 

goods and services from other Federal 

Government entities without reimbursing the 

providing entity for all the related costs. In 

addition, Federal Government entities also 

incur costs that are paid in total or in part by 

other entities. An imputed financing source is 

recognized by the receiving entity for costs 

that are paid by other entities. FMC 

recognized imputed costs and financing 

sources in fiscal years 2014 and 2013 to the 

extent directed by accounting standards. 

O. Contingencies 

Liabilities are deemed contingent when the 

existence or amount of the liability cannot be 

determined with certainty pending the 

outcome of future events. FMC recognizes 

contingent liabilities in the accompanying 

balance sheet and statement of net cost, when 

it is both probable and can be reasonably 

estimated. 

FMC discloses contingent liabilities in the 

notes to the financial statements when the 

conditions for liability recognition are not met 

or when a loss from the outcome of future 

events is more than remote. In some cases, 

once losses are certain, payments may be made 

from the Judgment Fund maintained by the 

U.S. Treasury rather than from the amounts 

appropriated to FMC for agency operations. 

Payments from the Judgment Fund are 

recorded as an “Other Financing Source” when 

made. 

P. Reclassification 

Certain fiscal year 2013 balances have been 

reclassified, retitled, or combined with other 

financial statement line items for consistency 

with the current year presentation. 
Chapter Three Financial Information

67

NOTE 2. FUND BALANCE WITH TREASURY 

Fund balance with Treasury account balances as of September 30, 2014 and 2013 were as 

follows: 

2014 2013

Fund Balances:

Appropriated Funds $ 4,105,128 $ 2,620,747 

Total $ 4,105,128 $ 2,620,747 

Status of Fund Balance with Treasury:

Unobligated Balance

 Available $ 18,211 $ 10,251 

 Unavailable 368,993 575,060 

Obligated Balance Not Yet Disbursed 3,717,924 2,035,436 

Total $ 4,105,128 $ 2,620,747 

No discrepancies exist between the Fund Balance reflected on the Balance Sheet and the 

balances in the Treasury accounts. 

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 

fund balance on hand (see also Note 11).

NOTE 3. ACCOUNTS RECEIVABLE

Accounts receivable balances as of September 30, 2014 and 2013, were as follows: 

2014 2013

With the Public

Miscellaneous Account Receivable $ 1,389 $ 233 

Interest Receivable - 6 

Penalties and Fines Receivable 131 34 

Total Accounts Receivable $ 1,520 $ 273 
Chapter Three Financial Information

68

The accounts receivable is primarily made up of billings for services rendered, user fees, and 

payroll related collections. 

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

no material uncollectible accounts as of September 30, 2014 and 2013. 

NOTE 4. PROPERTY, EQUIPMENT, AND SOFTWARE 

Schedule of Property, Equipment, and Software as of September 30, 2014 

Major Class 

Acquisition 

Cost

Accumulated 

Amortization/

Depreciation

Net Book 

Value

Leasehold Improvements $ 225,000 $ 225,000 $ - 

Furniture & Equipment 341,800 262,401 79,399

Software-in-Development 325,307 - 325,307

Total $ 892,107 $ 487,401 $ 404,706

Schedule of Property, Equipment, and Software as of September 30, 2013

Major Class

Acquisition 

Cost

Accumulated 

Amortization/

Depreciation

Net Book 

Value

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

Furniture & Equipment 315,251 202,704 112,547

Software-in-Development 210,579 - 210,579

Total $ 750,830 $ 405,204 $ 345,626
Chapter Three Financial Information

69

NOTE 5. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

The liabilities for FMC as of September 30, 2014 and 2013 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. 

2014 2013

Intragovernmental – FECA $ - $ 200

Unfunded Leave 1,123,416 1,249,227

Actuarial FECA 788 6,912

Custodial Liabilities 1,753 273

Total Liabilities Not Covered by Budgetary Resources 1,125,957 $ $ 1,256,612

Total Liabilities Covered by Budgetary Resources 975,688 800,507

Total Liabilities $ 2,101,645 $ 2,057,119

FECA and the Unemployment Insurance liabilities represent the unfunded liability for actual 

workers compensation claims and unemployment benefits paid on FMC’s behalf and payable to 

the 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

70

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 total operating lease expense 

for fiscal years 2014 and 2013 were $3,433,323 and $2,985,156, respectively. The lease 

locations and terms are listed below: 

Location Term Lease Expiration Date

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

Washington, DC 10 years 10/31/2022

Iselin, New Jersey 10 years 03/15/2024

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

options. The schedule of future payments for the term of the leases is as follows: 

Fiscal Year Totals

2015 $ 3,279,642 

2016 3,313,304 

2017 3,347,341 

2018 3,552,070 

2019 3,589,939 

Thereafter 10,939,500 

Total Future Minimum Payments $ 28,021,796 

NOTE 7. CONTINGENT LIABILITIES 

FMC records commitments and contingent liabilities for legal cases in which payment has been 

deemed probable, and for which the amount of potential liability has been estimated, including 

certain judgments that have been issued against the agency. There was one legal action pending 

against FMC, with an estimated possibly liability of $300,000 in FY 2013. The FMC has no 

knowledge of lawsuits/investigations arising from FMC operations in FY 2014. 
Chapter Three Financial Information

71

NOTE 8. INTRAGOVERNMENTAL COSTS AND EXCHANGE REVENUE 

Intragovernmental costs and revenue represent exchange transactions between FMC and other 

federal government entities, and are in contrast to those with non-federal entities (the public). 

Such costs and revenue are summarized follows: 

2014 2013

Operational and Administrative

 Intragovernmental Costs $ 3,793,654 $ 4,592,510

 Public Costs 12,327,249 11,510,422

 Net Program Costs 16,120,903 16,102,932

Formal Proceedings

 Intragovernmental Costs 1,021,862 1,304,358

 Public Costs 6,483,940 6,299,288

 Total Program Costs 7,505,802 7,603,646

 Less: Intragovernmental Earned Revenue (29,030) -

 Net Program Costs 7,476,772 7,603,646

Office of Inspector General

 Intragovernmental Costs 67,586 115,130

 Public Costs 246,955 519,600

 Total Program Costs 314,541 634,730

 Less: Intragovernmental Earned Revenue - (20,410)

 Net Program Costs 314,541 614,320

Office of Equal Employment Opportunity

 Intragovernmental Costs 20,323 19,624

 Public Costs 172,816 175,688

 Net Program Costs 193,139 195,312

Total Intragovernmental costs 4,903,425 6,031,622

Total Public Costs 19,230,960 18,504,998

 Total Costs 24,134,385 24,536,620

Less: Total Intragovernmental Earned Revenue (29,030) (20,410)

 Total Net Cost $ 24,105,355 $ 24,516,210
Chapter Three Financial Information

72

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 fiscal years ended September 30, 2014 and 2013 imputed financing was as 

follows: 

2014 2013

Office of Personnel Management $ 1,307,305 1,418,039 $ 

Total Imputed Financing Sources $ 1,307,305 1,418,039 $ 

NOTE 10. BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE 

UNITED STATES GOVERNMENT 

The President’s Budget that will include fiscal year 2014 actual budgetary execution information 

has not yet been published. The President’s Budget is scheduled for publication in February 

2015 and can be found at the OMB Web site: http://www.whitehouse.gov/omb/. The 2015 

Budget of the United States Government, with the "Actual" column completed for 2013, 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 in 2014 and 2013 

consisted of the following: 

2014 2013

Direct Obligations, Category A $ 24,765,296 $ 22,987,460

Reimbursable Obligations, Category A 29,030 20,410

Total Obligations Incurred $ 24,794,326 $ 23,007,870

Category A apportionments distribute budgetary resources by fiscal quarters. 

NOTE 12. UNDELIVERED ORDERS AT THE END OF THE PERIOD 

For the fiscal years months ended September 30, 2014 and 2013, budgetary resources obligated 

for undelivered orders amounted to $2,742,237 and $1,234,929, respectively. 
Chapter Three Financial Information

73

NOTE 13. CUSTODIAL ACTIVITY 

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

collecting entity, FMC measures and reports cash collections and refunds. These collections are 

reported as custodial activity on the "Statement of Custodial Activity." The type of cash 

collected is for fines, penalties and administrative fees. A small portion is for interest on the past 

due fines. Another part of the custodial activity is application for licenses issued to qualified 

Ocean Transportation Intermediaries (OTI’s) in the U.S., commission reviews, petitions, status 

changes and special permission fees. 

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

2014 2013

Fines, Penalties, and Forfeitures $ 2,968,132 3,102,188$ 

General Fund Proprietary Receipts (User fees) 221,665 217,393

Accrual Adjustments (1,248) (15)

Total Custodial Collections $ 3,188,549 3,319,566$ 

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. 

2014 2013

 Obligations Incurred 24,794,326$ 23,007,870$ 

 Spending Authority from Offsetting Collections and Recoveries (297,987) (251,735)

 Offsetting Receipts (220,316) (219,812)

 Net Obligations 24,276,023 22,536,323

 Imputed Financing from Costs Absorbed by Others 1,307,305 1,418,039

 Net Other Resources Used to Finance Activities 1,307,305 1,418,039

 25,583,328 23,954,362

 (1,560,406) 404,990

 24,022,922 24,359,352

Generate Resources in the Current Period 82,433 156,858

Net Cost of Operations 24,105,355$ 24,516,210$ 

 Components of Net Cost of Operations that will not Require or 

 Total Resources Used to Finance the Net Cost of Operations 

Resources Used to Finance Activities

Budgetary Resources Obligated

Other Resources

 Total Resources Used to Finance Activities 

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

Operations 

NOTE 15. SUBSEQUENT EVENTS 

In preparing these financial statements, management has evaluated events and transactions for 

potential recognition or disclosure through November 12, 2014, which is the date the financial 

statements are available to be issued. 
Chapter Four

OTHER INFORMATION 
75 

FEDERAL MARITIME COMMISSION

Washington, DC 20573 

October 15, 2014 

Office of Inspector General

TO: Chairman Cordero 

Commissioner Lidinsky 

Commissioner Doyle 

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) [or Agency Financial 

Report (AFR)] for fiscal year (FY) 2014. 

This year, the Office of Inspector General (OIG) has identified two management and 

performance challenges for inclusion in the FMC’s FY 2014 PAR: information technology 

security and workplace satisfaction. 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 / 

AFR that is due by November 17, 2014. 

 

 Jon Hatfield, Inspector General 

Attachment 

cc: Vern Hill, Managing Director 
76 

Office of Inspector General - Fiscal Year 2014 Management 

Challenges

The Management Challenge: Information Technology Security 

Information technology (IT) security, while improving each year at the Federal Maritime 

Commission (FMC), continues to be a challenge for the agency. One of the primary challenges 

the FMC shares with other Federal government departments and agencies is the evolving and 

growing threats to government information systems. Risks to information and communication 

systems include insider threats from disaffected or careless employees and business partners, 

escalating and emerging threats from around the globe, the ease of obtaining and using hacking 

tools, the steady advance in the sophistication of attack technology, and the emergence of new 

and more destructive attacks. 

The Government Accountability Office (GAO) releases a High Risk List every two years to 

identify the high risk areas that exist government-wide. Since 1997, GAO’s High Risk List has 

identified the protection of the Federal government’s information systems as a risk related to 

many government agencies. According to GAO, the underlying cause for this weakness in IT 

security controls is that agencies have not fully or effectively implemented agency-wide 

information security programs. An agency-wide security management program should be in 

place to establish a framework and continuing cycle of activity to manage security risks, develop 

security policies, assign responsibilities, and monitor the adequacy of computer security related 

controls. The program should also represent the foundation for an entity’s security control 

structure and a reflection of senior management’s commitment to addressing security risks. 

The FMC maintains information about its employees and stakeholders and has a responsibility to 

protect the information from loss, unauthorized disclosure or misuse. Properly protecting this 

information is critical to prevent harm, embarrassment, and negative impact to the agency, its 

employees and stakeholders. In addition, among the challenges the FMC and other Federal 

agencies face is protecting personally identifiable information (PII) of its employees and 

stakeholders. PII is any information about an individual that is maintained by an agency, 

including information that can be used to distinguish or trace an individual’s identity, such as 

name, social security number, date and place of birth, mother’s maiden name, or biometric 

records; and any other information that is linked or linkable to an individual, such as medical, 

educational, financial and employment information. Failure to protect PII can lead to identity 

theft, a serious and increasing problem in the United States. 

In recent years, some Federal agencies have reported the loss or theft of equipment containing 

personal information or unauthorized access to information on agency systems. The Privacy Act 

of 1974 and the E-Government Act of 2002 establish Federal agency responsibilities to protect 

personal information, and to ensure its security. Given the importance of protecting 

stakeholders’ and employees’ PII, the FMC emphasizes information security through annual 

security awareness training and establishment of policy documents, such as Commission orders, 

managing directives and Office of Information Technology (OIT) policies. 
77 

Agency Progress in Addressing the Challenge: 

The FMC has taken important steps to establish and implement an effective information security 

program. In the OIG’s Evaluation of the FMC’s Compliance with the Federal Information 

Security Management Act (FISMA) FY 2013, the OIG found the FMC had successfully deployed 

complexity settings on the servers supporting the major applications. It is also noteworthy to 

recognize the OIG’s FY 2013 FISMA evaluation did not report any new deficiencies. Although 

there were no new deficiencies, the OIG suggested in the FY 2013 FISMA evaluation report that 

the FMC consider purchasing specialized computer software to better enable the agency to 

manage and respond to risks. As a result of this suggestion, the agency purchased the software 

to identify vulnerabilities, outdated patches and virus definitions, among other benefits. The 

FMC is also partnering with the Department of Homeland Security (DHS) to complete a 

vulnerability assessment of the FMC’s systems and implementation of DHS’ dashboard for 

continuous monitoring of IT systems. 

The OIG is currently conducting the FY 2014 FISMA evaluation and continued progress is being 

made by the agency to address security weaknesses; the final report is expected to be issued in 

November 2014. In addition, the OIG has completed the fieldwork for the Evaluation of the 

FMC’s FY 2014 Privacy and Data Protection. The FMC has made significant progress on the 

establishment of an effective privacy program and compliance with applicable Federal privacy 

laws and regulations. This privacy evaluation report is also expected to be issued in November 

2014. 

Challenge Ahead:

Continued advancements in computer and communication technologies will likely result in 

ongoing challenges protecting FMC’s systems. In 2012, GAO reported the number of cyber 

security computer incidents reported by Federal agencies to the Federal information security 

incident center during a six year period had increased by nearly 680 percent. These incidents 

included unauthorized access to systems; improper use of computing resources; and the 

installation of malicious software, among others. To respond to this increasing challenge, it will 

be critical for the agency to prioritize security controls and enhancements based on risk, as well 

as continue to properly plan and partner with Federal agencies to protect vital agency resources. 

The Management Challenge: Workplace Satisfaction

The OIG identified workplace satisfaction at the FMC as a management challenge for the first 

time in 2013. In December 2012, the Partnership for Public Service (PPS), a nonprofit 

organization that works to revitalize the Federal government, released its rankings for the Best 

Places to Work in the Federal Government. The December 2012 report ranked the FMC the 

second lowest of small agencies. The PPS uses data from the Office of Personnel Management’s 

(OPM) Federal Employee Viewpoint Survey to rank agencies according to a Best Places to Work

index score. OPM surveys agency employees and then the agencies are measured on overall 

employee satisfaction, as well as 10 workplace categories, such as effective leadership, employee 

skills/mission match, pay, teamwork and work/life balance. 
78 

As a result of the OIG’s identification of this management challenge last year, in September 

2014, the OIG initiated an independent evaluation of the FMC’s workplace environment. 

Through a competitive bid process, the OIG contracted with an organization with expertise in 

this area to evaluate the FMC’s workplace environment. The objectives are to evaluate: (1) the 

historical and most recent OPM Federal Employee Viewpoint Survey results for the FMC; (2) 

the effectiveness of the agency to implement corrective action related to workplace issues 

requiring improvement; (3) and provide recommendations for improvement, where warranted. 

The OIG’s evaluation should result in a detailed assessment of the strengths and weaknesses of 

the FMC’s workplace environment. The evaluation will involve analysis of current and historical 

Viewpoint survey results; several workshops and one-on-one meetings with staff at all levels of 

the agency; as well as an action planning session with management officials able to effect 

positive change within the agency. The OIG expects to complete the evaluation and issue the 

final report in late 2014. 

Agency Progress in Addressing the Challenge: 

In January 2013, the PPS provided a briefing to senior agency officials and made 

recommendations on how to proceed, based on best practices from other Federal government 

agencies. Subsequently, the agency’s senior executives produced a Statement of Principles 

(Statement), signed and released on May 22, 2013.The Statement asserts the senior executives’ 

commitment “to work together to create a positive working environment at the Commission that 

is achieved through communication, recognition, empowerment and accountability.” The 

agency also drafted in May 2013 a “Plan of Action to Improve FMC Working Environment & 

Employee Morale.” Although the draft plan of action appears to recognize completion of several 

action items, as of October 2014, the plan of action has not been finalized and issued to FMC 

staff. 

There have been several changes at the FMC in the last couple of years; among these are changes 

in senior leadership, including a newly designated Chairman in April 2013 and a new Managing 

Director. Since the 2012 OPM Viewpoint survey, there has been some improvement in the 

survey results. Specifically, the 2013 OPM survey results showed a 7.8 point increase in the 

FMC’s Best Places to Work Index Score, from 34.7 to 42.5. Although the agency has 

experienced some improvement in the workplace satisfaction results since 2012, the agency’s 

relative ranking to other small agencies continues to languish; the FMC was ranked 27 out of 29 

small agencies in 2013. 

The Challenge Ahead: 

The OIG recommends the agency utilize the results of the Viewpoint surveys, the OIG’s 

anticipated workplace evaluation final report, and other relevant information to finalize the “Plan 

of Action to Improve FMC Working Environment & Employee Morale.” In addition, the OIG’s 

evaluation and other information should provide the agency with the workplace strengths to 

capitalize on, and weaknesses to improve. Lastly, inclusion of staff at all levels in the agency to 

help develop measurable and transparent objectives will increase the likelihood of success. 
Chapter Four Other Information

79

Comments on IG-Identified Management and Performance 

Challenges

The Inspector General identified two management and performance challenges facing the FMC. 

The FMC's responses to these challenges are outlined below: 

I Information Technology Security 

 Management agrees that with the growing number of cyber attacks on Federal 

government networks, the FMC will have to deal with a state of "continuous transition" in its 

efforts to provide cyber security and information privacy. The agency has taken a number of 

actions to mitigate risk and its overall readiness in 2014. The FMC has implemented a software 

solution that provides a centralized risk management platform for enterprise security intelligence 

through continuous compliance monitoring and electronic IT asset inventory. Additionally, in 

order to improve the agency's ability to identify and mitigate cyber threats, the FMC is 

implementing, in coordination with the Department of Homeland Security (DHS), a Continuous 

Diagnostics and Mitigation (CDM) Program. The CDM Program will enable the agency to 

expand its capabilities for continuous monitoring of its IT system infrastructure. The agency has 

also transitioned its Certification and Accreditation (C&A) process to the Risk Management 

Framework (RMF). Staff continues to work and has made significant progress on development 

of an IT plan for the next several years, weighing risk and prioritizing needs to protect our vital 

computer and communications technologies. 

II Workplace Satisfaction 

The Commission is committed to performing its mission and providing quality service to 

the public. We recognize that performance is improved when employees are satisfied with their 

employer and the work that they do. The FMC participates in the Federal Employees Viewpoint 

Survey (FEVS) to gather information on employee satisfaction. The FEVS, administered by the 

Office of Personnel Management (OPM), measures employee satisfaction and changes in 

employee engagement and workplace environment. 

As recently as 2009, the FMC ranked highly in the FEVS. In 2012, however, the FMC’s 

results indicated that employee satisfaction had decreased significantly. The recent years’ results 

continue to demonstrate lower employee satisfaction from the 2009 ranking. Some of the 

decrease may be attributable to factors outside of the Commission’s control, such as payroll 

freezes, sequestration, and budget issues. The FMC can, however, positively influence 

workplace satisfaction in terms of leadership, transparency, matching skills to its mission, and 

work/life balance, and it is in those areas that the FMC seeks improvement. In 2014, 86 

employees, comprising 81% of the Commission’s staff, completed the FEVS. Staff reports that 

they feel the work they do is important4

 and that they are held accountable for achieving results.5 

Despite this, employees’ overall workplace satisfaction can and must be improved. 

 

4

 This number consistently remains high among responders. In 2013, 82% responded that they feel the work they do 

is important. In 2014, 81% responded affirmatively. 

5

 This figure remained at 77% for both 2013 and 2014 FEVS results. 
Chapter Four Other Information

80

The FMC’s Chairman, Commissioners, and the senior executive service staff (SES) work 

closely on efforts to improve workplace satisfaction. Chairman Cordero has identified 

improvement of employee morale and workplace satisfaction as a priority objective. The 

Chairman initiated all hands meetings with the staff to provide updates on important 

Commission initiatives and improve transparency in Commission actions and general 

communications. The Chairman issued invitations to all staff to meet one-on-one with him to 

address any workplace matters they wished to discuss. These meetings, while not mandatory, 

facilitated an open dialogue with employees about Commission goals and workplace conditions. 

 

Senior leadership continues to address workplace satisfaction. On May 22, 2013, the SES 

issued a Statement of Principles, which was endorsed by Chairman Cordero. Since then, all SES 

have updated their SES contracts to incorporate the principles into their performance plans, and 

the Statement of Principles was discussed with staff at the office and bureau level. The SES has 

focused efforts on improving the agency’s commitment to work together towards creating a 

positive working environment, fostering an environment where communication and employee 

engagement is welcome and encouraged at all levels, increasing employees’ sense of 

empowerment, and providing additional training and recognition for jobs well done. The SES 

meets regularly to revisit and reinforce their commitment to these leadership principles. Senior 

leadership continues to encourage involvement and provide opportunities for participation in 

agency sponsored programs. 

As the Inspector General mentions above, workplace satisfaction has been identified as a 

management challenge and the Office of the Inspector General has undertaken an independent 

evaluation of the FMC’s workplace environment with the assistance of an external organization 

specializing in this area. The evaluation process has begun, and senior leadership welcomes the 

feedback and information that will result from the process. FMC senior leaders are participating 

fully in the evaluation, and are actively encouraging employee participation at all levels. 

Concerted effort will continue to improve workplace satisfaction at the Commission. 
Chapter Four Other Information

81

Improper Payments Information Act 

Narrative Summary of Implementation Efforts for FY 2014 

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 2014, 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 2014 with 

percentage forecasts through FY 2017. 

Improper Payments Information Act Reduction Outlook FY 2014 - 2017

(millions)

 Program FY 14

 Outlays

 FY14

 IP %

 FY14

 IP $

 FY15

 %

 FY16

 %

 FY17

 %

 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
Chapter Four Other Information

82

V. The FMC has a segregation of duties in place to ensure that all invoices processed for 

payment are legitimate expenses of the agency. All IPAC invoices are received by BFS 

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 COR 

indicating that goods/services have been received by the Commission and approves the 

invoice for payment. BFS 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 BFS with the period of performance. Once 

the payment authorization has been processed by OBF, the payment information is 

verified by a second OBF staff member. At that point, the invoice is electronically 

returned to BFS 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. 

 

VI. The Chairman, as the Chief Administrative Officer of the FMC, is ultimately responsible 

for the efficient and effective utilization of the spending 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 disbursements made by BFS 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 by 

BFS in Parkersburg, WV. 

 

b. In 2014, the FMC requested funding to maintain the contract between the FMC and 

BFS for financial support and platform access to the Oracle database through 

Oracle’s Discoverer portal. 

 

VIII. There are no statutory or regulatory barriers that limit the agency’s ability to take 

corrective actions to address any improper payments. 

 

IX. The IPAC system does not allow an agency to refuse or charge back a collection from 

another agency it deems improper or incorrect. 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 Information

83

Summary of Financial Statement Audit 

Summary of Financial Statement Audit

Audit opinion Unmodified

Restatement No

Material Weakness Beginning 

Balance New Resolved Consolidated Ending Balance

None 0 0 0 0 0