Office of Inspector General 

Semiannual Report to Congress 

Covering the Period 

October 1, 2016 – March 31, 2017 

FEDERAL MARITIME COMMISSION
 
 

 

 

 

 

 

 

FEDERAL MARITIME COMMISSION 

Washington, DC 20573 

April 28, 2017 

Office of Inspector General 

Dear Acting Chairman Khouri and Commissioners Dye, Cordero, Doyle and Maffei: 

The following report is submitted in accordance with Section 5 of the Inspector General 

Act of 1978, as amended. This report summarizes the activities of the Federal Maritime 

Commission (FMC) Office of Inspector General (OIG) for the period October 1, 2016 to March 

31, 2017. 

During this reporting period, the OIG issued the Independent Auditors’ Report of the 

FMC’s FY 2016 Financial Statements (A17-01) and the report on the Evaluation of the FMC’s 

Compliance with the Federal Information Security Management Act FY 2016 (A17-02). The OIG 

also completed a risk assessment of the FMC’s purchase card program, and a review of the FMC’s 

reporting and performance requirements regarding improper payments. All of these assignments 

are discussed in more detail in the enclosed report. 

The OIG continues to appreciate the cooperation and courtesies provided by the FMC’s 

leadership and staff. 

Respectfully submitted, 

Jon Hatfield 

Inspector General 

Enclosure 
	 	 	

   

   

   

       

         

       

   

   

   

     

                     

         

                            

          

          

                  

          

            

Table of Contents

Transmittal Letter
 

EXECUTIVE SUMMARY...............................................................................................................................1
 

FEDERAL MARITIME COMMISSION............................................................................................................1
 

OFFICE OF INSPECTOR GENERAL ................................................................................................................2
 

OFFICE OF INSPECTOR GENERAL ACTIVITIES ..............................................................................................3
 

Completed Audit and Evaluation .............................................................................................................................. 3
 

Other Reviews........................................................................................................................................................... 4
 

Hotline and Investigations........................................................................................................................................ 5
 

OTHER ACTIVITIES .....................................................................................................................................6
 

Review of Legislation ................................................................................................................................................ 6
 

Council of the Inspectors General on Integrity and Efficiency (CIGIE) Activities...................................................... 6
 

SUMMARY OF INSPECTOR GENERAL REPORTING REQUIREMENTS.............................................................7
 

TABLE I ‐ Summary of Reports with Corrective Actions Outstanding for More than 6 Months..................8
 

TABLE II ‐ Listing of Reports Issued...........................................................................................................8
 

TABLE III ‐ Reports with Questioned Costs ...............................................................................................9
 

TABLE IV  ‐ Recommendations that Funds be Put to Better Use ..............................................................10
 

Appendix A ‐ Peer Review Activity .........................................................................................................11
 

Pictured: The Port of Virginia, Norfolk, Virginia
	 	

	 	

EXECUTIVE SUMMARY
 

This semiannual report summarizes the activities and accomplishments of the Federal 

Maritime Commission (FMC), Office of Inspector General (OIG) for the six month reporting 

period October 1, 2016 through March 31, 2017. The most significant activities of the OIG during 

the first half of fiscal year (FY) 2017 are summarized below and additional details can be found in 

subsequent sections of this report. 

During this reporting period, the OIG issued the Independent Auditors’ Report of the 

FMC’s FY 2016 Financial Statements (A17-01) and the report on the Evaluation of the FMC’s 

Compliance with the Federal Information Security Management Act FY 2016 (A17-02). The OIG 

also completed a risk assessment of the FMC’s purchase card program, and a review of the FMC’s 

reporting and performance requirements regarding improper payments. 

During the period, there were no new investigations or matters referred to prosecutorial 

authorities. At the end of this reporting period, four hotline complaints were pending and there 

were no investigations open. 

FEDERAL MARITIME COMMISSION

The FMC is an independent federal agency responsible for the regulation of ocean borne 

transportation in the foreign commerce of the United States. 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; and Section 19 

of the Merchant Marine Act of 1920. 

The FMC is headed by five Commissioners nominated by the President and confirmed by 

the U.S. Senate, each serving five-year terms. Although the majority of FMC personnel are located 

in Washington, D.C., the FMC also maintains a presence in Los Angeles, Seattle, New York, New 

Orleans, Houston, and South Florida through Area Representatives. These Area Representatives 

serve the major ports and transportation centers within their respective geographic areas, and 

provide information, liaison and investigatory services on behalf of the FMC. 

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OFFICE OF INSPECTOR GENERAL
 

The OIG was established in 1989 by the Inspector General (IG) Act of 1978, as amended 

(5 U.S.C. app.). The OIG is an independent audit and investigative unit headed by an IG who 

reports to the FMC Commissioners and Congress. The OIG is responsible for conducting audits 

and investigations relating to the programs and operations of the FMC. Audits are conducted for 

the purpose of finding and preventing fraud, waste and abuse, and promoting economy, efficiency 

and effectiveness within the agency. The OIG investigations seek out facts related to allegations 

of wrongdoing on the part of FMC employees and individuals, or entities contracting with, or 

obtaining benefits from, the agency. The IG Act provides that the OIG shall have access to all 

agency records and may subpoena records from entities outside of the agency in connection with 

an audit or investigation. 

The OIG is required by law to prepare this report summarizing OIG audits and 

investigations during the immediately preceding six-month period. This report is sent to the FMC 

Commissioners; the President of the Senate; the Speaker of the House; and FMC’s Congressional 

appropriating and authorizing committees. This dual reporting requirement helps to ensure the 

independence of the OIG. 

To aid the FMC in accomplishing its mission, the OIG is provided two full-time positions, 

the IG and an auditor. During this reporting period, the OIG’s one auditor position was vacant. 

In accordance with Section 3 of the Inspector General Act of 1978, as amended, each Inspector 

General shall have his or her own legal counsel, or obtain the services of a counsel appointed by 

and directly reporting to another Inspector General on a reimbursable basis. The OIG has a 

memorandum of understanding (MOU) with the Federal Election Commission (FEC) OIG under 

which the FEC IG’s Counsel also serves as the FMC IG’s Counsel on a reimbursable basis. 

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OFFICE OF INSPECTOR GENERAL ACTIVITIES

Completed Audit and Evaluation

Independent Auditors’ Report of the FMC’s FY 2016 Financial Statements, A17-01. 

This audit report was issued on November 9, 2016. The OIG contracted with Dembo Jones, P.C. 

to perform the audit and the OIG actively monitored and reviewed the work and results of the 

contractor. The audit objectives were to opine on whether the FMC’s FY 2016 financial statements 

followed U.S. Generally Accepted Accounting Principles (GAAP) and presented fairly the 

financial position of the agency. The auditors also reviewed internal controls over financial 

reporting and agency compliance with laws and regulations. The statements audited were the 

balance sheet as of September 30, 2016, and the related statements of net cost, changes in net 

position, budgetary resources and custodial activity for the year then ended. 

The independent auditor opined that the FMC’s financial statements were fairly presented, 

in all material respects, in conformity with GAAP; there were no material weaknesses in internal 

control over financial reporting (including safeguarding assets); and no reportable noncompliance 

with laws and regulations tested. Therefore, there were no findings or recommendations in the 

audit report. 

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

Act (FISMA) FY 2016, A17-02. This evaluation report was issued on November 8, 2016. The 

OIG contracted with Your Internal Controls, LLC to perform the evaluation and the OIG actively 

monitored and reviewed the work and results of the contractor. The objectives of this independent 

evaluation of the FMC’s information security program were to evaluate its security posture by 

assessing compliance with the FISMA and related information security policies, procedures, 

standards, and guidelines. 

The scope of the testing focused on the FMC General Support Systems (GSS) and major 

applications. Evaluation testing included inquiry of FMC personnel, observation of activities, 

inspection of relevant documentation, and the performance of technical security testing. More 

specifically, testing covered a sample of controls as listed in National Institute of Standards and 

Technology’s (NIST) 800-53, Recommended Security Controls for Federal Information Systems 

and Organizations, Revision 4. The agency continues to make improvements on the agency’s 

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information technology (IT) security. However, some weaknesses remain. The report contained 

three recommendations to address three findings; however, two of the three recommendations were 

implemented by the agency prior to the release of the report. In addition, the OIG concluded the 

FMC had effectively implemented six of the nine outstanding prior year FISMA recommendations. 

Other Reviews

In January 2017, the OIG completed the FY 2016 risk assessment of the FMC’s purchase 

card program. Executive agencies, including the FMC, use purchase cards and convenience 

checks to purchase needed goods and services for the agency. In accordance with the Government 

Charge Card Abuse Prevention Act of 2012 (Charge Card Act), Public Law 112‐194, and OMB 

implementing guidance for the Act, the Inspector General (IG) of each executive agency is 

required to conduct an annual risk assessment of the agency’s purchase card program; and travel 

card program if annual charges are at least $10 million. The FMC’s travel card transactions are 

significantly below the $10 million threshold requiring a risk assessment of the travel card 

program. 

The objective of the risk assessment was to assess the risk of illegal, improper, or erroneous 

use of the purchase card program to determine the scope, frequency, and number of future audits 

and reviews to be conducted by the OIG. The assessment was conducted using industry standard 

principles for risk management and professional judgment. Specifically, the purchase card 

program was assessed using the criteria identified in the Charge Card Act and OMB Circular No. 

A-123, A p p e n d i x B , Improving the Management of Government Char ge Car d 

Programs , R e v i s e d , J a n u a r y 1 5 , 2 0 0 9 . The OIG concluded the risk of illegal, improper, or 

erroneous use in the FMC’s purchase card program is “low.” As a result, an OIG audit or review 

of the agency’s purchase card program is not planned for FY 2017. 

In March 2017, the OIG completed the annual review of the FMC’s compliance with 

reporting and performance requirements regarding improper payments. The OIG is required by 

the Improper Payments Elimination and Recovery Act of 2010 (IPERA) to prepare and submit the 

annual compliance report within 180 days after the agency’s Performance and Accountability 

Report is published. For FY 2016, the OIG concluded the FMC complied and met the requirements 

that are applicable to the agency for improper payment reporting. 

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The OIG completed this annual review based on guidance contained in Office of 

Management and Budget (OMB) Circular No. A-123, Appendix C, Requirements for Effective 

Estimation and Remediation of Improper Payments (as modified by OMB M-15-02, October 20, 

2014). Appendix C implements requirements from the following: (1) the Improper Payments 

Information Act of 2002 (IPIA), as amended; (2) the Improper Payments Elimination and 

Recovery Act of 2010 (IPERA); (3) the Improper Payments Elimination and Recovery 

Improvement Act of 2012 (IPERIA); and (4) Executive Order 13520 - Reducing Improper 

Payments, November 20, 2009. 

The purpose of IPERA and the related requirements are to improve the federal 

government’s efforts to reduce and recover improper payments. An improper payment is any 

payment that should not have been made or that was made in an incorrect amount. Incorrect 

amounts are overpayments or underpayments that are made to eligible recipients. An improper 

payment also includes any payment that was made to an ineligible recipient or for an ineligible 

good or service, or payments for goods or services not received (except for such payments 

authorized by law). In addition, when an agency's review is unable to discern whether a payment 

was proper as a result of insufficient or lack of documentation, this payment must also be 

considered an improper payment. 

Hotline and Investigations

The Inspector General Act of 1978, as amended, provides that the IG may receive and 

investigate complaints or information concerning possible allegations of fraud, waste and abuse 

occurring within FMC programs and operations by employees or contractors. Matters of possible 

wrongdoing are referred to the OIG in the form of allegations or complaints from a variety of 

sources, including FMC employees, other government agencies and the general public. 

During the period, there were no new investigations or matters referred to prosecutorial 

authorities. At the end of this reporting period, four hotline complaints were pending and there 

were no investigations open. 

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OTHER ACTIVITIES

Review of Legislation

As required by the Inspector General Act of 1978, as amended, the OIG routinely reviews 

proposed legislation and regulations. The purpose of these reviews is to assess whether the 

proposed legislation or regulation: (1) impacts the economy and efficiency of FMC programs and 

operations; and (2) contains adequate internal controls to prevent and detect fraud, waste, and 

abuse. 

Council of the Inspectors General on Integrity and Efficiency (CIGIE) Activities

The CIGIE was established by law as an independent entity by the Inspector General 

Reform Act of 2008 (P.L. 110-409) to: 

 address integrity, economy and effectiveness issues that transcend individual government 

agencies; and 

 increase the professionalism and effectiveness of personnel by developing policies, 

standards, and approaches to aid in the establishment of a well-trained and highly skilled 

workforce in the Office of Inspectors General. 

The CIGIE is comprised of all inspectors general that are Presidentially-appointed / Senate 

confirmed and those that are appointed by agency heads. The FMC OIG remains active in CIGIE 

operations. Specifically, the Inspector General (IG) is a member of CIGIE, participates in the 

monthly CIGIE meetings and periodically assists CIGIE on special projects. 

During this reporting period, the IG served on the CIGIE’s Audit Committee and 

Investigations Committee. The Audit Committee is responsible for coordinating government-wide 

activities that promote economy and efficiency in federal programs and operations, and to address 

areas of weakness and vulnerability with respect to fraud, waste, abuse, and mismanagement. The 

Audit Committee serves as a resource for the federal audit community, maintains professional 

audit standards, and develops auditor training requirements. The mission of the Investigations 

Committee is to advise the IG community on issues involving investigations, investigative 

personnel, and establishing investigative guidelines. 

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SUMMARY OF INSPECTOR GENERAL REPORTING REQUIREMENTS
 

IG Act Reference Reporting Requirement Pages 

Section 5(a)(1) Significant problems, abuses and deficiencies None 

Section 5(a)(2) Recommendations with respect to significant problems, 

abuses, or deficiencies 

None 

Section 5(a)(3) Prior significant recommendations on which corrective 

actions have not been completed 

8 

Section 5(a)(4) Matters referred to prosecutorial authorities and results None 

Section 5(a)(5) Summary of instances where information was refused None 

Section 5(a)(6) List of audit, inspection, and evaluation reports by subject 

matter, and where applicable, the value of questioned costs, 

unsupported costs, and funds put to better use 

8 

Section 5(a)(7) Summary of each report 3-5 

Section 5(a)(8) Audit, inspection, and evaluation reports with questioned 

and unsupported costs 

None 

Section 5(a)(9) Audit, inspection, and evaluation report recommendations 

that funds be put to better use 

None 

Section 5(a)(10) Summary of each audit, inspection, and evaluation report 

issued before the commencement of this reporting period for 

which no management decision was made by the end of the 

reporting period; for which comments were not returned 

within 60 days of report issuance; and for which there are 

any outstanding unimplemented recommendations 

8 

Section 5(a)(11) Description and explanation of significant revised 

management decisions 

None 

Section 5(a)(12) Significant management decisions with which the inspector 

general disagrees 

None 

Section 5(a)(13) Information under Section 804(b) of the Federal Financial 

Management Improvement Act (FFMIA) of 1996 

None 

Section 5(a)(14)(15) Peer review activity on FMC OIG 11, App. A 

Section 5(a)(16) Peer review activity by FMC OIG on another OIG None 

Section 5(a)(17) Statistical tables on investigative activities None 

Section 5(a)(18) Description of metrics used for developing the data for the 

statistical table under Section 5(a)(17) 

None 

Section 5(a)(19) Report on each investigation involving a senior Government 

employee where allegations of misconduct were 

substantiated 

None 

Section 5(a)(20) Description of whistleblower retaliation None 

Section 5(a)(21) Description of any attempt by the establishment to interfere 

with the independence of the OIG 

None 

Section 5(a)(22) Description of particular circumstances of each inspection, 

evaluation, and audit conducted that is closed and was not 

disclosed to the public; and investigation conducted by the 

OIG involving a senior Government employee that is closed 

and was not disclosed to the public 

None 

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TABLE I ‐		Summary of Reports with Corrective Actions Outstanding for More

than 6 Months

Recommendations 

Report Title Report 

Number 

Issue 

Date Number Open Closed 

FY 2016 Implementation 

of FISMA 

A17-02 11/8/16 9 3* 6 

*In a memorandum dated April 4, 2017, the agency advised the OIG that all three 

open recommendations have been resolved; the OIG plans to review the agency’s 

implementation of the recommendations during the FY 2017 FISMA evaluation. The 

three recommendations are as follows: 

(1) Ensure all contractors undergo an appropriate investigation or screening prior to being 

granted access to any data and/or systems. Furthermore, ensure that all contractors undergo 

appropriate periodic reinvestigations or screening once the initial investigation is deemed 

to be successful; 

(2) Ensure a sufficient number of certifying officials are properly authorized and trained 

on the responsibilities associated with monitoring, certifying and documenting the results 

of employee background investigations, and reinvestigations, when warranted; and 

(3) OIT should establish a formalized policy for how timely separated users’ access is 

disabled once they have left the agency. Best practices across other agencies disable 

separated users within 5 business days, therefore, FMC should follow best practices. 

TABLE II ‐		Listing of Reports Issued

Report Title Assignment 

Number 

Issue 

Date 

Questioned 

Costs 

Unsupported 

Costs 

Funds Put to 

Better Use 

Independent Auditors’ Report of 

the FMC’s FY 2016 Financial 

Statements 

A17-01 11/9/16 $0 $0 $0 

Evaluation of FMC’s Compliance 

with the Federal Information 

Security Management Act 

(FISMA) FY 2016 

A17-02 11/8/16 $0 $0 $0 

FY 2016 risk assessment of the 

FMC’s purchase card program 

A17-03 1/31/17 $0 $0 $0 

FMC’s compliance with reporting 

and performance requirements 

regarding improper payments 

A17-04 3/31/17 $0 $0 $0 

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TABLE III ‐		Reports	 	 with Questioned	 	 Costs

Number 

of 

Reports 

Questioned 

Costs 

Unsupported 

Costs 

A. For which no management decision has been 

made by the commencement of the reporting 

period. 

0 $0 $0 

B. Which were issued during the reporting period. 0 $0 $0 

Subtotal (A + B) 0 $0 $0 

C. For which a management decision was made 

during the reporting period. 

0 $0 $0 

 (i) dollar value of disallowed costs; and 0 $0 $0 

 (ii) dollar value of costs not disallowed. 0 $0 $0 

D. For which no management decision has been 

made by the end of the reporting period. 

0 $0 $0 

E. Reports for which no management decision 

was made within six months of issuance. 

0 $0 $0 

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TABLE IV ‐		Recommendations that Funds be Put to Better Use

Number 

of 

Reports Dollar Value 

A. For which no management decision has been made 

by the commencement of the reporting period. 0 $0 

B. Which were issued during the reporting period. 0 $0 

Subtotal (A + B) 0 $0 

C. For which a management decision was made during 

the reporting period. 0 $0 

 (i) dollar value of recommendations that were 

agreed to by management; and 

0 $0 

 (ii) dollar value of recommendations that were not 

agreed to by management. 

0 $0 

D. For which no management decision has been made 

by the end of the reporting period. 0 $0 

E. Reports for which no management decision was 

made within six months of issuance. 0 $0 

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Appendix A ‐		Peer Review Activity

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 

2010 (Section 989C of P.L. 111-203), which amended Section 5 of the Inspector General Act of 

1978, OIGs are required to include in their semiannual reports (SAR) to Congress the results of 

peer reviews of their offices, as well as outstanding and not fully implemented recommendations 

from peer reviews the OIG received from another OIG, and outstanding and not fully implemented 

recommendations the OIG made in any peer review it performed for another OIG. 

An external peer review of the FMC OIG audit office was completed on March 24, 2016, 

during a prior semiannual period, by the U.S. International Trade Commission OIG. A pass rating 

was issued and there were no recommendations contained in the peer review report. 

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HOTLINE COMPLAINTS 

The success of the OIG mission to prevent fraud, waste and abuse 

depends on the cooperation of FMC employees and the public. 

Employees and the public are encouraged to contact the OIG regarding

any incidents of possible waste, fraud or abuse occurring within FMC

programs and operations.

A COMPLAINT CAN BE REPORTED BY CALLING OUR 24‐HR DIRECT LINE:

(202) 523‐5865

ONLINE COMPLAINT FORM:

https://www2.fmc.gov/oigcomplaints/

TO PLACE A COMPLAINT IN WRITING PLEASE MAIL TO:

Federal Maritime Commission

Office of Inspector General

Suite 1054

800 North Capitol Street, NW

Washington, DC 20573

To Be Opened By the IG Only

THE INFORMATION YOU PROVIDE IS CONFIDENTIAL. YOU CAN CHOOSE TO REMAIN

ANONYMOUS; HOWEVER, INDIVIDUALS ARE ENCOURAGED TO ASSIST THE INSPECTOR

GENERAL BY SUPPLYING INFORMATION AS TO HOW THEY MAY BE CONTACTED FOR

ADDITIONAL INFORMATION.

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