Office      of Inspector General
 

Independent Auditors’ Report of the
 

FMC’s FY 2014 Financial Statements
 

A15-01
 

November 2014 

FEDERAL MARITIME COMMISSION
 
        

 

 

 

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. 
 

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 
 

 

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
 
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 .......................................................................................... 1-3 

Balance Sheet.......................................................................................................................4 

Statement of Net Cost ..........................................................................................................5 

Statement of Changes in Net Position .................................................................................6 

Statement of Budgetary Resources ......................................................................................7 

Statement of Custodial Activity ...........................................................................................8 

Notes to Financial Statements........................................................................................ 9-20 

Agency Comments on Draft Audit Report (Appendix A) .................................................21 
 

MANAGEMENTCONSULTANTS&

CERTIFIEDPUBLICACCOUNTANTS

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 

1
 1400 Eye Street, NW, Suite 425, Washington, DC 20005 Tel 202-296-7101 Fax 202-296-7284
 
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; 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. 

2 
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 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 

3 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 

The accompanying notes are an integral part of these financial statements 

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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 

The accompanying notes are an integral part of these financial statements 

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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 -

Other Financing Sources (Non-Exchange): 

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

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 

The accompanying notes are an integral part of these financial statements 

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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 $ 23,470,481 

The accompanying notes are an integral part of these financial statements 

7 
 

 

 

 

 

 

 

 

 

 

 

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 $ - $ -

The accompanying notes are an integral part of these financial statements 

8 
 

 

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. 

9 
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. 

10 
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 

liabilities that are covered by budgetary resources, and liabilities not covered by budgetary 

resources. 

11 
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cont’d 

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. 

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. 

12 
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cont’d 

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. 

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. 

13 
 

 

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cont’d 

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. 

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. 

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NOTE 2- FUND BALANCE WITH TREASURY Cont’d 

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). 

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: 

Accumulated 

Major Class 

Acquisition 

Cost 

Amortization/ 

Depreciation 

Net Book 

Value 

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

Leasehold Improvements 

Furniture & Equipment 

225,000 

341,800 

225,000 

262,401 

-

79,399 

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

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NOTE 4- PROPERTY, EQUIPMENT, AND SOFTWARE Cont’d 

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

Accumulated 

Acquisition Amortization/ Net Book 

Major Class Cost Depreciation Value 

Leasehold Improvements

Furniture & Equipment

 $ 225,000 

315,251 

$ 202,500 

202,704

$ 22,500 

 112,547 

Software-in-Development 

Total $ 

210,579 

750,830 

-

$ 405,204 $ 

 210,579 

345,626 

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. 

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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 

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. 

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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 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 

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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. 

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

Spending Authority from Offsetting Collections and Recoveries (297,987) (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 25,583,328 23,954,632

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

 Operations (1,560,406) 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 

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. 

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APPENDIX A - 

FEDERAL MARITIME COMMISSION COMMENTS ON 

DRAFT AUDIT REPORT
 

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