FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 1

FEDERAL MARITIME COMMISSION 

PERFORMANCE AND 

ACCOUNTABILITY REPORT 

FISCAL YEAR 

2006 
 2 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

VISION 

 

Fairness and Efficiency in U.S. Maritime Commerce 

 

 

 

 

 

MISSION 

The FMC’s Mission is to : 

 

• Develop and administer policies and regulations 

that foster a fair, efficient and secure maritime 

transportation system;

• Protect U.S. maritime commerce from unfair 

foreign trade practices and market-distorting 

activities; 

 

• Facilitate compliance with U.S. shipping statutes 

through outreach and oversight; 

 

• Assist in resolving disputes. 

 

 

 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 3

This Fiscal Year 2006 Performance and Accountability Report 

is published by the 

Federal Maritime Commission. 

An electronic version of this report can be found at 

http://www.fmc.gov. 

Please refer any questions concerning this report to the 

Federal Maritime Commission at 

(202) 523-5800. 

Published in Washington, DC 

November 15, 2006 
 4 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

The Federal Managers’ Financial Integrity Act of 1982 requires continuous evaluations and reporting of the adequacy 

of the systems of internal accounting and administrative controls. The Act can be found at the following URL: 

http://www.whitehouse.gov/omb/financial/fmfia1982.html

The Chief Financial Officers Act of 1990 provides for the production and submission of complete, reliable, timely, and consistent 

financial information for the use of the Executive Branch of the government and the Congress in the financing, management and 

evaluation of federal programs. The Act can be found at the following URL: 

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

The Reports Consolidation Act of 2000 authorizes agencies to consolidate several reports in order to provide performance, 

financial and other related information in a more useful manner. The Act can be found at the following URL: 

http://www.cbo.gov/showdoc.cfm?index=2193&sequence=0

The Federal Financial Management Improvement Act of 1996 requires the assessment of financial systems to ensure they adhere 

to government -wide financial requirements. The Act can be found at the following URL: 

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=104_cong_public_laws&docid=f:publ208.104.pdf

The Inspectors General Act of 1978 (amended) requires that the inspector general make available information on management 

actions taken in response to IG audits. The Act can be found at the following URL: 

http://www.access.gpo.gov/uscode/title5a/5a_2_.html

The Government Performance and Results Act of 1993 requires an annual report that measures the performance results of the 

agency against the established agency goals. The Act can be found at the following URL: 

http://www.whitehouse.gov/omb/mgmt-gpra/gplaw2m.html

The Government Management Reform Act of 1994 requires the submission of audited financial statements. The Act can be found 

at the following URL: 

http://govinfo.library.unt.edu/npr/library/misc/s2170.html

The Federal Maritime Commission’s (FMC) Performance and Accountability Report (PAR) 

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: 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 5

 TABLE OF CONTENTS 

 

 

 

 A Message From the Chairman 1 

 Chapter One: Management’s Discussion and Analysis 

 

 Introduction 2 

 Regulatory Responsibility 3 

 Future Challenges 4 

 Program Performance Overview 5 

 President’s Management Agenda 5 

 Financial Performance Overview 6 

 Financial Statement Highlights 8 

 Improper Payments Information Act 11 

 Systems, Controls, and Legal Compliance 13 

 

 Chapter Two: Program Performance 16 

 

 Introduction 16 

 

 Program Activities: 16

 Formal Proceedings Program: 

 Office of the Commissioners 17 

 Office of the Secretary 17 

 Office of Consumer Affairs and Dispute Resolution Services 18 

 Office of the General Counsel 18 

 Office of Administrative Law Judges 19 

 Inspector General Program 20 

 

 Equal Employment Opportunity Program 20 

 

 Operations Program: 21 

 Office of Operations 21 

 Bureau of Enforcement 22 

 Bureau of Trade Analysis 23 

 Bureau of Certification and Licensing 26 

 

 Administration Program: 29

 Office of the Director 29

Office of Financial Management 30 

 Office of Human Resources 30 

 Office of Information Technology 31 

 Office of Management Services 31 

 Annual Performance Report 33 

 Addressing the President’s Management Agenda 42 

 

 FY2006 Federal Maritime Commission 
 TABLE OF CONTENTS 

Chapter Three: Auditors’ Report and Financial Statements: 

 

 A Message From the Chief Financial Officer 44 

 Limitations of the Financial Statements 45 

 Independent Auditor’s Report 46 

 Independent Auditor’s Report on Compliance and Other Matters 47 

 Independent Auditor’s Report on Internal Controls 48 

 Balance Sheets 49 

 Statements of Net Cost 50 

 Statements of Changes in Net Position 51

 Statements of Budgetary Resources 52

 Statements of Financing 53 

 Statements of Custodial Activity 54 

 Notes to the Financial Statements 55

 Appendix A Inspector General’s Assessment of the Most Serious 

 Management Challenges Facing the FMC 65 

 Appendix B Actions to Address the FMC’s Management Challenges 69 

 Appendix C Management Decisions and Final Actions on OIG 

 Audit Recommendations 70 

 Appendix D FMC Organization Chart 72 

 Appendix E Annual Performance Plan 2006 73 

 Appendix F Glossary of Acronyms 88 

 FY2006 Federal Maritime Commission 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

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FEDERAL MARITIME COMMISSION

MANAGEMENT’S DISCUSSION and ANALYSIS 

Fiscal Year 2006 
 1 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

A MESSAGE FROM THE CHAIRMAN 

It is my pleasure to present the Federal Maritime Commission’s 

Performance and Accountability Report for FY 2006. This Performance and 

Accountability Report represents the dedication and achievement of the 

agency’s 122 employees. Because of their efforts, the FMC continues to be 

held in high regard by the industry it oversees. We are committed to 

developing programs and processes that will enable us to meet the changing 

demands of an always-evolving industry. In doing so, we strive to increase 

performance efficiencies and the effectiveness of our workforce to both be 

responsive to changing business practices and to better serve the American 

public and our stakeholders. 

As a transportation/trade regulatory agency, our Vision is to ensure fairness 

and efficiency in U.S. maritime commerce. Our mandate is to help remove 

impediments to fair competition – undue controls, influences or non-market 

barriers imposed by any nation, carrier, cargo owner or intermediary – 

which can adversely affect U.S. oceanborne trade. Our regulatory system 

allows for the necessary oversight with minimal disruption to the efficient flow of U.S. imports and exports, 

ensuring that fair competition exists in the ocean transportation industry while allowing the industry to conduct 

business as efficiently as possible. 

I am pleased to report that the FMC continues to position its resources with greater precision and effectiveness in 

order to continue to achieve its mandate within budget resources. FMC thus has achieved nearly all of its 

performance goals. In FY 2006, the FMC broadened its efforts to implement the President’s Management Agenda 

initiative to expand electronic government by improving the management of information through the more 

effective use of available technologies, by streamlining the delivery of services and information to regulated 

entities, other government agencies and the public, and by further automating agency systems and enhancing the 

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

As the chief administrative officer of the agency, one of my responsibilities is to ensure that our resources are 

efficiently managed and effectively used. The FMC has evaluated its management controls and financial 

management system, as required by the Federal Managers’ Financial Integrity Act, and I can certify, with 

reasonable assurance, that the Commission is in compliance with the provision of that Act. The FMC is proud of 

its FY 2006 accomplishments and looks forward to providing high-quality service to the American public in future 

years. 

Sincerely, 

Steven R. Blust 

Chairman, Federal Maritime Commission 

MANAGEMENT’S DISCUSSION & ANALYSIS 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

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Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Introduction 

This Performance and Accountability Report represents the completion of the Federal Maritime Commission’s 

program and financing management process for Fiscal Year 2006, which began with mission and program 

planning, continued with the formulation and justification of FMC’s budget submission to the President and 

Congress, through budget execution, and ended with a report of our program performance and the use of resources. 

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

Reports Consolidation Act, and OMB Circular No-A136 (Revised), and covers the Commission’s activities from 

October 1, 2005, through September 30, 2006. 

Our Performance and Accountability Report, provides an overview of the FMC. It consists of nine sections: 

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

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

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

Agenda describes activities related to the relevant initiatives; Financial Performance Overview discusses the 

FMC’s financial position and audit results; Financial Statement Highlights gives an overview of the major 

financial statements; Improper Payments Information Act provides a breakdown of any improper payments made 

by the agency and efforts to collect improper disbursements; and Systems, Controls, and Legal Compliance

discloses the FMC’s compliance with certain legal and regulatory requirements. 

About the FMC 

The FMC is an independent transportation/trade regulatory agency which administers the Shipping Act of 1984 

(“1984 Act” or “Shipping 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 Public 

Law (“P.L.”) 89-777 (passenger vessel certification). The Commission: monitors the activities of ocean common 

carriers, marine terminal operators, conferences, ports and ocean transportation intermediaries (non - vessel - 

operating common carriers and ocean freight forwarders) who operate in the U. S. foreign commerce to ensure 

they maintain just and reasonable practices; maintains a trade monitoring and enforcement program designed to 

assist regulated entities in achieving compliance and to detect and appropriately remedy malpractices and 

violations of the prohibited acts set forth in section 10 of the 1984 Act; monitors the laws and practices of foreign 

governments which could have a discriminatory or otherwise adverse impact on shipping conditions in U. S. 

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

special regulatory requirements applicable to carriers owned or controlled by foreign governments; processes and 

reviews agreements, service arrangements and service contracts 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 in the U. S., ensures that all OTIs are bonded or maintain other evidence of financial responsibility, 

and ensures that passenger vessel operators demonstrate adequate financial responsibility in case of 

nonperformance or injury to passengers. 

Organization 

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

consent of the Senate. No more than three members of the FMC may belong to the same political party. The 

President designates one of the Commissioners to serve as Chairman. The Chairman is the chief executive and 

administrative officer of the agency. The FMC’s organizational units consist of: Offices of the Commissioners; 

Office of the General Counsel (“OGC”); Office of the Secretary (“OS”), including the Library and Office of 

Consumer Affairs and Dispute Resolution Services (“CADRS”); Office of Administrative Law Judges (“ALJ”); 

Office of Equal Employment Opportunity (“EEO”); Office of the Inspector General (“OIG”); Office of Operations 

(“OPS”), including the Bureaus of Certification and Licensing (“BCL”), Enforcement (“BOE”), and Trade 

Analysis (“BTA”); and Office of Administration (“OA”), including the Offices of Financial Management 

(“OFM”), Human Resources (“OHR”), Information Technology (“OIT”), and Management Services (“OMS”). 

The majority of FMC personnel are located in Washington, DC., with Area Representatives in New York, New 

Orleans, Los Angeles, Seattle, and South Florida. 

In FY 2006, the FMC’s appropriation totaled $20,294,010 which funded 122 full-time-equivalent staff. 
 3 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Regulatory Responsibility 

The FMC’s regulatory responsibilities include: 

• Protecting shippers and carriers engaged in the foreign commerce of the U.S. from 

restrictive or unfair foreign laws, regulations, or business practices that harm U.S. 

shipping interests or ocean trade. 

• Reviewing operational and pricing agreements among ocean common carriers and marine 

terminal operators (“MTOs”), to ensure that they do not have excessively anticompetitive 

effects. 

• Reviewing and maintaining a system containing the service contracts between ocean 

common carriers and shippers, and service arrangements between non-vessel-operating 

common carriers (“NVOCCs”) and shippers, and using this system to guard against 

anticompetitive practices and other unfair prohibited acts. 

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

private, electronically accessible systems. 

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

 that they are just and reasonable and are not unfairly undercutting private competitors. 

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

charters to pay judgments for personal injury or death or to repay fares for the 

 nonperformance of a voyage or cruise. 

• Licensing OTIs to protect the public from unqualified, insolvent, or dishonest companies. 

 

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

public from financial loss. 

• Investigating discriminatory rates, charges, classifications, and practices of common 

carriers, MTOs, and OTIs operating in the foreign commerce of the U.S. 

The FMC is authorized by the FSPA, section 19 of the 1920 Act, and section 13(b)(6) of the 1984 Act, 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. 

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

commerce. It exempts agreements that have become effective under the 1984 Act from the U.S. antitrust laws, as 

contained in the Sherman and Clayton Acts. The FMC reviews and evaluates agreements to ensure that they do 

not exploit the grant of antitrust immunity, and to ensure that agreements do not otherwise violate the 1984 Act or 

result in an unreasonable increase in transportation cost or unreasonable reduction in service. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 4

Regulatory Responsibility (continued) 

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

carriers, as well as those permitted by agreement to act in concert, fairly treat shippers and other members of the 

shipping public, in accordance with the 1984 Act’s prohibition against undue discrimination. The 1984 Act also 

requires all carriers to make their rates, charges and practices available in automated tariff systems that must be 

available electronically to the public. NVOCCs may assess the rates and charges published in their tariffs or may 

offer service arrangements with shipping customers. Ocean common carriers are permitted to enter into service 

contracts with their shipper customers. Such contracts are filed electronically with the FMC in our Internet-based 

system, and are provided confidential treatment by the FMC as required by the Act. The FMC does not have the 

authority to approve or disapprove general rate increases (“GRIs”) or individual commodity rate levels in the U.S. 

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

P. L. 89-777 requires the operators of passenger vessels with 50 or more berths who embark passengers at U.S. 

ports to establish financial coverage to indemnify passengers in cases of death, injury, or nonperformance of 

transportation. The FMC certifies such operators upon the submission of satisfactory evidence of financial 

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

sufficient financial responsibility to protect shippers from financial loss. Additionally, the FMC licenses all U.S. 

OTIs. 

The FMC carries out its regulatory responsibilities by conducting informal and formal investigations. It holds 

hearings, considers evidence and renders decisions, and issues appropriate orders and implementing regulations. 

The FMC also adjudicates and mediates disputes involving the regulated community, the general shipping public, 

and other affected individuals or interest groups. 

The FMC also carries out a management and support function for information technology, financial management, 

human resources, and administrative support. 

The FMC oversees approximately 5,400 regulated persons (passenger vessel operators, conferences, OTIs, 

NVOCCs, etc.). 

The FMC has a new, improved, easy-to-navigate website which contains more information concerning the 

agency’s activities and responsibilities. Please visit us at www.fmc.gov. 

Future Challenges 

International trade remains dependent upon an efficient ocean transportation system. The ocean shipping industry 

continues to face significant challenges related to port and maritime security, port congestion, industry 

consolidation and dynamic economic conditions. As the industry restructures to adapt to these changes, it is 

imperative for the FMC to ensure that its oversight produces a competitive trading environment in U.S. ocean 

commerce that is in harmony with, and responsive to, international shipping practices, and encourages fair and 

open commerce. 

In response to industry changes, the Commission continues to review its regulatory initiatives to ensure that agency 

resources are utilized in a manner best suited to accomplish statutory obligations with a minimum of government 

intervention and regulatory cost. Similarly, we have implemented new internal business processes that are more 

responsive to the needs of the industry and other government agencies. 

Cooperative working arrangements with front-line security agencies remain in place. Effective use of emerging 

information technologies continues to facilitate our efforts. 

Chapter One 

 

 MANAGEMENT’S DISCUSSION and ANALYSIS 
 5 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

Program Performance Overview 

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

Government Performance and Results Act (“GPRA”). The FMC has organized its performance goals to achieve its 

strategic goals. The FMC’s FY 2003-FY 2008 Strategic Plan is available on the FMC’s website. The complete FY 

2006 Program Performance Report is contained in Chapter 2, Program Performance. Briefly, in FY 2006, the 

Commission focused on refining the agency’s business practices, specifically on revising and updating internal 

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

dissemination of filed material in order to improve analysis of required filings and responsiveness to inquiries, and 

implementation of procedural changes to enhance the effectiveness of agency operations. We broadened our efforts 

to implement the President’s Management Agenda initiative to expand electronic government by improving the 

management of information through the more effective use of available technologies. We also streamlined the 

delivery of services and information to regulated entities, other government agencies and the public, and further 

automated agency systems and enhanced the use of agency databases to allow staff to discharge program 

responsibilities more effectively. Further, we simplified and refined the agency’s performance appraisal system and 

developed a strategic succession plan for agency senior executives and non-SES upper level managers. Overall, we 

are pleased with the success we achieved in addressing our stated goals and objectives. 

Achieving Strategic Goal Results 

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

the FMC’s strategic goals, and the processes or activities required to achieve the goals are identified. The agency 

then specifies the outcomes it believes will result from accomplishing each stated goal, and agrees on performance 

indicators as the quantifiers of performance. Finally, performance measures are established for evaluation of 

achievement of performance goals. Taken together, performance goals under each strategic goal are designed to 

enhance and further those goals each fiscal year, bringing the agency closer to its ideal of full achievement of its 

strategic goals. 

President’s Management Agenda 

The President’s Management Agenda is intended to make Government more citizen-centered, results-oriented, and 

market-based. The five initiatives are: 1) Strategic Management of Human Capital; 2) Competitive Sourcing; 3) 

Improved Financial Management, 4) Expanded E-Government, and 5) Budget and Performance Integration. The 

FMC has achieved some successes in its agenda to address these initiatives. Chapter 2, Program Performance, 

discusses our activities in these important areas in more detail. 

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

Strategic Management of Human Capital – The FMC focused heavily on succession planning during FY 2006. We 

reviewed our performance appraisal system, implemented an SES Candidate Development Program and an 

Emerging Leaders Program, and initiated a pilot Individual Development Plan Program. 

Budget and Performance Integration – The Strategic Plan and Annual Performance Plan continue to represent the 

fundamental framework for the agency’s planning and budgeting activities. Funding and FTE levels are integrated 

into the agency’s performance planning document by strategic goal, to identify clearly the budgetary and staff 

resources that are committed to each goal. 

Chapter One 

 

 MANAGEMENT’S DISCUSSION and ANALYSIS 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 6

Chapter One 

 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

President’s Management Agenda (continued) 

Competitive Sourcing - The FMC submitted its FY 2006 Federal Activities Inventory Reform Act Inventory to 

OMB in June 2006. The Inventory identified 79 of the agency’s 126 FTEs as commercial activity FTEs. No 

challenges to its commercial inventories have ever been received. 

Expanded Electronic Government - During the fiscal year, the FMC made a number of filings in significant 

docketed proceedings available on the agency’s website, as well as a significant number of historical agency 

decisions. Further, the FMC’s SERVCON system was upgraded. The FMC upgraded service and support for the 

agency’s online Agreements Library, and also upgraded a number of internal databases to streamline and simplify 

agency operations during FY 2006. 

Improved Financial Performance - The FMC received an unqualified opinion on its financial statements in FY 

2006, for the third straight year. The FMC will continue to strive to achieve unqualified audit opinions. 

Financial Performance Overview 

As of September 30, 2006, the financial condition of the FMC was sound with respect to having sufficient funds to 

meet program needs and adequate control of funds in place to ensure obligations did not exceed budget authority. 

The FMC’s accounting services provider, the Bureau of the Public Debt (“BPD”), prepared the agency’s financial 

statements in accordance with accounting standards codified in the Statements of Federal Financial Accounting 

Standards and the Office of Management and Budget Circular A-136, Financial Reporting Requirements (Revised 

7/24/2006). 
 7 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

Chapter One 

 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Sources of Funds 

The FMC has a single source of funds, 

Salaries and Expenses, funded by an 

annual appropriation that is available 

for commitments and obligations 

incurred during the fiscal year in which 

the authority was granted. The FMC’s 

total new budget authority for fiscal 

year 2006 was just over 20 million. 

This represents a net increase in budget 

authority over fiscal year 2005 of 

$950,000 dollars. Although the FMC 

collects remittances for “user fees” and 

“fines and penalties,” the agency is not 

authorized to offset any of its budget 

authority by utilizing these funds. The 

collections are deposited directly into the Treasury General Fund, and captured in the Statement of Custodial 

Activity which can be found in Chapter 3, Auditors’ Reports and Financial Statements.

Personnel Strength History 

 

The FMC’s actual FTE level has 

fluctuated slightly since 2000. After an 

initial decline in 2001, the FMC 

experienced modest growth in its FTE 

level through 2004, followed by a recent 

decline. The agency has endeavored to 

develop the appropriate mix of staffing 

and other available means to ensure the 

effective accomplishment of our 

mission. 

In recent years, the Commission has 

been authorized a total of 180 full-timeequ iv alen t po sition s. Du e to 

appropriation levels, the Commission has been required to maintain full-time personnel levels much lower than 

authorized. 

Federal Maritime Commission 

Appropriation 

(000s)

20,294

19,340 18,471

16,447 16,591 15,466 14,097

8,000

13,000

18,000

23,000

2000 2001 2002 2003 2004 2005 2006

Fiscal Year

Appropriation

Federal Maritime Commission FTE Strength

124 122 129 129 127 121 128

100

125

150

175

200

2000 2001 2002 2003 2004 2005 2006

Fiscal Year

Strength

Authorized FTE 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 8

Uses of Funds by Expense Category 

In FY 2006, the FMC incurred new obligations of $20.3 million, which was a $905 thousand dollars increase over 

fiscal year 2004. Approximately 70% of the total appropriation was used for salaries and benefits. Of the 

remaining budget authority, 1% was used for Commission travel expenses and the remaining 29% was used for 

administrative expenses also known as operating expenses (e.g., rent, furniture, printing, maintenance). The unobligated authority balance of $4,636 will remain active for four years to service FMC-established requirements. 

Audit Results 

The FMC received an unqualified opinion on its FY 2005 financial statements from the auditing firm of Clifton 

Gunderson LLP under contract through the FMC’s Inspector General. For FY 2006, the FMC was again awarded 

an unqualified opinion on its financial statements. Comparative statements can be located in Chapter 3, Auditors’ 

Reports and Financial Statements. 

Financial Statement Highlights 

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

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 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 3, Auditors’ Report and Financial Statements. A brief analysis of the principal statements 

follows. 

Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Utilization of Funds by Expenses Categories

($000s)

5,819

14,243

227

14,094

116

5,129

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Salaries & Expenses Travel Administrative

FY 2006 FY 2005
 9 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Analysis of the Balance Sheet 

The FMC’s assets in fiscal year 2006 were 

$2,710,231 as of September 30, 2006. This 

represents an increase over fiscal year 2005 of 

$440,625. The FMC’s assets reported in the 

balance sheet are summarized in the 

accompanying table. 

The Fund Balance with Treasury represents 

the FMC’s largest asset of $2,676,163 as of 

September 30, 2006. This is an increase of 

20.7% over fiscal year 2005 and represents 

98.7% of the agency’s total assets. 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, 2006, was at $2,961. This is a 46.5% increase over fiscal year 2005, and 

accounts for .001% of the FMC’s total assets. 

Capital Assets, also known as Property, Plant and Equipment, accounts for 1.2% of the FMC’s total assets as of 

September 30, 2006. The “Net” value of $30,353 accounts for the depreciation of all assets and represents the 

current book value of those assets. 

The FMC’s Liabilities totaled $2,287,089 as 

of September 30, 2006. The accompanying 

table depicts an increase of $329,540 total 

liabilities over fiscal year 2005. Accounts 

Payable represents the total goods and services 

received by the FMC as of September 30, 

2006. The FMC is not in receipt of a billing 

from the various vendors as of the close of 

fiscal year 2006. Federal Employee Benefits 

represents accrued salaries and liabilities that 

are not funded by budgetary resources. These 

liabilities represent future workers’ 

compensation, and accrued annual leave that remains on the books. The Federal budget process does not recognize 

future benefits for today’s employees, however, these liabilities will be recognized in future budget cycles as they 

are paid. 

Net Position is the difference between total 

assets and total liabilities. The total net 

position for fiscal year 2006 is an increase of 

$111,085 from fiscal year 2005. Unexpended 

Appropriations represents the total authority 

granted by Congress that the FMC has not 

expended as of September 30, 2006. 

Cumulative Results of Operations represents 

the net results of all operations of the FMC. 

The decrease in Cumulative Results is due mainly to the net decrease in Capital Assets as of September 30, 2006. 

FY 2006 FY 2005 

Fund Balance with Treasury $2,676,163 $2,217,146 

Accounts Receivable $2,961 $2,021 

Capital Assets $30,353 $50,439 

Other $754 $0 

Summary of Assets as of September 30, 2006 

Total Assets 2,710,231 2,269,606 

Summary of Liabilities as of September 30, 2006 

FY 2006 FY 2005 

Accounts Payable $275,054 $197,294 

Payroll Taxes Payable $114,014 $93,366 

Accrued Liabilities $827,383 $687,654 

Total Liabilities $2,287,089 $1,957,549 

Federal Employee Benefits $1,070,638 $979,235 

Net Position Summary as of September 30, 2006 

FY 2006 FY 2005 

Unexpended Appropriations $1,453,216 $1,231,683 

Cumulative Results of Operations ($1,030,074) ($919,626) 

Total Net Position $423,142 $312,057 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 10

Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Analysis of Net Cost 

The analysis of Net Costs presents the net cost 

of FMC’s five Commission Programs as 

identified in the FMC’s Annual Report. The 

five agency programs are Formal Proceedings, 

Inspector General, Equal Employment 

Opportunity, Operations and Administration. 

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 3, Auditors’ Report and 

Financial Statements. 

Analysis of the Statement of Changes in Net Position 

The Statement of Changes in Net Position, found on page nine, reports the change in the agency’s net position 

during the reporting period. The statement is a summary of two factors, Unexpended Appropriations and 

Cumulative Results in Operations. The increase of $111,085 from fiscal year 2005 to fiscal year 2006 is due 

principally to the net change in Cumulative Results of Operations due to further depreciation of Capital Assets and 

an increase in unexpended appropriations. 

Analysis of the Statement of Budgetary Resources 

 The Statement of Budgetary Resources 

(“SBR”) shows the source of the agency’s 

budgetary resources and the status of those 

resources at the end of the reporting period. 

The statement also shows the relationship 

between budgetary resources and the status of 

the resources. The total budgetary resources 

must be equal to the status of budgetary 

resources at all times. A more detailed SBR 

can be found in Chapter 3, Auditors’ Report 

and Financial Statements. For fiscal year 

2006, the FMC had total budgetary resources 

available of $20,473,727. This represents a 4.3% increase over fiscal year 2005 budgetary resources available of 

$19,622,729. For fiscal year 2006, the SBR shows the FMC had incurred obligations of $20,346,990, representing 

99.4% of funding available, and had an unobligated balance of $126,737. 

Analysis of the Statement of Financing 

The Statement of Financing is intended to provide a connection between accrual-based information (financial 

accounting) contained within the Statement of Net Cost and the obligation-based information (budgetary 

accounting) contained within the SBR. The Statement of Financing provides a reconciliation between the 

budgetary and proprietary accounting information within the financial system and ensures that they are in balance. 

Non-budgetary resources, costs not requiring resources, and financing sources yet to be provided are deducted 

from the budgetary obligations. This balance is then reconciled against the Net Cost of Operations. 

 Summary of the Statement of Budgetary Resources 

as of September 30, 2006 

FY 2006 FY 2005 

Total Budgetary Resources $20,473,727 $19,622,729 

Obligations Incurred $20,346,990 $19,441,873 

Status of Budgetary Resources $20,473,727 $19,622,729 

Unobligated Balance $126,737 $180,856 

 Summary of the Statement of 

Net Cost as of September 30, 2006 

FY 2006 FY 2005 

Office of Administration $8,449,512 $6,763,548 

Office of Equal Employment 

Opportunity 

$135,722 $90,712 

Net Cost of Program Services $21,146,426 $20,411,417 

Office of Inspector General $469,885 $433,223 

Formal Proceedings $4,958,503 $5,771,665 

Office of Operations $7,132,804 $7,352,269 
 11 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

Improper Payments Information Act 

Narrative Summary of Implementation Efforts for FY 2006 

 And 

 Agency Plans for FY 2006—FY 2009 

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 high-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 are offset by NFC. In FY 2006, 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 

one hundred percent of all disbursements made by the FMC. This was the case for all programs. 

III. In order to reduce the rate of improper payments, 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 are 

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 2006 with percentage 

forecasts through FY 2009. 

Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

FY06 FY06 FY 06 FY 07 FY08 FY 09

Program Outlays IP % IP $ % % %

Formal Proceedings 0.00 0.0000 0.0000 0.00 0.00 0.00

Inspector General 0.00 0.0000 0.0000 0.00 0.00 0.00

Equal Employment Opportunity 0.00 0.0000 0.0000 0.00 0.00 0.00

Operations 0.00 0.0000 0.0000 0.00 0.00 0.00

Administration 0.00 0.0000 0.0000 0.00 0.00 0.00

Totals 0.00 0.0000 0.0000 0.00 0.00 0.00

Improper Payment Reduction Outlook FY 2005 - FY2009 

(Millions)
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

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Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Improper Payments Information Act (continued) 

V. The FMC has in place a segregation of duties to ensure that all invoices processed for payment are 

legitimate expenses of the agency. When an invoice is received it is first verified as a valid invoice 

belonging to the agency. The invoice is then processed by the OMS to identify the proper purchase order 

the payment is to be expensed against. The OFM then processes the invoice against the purchase order to 

ensure that there are sufficient funds available on the purchase order to make the payment. If there are 

insufficient funds remaining on the purchase order, a request is made to modify the purchase order to 

increase funding. Once the payment authorization has been processed, it is verified by a second member of 

the OFM. From there the payment request is forwarded to the BPD for processing. When the payment is 

loaded into the Oracle database, a final funds availability check is made by the financial system against the 

fund controls set for the FMC. Currently the fund controls are set to the summary appropriation level. 

Beginning 10/01/06, the original invoices are received by BPD and forwarded to OFM via electronic 

media. This effects another level of scrutiny for every invoice and subsequent payment disbursed by BPD 

on behalf of the FMC. 

 The receipt of an invalid IPAC collection must be processed as a payment for the reason that the funds 

have already been moved from the Treasury General Fund as a disbursement against the FMC’s Agency 

Location Code (“ALC”). The internal controls in place remain unchanged, with a closer scrutiny paid to all 

invoices and subsequent payments. 

VI. The Chairman, as the Chief Administrative Officer of the FMC, is ultimately responsible for the efficient 

and effective utilization of the authority granted the agency by Congress. The Chairman has delegated 

financial responsibility to the Director, OFM. The Director of OFM has the responsibility to ensure that all 

disbursements made by BPD on behalf of the FMC are legitimate expenses of the agency and that there are 

sufficient funds available. The OFM is responsible for reducing and recovering improper payments, and 

keeps senior agency officials appraised of all relevant activities. 

VII. a. The FMC does not have an in-house information system to help reduce improper payments. The agency 

utilizes the infrastructure and financial system maintained in Parkersburg, WV by BPD. 

 b. In fiscal year 2006, the FMC requested funding to maintain the contract between the FMC and BPD for 

financial support and platform access to the Oracle database through Oracle’s Discoverer portal. 

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 current IPAC system does not allow an agency to refuse a collection against its ALC through the 

General Fund it deems improper. The end result is a requirement to make the payments during the 

accounting period in which the collection was made and reverse the collection at a later date. The ability to 

challenge the collection would reduce the number of improper collections made against the agency, 

therefore reducing the number of improper payments. 
 13 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Systems, Controls, and Legal Compliance 

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

Federal Managers’ Financial Integrity Act 

Federal Financial Management Improvement Act 

Prompt Payment Act 

Debt Collection Improvement Act 

Biennial Review of User Fees 

Performance Measure Summary 

Inspector General Act 

Federal Managers’ Financial Integrity Act 

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

ensure that obligations and cost comply with applicable law; assets are safeguarded against waste, loss, 

unauthorized use, or misappropriation; and revenues and expenditures are properly recorded and accounted for. It 

requires the agency head to provide an assurance statement of the adequacy of management controls and 

conformance of financial systems with Government standards. 

In his Message earlier in this document, the Chairman provided his annual assurance statement. This statement 

was based on various sources and included management knowledge gained from the daily operation of agency 

programs and reviews, discussions with senior managers who together comprise the agency’s Senior Policy Group, 

audits of financial statements, annual performance plans, and Inspector General reports, among other sources. The 

Senior Policy Group is comprised of all SES-level senior executives, including the Director of Operations, the 

General Counsel, and the agency’s Chief Financial Officer, among others. Additionally, the Chairman meets 

regularly with, and receives regular reports from, the FMC’s Inspector General. 

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

agency. For instance, corrective actions for significant deficiencies identified in the agency’s information 

technology area are overseen directly by the agency’s Chief Information Officer. 

FY 2006 Integrity Act Results 

The Chairman of the FMC determined that, as of September 30, 2006, the management controls of the FMC 

provide reasonable assurance that the objectives of the FMFIA are being met, and that the FMC, as a whole, is in 

compliance with section 2 of the FMFIA. The FMC’s financial management systems also are in substantial 

compliance with the objectives of the FMFIA, and the Commission is in compliance with section 4 of the FMFIA. 

During the fiscal year, the FMC mitigated two significant deficiencies (formerly called “material weaknesses” by 

OMB) which were first identified in a previous fiscal year. These significant deficiencies were in the information 

technology program. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 14

FY 2006 FMFIA Results (continued) 

The first of the two significant deficiencies was the quality of certification and accreditation (“C&A”) documents 

and security self-assessments. To mitigate the deficiency, the FMC hired an IT Security Officer who conducted a 

review of the agency’s systems and developed updated C&A documents for them. Disaster recovery testing was 

accomplished, and infrastructure and security upgrades were implemented on the FMC Network. 

The second of the two significant deficiencies was the lack of assurance that a contractor-operated system 

(SERVCON) was configured and operated under Federal security guidelines. The FMC terminated the contract to 

operate the system off-site, transferred management of SERVCON to FMC in-house staff, and rewrote the 

system’s security and password features. Disaster recovery testing was then accomplished. 

The FMC is pleased to report that these significant deficiencies were mitigated. 

During FY 2006, as a result of the Inspector General’s review of the agency’s implementation of FISMA, a finding 

was made which the FMC is reporting as a significant deficiency: C&A documents developed for the FMC 

network and applications do not provide enough information to evaluate the threats, vulnerabilities, safeguards and 

risks associated with operating the systems in a production environment. The FMC plans to address this deficiency 

through an application of appropriate NIST standards and requirements while also taking into account the size of 

the agency and the systems involved when developing additional materials for the C&A documents. We anticipate 

that this significant deficiency will be mitigated during FY 2007. 

The existence of a significant deficiency does not preclude a statement of overall compliance, as the deficiency is 

not sufficient to prevent reasonable assurance of overall compliance. 

Federal Financial Management Improvement Act 

The Federal Financial Management Improvement Act (“FFMIA”) requires agencies to implement and maintain 

systems that comply substantially with: Federal financial management system requirements; applicable Federal 

accounting standards; and the standard general ledger at the transaction level. The Act requires the agency head to 

determine whether the agency’s financial management systems comply with the FFMIA and to develop 

remediation plans for systems that do not comply. 

FY 2006 Federal Financial Management Improvement Act Results 

The Chairman of the FMC determined that, as of September 30, 2006, FMC’s financial management systems were 

in substantial compliance with the FFMIA. In making his determination, the Chairman considered the results of 

audits conducted by outside auditors in successive fiscal years, in addition to Inspector General reports, among 

other resources. 

Prompt Payment Act 

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 2006, the FMC maintained a percentage of on-time payments at 92.8%. The interest 

payments of $44.11 were primarily a result of new invoice processing procedures that were implemented mid-year. 

The FMC will continue to strive towards 100% on-time payments in future years. The FMC has maintained a 

100% on-time electronic/credit-card payment to its vendors. 

Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 
 15 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

Chapter One 

 MANAGEMENT’S DISCUSSION and ANALYSIS 

Debt Collection Improvement Act

The Debt Collection Improvement Act enhances the ability of the Government to service and collect debts. The 

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

debts is conducted by the Financial Management Service through the Treasury Offset Program where the names 

and taxpayer identification numbers (“TIN”) are matched against the TINs of recipients of government payments. 

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

Office of Personnel Management (“OPM”) retirement, vendor, IRS refunds, Social Security Benefits, and some 

federal salary payments are being offset. Federal agencies are required to refer delinquent accounts in excess of 

180 days to Treasury for collection. The goal of the FMC is to minimize the amount of delinquent debt owed to the 

agency. 

Biennial Review of User Fees 

The Chief Financial Officers Act requires agencies to conduct a biennial review of fees and other charges imposed 

by agencies, and to make revisions to cover program and administrative costs incurred. During FY 2005, the FMC 

published its revised fees subsequent to its biennial review. The fees are posted on the FMC’s website. In FY 2007 

the FMC will again conduct its biennial review. 

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 receives accounting services 

from BPD located in Parkersburg, WV. The Commission verifies and reconciles all financial statements and 

reports prior to submission, and has remained in compliance with all reporting thresholds including FACTS I 

(Federal Agencies’ Centralized Trial-Balance System) reporting, timely reporting, and reconciliation of any 

financial statement differences. 

Inspector General Act 

The FMC has a very good record in resolving and implementing open audit recommendations presented in its 

Inspector General reports. Section 5(b) of the Inspector General Act requires agencies to report on final actions 

taken on Inspector General audit recommendations. Information can be found in Appendix C.

Briefly, during fiscal year 2006, the Inspector General completed the following audits/inspections: 

Audit of FY 2005 Financial Statements 

Audit of FY 2005 FISMA Compliance 

IG Assessment of Management Challenges Facing the FMC 

Audit of Data Accuracy in BOE’s Tracking System 

Audit of Payroll Processing Transactions 

Audit of FY 2006 FISMA/Privacy Compliance 

The Inspector General’s reviews disclosed no instances of questioned costs nor were any recommendations made 

that funds be put to better use. The FMC has addressed a number of recommendations from these reviews, and it is 

anticipated that the ones which remain outstanding will be completed in FY 2007. 

During FY 2006, the agency mitigated two significant deficiencies which had been identified in a previous fiscal 

year. The Inspector General, in his FY 2006 FISMA Review, identified one significant deficiency related to the 

agency information security program; it is anticipated that corrective action on that deficiency will be completed in 

FY 2007. 
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FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

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CHAPTER TWO

PROGRAM PERFORMANCE 

Fiscal Year 2006 
 16 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Chapter Two 

 PROGRAM PERFORMANCE 

Introduction 

This chapter presents information on the performance of the FMC during FY 2006. The FMC’s performance 

measurement system is discussed, along with the alignment of resources to strategic goals, and a summary of 

performance relative to specific performance goals. Following the discussion of performance goals, this chapter 

discusses the FMC’s efforts to address the President’s Management Agenda. 

FMC’s Performance Management System 

The FMC’s performance management system includes both strategic goals and performance goals and measures. 

The strategic goals, taken together, represent the FMC’s mission and reflect the overall outcomes to be achieved. 

The performance goals focus on outcomes which are contributors to achieving the agency’s strategic goals. The 

performance measures associated with each performance goal provide benchmarks for measuring how effectively 

the FMC is achieving its goals. 

Aligning Resources to Goals 

To achieve the FMC’s strategic goals, both steady state activities and fiscal year-specific performance goals have 

been developed. The FMC plans and budgets for its program activities during each fiscal year to ensure appropriate 

resources (funds and FTEs) are available to achieve its performance goals and accomplish its steady state 

activities. 

Future Improvements in Performance Management 

As a small agency, OMB agreed that the FMC should use an appropriately scaled mechanism for the GPRA 

process and development with a framework which would be productive, yet less resource-intensive. Nonetheless, 

the FMC strives to ensure its performance plans present relevant information clearly and concisely, and to be as 

detailed as possible while avoiding minutiae. 

In FY 2005, the FMC’s performance plan for the first time allocated all agency resources, and linked the agency’s 

performance goals, directly to its strategic goals instead of its budget program activities. This demonstrates the 

FMC’s substantial progress in integrating performance management and budget processes, as it fosters efforts to 

link planning, budgeting and performance more effectively. We continued this process in FY 2006. Future 

performance reports will continue to integrate performance management and budget by aligning agency resources 

with strategic goals. 

Program Activities 

Overview 

In Chapter 1 there is a description of the FMC’s organization and its regulatory responsibilities. In order to carry 

out its mandates, the FMC operates under five program areas: Formal Proceedings, Equal Employment 

Opportunity, Inspector General, Operations, and Administration. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

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Chapter Two 

 PROGRAM PERFORMANCE 

Formal Proceedings Program 

Office of the Commissioners 

Five Commissioners are appointed by the President with the advice and consent of the Senate. The president 

designates one of the Commissioners to serve as Chairman. The Chairman has exclusive authority over agency 

personnel matters, organization and supervision, distribution of business, and use of funds for administrative 

purposes. 

The Chairman and the other four Commissioners are responsible for deciding cases in which parties must have the 

opportunity to be heard. During FY 2006, the Commission issued 11 orders and/or notices in docketed 

proceedings. 

Office of the Secretary 

The Office of the Secretary serves as the focal point for all matters submitted to and emanating from the 

Commission. Accordingly, the Office is responsible for preparing and submitting regular and notation agenda 

matters for consideration by the Commission, and preparing and maintaining the minutes of actions taken on these 

agenda and notation matters; receiving and processing formal and informal complaints involving violations of the 

shipping statutes and other applicable laws; receiving and processing special docket applications and applications 

to correct clerical or administrative errors in service contracts; issuing orders and notices of actions of the 

Commission; maintaining official files and records of all proceedings; receiving all communications, petitions, 

notices, pleadings, briefs, or other legal instruments in regulatory and quasi-judicial proceedings and subpoenas 

served on the Commission or members thereof; administering the Freedom of Information, Government in the 

Sunshine, and Privacy Acts; responding to information requests from the maritime industry, the public, and FMC 

staff; issuing publications and authenticating instruments and documents of the Commission; compiling and 

publishing Commission decisions; maintaining and promulgating official copies of the FMC's regulations; and 

maintaining the FMC's Public Reference/Law Library, Docket Activity Library and Internet website. The 

Secretary's Office also participates in the implementation of legislative changes to the shipping statutes. Further, 

the Secretary’s office oversees the administration of the Office of Consumer Affairs and Dispute Resolution 

Services. 

Looking Back: 2006 

• In FY 2006, the Office of the Secretary issued 11 orders and/or notices in formal docketed proceedings, 

processed 58 agenda items, 90 pages of minutes, 260 Federal Register Notices, and 13 FOIA requests. The 

Office also continued to update the Commission’s new website and provide more historical data electronically.

Looking Ahead: 2007 

• In FY 2007, the Office of the Secretary will work to redesign the agency’s intranet, to make information more 

readily available internally. 
 18 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Chapter Two 

 PROGRAM PERFORMANCE 

Office of Consumer Affairs and Dispute Resolution Services 

The Office of Consumer Affairs and Dispute Resolution Services implements the FMC's Alternative Dispute 

Resolution ("ADR") program, and provides ombuds services and responds to inquiries and complaints. Under this 

program, parties to a dispute are encouraged to avail themselves of services provided by the FMC to resolve 

disputes through mediation or ombuds services. The Director of the Office is the FMC’s Dispute Resolution 

Specialist. The Director and other trained Office staff serve as third-party neutrals in proceedings that are in 

litigation. CADRS personnel provide mediation services for a broad range of disputes, from informal, pre-litigation 

disputes to those involving significant matters in litigation. Ombuds services are provided to resolve a variety of 

immediate concerns involved with cargo shipments and cruise matters. Should a matter not be resolved through 

ombuds services, or through more formal mediation services, a claimant may choose to initiate an informal docket 

proceeding, alleging a 1984 Act violation. This is a form of arbitration, with both sides agreeing to be bound by the 

decision of the settlement officer. Claimants who prefer formal docket procedures may opt to file a formal 

complaint and fully litigate the dispute before the FMC’s Administrative Law Judges. Mediation services may also 

be provided in such formal proceedings. Also, CADRS staff review and decide special docket applications, which 

are requests to waive or refund freight charges. 

Looking Back: 2006 

• In FY 2006, 3,500 complaints and information requests were processed. Of those, 650 complaints required 

ombuds dispute resolution services. Office staff also served as neutrals in six dispute resolution proceedings 

involving a variety of significant issues. 

• In FY 2006, with assistance provided by the Office, a formal investigation of several problem movers was 

instituted by the Commission. In addition, injunctions were obtained against several companies and 

individuals to prohibit their continued operation. As a result, several entities ceased operations, thereby 

substantially reducing the numbers of complaints against those entities. 

Looking Ahead: 2007 

• In FY 2007, the Office intends to expand awareness of the ADR program through education and training, and 

other outreach efforts. The Office also will continue to make consumer protection information available and 

will expand its outreach through various websites and media sources. 

Office of the General Counsel 

The General Counsel provides legal counsel to the Commission. This includes reviewing staff recommendations 

for Commission action for legal sufficiency, drafting proposed rules to implement Commission policies, and 

recommending and preparing final decisions, orders, and regulations for Commission adoption. In addition, the 

Office of the General Counsel provides written and oral legal opinions to the Commission, its staff, and the general 

public in appropriate cases. As described in more detail below, the General Counsel also represents the 

Commission before the courts, Congress, and other government agencies and administers the Commission's 

international affairs program. 

Looking Back: 2006 

• In FY 2006, General Counsel produced 15 speeches, articles or presentations, 30 instances of interagency and 

international group participation, and responded to 275 requests for information. 

International Affairs Program 

• In FY 2006, General Counsel produced 35 reports, policy papers, briefings, or controlled carrier 

recommendations. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 19

Chapter Two 

 PROGRAM PERFORMANCE 

• In FY 2006, the Commission continued to monitor potentially restrictive shipping practices of the Government 

of Japan. 

2006 Legislative Activity 

Looking Back: 2006 

• During FY 2006, 120 bills, proposals and Congressional inquiries were referred to the Office for comment. 

The Office prepared and coordinated testimony for one Congressional hearing. The Office also worked 

closely with Congressional staffs on proposed legislation that affected the Commission. 

Looking Ahead: 2007 

• In FY 2007, the Office will increase relationships with other agencies with responsibilities related to the 

maritime transportation system. 

2006 Litigation 

• The General Counsel represents the Commission in litigation before courts and other administrative agencies. 

The following is representative of matters litigated by the Office. 

• American Institute of Shipper’s Associations v. Federal Maritime Commission, D.C. Circuit, Case No. 05-

1036; International Shippers’ Association v. Federal Maritime Commission, D.C. Circuit, Case No. 05-

1037. This proceeding is an appeal of the FMC’s final rule, and its order denying rehearing, in Docket No. 

04-12, Non-Vessel-Operating Common Carrier Service Arrangements. In order to ensure that competition 

would not be harmed, that rule forbade NVOCCs and shippers’ associations with NVOCC members from 

acting as shippers in NSAs. The petitioners sought to convince the Court of Appeals either that the 

Commission’s rule is discriminatory against shippers’ associations with NVOCC members, or that the rule is 

entirely beyond the scope of the agency’s authority. The Court, on its own motion, consolidated Case Nos. 

05-1036 and 05-1037. On May 11, 2005, the following entities were granted leave to intervene in support of 

the FMC’s rule: BAX Global Inc., FEDEX Trade Networks Transport & Brokerage, Inc., National Industrial 

Transportation League, Transportation Intermediaries Association, and United Parcel Service, Inc. The court 

also granted permission to the Fashion Accessories Shippers Association (“FASA”) to participate as an amicus 

curiae. Following amendments made by the Commission to the NSA rule, petitioners moved for voluntary 

dismissal of the petitions. Amicus curiae, FASA, moved to convert its status to intervenor, in order to 

continue the case. On January 12, 2006, the court issued a per curiam Order granting petitioners’ motions for 

voluntary dismissal of these consolidated proceedings. The Court also denied FASA’s motion to intervene. 

Office Of Administrative Law Judges

Administrative Law Judges regulate the course of proceedings, conduct hearings, approve settlements, and render 

decisions in adjudicatory proceedings held after receipt of a complaint, or when instituted by the Commission. 

ALJs have authority to administer oaths and affirmations; issue subpoenas; rule upon motions and offers of proof; 

receive evidence; authorize depositions; regulate the course of hearings; hold pre-hearing conferences for the 

settlement or simplification of the issues involved; refer matters to mediation when appropriate; dispose of 

procedural requests; act as settlement judges in particular cases; and take any other action authorized by agency 

rule or the Administrative Procedure Act. 

 

Looking Back: 2006 

• In FY 2006, 2 formal proceedings were settled formally by the ALJs, and 5 formal proceedings were 

dismissed by the ALJs. Additionally, 7 initial decisions in formal proceedings were issued but not settled by 

the ALJs. 
 20 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Chapter Two 

 PROGRAM PERFORMANCE 

Looking Ahead: 2007 

• In FY 2007, the Office will conduct hearings and render decisions on adjudicatory proceedings and on such 

rulemaking proceedings as may be referred to the Office. 

Inspector General Program 

The Office of the Inspector General operates pursuant to the Inspector General Act of 1978, as amended in 1988. 

The 1988 amendments created additional statutory offices of inspector general at various designated Federal 

entities, including the FMC. The Office is an independent and objective unit which conducts audits, reviews 

operations and programs, investigates possible fraud, waste and abuse of Commission resources, and promotes 

economy, efficiency and effectives in programs and operations administered by the Commission. 

Looking Back: 2006 

• In FY 2006, the Office issued an audit of the agency’s FY 2005 financial statements and a companion report 

to management containing financial-related findings and recommendations resulting from the audit. The OIG 

also issued reports to management on agency compliance with the Federal Information Security Management 

Act of 2002, management challenges facing FMC in FY 2005, data accuracy in the Bureau of Enforcement’s 

tracking systems and the effectiveness of controls over select aspects of payroll processing. Finally, the OIG 

issue two semiannual reports to Congress identifying the office’s audit and investigative activity for the fiscal 

year. 

Looking Ahead: 2007 

• The Office will continue its high priority program of conducting program evaluations in order to improve 

agency programs and operations, and will conduct required reviews of the agency’s financial statements and 

information security program. 

• In FY 2007, the Office will undergo a peer review to ensure that the Office has an effective quality control 

program in place. 

• The Office will continue to keep the agency head, OMB and Congress fully informed of OIG activities. 

Equal Employment Opportunity Program 

The Office of Equal Employment Opportunity (EEO) assists the FMC in carrying out its responsibilities relative to 

Titles VI and VII of the Civil Rights Act of 1964 and other laws, executive orders, and regulatory guidelines 

affecting affirmative employment and non-discrimination in the federal government. The Office of EEO 

administers and ensures the Commission's compliance with the laws, regulations and policies that prohibit 

discrimination in the Federal workplace based on race, color, national origin, religion, gender, age, disability, or 

reprisal. The Office of EEO is responsible for processing EEO pre-complaints and formal complaints, for 

encouraging resolution, and for establishing and maintaining a continuing affirmative employment program 

designed to promote equal opportunity in every aspect of the Commission's personnel policies and practices. 

Looking Back: 2006 

• In FY 2006, the Office continued providing support and assistance to managers and supervisors in maintaining 

and effectively managing a diverse workforce. Senior officials were briefed on a quarterly basis on different 

aspects of the EEO and Diversity Management areas. 

• The Office updated most EEO-related policy statements and Commission orders. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

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Equal Employment Opportunity Program (continued) 

• The Office continued educating and raising awareness about diversity in the workplace by facilitating special 

emphasis and commemorative programs throughout the year. 

Looking Ahead: 2007 

• The Office will continue all existing EEO programs and will assess the need for additional activities and 

programs that promote equal opportunity in the Commission and increase understanding of EEO concepts and 

principles. 

Operations Program 

Office of Operations 

The Director of Operations is the senior staff official responsible to the Chairman for the management and 

coordination of FMC programs under the Bureau of Enforcement, the Bureau of Trade Analysis, and the Bureau of 

Certification and Licensing. Program accomplishments are detailed in individual bureau sections. 

In addition, the Office of Operations oversees the Area Representatives. 

Area Representatives 

The Commission maintains a presence in Los Angeles, South Florida, New Orleans, New York and Seattle though 

Area Representatives based in each of those areas. These representatives serve major port cities and transportation 

centers within their respective areas. In addition to monitoring and investigative functions, Area Representatives 

represent the FMC within their jurisdictions, provide liaison between the FMC and the maritime industry and the 

shipping public, collect and analyze intelligence of regulatory significance, and assess industry conditions. Liaison 

activities involve cooperation and coordination with other government agencies and departments, providing 

regulatory information and relaying FMC policy to the shipping industry and the public, and handling informal 

complaints within each representative’s area of responsibility. Area Representatives also work on Commission 

outreach through seminars, booths at various conferences and trade shows, presentations, and local community 

contacts. 

The Office of Operations supported the operational bureaus through oversight and guidance towards the 

accomplishment of many programmatic achievements during FY 2006. 

* Seattle, New Orleans, Los Angeles, and New York are covered by 1 Area Representative each; South Florida is 

covered by two Area Representatives. In addition to the Area Representatives under the Office of Operations, 

Bureau of Enforcement staff covers the mid-Atlantic consisting of 1,222 U.S. and foreign regulated entities. 

Chapter Two 

 PROGRAM PERFORMANCE 

Regulated Entities by Region*

0 200 400 600 800 1000 1200

Seattle

New Orleans

LA

South Florida

New York
 22 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Looking Back: 2006 

• In FY 2006, the Office worked with the bureaus and other agency units to review Commission rules and 

regulations regarding business practices in the OTI sector, and worked with BCL to report to the 

Commission regarding OTI industry changes, including proposing initiatives in that area. 

• The Office led the bureaus and other agency units in reviewing and coordinating compliance and 

enforcement policy, including taking action against unscrupulous household goods movers. 

• In FY 2006, the Office worked with staff to make technological advances, including work on the automated 

form FMC-18. 

• In FY 2006, the Office was heavily involved in developing an agency outreach strategy. 

Looking Ahead: 2007 

• In FY 2007, the Office will continue to concentrate on increasing agency outreach and raising public 

awareness of agency regulations and services. 

• The Office will focus on reviewing agency policies and regulations to ensure alignment between the FMC 

and the industry and on automating certain processes, and will continue to refine integration of the three 

agency bureaus. 

Bureau of Enforcement 

The Bureau of Enforcement is the primary prosecutorial arm of the Commission. Attorneys of the Bureau of 

Enforcement participate as trial counsel in formal adjudicatory proceedings. The Bureau also participates in 

formal complaint proceedings where intervention is appropriate. Bureau attorneys serve as legal advisors to the 

Director of Operations and other bureaus, and also may be designated Investigative Officers in non-adjudicatory 

fact finding proceedings. The Bureau monitors all other formal proceedings in order to identify major regulatory 

issues and to advise the Director of Operations and the other bureaus. The Bureau also participates in the 

development of Commission rules and regulations. Under the direction of the General Counsel, attorneys from 

the Bureau also may participate in matters of court litigation to which the Commission is a party. 

Looking Back: 2006 

• At the beginning of FY 2006, 27 enforcement cases were pending final resolution by the Bureau, the Bureau 

was party to 7 formal proceedings, and there were 71 matters pending which the Bureau was monitoring or 

for which it was providing legal advice. During the fiscal year, 20 new enforcement actions were 

commenced; 15 were compromised and settled, administratively closed, or referred for formal proceedings; 

and 32 enforcement cases were pending resolution at fiscal year's end. Also, the Bureau participated in 4 

new formal proceedings, 4 proceedings were completed, and 4 formal proceedings were pending at the end 

of the fiscal year. Additionally, 51 matters involving monitoring or legal advice were received during the 

fiscal year, 49 such matters were completed, and 73 were pending in the Bureau on September 30, 2006. 

• During FY 2006, the Bureau worked to obtain statutory compliance in all major trades and with all segments 

of the transportation industry, i.e., carriers, carrier agreements, MTOs, PVOs, and OTIs.

Chapter Two 

 PROGRAM PERFORMANCE 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 23

Chapter Two 

 PROGRAM PERFORMANCE 

• The Bureau also initiated enforcement action to address market-distorting activities such as various forms of 

secret rebates and absorptions, misdescriptions of commodities and misdeclarations or measurements, illegal 

equipment substitution, unlawful use of service contracts, as well as carriage of cargo by and for untariffed 

and unbonded non-vessel-operating common carriers, and joint carrier activities outside the authority of filed 

agreements. Major initiatives to address activities of unlicensed, unbonded OTIs were conducted with special 

emphasis on household goods transportation providers. 

 

Looking Ahead: 2007

• In FY 2007, the Bureau will continue to pursue statutory compliance by entities regulated by the Commission, 

and the elimination of market-distorting, fraudulent and anticompetitive practices. 

• The Bureau will work with non-vessel-operating common carriers and vessel-operating common carriers to 

limit participation of unlawful entities in ocean transportation. 

Bureau of Trade Analysis 

The Bureau of Trade Analysis reviews agreements and monitors the concerted activities of common carriers by 

water under the standards of the 1984 Act. The Bureau also reviews and analyzes service contracts and NSAs, 

monitors rates of government controlled carriers, reviews carrier published tariff systems under the accessibility 

and accuracy standards of the 1984 Act, and responds to inquiries or issues that arise concerning service contracts 

or tariffs. The Bureau also is responsible for competition oversight and market analysis, focusing on activity that is 

substantially anti-competitive and market distorting in violation of the 1984 Act. BTA strives to be an expert 

organization on the economics of international liner shipping and maritime agreements, especially with respect to 

issues of competition and unfair trade practices as they may affect the interests of the shipping public and U.S. 

international trade. 

An integral part of BTA's responsibilities is the systematic surveillance of carrier activity and commercial 

conditions in the U.S. liner trades. Accordingly, BTA administers a variety of monitoring programs, and other 

research efforts, designed to apprise the Commission of current trade conditions, emerging commercial trends, and 

carrier pricing and service activities. 

Office of Agreements

The Bureau's agreement program activities consist of: (1) processing carrier and marine terminal agreement filings 

under the procedures of the 1984 Act as modified by OSRA; (2) conducting a comprehensive review and analysis 

of all pertinent legal and commercial facets of agreements to recommend appropriate action to the Commission on 

the disposition of filed agreements; (3) making appropriate recommendations on requests for a waiver of 

Information Form and Monitoring Report filing requirements; (4) maintaining the FMC's official agreement 

archives; and (5) maintaining an agreement database that contains pertinent information on each carrier and marine 

terminal agreement filed with the FMC. 

 

Looking Ahead: 2006 

• During FY 2006, the Bureau received 265 carrier agreement filings and 18 terminal agreement filings. The 

Bureau also received and reviewed minutes of meetings and reports filed by various agreement parties. 

 
 24 

CHAPTER TWO 

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Chapter Two 

 PROGRAM PERFORMANCE 

• During FY 2006, the Bureau reviewed and analyzed the justification for the establishment of the Traffic 

Mitigation Fee (TMF) established by PierPASS, an organization created pursuant to the West Coast MTO 

Discussion Agreement (FMC No. 201143), as a means of funding extended gate hours at marine terminals at 

the ports of Los Angeles and Long Beach. The TMF also provides a monetary incentive for shippers to move 

cargo traffic to off-peak evening hours as a means of reducing traffic congestion and air pollution levels 

attributable to truck idling time at port facilities. 

• The Bureau commenced adding copies of terminal agreements to its electronic agreement library. Public 

access to terminal agreements will be through existing links on the agency website. 

• The Commission’s decision last year to allow expedited implementation of certain agreements resulted in a 

doubling of the percentage of low market share agreements that were exempted from the 45-day waiting 

period in 2006 as compared to 2005. More than 20% of all filings in FY 2006 qualified for the exemption. 

Looking Ahead: 2007 

• The Bureau expects to complete its evaluation of the impact of the new agreement rules on the industry and 

the internal processes of the agency. 

• The Bureau expects to further enhance public access to filed agreements, and to develop and implement 

procedures for the electronic filing of agreements. 

Office of Economics and Competition Analysis 

To keep the Commission apprised of current trade conditions, emerging commercial and economic trends, and the 

impact of regulations affecting waterborne liner transportation, the Bureau prepares studies and profiles of major 

trades, monitoring reports, economic analyses, and agreement/carrier profiles, and undertakes special projects to 

identify and track relevant competitive and economic activity in major U.S. trade lanes. The Bureau’s monitoring 

activities include surveillance programs to identify: (1) concerted activity without an effective agreement on file 

with the FMC, or concerted activity exceeding the scope or authority of an effective agreement; (2) activity 

contravening the mandatory conference agreement provisions required by sections 5(b) and 5(c) of the 1984 Act; 

(3) the potential for, or emergence of, unreasonable transportation service/cost impacts that contravene the section 

6(g) general standard; (4) controlled carrier activity in areas relevant to the FMC’s administration of section 9 of 

the 1984 Act; (5) the occurrence of prohibited acts proscribed under section 10; (6) economic harm associated with 

unfair trade practices of foreign governments; and (7) whether the continued operation of an effective agreement in 

its present form is consistent with the statutes and current FMC decisions, rules, and policies. The Bureau 

develops profiles of major trade areas to assess carrier behavior under agreements, to determine compliance with 

regulatory requirements, and to ascertain the competitive posture of carriers, shippers, and shippers’ associations 

within each trade. 

Looking Back: 2006

• The Bureau received 873 sets of minutes and 231 quarterly monitoring reports in FY 2006. 

• The Bureau converted its FOCUS database of historical PIERS data into an SQL Server database, and 

implemented an intuitive point-and-click web-based PIERS data analysis system. Over 30 million records 

were converted and an additional 450,000 records are newly appended each month. 

• The Bureau produced a variety of reports and analyses including a detailed study of service contract rate levels 

for major commodities moving between key port-pairs in the U.S.-China trade. That study assessed the 

pricing policies of the two largest Chinese state-owned carriers operating in this trade, pursuant to the rate 

standards for controlled carriers in section 9 of the Shipping Act. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 25

Chapter Two 

 PROGRAM PERFORMANCE 

• The Bureau initiated an economic review of the current and likely future operations of PierPASS and the 

procedures for and impact of the April 2006 increase of 25% in the TMF. The first stage of that review 

involved a series of meetings in the Los Angeles/Long Beach area with local officials, affected shippers, 

academics and PierPASS officials. 

Looking Ahead: 2007

• The Bureau intends to link the new PIERS data analysis system to the enhanced Agreements database to 

facilitate the review of new agreements or modification of existing agreements. The creation of a seamless 

link between these databases should facilitate and enhance the Bureau’s monitoring activities and the 

production of various trade analysis reports. 

• Given the impact of PierPASS on U.S. trade transiting the ports of Los Angeles and Long Beach, and its 

possible role as a model for addressing traffic congestion and air pollution issues at other U.S. container ports, 

the Bureau expects to conduct detailed research into the effectiveness of the PierPASS system and the impacts 

of its pricing procedures and cost allocation methods. 

U.S. Container Cargo Volumes (TEUs) 

Source: Journal of Commerce/PIERS, Trade Horizons (Summer 2006). 

Office of Contracts and Tariffs 

The 1984 Act allows ocean common carriers, either individually or through agreements, to negotiate and execute 

service contracts with one or more shippers or shippers’ associations. Under service contracts, shippers make a 

commitment to provide a certain volume or portion of cargo over a fixed period of time and carriers commit to a 

specified rate and a defined service level. These contracts are filed confidentially with the FMC. A concise 

statement of certain contract terms, i.e., commodity or commodities involved, minimum volume or portion, 

duration, and origin and destination port ranges, is required to be published in carriers’ or conferences’ tariffs. 

Service contracts offer an alternative to transportation under tariff terms. Contract flexibility enables carriers to 

tailor their transportation services to the specific commercial and operational needs of shippers. The 

confidentiality of contracts has spurred commercial innovations and brought greater efficiencies in the movement 

of cargo. Overall, the use of service contracts has continued to increase significantly due primarily to the 

efficiency, flexibility, and confidentiality of one-on-one negotiation of contracts between shippers and carriers. 

Year 

 

2003 

2004 

2005 

 2006 

Forecasts 

 2007 

2008 

 

 U.S. Imports Annual Growth 

 

 14,155,376 7.8% 

 15,981,873 12.9% 

 17,614,019 10.2% 

 19,159,611 8.8% 

 20,613,744 7.6% 

 21,934,828 6.4% 

 

 U.S. Exports Annual Growth 

 

 7,255,026 8.8% 

 7,835,668 8.0% 

 8,374,142 6.9% 

 9,077,928 8.4% 

 

 

 9,815,226 8.1% 

 10,531,750 7.3% 
 26 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Chapter Two 

 PROGRAM PERFORMANCE 

Under final rules in the FMC’s Docket No. 04-12, NVOCCs are permitted to enter into, and file with the FMC, 

NVOCC Service Arrangements with their shipper customers. These arrangements are similar to the confidential 

service contracts of common carriers and agreements of ocean common carriers. 

The 1984 Act, as amended by OSRA, requires carriers and conferences to publish their tariffs in private electronic 

systems. Tariffs are to be made available, typically through Internet access, to any person, without time, quantity, 

or other limitation. Carriers are permitted under law to charge a reasonable fee for providing public access to their 

tariffs. The Bureau reviews and monitors the accessibility and accuracy of the private systems and reviews 

published tariff material for compliance with the 1984 Act’s requirements. The Bureau continues to act upon 

applications for special permission to deviate from tariff publishing rules and regulations. 

Looking Back: 2006

• During FY 2006, the Bureau received approximately 50,000 new service contracts and 242,000 contract 

amendments. A new upgraded SERVCON system was implemented to streamline the filing process for all 

filers of service contracts and NSAs, and other major performance enhancements were made to the system. 

• 3,996 active/current tariff location addresses for carriers, conferences, and MTOs were posted on the FMC’s 

website during FY 2006. A total of 1,856 inactive/cancelled tariff location addresses were posted as well. 

• An estimated 414 NSAs and 342 amendments were filed by NVOCCs. The Bureau completed an initial audit 

of filed NSAs and a related research project on the use of NSAs. 

• The Bureau continued monitoring public accessibility of carriers’ published tariffs, and a review, and 

completed an audit of unique carriers’ automated tariff systems (“CATS”). 

Looking Ahead: 2007

• The Bureau intends to automate the registration forms for filing NSAs (FMC Form 78) and service contracts 

(FMC Form 83). 

• The Bureau will continue to participate in activities to help identify any service contract provisions that may 

bear on maritime security concerns. 

Bureau of Certification and Licensing 

The Bureau of Certification and Licensing (1) licenses and regulates OTIs, including ocean freight forwarders and 

NVOCCs; (2) issues certificates to owners and operators of passenger vessels that evidenced financial 

responsibility to satisfy liability incurred for nonperformance of voyages or for death or injury to passengers and 

other persons and (3) manages programs assuring financial responsibility of OTIs and PVOs, by developing 

policies and guidelines, and analyzing financial documents. In carrying out these functions, the Bureau provides 

information and referrals in responding to a wide array of informal inquiries, and provides guidance with respect to 

licensing and bonding. 

Office of Transportation Intermediaries 

 

The Office of Transportation Intermediaries has responsibility for reviewing and approving applications for OTI 

licenses, and maintaining and updating records about licensees. Without a license, an OTI may not legally operate 

in the United States. NVOCCs not domiciled in the U.S. are required to have a $150,000 bond and designate a 

U.S. resident agent. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 27

Chapter Two 

 PROGRAM PERFORMANCE 

Looking Back: 2006 

• During FY 2006, the Commission received 500 new and 300 amended OTI applications, 475 new and 300 

amended licenses were issued, 250 licenses were revoked, and an additional 55 non-U.S.-based unlicensed 

NVOCCs’ bonds were cancelled. 

• As a result Docket No. 04-02, Optional Rider for Proof of Financial Responsibility, OTIs may file an optional 

rider for additional proof of financial responsibility for U.S.-domiciled licensed NVOCCs servicing the U.S./

PRC trade, allowing them to meet financial responsibility requirements imposed on NVOCCs by the PRC. 

During FY 2006, the FMC processed 5 PRC bond riders for a total of 44 riders. 

• The FMC continued its outreach program and promoted awareness of licensing requirements. 

• The FMC initiated a new project to modernize the Regulated Person Index (RPI), a Commission database 

containing up-to-date records of licensed OTIs, ocean common carriers and other entities. Among other data 

uses, the RPI is used to post on the Commission’s website a list of OTIs which are compliant with OTI 

requirements, so that carriers and others can ascertain whether an OTI is properly licensed, bonded, and if 

required, has posted the location of its automated tariff. 

• The Bureau developed a system to permit electronic submission of the OTI application, Form FMC-18. 

Testing by BCL staff is underway. 

Looking Ahead: 2007 

• In FY 2007, the Bureau will initiate a rulemaking to release its automated FMC-18 filing system for public 

use. The Bureau will continue efforts in FY 2007 to design further improvements to the electronic FMC-18 

system to expedite licensing, further explore integration of FMC databases and develop the functionality for 

electronic payments, e-signature capability and to support electronic filing of bond information. 

• In FY 2007, the Bureau will enhance the OTI outreach program and promote awareness of OTI requirements. 

This program is envisioned to improve compliance by VOCCs and OTIs with the Shipping Act and reduce the 

number of transportation users currently impacted by action of unlawful operators. 
 28 

CHAPTER TWO 

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Chapter Two 

 PROGRAM PERFORMANCE 

Passenger Vessels and Information Processing 

The Office of Passenger Vessels and Information Processing (“OPVIP”) has the responsibility of implementing the 

Commission’s Passenger Vessel Program in accordance with P.L. 89-777 (46 CFR 540). This program ensures 

that passengers are indemnified against casualty or non-performance from cruise lines. The OPVIP is responsible 

for reviewing applications for certificates of financial responsibility, managing all activities with respect to 

evidence of financial responsibility of passenger vessel owner/operators, and developing and maintaining all 

Bureau databases and records of OTI applicants and licensee. 

Looking Back: 2006 

• The Passenger Vessel Program received 30 applications for Performance Certificates and processed 30, and 

received 30 and processed 34 applications for Casualty Certificates. 

• OPVIP worked with four cruise lines which ceased operations or left the trade to ensure all passengers due 

refunds under P.L. 89-777 received them and that where coverage was evidenced by escrow, the escrow 

accounts were closed appropriately. 

• A current list of OTIs in compliance with FMC requirements is maintained on the Commission’s website. 

This informs carriers and individuals regarding unlicensed OTIs, and is helpful to other government agencies. 

Monitoring Program 

Looking Back: 2006 

• During FY 2006, the Bureau continued to enhance the PVO monitoring program by commencing its On-Site 

Monitoring Program to evaluate the financial responsibility of PVOs participating in the Commission’s PVO 

program. 

• BCL briefed the Commission on its assessment of Passenger Vessel Operators’ Escrow Account Agreements. 

The purpose was to evaluate BCL’s existing program and business processes in relation to cruise line 

operators’ current practices involving the escrow process. 

Ocean Transportation Intermediary Statistics

Pre-OSRA As of 9/30/02 As of 9/30/03 As of 9/30/04 As of 9/30/05

Freight 

Forwarders 1,700 1,294 1,262 1,242 1,210

NVOCCs 2,200 1,298 1,317 1,401 1,455

Freight 

Forwarder /

NVOCC 400 873 900 946

 

 1,025 

Foreign 

NVOCC 

Unlicensed 0 653

 

721 775

 

 820 

Foreign 

NVOCC 

Licensed

0 41 40 36 38 

TOTAL 4,300 4,159 4,240 4,400 4,548

As of 9/30/06

1,157 

1,561 

1,119 

888 

40 

4,765 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 29

Chapter Two 

 PROGRAM PERFORMANCE 

Looking Ahead: 2007 

• In FY 2007, the Bureau will continue its efforts to accomplish the Commission’s goal related to assuring that 

the PVO program meets the contemporary needs of the cruising public. The Bureau will review the 

effectiveness of the PVO monitoring procedures previously implemented, make appropriate corrections in 

staff procedures and monitoring schedules, and follow up to ensure that new procedures are timely 

implemented. 

• In FY 2007, the Bureau will continue working on a rulemaking with respect to the Commission’s statutory 

obligation to the Passenger Vessel Financial Responsibility program derived from Sections 2 and 3 of P.L. 89-

777. 

Administration Program 

Office of the Director

The Office of Administration (“OA”) provides administrative support to the program operations of the 

Commission. The Director, OA, is responsible for the direct administration and coordination of the Office of 

Financial Management (formerly named the Office of Budget and Financial Management), the Office of Human 

Resources, the Office of Information Technology, and the Office of Management Services. Many of the functions 

and achievements of the OA are reflected below in the narratives for these offices. 

The Director, OA, provides administrative guidance to the Offices of the Commissioners, Secretary, General 

Counsel, Administrative Law Judges and Operations, and administrative assistance to the Offices of the Inspector 

General and Equal Employment Opportunity. The Director is the FMC’s Chief Acquisition officer, Audit Followup and Management (Internal) Controls Official, and Forms Control Officer, and serves as the agency’s lead 

executive for strategic planning and implementation of the Government Performance and Results Act of 1993. The 

Director also serves as the FMC’s representative, as Principal Management Official, to the Small Agency Council. 

As the Chief Financial Officer, the Director provides program oversight for the agency’s budget and financial 

management responsibilities, and ensures agency compliance with the Federal Managers Financial Integrity Act, 

the Antideficiency Act, and the Debt Collection Improvement Act of 1996. The Deputy Director of 

Administration is the FMC’s Chief Information Officer. He also serves as the FMC’s Competition Advocate and 

Records Management Officer. Additionally, a staffer is the point of contact for the Small Business 

Administration’s E-forms initiative. 

Looking Back: 2006 

• During FY 2006, the Office guided the agency’s continuing efforts to enhance its information technology 

program. 

• The agency received an unqualified opinion in its FY 2006 financial statement audit. 

• During FY 2006, the Office directed preparation of the Annual Performance Plan and the Annual Program 

Performance Report, as required by GPRA; prepared the Federal Activities Inventory Reform Act report, the 

Performance and Accountability Report (including the Management’s Discussion and Analysis, and the 

Federal Managers Financial Integrity Act report); and transmittal letters for the Inspector General’s semiannual reports to Congress. 

• The Office prepared the Agency Regulatory Plan and Semi-annual Unified Agendas, the SBPRA 

Implementation Plan, and the Final Regulatory Enforcement Act Report for FY 2005 to Congress, and 

coordinated completion of the agency’s 44th Annual Report. 
 30 

CHAPTER TWO 

PROGRAM PERFORMANCE 

• The Office directed the effort to update and refine the agency’s performance evaluation system, coordinated 

the agency’s development of a pilot Individual Development Plan program, and coordinated a series of inhouse functional briefings. 

Looking Ahead: 2007 

• In FY 2007, OA will continue to implement the Chairman’s policy directions aimed at refining and enhancing 

agency administrative programs and operations; monitor the accomplishment of agency performance goals; 

initiate further information technology improvements; and work with senior managers to ensure effective 

strategic succession planning. 

• During FY 2007, OA will take the lead in assuring an effective agency-wide computer security program, that 

the agency’s financial management system receives an unqualified opinion in annual financial audits, and that 

the agency complies fully with the HSPD-12 initiative. 

Office of Financial Management 

The OFM administers the Commission's financial management program and is responsible for offering guidance 

on optimal utilization of the Commission's fiscal resources. 

Looking Back: 2006 

• During FY 2006, OFM coordinated and prepared budget justifications and estimates for the FY 2007 

Congressional budget and FY 2008 OMB budget. 

• During FY 2006, OFM developed a process for the individual offices/bureaus to forecast the cost of annual 

goals in accordance with the Commission’s strategic goals, and prepared monthly allocation reports to provide 

management with meaningful, timely expense data by program. 

• OFM worked with BPD staff and auditors regarding the Audit of the Fiscal Year 2005 Financial Statements 

(resulting in an unqualified opinion), and worked with the Director of Administration to finalize and produce 

the Commission’s 2005 Management’s Discussion and Analysis and the Commission’s 2005 Performance and 

Accountability Report and to initiate work on the 2006 versions of those documents. 

• OFM coordinated and implemented the Commission’s migration to NFC’s new web-based Time & 

Attendance reporting system. 

Looking Ahead: 2007 

• During FY 2007, OFM will facilitate the implementation of Pay.gov for agencywide and industry acceptance 

of electronic payments. 

• During FY 2007, OFM will migrate to an updated platform for the Paperless Check Conversion through 

Federal Reserve Bank in Cleveland. 

• OFM will strive to ensure that the agency’s financial management system receives an unqualified opinion in 

its annual financial audit. 

Office of Human Resources 

The OHR plans and administers a complete human resources management program. 

Chapter Two 

 PROGRAM PERFORMANCE 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 31

Looking Back: 2006 

• During FY 2006, OHR served as advisor for certain employee development programs and activities to address 

executive succession, for example, coordinated recruitment for a Senior Executive Service (“SES”) Candidate 

Development Program and an Emerging Leaders Program. 

• OHR conducted a comprehensive training program in accordance with the agency’s strategic and performance 

plans, including revising internal procedural guidance and processes to capture training-related expenses and 

coordinating group training. 

• OHR initiated various administrative actions related to the Enterprise Human Resources Integration (EHRI) 

project, joined the Small Agency Human Resources Consortium to participate in a cost-effective “FastTrack” 

e-OPF implementation, and administered action on other e-Gov initiatives, such as Recruitment One-Stop, epayroll, and e-learning. 

Looking Ahead: 2007 

• During FY 2007, OHR plans to implement pertinent provisions of the HSPD-12 initiative. 

• OHR will complete implementation of e-OPF. 

Office of Information Technology 

 

The Office of Information Technology provides management support with respect to information technology 

(“IT”) to the program and administrative operations of the Commission, and thus is responsible for ensuring that 

the Commission’s IT program is administered in a manner consistent with applicable rules, regulations and 

guidelines. 

Looking Back: 2006 

• During FY 2006, OIT upgraded the FMC’s network security infrastructure to include SSL VPN. 

• During FY 2006, OIT completed the implementation of the enhanced Internet-based Service Contract Filing 

System. 

• OIT conducted the requirements analysis and inventory to meet the Internet Protocol version 6 (IPv6) 

government-wide initiative. 

• OIT further developed the disaster recovery/continuity of operations plans for the agency. 

Looking Ahead: 2007 

• During FY 2007, OIT plans to complete the IPv6 upgrade and upgrade existing applications for 

interoperability with IPv6. 

• During FY 2007, OIT will begin the analysis for upgrading the FMC’s existing desktop operating system, 

software applications, and equipment. 

Office of Management Services 

The OMS is responsible for procuring and furnishing all supplies, equipment and services necessary and required 

to support the day-to-day operations and overall mission objectives of the Commission. 

Chapter Two 

 PROGRAM PERFORMANCE 
 32 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Looking Back: 2006 

• During FY 2006, OMS upgraded the procurement services provided through BPD from platform services to 

full service support. 

• During FY 2006, OMS acquired and coordinated lease renewals for the Area Representatives in Los Angeles, 

Seattle, South Florida, and office space expansion in New York, and coordinated space renovations at 

Headquarters to more fully implement the recent agency realignment. 

Looking Ahead: 2007 

• During FY 2007, OMS will work with GSA, DHS, and other tenant agencies at FMC’s facilities to upgrade 

and/or improve the buildings’ security measures and emergency preparedness for better control of office space 

access and safety of agency personnel. 

• During FY 2007, OMS, in coordination with the agency’s other administrative offices, plans to implement 

HSPD-12 (the new government-wide ID requirements). 

Chapter Two 

 PROGRAM PERFORMANCE 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 33

Chapter Two 

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Annual Performance Report 

Introduction 

The Commission has prepared the following Annual Program Performance Report for FY 2006, as required by 

GPRA, and in accordance with OMB Circular No. A-11, Part 2. The Commission’s actual performance in FY 

2006 is compared with the projected levels of performance established in the agency’s FY 2006 Final Annual 

Performance Plan (See Appendix E for a copy of the Agency’s FY 2006 Plan). 

This progress report covers the Commission’s efforts in FY 2006 to foster an equitable, secure, and market driven 

ocean transportation industry. The Commission focused on refining the agency’s business practices, specifically 

on revising and updating internal procedures in line with the amendment of Commission regulations. This includes 

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

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

operations. We broadened our efforts to implement the President’s Management Agenda initiative to expand 

electronic government by improving the management of information through the more effective use of available 

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

agencies and the public, and further automated agency systems and enhanced the use of agency databases to allow 

staff to discharge program responsibilities more effectively. Further, we simplified and refined the agency’s 

performance appraisal system and developed a strategic succession plan for agency senior executives and non-SES 

upper level managers. 

 

We achieved overall success in reaching our stated goals and objectives, accomplishing most. We continue to find 

that the planning and direction required by the GPRA process facilitates our efforts to attain results-driven 

objectives. 

We have forwarded this report to the President, with a copy to the Director, OMB, and appropriate Congressional 

committees. Additionally, we have placed this document on our Internet website to ensure that it is readily 

accessible to interested parties, and have advised all Commission employees to take the time to review it. 

We have sought to be direct and concise in the manner in which we are presenting the relevant information. For 

organizational purposes, and to facilitate review, this report reflects our revised mission statement, and briefly 

summarizes it. We then list the Strategic Goals we have identified as crucial to accomplish our mission. Our 

agency Performance Goals are linked directly to our Strategic Goals. While our FY 2006 Final Annual 

Performance Plan contains specific Performance Goals, many of the Commission’s resources were dedicated to its 

various day-to-day activities. These steady state activities are not specifically addressed in this Report, as they are 

discussed in full in other documents, such as the agency’s Annual Report and President’s Budget. Instead, this 

Report focuses on the agency’s annual Performance Goals and how they were achieved. Thus, we have organized 

this report by the five Strategic Goals under which we operated in FY 2006. For each of these Goals, we state the 

Performance Goals that are directly related to them. We then state the target level of performance for each 

Performance Goal, and our actual level of performance regarding that Goal. For any Performance Goal that was 

not met or not substantially completed, we have provided a specific explanation why the Goal was not met, along 

with the actions and schedule for meeting the Goal in the future. Additionally, the last section of this report 

identifies the Performance Goals from our fiscal years 2003, 2004 and 2005 Program Performance Reports which 

we previously reported as not having been accomplished or substantially completed, and explains the actions we 

subsequently took regarding the requirements of each such Goal. 
 34 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Chapter Two 

 PROGRAM PERFORMANCE 

The Commission acknowledged in its 2003 Strategic Plan that the basic principles of liner shipping were being 

modified, as the shipping industry continued to restructure itself while shippers were placing an increasing 

importance on rates and services. Given the significant issues the agency was facing, in 2003 it identified the 

actions necessary to ensure that its oversight and legislative initiatives produced a competitive and 

nondiscriminatory trading environment in the U.S. ocean commerce that was in harmony with and responsive to 

international shipping practices. During 2004, the Commission built on that analysis and focused its energies and 

efforts on re-evaluating its organizational structure to ensure that it was aligned and managed in a manner best 

suited to accomplish its mission with a minimum of government intervention and regulatory costs. In 2005, the 

Commission focused on staff and program issues, and emphasized outreach for a more open dialogue with our 

industry partners and stakeholders in light of the changing dynamics of the ocean shipping industry. In 2006, the 

agency continued to focus on staff and program issues, and emphasized succession planning and expanding 

electronic government. 

FMC Strategic Goals 

In recognition of its stated mission, and in conformity with the Shipping Act, the FMC established the following 

five strategic goals: 

1. Efficient Regulatory Process: Provide a timely, efficient and decisive regulatory process, including alternative 

dispute resolution, to enable all segments of the industry to operate more effectively, with a minimum of 

regulatory costs. 

2. Compliance: Promote efficiency and fairness in U.S. foreign waterborne commerce through various means, 

including outreach and monitoring, to protect the public and assist stakeholders in achieving compliance with 

ocean transportation statutes administered by the FMC. 

3. Balanced Enforcement: Foster economic efficiencies, reliance on marketplace factors and maritime security 

by administering U.S. shipping statutes in a balanced and equitable manner to redress anticompetitive actions 

and other unlawful activities. 

4. Technological Efficiencies: Employ technological enhancements to improve efficiency and to facilitate the 

exchange of information. 

5. Management Capabilities: Ensure the FMC has the appropriate organizational framework and management 

systems to carry out its statutory mandates. 

These strategic goals addressed all important FMC statutory, programmatic, and management responsibilities. 

They were developed with a specific focus on accomplishing the basic thrusts of our mission. The Commission 

determined that achieving its mission-driven goals would enable it to address effectively the external factors it 

faced, while assuring an equitable and efficient administration of the shipping statutes under its jurisdiction. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 35

Chapter Two 

 PROGRAM PERFORMANCE 

Progress in Achieving Performance Goals 

The Performance Goals of the Commission’s FY 2006 Final Annual Performance Plan were linked directly to the 

Commission’s Strategic Goals; they were identified as the appropriate means for accomplishing our mission. This 

section of the report assesses our actual performance in addressing these Goals. 

Strategic Goal: Efficient Regulatory Process 

Provide a timely, efficient and decisive regulatory process, including alternative dispute resolution, to enable all 

segments of the industry to operate more effectively, with a minimum of regulatory costs. 

Performance Goal 1: 

By 9/30/06, make selected Opening/Reply Briefs & Exceptions & Replies in docketed proceedings available to the 

public through the Commission’s website. 

Progress: During FY 2006, the Commission completed this goal. Several significant dockets were identified and 

key documents filed in each proceeding were scanned, and posted on the Commission website. The key documents 

included the initial filing (i.e., complaint), notice of filing, opening and reply briefs, the Administrative Law 

Judge’s initial decision, exceptions and replies (if any), and the Commission’s final decision. The Commission 

plans to continue to make these types of documents, as well as other important filings and issuances in docketed 

proceedings, available in electronic form through its website.

Performance Goal 2: 

By December 2005, complete project for scanning & posting historical Commission decisions issued between 

1989 & 1996. 

Progress: This performance goal was significantly completed during the fiscal year. Historical Commission 

decisions issued between 1989 and 1996 were identified, scanned, and stored electronically. Decisions from 1989-

1991 were posted on the Commission’s website. The balance of the electronic documents (from 1992-1996) will 

be posted on the Commission’s website by the end of October 2006 – at which time this goal will be completed. 

Performance Goal 3: 

By 6/30/06, provide the option of filing carrier & marine terminal agreements online. 

Progress: While this performance goal has not yet been accomplished, the Commission has done the following: 

determined the parameters of the process in terms of security issues, e-signature and e-payment capabilities, and 

format and storage/retrieval questions; investigated whether, and to what extent, this project could be incorporated 

within other ongoing IT initiatives; and vetted the idea with industry contacts. The concept of e-filing of 

agreements received highly favorable reactions from our industry contacts, particularly with respect to the notion 

of e-payments. As more funding becomes available to address IT initiatives, the Commission anticipates 

completing this project, hopefully in FY 2007. 
 36 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Chapter Two 

 PROGRAM PERFORMANCE 

Progress in Achieving Performance Goals (continued) 

Strategic Goal: Compliance

Promote the development of U.S. exports and the efficiency of ocean shipping by monitoring and assisting 

stakeholders in achieving compliance with shipping statutes administered by the FMC. 

Performance Goal 1: 

By 9/30/06, enhance use of SC and NSA data, and evaluate SERVCON system functionality. 

Progress: The performance goal has been achieved. During FY 2006, the automated SERVCON system for filing 

service contracts and NVOCC service arrangements (“NSAs”) was upgraded. Major performance enhancements 

were made to the system such as screen display cleanups, faster retrieval and more reliable architecture. The new 

SERVCON has the same look as the previous system with the exception of a small change regarding the menu 

selection screens to make it more straightforward for external filers of service contracts. In the upgraded system, 

filers are able to view only menu selections that they need and are able to access, e.g., File Contracts, View 

Contents of Personal Directory Before Uploading, or File Corrected Transmission/Copy, rather than additional 

menu items such as Management, Search, or View Flagged Contracts, that are for FMC internal users. Further, the 

system’s upgraded search feature enables internal users to sort and retrieve data faster and more accurately, and to 

create profiles regarding specific carrier service contract or NSA activities to use in the development of trade 

profiles data and preparation of reports. In addition, the upgraded SERVCON system facilitates an automated 

rather than manual filing process for external filers to submit/upload service contract and NSA filings into the 

system, and accommodates a placeholder feature for carrier organization numbers. The placeholder allows service 

contracts that have been filed under a carrier’s previous name to be amended under a carrier’s new organization 

number resulting from a name change, without having to re-file the original contract and past amendments.

Performance Goal 2: 

Evaluate OTI rules & suggest changes, if necessary, to address industry & agency concerns. 

Progress: The Commission has met this goal. The Commission initiated a re-evaluation of its regulations of OTIs, 

examined its business processes and policies with respect to OTIs, and sought to construct a more comprehensive 

regulatory model reflecting state of technology and new and future trends in the OTI industry. Automating the 

Form FMC-18, the application form required to be licensed as an OTI, is well underway and is just one example of 

changes to FMC business processes to improve the timeliness of licensing decisions. Future rulemaking to 

implement changes to the Commission’s OTI policies and procedures will be commenced in FY 2007. The 

Commission continues its efforts to directly inform OTIs of licensing requirements and assist small businesses in 

meeting the application and licensing requirements. 

Strategic Goal: Balanced Enforcement 

Foster economic efficiencies, reliance on marketplace factors and maritime security by administering U.S. shipping 

statutes in a balanced and equitable manner to redress anticompetitive actions and other unlawful activities. 

Performance Goal 1: 

By 9/30/06, align BTA’s MR program for carrier agreements with the amended MR regulations in FMC Docket 

No. 03-15. 

Progress: This performance goal has been achieved. Prior to the effective date of the Commission’s revised 

monitoring reports and meeting minutes regulations, the Commission met with various attorneys representing the 

major carrier agreements to explain the new reporting requirements. In addition, letters were sent to carrier 

agreements explaining their new reporting requirements under the Commission’s revised regulations. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 37

Chapter Two 

 PROGRAM PERFORMANCE 

Progress in Achieving Performance Goals (continued) 

Requests for partial waiver of specific reporting requirements were granted in cases where the agreement could 

continue to be effectively monitored by the Commission. Subsequent to the receipt of the revised monitoring 

reports and meeting minutes submitted by the agreement parties, the reports were reviewed for content and 

compliance. In cases where data was incomplete or raised questions, staff followed up with telephone calls, letters 

or meetings to outline the problems found with the information submitted to the Commission. Any remaining 

issues are in the process of being rectified. During FY 2006, two extensive compliance checks were conducted to 

ensure that agreements were submitting monitoring reports and/or meeting minutes in accordance with their 

specific report requirements. All agreements have now substantially complied with the Commission’s new 

monitoring regulations. 

Performance Goal 2: 

Participate effectively in ITDS program. 

Progress: This performance goal has been met. During FY 2006, staff attended numerous meetings related to 

completion of the “Business Blueprinting” process necessary to integrate import, inspection and licensing 

functions of Federal agencies within Release 5 of the Automated Commercial Environment (“ACE”) program. In 

June 2006, the Commission was invited to nominate a representative to the ITDS Board of Directors. A 

Commission senior executive was chosen to fill that role. In addition, a senior manager serves on the ITDS legal 

and policy committee. Various Commission staff have completed background investigations and been granted 

interim access to ITDS through the ACE portal. 

Strategic Goal: Technological Efficiencies

Employ technological enhancements to improve efficiency and to facilitate the exchange of information. 

Performance Goal 1: 

Electronic payment of user fees. 

Progress: The agency has not yet met this goal. Subsequent to initial planning efforts, the agency determined that 

limiting the potential use of an electronic payment option to user fees was too narrow a focus. Instead, the agency 

has begun to explore options for payment of fines and penalties as well, such as utilizing Pay.gov to accept secure 

electronic payments directly from an entity’s bank account or credit/debit card. Staff have been in contact with the 

Department of Treasury, which coordinates Pay.gov, to gather further information as to agencywide usage and 

requirements. The process for implementation of such a process is quite complex. However, assuming no 

significant obstacles, it is anticipated that implementation will take place late in FY 2007. 

Performance Goal 2: 

Analyze information collections of the agency and update them as necessary to ensure they are meeting the needs 

of the users in the most efficient way possible, by being centralized, secure, and containing no unnecessary 

duplication. 

Progress: This goal has been accomplished. The agency fulfilled the requirements of this goal by reviewing its 

information systems and modifying and updating where appropriate. A Data Information Task Force was 

established to gather information and valuable input from representatives across the agency. Several information 

collections were modified and updated in response to expressed needs from agency staff. The agency’s 

enforcement case tracking system and the consumer complaints data base were transferred from older protocols 

into relational database configurations in order to expand user access, security, transparency and speed of access. 

The work of the Data Information Task Force was taken over by an agency Plan of Action and Milestones strategic 

planning initiative. Several information collections are being significantly expanded and made available to users 

for electronic filing. 
 38 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Progress in Achieving Performance Goals (continued) 

Performance Goal 3: 

Streamline agency procurement procedures, including: (1) credit card micro-purchases & (2) receiving & accepting 

of goods & services. 

Progress: This performance goal has been met. The Commission has entered into an agreement with the Bureau of 

Public Debt to assume certain procurement functions. Further, the agency has a framework for a standard operating 

procedure to address credit card micro-purchases and the receipt and acceptance of goods and services, developed 

in conjunction with recommendations made by the Bureau of Public Debt. While work continues on refining and 

finalizing the standard operating procedures, the essential elements are in place. 

Strategic Goal: Management Capabilities 

Ensure the FMC has the appropriate organizational framework and management systems to carry out its statutory 

mandates. 

Performance Goal 1: 

Simplify and refine the agency’s performance appraisal system so that expectations are clearly reflected, 

performance properly assessed via appropriate measures, and the system facilitates growth and development. 

Progress: This performance goal has been substantially completed. A task force of senior and mid-level managers 

developed revised guidelines and a new performance appraisal form which simplifies the current process, 

facilitates consistent approaches to employee appraisals, and provides a clearer, easier to use framework for 

reflecting expectations and assessing performance. This proposal is under review by senior managers, and after 

roll-out of the new form and training for managers and all staff, we anticipate implementation of the revised 

approach in January, 2007. The agency also has introduced, via a pilot program, an individual development 

program which will be used as a tool to help guide careers and develop/enhance skills; the employee and 

supervisor agree on career objectives to be pursued and activities that can help achieve those objectives, then 

activities are selected to provide the employee with the opportunity to gain knowledge, develop skills and operate 

in specific circumstances that can broaden perspectives. It is anticipated that after the pilot program concludes 

early in FY 2007, all agency employees will utilize IDPs, which will work together with performance plans to 

frame an employee’s activities over a given period. 

Performance Goal 2: 

Develop strategic succession plan for agency senior executives & non-SES upper level managers. 

Progress: This performance goal is complete. During FY 2006, the Commission instituted a Senior Executive 

Service Candidate Development Program, selecting several employees who have already begun their individual 

educational and training programs. Further, during FY 2006, the agency instituted its first ever Emerging Leaders 

Program, designed to provide career development opportunities and tailored work experience for mid-level staff 

and managers. The initial participants have been selected and are close to finalizing their specific development 

plans for the program. The Commission plans on conducting a second version of this program later in FY 2007, 

relying on lessons learned in this first effort to refine it as necessary. 

Chapter Two 

 PROGRAM PERFORMANCE 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 39

FY 2003, 2004 and 2005 Performance Goals Not Achieved 

Prior to FY 2005, Performance Goals were listed by Budget Program Activity rather than by Strategic Goal. 

This section discusses the goals from our FY 2003 Annual Performance Plan which we reflected in our FY 2003 

Progress Report as not achieved or not substantially completed. We explain in this section the actions we have 

taken to address these goals. 

Performance Goal 3 (Certification and Licensing Program Activity): 

Enhance informal complaint database to include more specific details on type of complaints against cruise 

operators. 

Progress: The goal has been completed. During FY 2006, the pilot informal complaints database developed at the 

end of FY 2005 was tested and evaluated. Based on that evaluation, it was determined that the Commission’s 

needs would be more appropriately met by developing the database with a more modern, more flexible, web-based 

software application. The database, along with standard data entry screens, standard queries and reports, and the 

ability to run customized reports was completed, tested, and deployed during FY 2006. The system is fully 

operational with staff entering and retrieving data on a daily basis. Other Commission offices have been given 

access to the database to use as a research tool in their respective program areas. As with all systems, the database 

will be evaluated periodically to modify programming as needed. 

This section discusses the goals from our FY 2004 Annual Performance Plan which we reflected in our FY 2003 

Progress Report as not achieved or not substantially completed. We explain in this section the actions we have 

taken to address these goals. 

 

Performance Goal 1 (Certification and Licensing Program Activity): 

By 9/30/04, modernize the FMC’s RPI database. 

Progress: While this goal has not been met, the Commission continues to make significant progress to update the 

RPI system. The reprogramming of the RPI is near completion. The system has been enhanced to include an 

option to generate various reports. Final testing is underway and the Commission expects the system to become 

operational in early FY 2007. In addition, new enhanced query functionality and data presentation format are 

being developed for delivery in early FY 2007. 

Performance Goal 2 (Certification and Licensing Program Activity): 

Complete a rulemaking by 9/30/04 that makes the changes necessary to ensure that PVOs’ financial responsibility 

requirements for nonperformance are providing appropriate protection for the public. 

Progress: The Bureau continues working on the rulemaking to ensure that the Passenger Vessel Program provides 

adequate consumer protection without being unduly burdensome on the industry. The staff continues to analyze 

financial information related to certain cruise lines’ operations, etc., and efforts remain ongoing as the Commission 

continues to pursue an updated Rule. 

Chapter Two 

 PROGRAM PERFORMANCE 
 40 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Progress in Achieving Performance Goals (continued) 

This section discusses the goals from our FY 2005 Annual Performance Plan which we reflected in our FY 2005 

Progress Report as not achieved or not substantially completed. We explain in this section the actions we have 

taken to address these goals. 

Strategic Goal: Efficient Regulatory Process 

Performance Goal 2: 

Develop options for updating and modernizing the Commission’s Rules of Practice & Procedure, including 

exploring the ability to utilize technology for electronic filing. 

Progress: After reassessing this goal, the Commission has determined to eliminate it for the foreseeable future. 

The Commission has determined that recent staffing changes and the need to complete certain related 

technological initiatives are necessary before we can effectively revise our Rules of Practice and Procedure. To do 

otherwise could result in additional cost and duplication of effort. 

Performance Goal 3: 

Develop an automated FMC-18 to permit electronic filing and explore the feasibility of electronic payment and esignature capability. 

Progress: While the Commission has not completed this goal, progress has been made in developing an automated 

Form FMC-18 filing system. During FY 2006, the Commission further defined system requirements and user 

needs in order to migrate from the present paper-based OTI licensing application Form FMC-18 to an automated 

Form FMC-18. During this period, software development expertise was brought into the agency and the first 

phase of the automated system, the electronic filing component, was developed. Internal testing of the system’s 

electronic filing capabilities has been completed, refinements have been integrated, and the Commission is 

presently addressing security issues. It is anticipated that the first phase, optional electronic filing, will be 

implemented in the winter of 2006, at the conclusion of a brief external testing period in the fall. The second phase 

involves streamlining and automating internal processing procedures. Enhancements to the system, including 

electronic payments, e-signatures, and electronic filing of bond information are scheduled to be implemented in 

future releases. It is anticipated these changes will permit a more thorough review of applications, decrease costs, 

and increase productivity. 

Strategic Goal: Compliance 

Performance Goal 1: 

Develop public relations strategies and programs. 

Progress: This performance goal has been met. In FY 2006, the Commission continued to formalize the 

development of public relations strategies and programs begun in 2005. Several new lists of government and 

media contacts were compiled and used to inform the public of Commission actions. Public relations policies 

throughout the agency were collected and evaluated to determine the best overarching strategy. The Commission 

continued to develop updated educational and informational materials for outreach events. 

Chapter Two 

 PROGRAM PERFORMANCE 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 41

Progress in Achieving Performance Goals (continued) 

Performance Goal 2: 

Enhance industry outreach. 

Progress: This goal is closely related to the Performance Goal Number 1, “Develop public relations strategies and 

programs” and was also further developed in FY 2006; thus, this goal has been accomplished. As part of our 

outreach efforts, the Commission designed and produced informational material including brochures, a banner, and 

other handouts that were used at industry conferences and other public gatherings. There was increased 

Commission presence at industry events and conferences. The staff also, increased its outreach efforts on an 

individual basis through telephone calls and personal visits. In addition, the Commission continued to host industry 

leaders to facilitate dialog between the staff and regulated community. 

Performance Goal 3: 

Provide opportunity for VOCCs to establish a “best practices” program to limit participation of unlawful entities in 

ocean transportation. 

Progress: This goal has not yet been completed. The original Performance Goal of providing VOCCs with an 

opportunity to establish “best practices” to restrict service to unlawful entities has been revised and enlarged to 

include “best practices” by NVOCCs, as well. There are nearly 4,000 licensed OTIs and their participation in 

developing best practices is critical to the overall efforts. The principals underlying effective “best practices” have 

been developed, along with model provisions covering tariff and service contract operations, and have been 

reviewed by, and discussed among, senior staff. Review by the Commission is scheduled for early FY 2007, with 

implementation, including publication on the Commission’s website and outreach efforts, to begin by the end of 

the first quarter of FY 2007. 

Chapter Two 

 PROGRAM PERFORMANCE 
 42 

CHAPTER TWO 

PROGRAM PERFORMANCE 

Chapter Two 

 PROGRAM PERFORMANCE 

Addressing the President’s Management Agenda 

Overview 

The President’s Management Agenda is comprised of five Government-wide initiatives to improve Government 

performance in 1) strategic management of human capital, 2) budget and performance integration, 3) competitive 

sourcing, 4) expanded electronic government, and 5) improved financial management. The FMC has made strides 

in a number of these areas. 

Strategic Management of Human Capital 

An SES Candidate Development Program was implemented during the fiscal year to address succession planning 

needs. For the first time, in FY 2006 the agency implemented an Emerging Leaders Program for long-range 

succession planning, to provide mid-level staff and managers an opportunity to develop targeted skills and to 

provide career development opportunities. The FMC also initiated a pilot Individual Development Plan Program to 

more effectively target career development needs of individual employees and improve overall agency skill levels. 

The FMC reviewed its performance appraisal system to ensure that it is a viable tool for enhancing skills, guiding 

career development, and assessing agency and employee progress. The agency continued to offer a college tuition 

reimbursement program as one option available to employees to improve skills needed in the workplace. The FMC 

also offers a range of flexible work options and employee-friendly and family-friendly programs and policies. 

These programs include transit subsidies, employee assistance, and adjustable work schedules, among others. 

The FMC’s recruitment practices utilize a wide range of alternatives such as those under the Direct-Hire Authority, 

delegated examining, and the Veterans Employment Opportunities Act, and the agency administers action on eGovernment initiatives such as Recruitment One-Stop, e-payroll, Enterprise Human Resources Integration, and elearning. 

Budget and Performance Integration 

The FMC continues to make progress in achieving budget and performance integration. In FY 2005, the FMC 

began an agency-wide assessment of our strengths, weaknesses, opportunities and threats to assist us in identifying 

our initiatives and priorities for the future, along with the resources necessary for successful operations. In FY 

2006, we continued that process, with internal working groups targeting specific issues for further development. 

The Strategic Plan and Annual Performance Plan continue to represent the fundamental framework for the 

agency’s planning and budgeting activities. Funding and FTE levels are integrated into the agency’s performance 

planning document by strategic goal, to identify clearly the budgetary and staff resources that are committed to 

each goal. 

FMC program managers receive reports which show the full cost of their programs, and reports which compare 

expenditures to budget allocations. These reports allow managers to plan and manage their programs more 

efficiently throughout the budget year. 

Competitive Sourcing 

The FMC is committed to acquiring goods and services in an efficient manner. The FMC submitted its FY 2006 

Federal Activities Inventory Reform Act Inventory to OMB in June 2006. The Inventory identifies 77 of the 

agency’s 126 FTEs as commercial activity FTEs. No challenges to its commercial inventories have ever been 

received. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 43

Chapter Two 

 PROGRAM PERFORMANCE 

Competitive Sourcing (continued) 

The Commission is a very small agency whose personnel perform many different activities. The number of FTEs 

has declined from 199 in 1993 to 126 in the President’s Budget for FY 2006(the FMC ended FY 2006 with 122 

FTEs). One way in which the Commission has been able to streamline and improve efficiencies is by committing 

budgetary resources to a variety of contracts for support services, including interagency/cross-service and 

commercial agreements for payroll, accounting, human resources processing, travel, health, excessing property, 

security guard, transit benefits, office space rent, messenger, and equipment maintenance services. 

The Commission determined that a core component of in-house resources are needed for the Commission to carry 

out its statutory responsibilities. It is essential that the Commission, as an independent agency with regulatory 

responsibilities, has a core group of technically qualified individuals to monitor, analyze and investigate conditions 

in the U.S. foreign commerce and activities of the maritime industry. It also is critical that the agency has sufficient 

in-house staff that are knowledgeable and impartial in their dealings with foreign governments, the industry, 

Congress and other Government agencies. Therefore, the Chairman made the determination, as in years past, to list 

those 77 FTEs as exempt from competition (Reason Code A), i.e., the commercial activities are not appropriate for 

private sector performance. 

The Commission is committed to improving and streamlining operations to carry out its mission and strategic 

goals, as is proven by its decreasing FTEs over a period of years. 

Expanded Electronic Government 

The FMC has planned and continues to implement the expansion of electronic government. During the fiscal year, 

the FMC made a number of filings in significant docketed proceedings available on the agency’s website, as well 

as a significant number of historical agency decisions. Further, the FMC’s SERVCON system was upgraded; 

major performance enhancements were made to the system, such as faster and more accurate retrieval and a more 

reliable architecture which facilitates an automated rather than a manual filing process for external filers. 

The FMC upgraded service and support for the agency’s online Agreements Library, and also upgraded a number 

of internal databases to streamline and simplify agency operations during FY 2006. Also, work continued on 

automating the submission process for certain FMC forms used by regulated entities. Internally, all forms used by 

FMC staff were made electronically fillable. The agency also continued to provide additional content to its new 

website. 

Senior managers are aware of the requirements and benefits of electronic government and are planning and 

initiating program changes to incorporate the expanded use of electronic government in day-to-day activities. 

Employees are required to complete on-line information technology security refresher training on an annual basis. 

The FMC continues to upgrade its network security infrastructure and provide a high-quality information 

technology program to its staff. The agency is committed to continuing its integration of information technology 

policies and procedures, and to continue to expand opportunities for e-government activities. In FY 2006, the 

agency mitigated two significant deficiencies related to its information technology program which were identified 

in an earlier FMFIA Report. Recently, the Inspector General, in his FY 2006 FISMA Review, identified a 

significant deficiency related to IT security documentation, and the FMC plans to correct the deficiency with all 

deliberate speed. 

Improved Financial Performance 

The FMC received an unqualified opinion on its financial statements in FY 2006, for the third straight year. The 

FMC will continue to strive to achieve unqualified audit opinions. 

In support of the e-government initiative, the FMC has interagency agreements with the BPD to provide generalledger accounting, travel, procurement and financial reporting services, and the NFC to provide payroll services. 

Our current systems satisfy operational and reporting requirements and provide timely, accurate and useful 

information to the agency. The FMC’s systems are in substantial compliance with Federal laws and regulations. 
 44 

CHAPTER ONE 

MANAGEMENT’S DISCUSSION and ANALYSIS 

CHAPTER THREE

AUDITORS’ REPORTS AND FINANCIAL 

STATEMENTS 

Fiscal Year 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 44

Message from the Chief Financial Officer 

I am pleased to present the FMC’s financial statements for FY 2006. Our 

independent auditor has rendered an unqualified opinion on our FY 2006 

financial statements. The FMC now has received an unqualified opinion in 

each of the three years in which independent financial audits have been 

conducted, which attests to the FMC’s commitment to high quality 

financial management. 

The FMC’s financial condition is sound with respect to having sufficient 

funds to meet its mission and having sufficient internal controls in place to 

ensure its budget authority is not exceeded. 

The FMC has fully integrated senior managers into the budget planning and 

execution process and keeps them fully informed of and able to track 

spending against budget allocations. This approach, along with a 

collaborative strategic planning process, has resulted in greater 

management accountability. Our financial management staff is to be 

commended for consistently finding ways to provide budget information in concise, reliable, and understandable 

formats. We have emphasized teamwork among our staff, which extends into the program, financial management 

and audit areas to promote results, accountability and efficiency. For FY 2006, we completed corrective actions on 

a number of audit recommendations. Quarterly financial statements were issued 15 days after the end of the 

quarter, and our FY 2006 Performance and Accountability Report is being published on November 15, 2006. 

As reported more fully in Chapter 1 in the section entitled Federal Managers’ Financial Integrity Act, the 

Commission mitigated two open significant deficiencies during FY 2006. Recently, our Inspector General 

completed his FISMA Review and identified one significant deficiency in the agency’s information technology 

security program for which corrective action is planned for the near future. We anticipate no major impediments to 

the correction of that newly identified deficiency. 

The FMC is committed to efficient and effective management of agency resources. We will focus in FY 2007 on 

maintaining an unqualified audit opinion and eliminating the non-financial significant deficiency identified by the 

agency’s Inspector General. I anticipate that in FY 2007 the FMC will continue its high level of quality financial 

management. 

Sincerely, 

Bruce A. Dombrowski 

November 15, 2006 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 
 45 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

PRINCIPAL STATEMENTS 

LIMITATIONS OF THE FINANCIAL STATEMENTS 

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

pursuant to the requirements of the Chief Financial Officers Act of 1990, as amended by the Government 

Management Reform Act of 1994. These statements have been prepared from the books and records of the FMC in 

accordance with the formats prescribed by the Office of Management and Budget. However, these statements 

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

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

U.S. Government, a sovereign entity. Liabilities not covered by budgetary resources cannot be liquidated without 

the enactment of an appropriation, and the payment of all liabilities other than for contracts can be abrogated by the 

sovereign entity. Other limitations are included in the footnotes to the principal statements. The accompanying 

notes are an integral part of these statements. 

The Federal Maritime Commission’s financial statements were audited by Clifton Gunderson LLP, under contract 

to the FMC’s Office of the Inspector General.
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 46

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

Independent Auditor’s Report 

Independent Auditor’s Report

To the Federal Maritime Commission 

We have audited the accompanying balance sheets of the Federal Maritime Commission (FMC) as of September 

30, 2006 and 2005, and the related statements of net cost, changes in net position, budgetary resources, financing, 

and custodial activity for the years then ended. These financial statements are the responsibility of FMC’s 

management. 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 the financial audits contained in Government Auditing Standards, issued by the 

Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 06-03, 

Audit Requirements for Federal Financial Statements. Those standards require that we plan and perform the audit 

to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 

includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 

An audit also includes assessing the accounting principles used and significant estimates made by management, as 

well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable 

basis for our opinion. 

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

of FMC as of September 30, 2006 and 2005 and its net cost; changes in net position; budgetary resources; 

reconciliation of net cost to budgetary obligations; and custodial activity for the years then ended in conformity with 

accounting principles generally accepted in the United States of America. 

In accordance with Government Auditing Standards, we have also issued our reports dated November 2, 2006 on 

our consideration of FMC’s internal control over financial reporting and on our tests of FMC’s compliance with 

certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of those reports 

is to describe the scope of our testing of internal control over financial reporting and compliance and the results of 

that testing, and not provide an opinion on the internal control over financial reporting or on compliance. Those 

reports are an integral part of our audit performed in accordance with Government Auditing Standards and should 

be considered in assessing the results of our audit. 

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. 

The Management’s Discussion and Analysis is not a required part of the basic financial statements but is 

supplementary information required by accounting principles generally accepted in the United States of America. 

We have applied certain limited procedures to such information, which consisted principally of inquiries of FMC 

management regarding the methods of measurement and presentation of the supplementary information. However, 

we did not audit the information and express no opinion on it. 

Calverton, Maryland 

November 2, 2006 
 47 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

Independent Auditor’s Report on Compliance and Other Matters 

Independent Auditor’s Report on Compliance and Other Matters 

To the Federal Maritime Commission 

We have audited the financial statements of the Federal Maritime Commission (FMC) as of, and for the year ended 

September 30, 2006, and have issued our report thereon dated November 2, 2006. We conducted our audit in 

accordance with auditing standards generally accepted in the United States of America; the standards applicable to 

financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United 

States; and Office of Management and Budget (OMB) Bulletin No. 06-03, Audit Requirements for Federal 

Financial Statements. 

The management of FMC is responsible for complying with laws and regulations applicable to FMC. As part of 

obtaining reasonable assurance about whether FMC’s financial statements are free of material misstatement, we 

performed tests of its compliance with certain provisions of laws and regulations, noncompliance with which could 

have a direct and material affect on the determination of financial statement amounts and certain other laws and 

regulations specified in OMB Bulletin No. 06-03, including the requirements referred to in the Federal Financial 

Management Improvement Act (FFMIA) of 1996. We limited our tests of compliance to these provisions and we 

did not test compliance with all laws and regulations applicable to FMC. 

The results of our tests of compliance with laws and regulations described in the preceding paragraph, exclusive of 

FFMIA, disclosed no instances of noncompliance with laws and regulations and other matters that are required to 

be reported under Government Auditing Standards and OMB Bulletin No. 06-03. 

Under FFMIA, we are required to report whether FMC’s financial management systems substantially comply with 

the Federal financial management systems requirements, applicable Federal accounting standards, and the United 

States Government Standard General Ledger at the transaction level. To meet this requirement, we performed tests 

of compliance with FFMIA section 803(a) requirements. The results of our tests disclosed no instances in which 

FMC’s financial management systems did not substantially comply with the three requirements discussed above. 

Providing an opinion on compliance with certain provisions of laws and regulations was not an objective of our 

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

This report is intended solely for the information and use of the management of FMC, the Bureau of Public Debt, 

the Government Accountability Office, OMB and Congress, and is not intended to be and should not be used by 

anyone other than these specified parties. 

Calverton, Maryland 

November 2, 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 48

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

Independent Auditor’s Report on Internal Controls 

Independent Auditor’s Report on Internal Control 

To the Federal Maritime Commission 

We have audited the financial statements of the Federal Maritime Commission (FMC), as of and for the 

year ended September 30, 2006, and have issued our report thereon dated November 2, 2006. We 

conducted our audit in accordance with auditing standards generally accepted in the United States of 

America; the standards applicable to the financial audits contained in Government Auditing Standards;

issued by the Comptroller General of the United States; and, Office of Management and Budget (OMB) 

Bulletin No. 06-03, Audit Requirements for Federal Financial Statements. 

In planning and performing our audit, we considered FMC’s internal control over financial reporting by obtaining 

an understanding of FMC’s internal control, determined whether internal controls had been placed in operation, 

assessed control risk, and performed tests of controls in order to determine our auditing procedures for the purpose 

of expressing our opinion on the financial statements. We limited our internal control testing to those controls 

necessary to achieve the objectives described in OMB Bulletin No. 06-03. We did not test all internal controls 

relevant to operating objectives as broadly defined by the Federal Managers’ Financial Integrity Act (31 U.S.C. 

3512), such as those controls relevant to ensuring efficient operations. The objective of our audit was not to 

provide assurance on internal control. Consequently, we do not provide an opinion on internal control. 

Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the 

internal control over financial reporting that might be reportable conditions. Under standards issued by the 

American Institute of Certified Public Accountants, reportable conditions are matters coming to our attention 

relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could 

adversely affect FMC’s ability to record, process, summarize, and report financial data consistent with the 

assertions by management in the financial statements. Material weaknesses are reportable conditions in which the 

design or operation of one or more of the internal control components does not reduce to a relatively low level the 

risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial 

statements being audited may occur and not be detected within a timely period by employees in the normal course 

of performing their assigned functions. Because of inherent limitations in internal controls, misstatements, losses, 

or noncompliance may nevertheless occur and not be detected. We noted no matters involving the internal control 

and its operation that we consider to be material weaknesses. We noted other matters involving internal control 

and its operation that we have reported in a separate letter dated November 2, 2006. 

Finally, with respect to internal controls related to performance measures reported in FMC’s Management’s 

Discussion and Analysis, we obtained an understanding of the design of significant internal controls relating to the 

existence and completeness assertions, as required by OMB Bulletin No. 06-03. Our procedures were not designed 

to provide assurance on internal control over reported performance measures, and, accordingly, we do not provide 

an opinion on such controls. 

*************************************** 

This report is intended solely for the information and use of the management of FMC, the Bureau of Public Debt, 

the Government Accountability Office, OMB and Congress, and is not intended to be and should not be used by 

anyone other than these specified parties. 

Calverton, Maryland 

November 2, 2006 
 49 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

2006 2005

ASSETS

Intragovernmental - Fund Balance with Treasury (Note 2) 2,676,163 $ 2,217,146 $ 

Accounts Receivable 3,715 2,021 

General Property, Plant and Equipment, Net (Note 3) 30,353 50,439

TOTAL ASSETS $ 2,269,606 2,710,231 $ 

LIABILITIES

Intragovernmental liabilities (Note 4) 126,328 $ 103,597 $ 

Accounts Payable (Note 4) 273,774 196,409 

Other (Note 4) 1,886,987 1,657,543 

 Total Liabilities 1,957,549 2,287,089 

NET POSITION

Unexpended Appropriations 1,453,216 1,231,683 

Cumulative Results of Operations (1,030,074) (919,626) 

Total Net Position 312,057 423,142 

TOTAL LIABILITIES AND NET POSITION $ 2,269,606 2,710,231 $ 

FEDERAL MARITIME COMMISSION

BALANCE SHEETS

September 30, 2006 and 2005
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 50

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

2006 2005

PROGRAM COSTS

Office of Administration 8,449,512 $ 6,763,548 $ 

Office of Operations 7,132,804 7,352,269 

Formal Proceedings 4,958,503 5,771,665 

Office of Inspector General 469,885 433,223 

Office of EEO 135,722 90,712 

NET COST OF OPERATIONS (Note 7) $ 20,411,417 21,146,426 $ 

FEDERAL MARITIME COMMISSION

STATEMENTS OF NET COST

For the Years Ended September 30, 2006 and 2005
 51 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

2006 2005

Cumulative Results of Operations:

 Beginning Balance (919,626) $ $ (867,708)

Budgetary Financing Sources:

Appropriations Used 19,920,517 19,195,167 

Other Financing Sources (Non-Exchange):

Imputed Financing Sources 1,115,461 1,164,332 

Total Financing Sources 20,359,499 21,035,978 

Net Cost of Operations (21,146,426) (20,411,417) 

Net Change (110,448) (51,918)

Cumulative Results of Operations (1,030,074) (919,626) 

Unexpended Appropriations:

 Beginning Balance 1,231,683 1,124,548 

Budgetary Financing Sources:

Appropriations Received 20,499,000 19,496,000 

Permanently Not Available (356,950) (193,698) 

Appropriations Used (19,920,517) (19,195,167) 

Total Budgetary Financing Sources 221,533 107,135 

Total Unexpended Appropriations 1,231,683 1,453,216 

Net Position $ 312,057 423,142 $ 

FEDERAL MARITIME COMMISSION

STATEMENTS OF CHANGES IN NET POSITION

For the Years Ended September 30, 2006 and 2005
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 52

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

2006 2005

BUDGETARY RESOURCES

Unobligated Balance Brought Forward, October 1: 180,856 $ 191,241 $ 

Recoveries of Prior Year Unpaid Obligations 150,821 129,186 

Budget Authority

Appropriation 20,499,000 19,496,000 

Spending Authority From Offsetting Collections - Collected - -

Subtotal - Budget Authority 20,499,000 19,496,000 

Permanently Not Available (356,950) (193,698) 

Total Budgetary Resources (Note 10) $ 19,622,729 20,473,727 $ 

STATUS OF BUDGETARY RESOURCES

Obligations Incurred

 Direct 20,346,990 $ 19,441,873 $ 

 Reimbursable - - 

Total Obligations Incurred 20,346,990 19,441,873 

Unobligated Balance - Apportioned 4,636 1,302 

Unobligated Balance - Not Available 122,101 179,554 

Total Status of Budgetary Resources (Note 10) $ 19,622,729 20,473,727 $ 

CHANGE IN OBLIGATED BALANCE

Obligated Balance, Net

Unpaid Obligations, Brought Forward, October 1 2,036,289 $ 1,657,763 $ 

Total Unpaid Obligated Balance, Net 2,036,289 1,657,763 

Obligations Incurred, Net 20,346,990 19,441,873 

Less: Gross Outlays 19,683,032 18,934,161 

Less: Recoveries of Prior Year Unpaid Obligations, Actual 150,821 129,186 

Obligated Balance, Net, End of Period

Unpaid Obligations 2,549,426 2,036,289 

Total, Unpaid Obligated Balance, Net, End of Period 2,549,426 $ 2,036,289 $ 

NET OUTLAYS

Gross Outlays 19,683,032 $ 18,934,161 $ 

Less: Offsetting Collections - - 

Net Outlays (Note 10) $ 18,934,161 19,683,032 $ 

FEDERAL MARITIME COMMISSION

STATEMENTS OF BUDGETARY RESOURCES

For the Years Ended September 30, 2006 and 2005
 53 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

2006 2005

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations Incurred 20,346,990 $ 19,441,873 $ 

Less: Spending Authority From Offsetting Collections and Recoveries (129,186) (150,821) 

Obligations Net of Offsetting Collections and Recoveries 20,196,169 19,312,687 

Less: Offsetting Receipts - - 

Net Obligations 20,196,169 19,312,687 

Other Resources

Imputed Financing From Costs Absorbed by Others 1,164,332 1,115,461 

Net Other Resources Used to Finance Activities 1,115,461 1,164,332 

Total resources used to finance activities 21,311,630 20,477,019

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

Operations

Change in Budgetary Resources Obligated for Goods,

Services and Benefits Ordered But Not Yet Provided 275,652 117,519 

Resources That Fund Expenses Recognized in Prior Periods 149 9,587

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

Operations 127,106 275,801 

Total Resources Used to Finance the Net Cost of Operations 21,035,829 20,349,913 

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

Generate Resources in the Current Period

Components Requiring or Generating Resources in Future Periods

Increase in Annual Leave Liability 91,057 -

Other - 644

Total Components of Net Cost of Operations That Will Require or

Generate Resources in Future Periods 644 91,057 

Components not Requiring or Generating Resources:

Depreciation and Amortization 20,086 61,996 

Other (1,136) (546) 

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

Generate Resources 19,540 60,860 

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

Generate Resources in the Current Period 110,597 61,504 

Net Cost of Operations $ 21,146,426 20,411,417 $ 

FEDERAL MARITIME COMMISSION

STATEMENTS OF FINANCING

For the Years Ended September 30, 2006 and 2005

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 54

2006 2005

Revenue Activity:

Cash Collections (Note 11) 1,595,530 $ 1,194,366 $ 

Accrual Adjustments 396 1,734 

Total Custodial Revenue 1,196,100 1,595,926 

Disposition of Collections:

Transferred to Treasury 1,595,530 1,195,964 

Other 396 136

Net Custodial Activity $ - - $ 

FEDERAL MARITIME COMMISSION

STATEMENTS OF CUSTODIAL ACTIVITY

For the Years Ended September 30, 2006 and 2005

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 
 55 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

A. Reporting Entity 

FMC was established as an independent regulatory agency effective August 12, 1961. FMC is responsible for the 

regulation of ocean borne transportation in the foreign commerce of the United States (U.S.). The principle 

statutes or statutory provisions administered by the Commission are the Shipping Act of 1984, the Foreign 

Shipping Practices Act of 1988, and section 19 of the Merchant Marine Act of 1920, and sections 2 and 3 of Public 

Law No. 89-777. Most of these statutes were modified by the passage of the Ocean Shipping Reform Act of 1998, 

which took effect in 1999. 

FMC monitors the activities of ocean common carriers, marine terminal operators, conferences, ports and ocean 

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

operate in the foreign commerce of the U.S. and monitor these activities to ensure they maintain just and 

reasonable practices. FMC maintains a trade monitoring and enforcement program designed to detect and 

appropriately remedy malpractices and violations. FMC monitors the laws and practices of foreign governments 

which could be potentially restrictive and identifies and monitors carriers owned or controlled by foreign 

governments; processes and reviews agreements and service contracts for compliance with statutory requirements; 

and reviews common carriers’ privately published tariff systems for accessibility and accuracy as required by the 

Ocean Shipping Reform Act of 1998. 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 

demonstrate adequate financial responsibility for casualty and nonperformance. 

FMC is composed of five Commissioners appointed for five-year terms by the President with the advice and 

consent of the Senate. The President designates one of the Commissioners to serve as Chairman, who is also the 

chief executive and administrative officer of FMC. 

Congress enacts appropriations to permit FMC to incur obligations for authorized purposes. In fiscal years 2006 

and 2005, FMC was accountable for General Fund appropriations. FMC recognizes budgetary resources as assets 

when cash (funds held by the U. S. Treasury) is made available through the Department of Treasury General Fund 

warrants. 

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

other authorizations to spend general revenues. 

General Fund Miscellaneous Receipts are accounts established for receipts of non-recurring activity, such as fines, 

penalties, fees and other miscellaneous receipts for services and benefits. 

FMC has rights and ownership of all assets reported in these financial statements. There are no non-entity assets. 

B. Basis of Presentation 

The financial statements have been prepared to report the financial position, net cost of operations, changes in net 

position, status and availability of budgetary resources, and the reconciliation between proprietary and budgetary 

accounts of the FMC. The statements are a requirement of the Chief Financial Officers Act of 1990, the 

Government Management Reform Act of 1994, the Accountability of Tax Dollars Act of 2002 and the Office of 

Management and Budget (OMB) Circular A-136, Financial Reporting Requirements. They have been prepared 

from, and are fully supported by, the books and records of FMC in accordance with the hierarchy of accounting 

principles generally accepted in the United States of America, standards approved by the principals of the Federal 

Accounting Standards Advisory Board (FASAB), OMB Circular No. A-136, and FMC accounting policies which 

are summarized in this note. 

 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 56

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

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 statements consist of the Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, 

Statement of Budgetary Resources, Statement of Financing, and the Statement of Custodial Activity. In 

accordance with OMB Circular A-136, the financial statements and associated notes are presented on a 

comparative basis. 

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. These financial statements were prepared following accrual accounting. Budgetary 

accounting facilitates compliance with legal requirements on the use of federal funds. Balances on these 

statements may therefore differ from those on financial reports prepared pursuant to other OMB directives that are 

primarily used to monitor and control FMC’s use of budgetary resources. 

D. Revenues & Other Financing Sources 

Congress enacts annual appropriations to be used, within statutory limits, for operating, capital and grant 

expenditures. Additional amounts are obtained from service fees and reimbursements from other government 

entities and the public. 

Appropriations are recognized as a financing source when expended. Revenues from service fees associated with 

reimbursable agreements are recognized concurrently with the accrued expenditures for performing the services. 

Appropriations expended for capitalized property and equipment are recognized as expenses when an asset is 

consumed in operations. 

FMC recognizes as an imputed financing source the amount of accrued pension and post-retirement benefit 

expenses for current employees paid on our behalf by the Office of Personnel Management (OPM). 

There are no earned revenues in the fiscal years ended September 30, 2006 and 2005. 

E. Taxes 

FMC, as a federal entity, is not subject to Federal, State, or local income taxes, and, accordingly, no provision for 

income taxes has been recorded in the accompanying financial statements. 

F. Fund Balance with Treasury 

The U.S. Treasury processes cash receipts and disbursements. Funds held at the Treasury are available to pay 

agency liabilities. FMC does not maintain cash in commercial bank accounts or foreign currency balances. 

G. Accounts Receivable 

Accounts receivable consists of amounts owed to FMC by the general public and FMC employees. Accounts 

receivable in the Salaries and Expense Fund represents an employee related receivable. 
 57 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

G. Accounts Receivable (continued) 

An allowance for uncollectible accounts receivable from the public is established when either (1) 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, or (2) an account for which no allowance has been 

established is submitted to the Department of the Treasury for collection, which takes place when it becomes 180 

days delinquent. 

H. General Property, Plant and Equipment 

FMC’s property, plant and equipment is recorded at original acquisition cost and is depreciated using the straightline method over the estimated useful life of the asset. Major alterations and renovations are capitalized, except 

wherein the tenant improvement allowance specified in lease agreement covers the costs of certain renovations. 

Maintenance and repair costs are charged to expense as incurred. FMC’s capitalization threshold is $25,000 for 

individual purchases. Applicable standard governmental guidelines regulate the disposal and convertibility of 

agency property, plant and equipment. The useful life classification for capitalized equipment assets is 5 years. 

I. 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 in select circumstances. 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. 

J. Liabilities

Liabilities covered by budgetary or other resources are those liabilities for which Congress has appropriated funds 

or funding is otherwise available to pay amounts due. 

Liabilities not covered by budgetary or other resources represent amounts owed in excess of available 

Congressionally appropriated funds or other amounts. The liquidation of liabilities not covered by budgetary or 

other resources is dependent on future Congressional appropriations or other funding. Intragovernmental liabilities 

are claims against FMC by other federal agencies. Liabilities not covered by budgetary resources on the Balance 

Sheet are equivalent to amounts reported as Components Requiring or Generating Resources on the Statement of 

Financing. Additionally, the Government, acting in its sovereign capacity, can abrogate liabilities. 

K. Accounts Payable 

Accounts payable consists of amounts owed to other federal agencies and the public. 

L. 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. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 58

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

L. Annual, Sick and Other Leave (continued) 

Nonvested leave is expensed when used. Any liability for unused sick leave by a Civil Service Retirement System 

(CSRS)-covered employee is transferred to the Office of Personnel Management upon the retirement of that 

individual. No credit is given for sick leave balances upon the retirement of Federal Employee’s Retirement 

System (FERS)-covered employees. 

M. Accrued Workers’ Compensation 

A liability is recorded for actual and estimated future payments to be made for workers’ compensation pursuant to 

the Federal Employees’ Compensation Act (FECA). The actual costs incurred are reflected as a liability because 

FMC will reimburse the Department of Labor (DOL) two years after the actual payment of expenses. 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. 

N. Retirement Plans 

FMC employees participate in either the Civil Service Retirement System (CSRS) or the Federal Employees’ 

Retirement System (FERS). FERS was established by the enactment of Public Law 99-335. Pursuant to this law, 

FERS and Social Security automatically cover most employees hired after December 31, 1983. Employees hired 

before January 1, 1984 elected to join either FERS and Social Security or remain in CSRS. 

All employees are eligible to contribute to the Thrift Savings Plan (TSP). For those employees participating in the 

FERS, a TSP account is automatically established and FMC makes a mandatory one percent contribution to this 

account. In addition, FMC makes matching contributions, ranging from one to four percent, for FERS eligible 

employees who contribute to their TSP accounts. Matching contributions are not made to the TSP accounts 

established by CSRS employees. For FERS participants, FMC also remits the employer’s share of the required 

contribution. 

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

program after retirement. 

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 communicates 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. 
 59 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

O. Use of Estimates 

Management has made certain estimates when reporting assets, liabilities, revenue, and expenses, and in the note 

disclosures. The preparation of financial statements in conformity with generally accepted accounting principles 

requires management to make assumptions that affect the reported amounts of assets and liabilities and disclosure 

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and 

expenses during the reporting period. Actual results could differ from those estimates. 

P. Net Position 

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

and cumulative results of operations. Unexpended appropriations represent the amount of unobligated and 

unexpended budget authority. Unobligated balances are the amount of appropriations or other authority remaining 

after deducting the cumulative obligations from the amount available for obligation. The cumulative results of 

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

Q. 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 2006 

and 2005 to the extent directed by OMB. 

R. 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. There are no contingencies that require disclosure. 

S. Reclassifications 

Statement of Budgetary Resources - The presentation used for the Statement of Budgetary Resources (SBR) prior 

to FY06 has been revised to reflect a new format required pursuant to the Office of Management and Budget 

(OMB) Circular A-136, Financial Reporting Requirements. Circular A-136 requires agencies to present both 

FY06 and FY05 SBR in the same format. Accordingly, certain reclassifications were made to the previously 

issued FY05 SBR to conform to the new format. 

Other - Certain fiscal year 2005 balances have been reclassified, retitled, or combined with other financial 

statement line items for consistency with the current year presentation. Due to a change in the accrual process, 

certain balances in Other Accrued Liabilities for fiscal year 2005 have been reclassified to Accounts Payable for 

consistency with the current year presentation. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 60

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

T. Expired Accounts and Cancelled Authority 

Unless otherwise specified by law, annual authority expires for incurring new obligations at the beginning of the 

subsequent fiscal year. The account in which the annual authority is placed is called the expired account. For five 

fiscal years, the expired account is available for expenditure to liquidate valid obligations incurred during the 

unexpired period. Adjustments are allowed to increase or decrease valid obligations incurred during the unexpired 

period but not previously reported. At the end of the fifth expired year, the expired account is cancelled. 

NOTE 2 – FUND BALANCE WITH TREASURY

Fund balance with Treasury as of September 30, 2006 and 2005 consisted of: 

Status of Fund Balance with Treasury: 

Restricted 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. 

NOTE 3 – GENERAL PROPERTY, PLANT AND EQUIPMENT 

Property, plant and equipment account balances as of September 30, 2006 and 2005 were as follows: 

 2006 2005 

Fund Balances: 

Appropriated Funds $ 2,676,163 $ 2,217,146

 

Description

Acquisition Cost Accumulated 

Depreciation 

 Net 

Book Value 

September 30, 2006 

Office Equipment $ 419,982 $ (389,629) $ 30,353

September 30, 2005 

Office Equipment $ 419,982 $ (369,543) $ 50,439

Unobligated Balance 

Available $ 4,636 $ 1,302 

Unavailable 122,101 179,554 

Obligated Balance not yet Disbursed 2,549,426 2,036,290

Total $ 2,676,163 $ 2,217,146
 61 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 4 – LIABILITIES

The accrued liabilities for FMC are comprised of program expense accruals, payroll accruals, and annual leave 

(funded and unfunded) earned by employees. Program expense accruals represent expenses that were incurred 

prior to year-end but were not paid. Similarly, payroll accruals represent payroll expenses that were incurred prior 

to year-end but were not paid. 

September 30

2006 2005

Intragovernmental:

Accounts Payable & Other Accrued $ 11,145 $ 10,130

Payroll Taxes Payable 102,709 82,970

Other Post-Employment Benefits 8,529 8,034

Unfunded FECA Liability 495 644

Custodial Liabilities 3,450 1,819

Total Intragovernmental 126,328 103,597

Accounts Payable $ 273,774 $ 196,409

Payroll Accrual 816,238 677,525

Unfunded Annual Leave 1,061,614 970,557

Payroll Taxes Payable 11,305 10,396

Custodial Liabilities (2,170) (935)

Total Other Liabilities 2,160,761 1,853,952

Total Liabilities $ 2,287,089 $ 1,957,549
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 62

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 5 - LEASES 

FMC occupies office space under six lease agreements that are accounted for as operating leases. The lease 

locations and terms are listed below: 

The lease amounts vary from year to year depending on the specific lease. The total operating lease expense for 

fiscal years 2006 and 2005 was $2,820,287 and $2,732,261, respectively. The schedule of future payments for the 

term of the leases is as follows: 

NOTE 6 – LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

The liabilities on FMC’s Balance Sheet as of September 30, 2006 and 2005, include liabilities not covered by 

budgetary resources, which are liabilities for which 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. Liabilities not covered by budgetary resources consist 

entirely of unfunded leave. Unfunded leave balances are $1,061,614 and $970,557 as of September 30, 2006 and 

2005, respectively. 

LOCATION 

 

TERM 

 LEASE 

EXPIRATION 

DATE 

Jamaica, NY 9 months 12-31-2006 

Jamaica, NY 5 years 1-01-2007 

Hollywood, FL 2 years 8-31-2007 

Seattle, WA 2 years 5-31-2008 

Washington, DC 10 years 11-02-2012 

San Pedro, CA Indefinite - 

Fiscal Year Lease Payments

2007 $ 2,751,173 

2008 2,749,283 

2009 2,770,460 

2010 2,795,448 

2011 2,821,193 

Thereafter 3,085,408

Total Future Payments $ 16,972,965
 63 

CHAPTER THREE 

AUDITORS’ REPORT and FINANCIAL STATEMENTS 

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 7 – INTRAGOVERNMENTAL COSTS 

Intragovernmental costs represent goods and services exchange transactions made between two reporting entities 

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

summarized as follows: 

FMC had no earned revenues. 

 2006 2005 

Office of Administration: 

Intragovernmental Costs $ 5,487,121 $ 3,841,006 

Public Costs 2,962,391 2,922,542

Total Office of Administration Costs $ 8,449,512 $ 6,763,548

 

Office of Operations: 

Intragovernmental Costs $ 1,145,281 $ 1,779,211 

Public Costs 5,987,523 5,573,058

Total Office of Operations Costs $ 7,132,804 $ 7,352,269

 

Formal Proceedings: 

Intragovernmental Costs $ 754,837 $ 1,403,172 

Public Costs 4,203,666 4,368,493

Total Formal Proceedings Costs $ 4,958,503 $ 5,771,665

 

Office of Inspector General: 

Intragovernmental Costs $ 51,228 $ 85,112 

Public Costs 418,657 348,111

Total Office of Inspector General Costs $ 469,885 $ 433,223

 

Office of EEO: 

Intragovernmental Costs $ 17,798 $ 32,207 

Public Costs 117,924 58,505

Total Office of EEO Costs $ 135,722 $ 90,712
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 64

Chapter Three 

 AUDITORS’ REPORTS AND FINANCIAL STATEMENTS 

FEDERAL MARITIME COMMISSION 

NOTES TO THE FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006, 2005 

NOTE 8 – IMPUTED FINANCING SOURCES 

FMC recognizes as imputed financing the amount of accrued pension and post-retirement benefit expenses for 

current employees. The assets and liabilities associated with such benefits are the responsibility of the 

administering agency, the Office of Personnel Management (OPM). For the fiscal years ended September 30, 

2006 and 2005, respectively, imputed financing from OPM were $1,115,461 and $1,164,332 

NOTE 9 – UNDELIVERED ORDERS AT THE END OF THE PERIOD 

Beginning with FY06, the format of the Statement of Budgetary Resources has changed and the amount of 

undelivered orders at the end of the period is no longer required to be reported on the face of the statement. 

Statement of Federal Financial Accounting Standards No. 7, Accounting for Revenue and Other Financing Sources 

and Concepts for Reconciling Budgetary and Financial Accounting, states that the amount of budgetary resources 

obligated for undelivered orders at the end of the period should be disclosed. For the years ended September 30, 

2006 and 2005, undelivered orders amounted to $1,326,478 and $1,050,826, respectively. 

NOTE 10 – BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE UNITED STATES 

GOVERNMENT 

Statement of Federal Financial Accounting Standards No. 7, Accounting for Revenue and Other Financing Sources 

and Concepts for Reconciling Budgetary and Financial Accounting, calls for explanations of material differences 

between amounts reported in the Statement of Budgetary Resources (SBR) and the actual balances published in the 

Budget of the United States Government (President’s Budget). However, the President’s Budget that will include 

FY06 actual budgetary execution information has not yet been published. The President’s Budget is scheduled for 

publication in February 2007 and can be found at the OMB Web site: http://www.whitehouse.gov/omb. The 2007 

Budget of the United States Government, with the Actual Column completed for 2005, has been reconciled, and 

there were no material differences. 

NOTE 11 – CUSTODIAL ACTIVITY 

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

measures revenue based on cash collection and refunds. This revenue is 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. 
 65 

APPENDIX A 

INSPECTOR GENERAL’S ASSESMENT of the MOST SERIOUS MANAGEMENT CHALLENGES FACING THE FMC 

Appendix A 

 Inspector General’s Assessment of the Most Serious Management Challenges Facing the FMC 

Management Challenges Facing the FMC 

FEDERAL MARITIME COMMISSION

800 North Capitol Street, N.W.

Washington, DC 20573 

November 01, 2006

 

 Tel.: (202) 523-5863 

Office of Inspector General Fax: (202) 566-0043 

 E-mail: oig@fmc.gov

 

TO: Steven Blust, Chairman 

Federal Maritime Commission 

FROM: Adam R. Trzeciak 

 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 the agencies’ 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 Performance and Accounting Report for Fiscal Year 2006.

This year’s Statement on the Federal Maritime Commission’s Management and Performance Challenges 

summarizes two areas for inclusion in the FMC’s FY 2006 PAR: Improving Government Operations and 

Information Technology Security. These assessments are based on information derived from a combination of 

sources, including Office of Inspector General audit and inspection work, Commission reports, and a general 

knowledge of the Commission’s programs. I am glad to report that the FMC has already devoted significant 

efforts to address the challenges and progress is being made on these important areas. 

The Reports Consolidation Act of 2000 permits agency comment on the inspector general’s statements. Agency 

comments, if applicable, are to be included in the final version of the PAR that is due on November 15, 2006. 

FMC Management and Performance Challenges 

(Submitted by FMC Office of Inspector General) 

I. Improving Government Operations 

Management Challenge:

To effectively meet the needs of those the FMC regulates in a changing maritime industry. To assist the maritime 

industry to comply with federal laws and regulations while enhancing U.S. competitiveness both at home and 

abroad. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 66

Appendix A 

 Inspector General’s Assessment of the Most Serious Management Challenges Facing the FMC 

Agency Progress in Addressing the Challenge:

The FMC's mission is to: 

• Develop and administer policies and regulations that foster a fair, efficient and secure maritime transportation 

system; 

• Protect U.S. maritime commerce from unfair foreign trade practices and market-distorting activities; 

Facilitate compliance with U.S. shipping statutes through oversight and outreach. 

The international maritime transportation industry has changed dramatically in the last decade. In response to 

these changes, and the further changes that are anticipated, the Commission has undertaken an extensive review of 

its internal regulatory processes and its rules to ensure they are reflective of the industry and responsive to its 

stakeholders. 

In 1998, Congress amended the Commission’s primary statute, the Shipping Act of 1984, with passage of the 

Ocean Shipping Reform Act of 1998 (OSRA), which became effective May 1, 1999. OSRA changed the way 

many entities subject to the Commission’s regulation do business. The most significant change introduced by 

OSRA was to give ocean carriers and their customers the ability to individually negotiate, on a confidential basis, 

the terms and conditions for the movement of freight. As a consequence, “conference-based” service contracts 

gave way to the free negotiation of individual rate-and-service packages. This reform has successfully promoted a 

market-driven, efficient liner shipping regime by stimulating changes in the way the industry does business. A 

greater degree of cooperation among ocean carriers, ocean transportation intermediaries and shippers was 

achieved, and continues to exist today. 

In addition, the terrorist attacks of September 11, 2001, highlighted vulnerabilities surrounding ocean shipping and 

the security of cargo moving into the United States. Although the Commission is not a front-line agency in this 

regard, it stands ready to offer its expertise and support to those who protect U.S. seaports. 

More recently, the FMC’s review of its regulations and internal business processes has led to additional market 

enhancing changes. First, in response to several petitions from the industry, the Commission established an 

exemption to its tariff publication requirements to allow “non-vessel-operating common carriers” (i.e., freight 

middlemen) to offer their customers “service arrangements”– a contracting option similar to the service contracts 

that ocean carriers use. 

In addition, the Commission has streamlined the agreement review process (46 CFR Part 535), by removing 

burdens on agreements that are seen as generally non-problematic and concentrating limited resources on 

agreements that tend to have impacts on competition. 

In the consumer affairs arena, the Commission promotes the use of alternative dispute resolution to encourage nonjudicial settlements of disputes (generally seen as a very efficient and effective use of limited Commission 

resources by the industry). The agency has realigned its five field offices so that their primary role is to assist the 

industry to comply with U.S. laws and regulations rather than a more punitive enforcement approach. It introduced 

a “friendlier,” more accessible website and generally permits the electronic filing of many documents. 

The Challenge Ahead:

Change in the industry is continuing. The trade imbalance is expected to widen even as we approach the upper 

limits on the U.S. distribution infrastructure. There is an expanding emphasis on environmental concerns and 

awareness. Many large Non-Vessel- Operating Common Carriers are appearing on the scene (UPS, FedEx, DHL) 

while smaller Vessel Operating Common Carriers are merging. The industry is also seeing more vertical 

integration of transportation providers. 

The FMC cannot rest on its accomplishments. It must continue to change with the industry. For example, the 

FMC should continue its efforts to provide a more thorough review of licensure applications. This will satisfy the 

dual goals of protecting the shipping public and helping to promote maritime security.
 67 

APPENDIX A 

INSPECTOR GENERAL’S ASSESMENT of the MOST SERIOUS MANAGEMENT CHALLENGES FACING THE FMC 

The FMC should revisit ocean transportation intermediary rules and internal processes regularly (relating to both 

review and enforcement) to proactively identify and, if necessary, amend unforeseen and unintended impediments 

to U.S. competitiveness and viability. The FMC could also play a more active role in identifying restrictive trade 

practices in developing nations. 

Finally, although the FMC’s roles and responsibilities only tangentially encompass security, still it is a paramount 

concern in the shipping industry, as seen by recent proposals aimed at enhancing container inspections. FMC field 

personnel currently work closely with Customs and other law enforcement officials to assist in verifying container 

contents. Moving forward, the agency should continue this assistance and identify new and innovative ways to tap 

its considerable expertise in container shipping and shipping agreements to enhance the effectiveness of law 

enforcement security efforts. 

Technology Security 

Management Challenge:

To maintain a comprehensive information security program that safeguards Commission data from internal and 

external threats. 

Agency Progress in Addressing the Challenge:

The accomplishment of the Federal Maritime Commission’s mission and goals depends heavily on information 

systems. Further, the President has placed a high priority on securing the Federal government’s operations and 

assets. Protecting the information and information systems on which the Federal government depends requires 

agencies to identify and resolve current security weaknesses and risks and to protect against future vulnerabilities 

and threats. 

The OIG has performed numerous IT security evaluations over the past several years, both in response to 

legislative mandates and to the OIG’s strategic plan. Each year, the agency has made steady improvements in its 

overall security posture. Just within the last few years, the agency established physical security controls that 

restrict access to FMC controlled areas including the Data Center. FMC established safe rooms throughout its 

facility to protect personnel from various security incidents. The agency has documented back-up procedures and 

stores backups at various off-site locations. FMC has also established a hot site that should keep critical systems 

functioning in the event that the primary Data Center is destroyed or damaged. Finally, FMC implemented an online security awareness training program to promote security awareness among FMC personnel. 

The FMC has also taken steps to ensure privacy and protection of personally identifiable information. The FMC 

appointed a Privacy Officer and has posted its privacy policy on its website. Recently the agency completed a 

thorough review of employee-initiated forms to identify and revise outdated forms that ask for the employee’s 

Social Security Number (SSN) even though the SSN is not needed to process the transaction. 

While improvements have been made, there is still much work to be done. The Certification and Accreditation 

(C&A) packages do not contain sufficient detail for the Chief Information Officer or system owner to make valid, 

risk-based decisions on whether to place the system into production. The agency lacks documented information 

security policies in many critical areas. The FMC is not adequately tracking its IT vulnerabilities to ensure that 

they are properly addressed and closed. Finally, the FMC’s back-up site was recently hacked; however OIT 

personnel responded quickly and contained the potential damage. Notwithstanding this positive outcome, this 

break-in could have been prevented by employing basic security measures that simply were not implemented. 

The Challenge Ahead:

No federal agency, including the FMC, can rest on its security accomplishments made in response to yesterday’s 

threats. Agencies must be proactive and continually evaluate their risks and take concrete steps to mitigate those 

risks – essentially keeping one step ahead of those who threaten agency data and IT operations. 

Appendix A 

 Inspector General’s Assessment of the Most Serious Management Challenges Facing the FMC 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 68

The FMC faces a challenge to balance its operational needs – which are both tangible and visible, with its security 

needs, which are often made in response to perceived vulnerabilities. The requirement to certify and accredit all 

information systems is the end result of a lengthy and detailed review of risks and steps to mitigate them. With a 

small IT staff, performing these critical functions means time away from operations. Nonetheless, it is important 

that a balance be struck and security be assigned a prominent role in the IT program. As recent security lapses at 

various federal agencies have demonstrated, the resources required to fix compromised systems or stolen data 

often dwarf the relatively meager security budgets in place to prevent those episodes from happening in the first 

place. Unfortunately, once information is lost or compromised, the impact on the agency, both financial and the 

public’s perception of it, can be devastating. 

Appendix A 

 Inspector General’s Assessment of the Most Serious Management Challenges Facing the FMC 
 69 

APPENDIX B 

ACTIONS TO ADDRESS the FMC’s MANAGEMENT CHALLENGES 

Appendix B 

 Actions to Address the FMC’s Management Challenges 

Actions to Address the FMC’s Management Challenges 

This appendix discusses the management challenges that the FMC’s Inspector General identified for FY 2006 in a 

memorandum to Chairman Blust, dated November 1, 2006. 

Challenge 1 - Information Technology 

The Commission fully embraces the Inspector General’s management challenge to continue to change with the 

ocean transportation industry and to regularly revisit our ocean transportation intermediary rules. As the Inspector 

General outlined, our trade imbalance grows while our domestic infrastructure is reaching its upper limit. The 

industry continues to find innovative solutions to meet the growing demand with the existing infrastructure. It is 

incumbent upon the Commission to evolve in order to meet the demands of an ever-changing industry. 

As the industry expands, it is ever more important for the Commission to continue its diligent review of its 

practices and policies to ensure that it is able to meet the needs of the industry while fulfilling our statutory role. 

The Commission has been engaged in a comprehensive review of our licensing procedures to ensure broad 

compliance with our rules and regulations. Further, we are continually reviewing our rules and regulations to 

avoid unintended impediments to U.S. competitiveness and the viability of our trades and we are fully prepared to 

amend our rules when necessary. Finally, the Commission has continued to assist security efforts by identifying 

new ways to utilize commercial information to provide for a more secure supply chain. Through these efforts, the 

Commission seeks to meet the demands of today with the flexibility to prepare for tomorrow. 

Challenge 2 – Information Technology Security 

The Commission agrees with the Inspector General’s management challenge to maintain a comprehensive 

information security program that safeguards Commission data from internal and external threats. The 

Commission has come a long way in its efforts to assess and improve its information security protections in recent 

years. The Inspector General remarked upon some of our positive efforts, and has indicated our steady 

improvement. 

Over the past few years, the Commission hired critical information security staff who stabilized our network 

environment and introduced robust security features. More recently, the agency focused more intently on physical 

security, such as establishing an alternate site from which to restore agency access to critical databases and e-mail 

in the event of a disaster. And as discussed earlier in the section entitled Federal Managers’ Financial Integrity 

Act, the Commission mitigated two significant deficiencies during the fiscal year which were related to 

information security issues. There is one significant deficiency in this program area which the Inspector General 

discussed in his FY 2006 FISMA review related to documentation, which the Commission will address 

aggressively in the coming fiscal year. Please see that earlier section for a more in-depth discussion of issues 

related to this Challenge. 

While much has been accomplished to bolster the Commission’s information security program already, we agree 

that ongoing efforts are needed to refine the program. The Commission is committed to mitigating the significant 

deficiency recently identified by the Inspector General with all deliberate speed. Further focusing of resources is 

needed not only in the area of documentation but also risk mitigation, and as resources are available, the 

Commission will make a more concerted effort to be more proactive in addressing possible new threats. 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 70

Appendix C 

 Management Decisions and Final Actions on OIG Audit Recommendations 

Management Decisions and Final Actions on OIG Audit Recommendations 

The FMC has established and strives to maintain a good record in resolving and implementing audit 

recommendations presented in OIG reports. Section 5(b) of the Inspector General Act of 1978, as amended, 

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

The following tables give the dollar value of questioned or unsupported costs and of reports of recommendations 

that funds be put to better use as determined through audits conducted by the OIG. 

Number of Amounts agreed

Reports by Management

IG audit reports for which final action by mangement had not been 

taken by 9/30/05 0 $0.00

IG audit report on which a Management Decision was Made from 

10/01/05 through 9/30/06. 0 $0.00

For Which Final Actions Were Taken During the Reporting 

Period. 0 $0.00

Subtotal: 0 $0.00

Less:

IG audit reports for which final action was taken by management 

from 10/01/05 through 9/30/06. 0 $0.00

(a) Amounts that were recovered by management. 0 $0.00

(b) Amounts that were not recovered by management. 0 $0.00

(c) Amounts classified by the IG as unrecoverable. 0 $0.00

IG audits for which no management decision was made within six 

months of issue. 0 $0.00

Totals: 0 $0.00

Table I - Disallowed Costs, section 5(b)(2)
 71 

APPENDIX C 

MANAGEMENT DECISIONS and FINAL ACTIONS on OIG AUDIT RECOMMENDATIONS 

Management Decisions and Final Actions on OIG Audit Recommendations 

(cont) 

Audit Report Date Disallowed Funds Put to Explanation Final Action

Number Issued Costs Better Use Not Taken

None 0 $0.00 $0.00 None

Table III - Final Action Not Complete in One Year, section 5(b)(4)

Appendix C 

 Management Decisions and Final Actions on OIG Audit Recommendations 

Number of Amounts agreed

Reports by Management

IG audit reports for which final action by mangement had not been 

taken by 9/30/05 0 $0.00

IG audit report on which a Management Decision was Made from 

10/01/05 through 9/30/06. 0 $0.00

For Which Final Actions Were Taken During the Reporting 

Period. 0 $0.00

Subtotal: 0 $0.00

Less:

IG audit reports for which final action was taken by management 

from 10/01/05 through 9/30/06. 0 $0.00

(a) Amounts that were recovered by management. 0 $0.00

(b) Amounts that were not recovered by management. 0 $0.00

(c) Amounts classified by the IG as unrecoverable. 0 $0.00

IG audits for which no management decision was made within six 

months of issue. 0 $0.00

Totals: 0 $0.00

Table II - Funds Put to Better Use, section 5(b)(3)
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 72

Appendix D 

 FMC Organization Chart as of September 30, 2006 

Office of Equal

Employment

Opportunity

Office of the

Inspector General

Office of the

Secretary

Office of

Operations

Office of

Administration

Office of the

General Counsel

Commissioner

(DYE)

Commissioner

(BRENNAN)

Chairman

(BLUST)

Commissioner

(CREEL)

Commissioner

(ANDERSON)

Bureau of

Certification

 and Licensing

Bureau of

Enforcement

Bureau of Trade

Analysis

Office of

Administrative

Law Judges

Office of

Consumer Affairs

and Dispute

Resolution

Services

Area

Representatives

New York

Los Angeles

New Orleans

Seattle

South Florida

Office of Financial

Management

Office of Human

Resources

Office of

Information

Technology

Office of

Management

Services
 73 

APPENDIX E 

ANNUAL PERFORMANCE PLAN 

INTRODUCTION 

This document comprises the FMC’s Final Annual Performance Plan for FY 2006. This plan is closely linked to 

the agency’s Strategic Plan and it sets forth objective performance goals and narrow, measurable performance 

indicators so as to facilitate implementation and assessment of performance. 

For FY 2006, we have continued the modified approach for our annual planning first implemented with our 

Revised Final Plan for FY 2005. Agency performance goals now are tied directly to our Strategic Goals instead of 

our budget program activities. This has resulted in the development of broader performance goals better suited to 

the achievement of agency-wide objectives, as opposed to more narrowly focused goals tailored to the 

responsibilities of individual units. It also facilitates our aim of utilizing a more inclusive, collaborative approach 

in conducting our ongoing activities, which we believe both enhances decision-making and improves ultimate 

results. Addressing our performance goals in this fashion also has enabled us to link planning, budgeting and 

performance more effectively. 

Our Plan for FY 2006 focuses on refining the agency’s business practices, specifically on revising and updating 

internal procedures in line with the amendment of Commission regulations. Several performance goals were 

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

and responsiveness to inquiries, and to implement procedural changes to enhance the effectiveness of agency 

operations. 

Our FY 2006 Plan also broadens our efforts to implement the President’s Management Agenda initiative to expand 

electronic government. Several performance goals were formulated to improve the management of information by 

more effective use of available technologies. We plan to streamline and simplify the delivery of services and 

information to regulated entities, other government agencies and the public, as well as automate agency systems 

and enhance the use of agency databases, which will allow staff to discharge program responsibilities more 

effectively. 

The Commission’s Annual Performance Plan comports with the overall objectives of GPRA while maintaining 

flexibility in its presentation and application. The majority of Commission activities are statute-driven and our 

goals essentially are based upon legislative mandates which are clear and direct. Significant alteration of our 

existing programs is not possible, given that many measures and goals are required by statute. 

 

Accordingly, OMB agreed that the Commission should use an appropriately scaled mechanism for GPRA process 

and development with a framework which would be productive, yet less resource-intensive. Nonetheless, our Plan 

presents relevant information clearly and concisely, and strives to be as detailed as necessary while avoiding 

minutiae. 

Our Plan sets forth the mission statement and general goals from our Strategic Plan, as a point of reference for the 

reader. As aforementioned, we have prepared performance goals for the agency in line with each of the agency’s 

Strategic Goals. Each performance goal has been stated as a narrow, measurable objective. For each performance 

goal, we have identified the related “means to achieve” from the Strategic Plan, the intended outcomes, appropriate 

performance indicators, the processes and resources required to accomplish it, and the means for measuring/

evaluating performance. To ensure a clear understanding of the Plan’s contents, set forth below are definitions of 

basic terms used. We relied on OMB’s published guidance for these definitions, and have included parenthetically 

our interpretation of their practical application. 

- A target level of performance; a measurable objective (a specific, proposed performance action). 

- A specific action identified in the agency’s Strategic Plan as one means of achieving a particular Strategic Goal 

(actions to accomplish Strategic Goals). 

Appendix E 

 Final Annual Performance Plan 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 74

INTRODUCTION (continued) 

- Intended result or consequence of carrying out the activity (the projected effect or what is hoped to be achieved). 

- A value or characteristic for measuring results (the quantifier or qualifier of performance). 

- The processes, skills, or resources that are required to effectively accomplish a performance goal (what is needed 

to achieve the goal). 

- The means used to verify and validate measured values (methods used for assessing if programs achieved 

objectives, or, the specific means to measure if outcomes were realized). 

The Commission used its existing consultation process in developing this Plan. We have kept key Congressional 

Committees apprised of our efforts, and have responded to any inquiries. We continued our ad hoc meetings and 

visits with all sectors of the industry to discuss the state of U.S. ocean shipping and the FMC’s oversight 

responsibilities. In coordination with the various sectors of the maritime industry, we are holding periodic 

briefings by industry experts designed to provide Commission staff with valuable information on industry services, 

operations, business practices, and regulatory concerns. And we plan to initiate the second phase of our seminar 

series, where agency staff travel to various locations to exchange information and discuss relevant issues with the 

industry and the shipping public. The opinions and comments we received via these various efforts have assisted us 

in developing our performance goals and implementing approaches. 

 

In line with OMB guidance, the Commission has reflected the resources needed to accomplish its performance 

goals. We have provided an FTE and funding figure for each Strategic Goal, which reflects what we believe will 

be required to accomplish the performance goals and “steady state” functions under each respective Strategic Goal. 

Accordingly, all Commission resources are accounted for in this Plan, i.e., the figures under each Strategic Goal, 

when summed, reflect the full FTE and funding levels of the President’s budget for the FMC for FY 2006. 

The Commission will post this Performance Plan on its Internet website to ensure that it is readily accessible to 

interested parties, and will advise all employees to take the time to review it. Additionally, all employee 

performance plans are required to comport with the agency’s Strategic and Annual Performance Plans, and 

contain specific elements and standards with a clear explanation of what is expected of the employee in support of 

the agency achieving its goals. This process in turn has the effect of directly furthering the Administration’s 

initiative on strategic human capital management. Performance of managers and staff is evaluated in part on how 

they achieve the objectives in this plan. 

Appendix E 

 Final Annual Performance Plan 2006 
 75 

APPENDIX E 

ANNUAL PERFORMANCE PLAN 

FMC VISION AND MISSION

The FMC’s vision is: 

 Fairness and Efficiency in U.S. Maritime Commerce. 

To achieve its vision, the FMC’s mission is to: 

• Develop and administer policies and regulations that foster a fair, efficient and secure 

 maritime transportation system. 

• Protect U.S. maritime commerce from unfair foreign trade practices and market- 

 distorting activities. 

• Facilitate compliance with U.S. shipping statutes through outreach and oversight. 

• Assist in resolving disputes.

OSRA and the events of September 11, 2001, have significantly changed the manner in which the business of 

ocean shipping is being conducted. The industry continues to restructure its operations to adapt to dynamic 

economic conditions, emerging trends, and maritime security efforts. International trade remains dependent upon 

an efficient ocean transportation system. Therefore, it is imperative for the FMC to ensure that its oversight 

activities produce a competitive trading environment in U.S. ocean commerce that is in harmony with and 

responsive to international shipping practices, and permits fair and open commerce. We must focus our energies 

and efforts on this mission, and assure that the agency is organized and managed in a manner best suited to 

accomplish it with a minimum of government intervention and regulatory cost. Effective use of emerging 

information technologies will facilitate our efforts. Our actions also must encourage the development of a sound 

U.S.-flag liner fleet. Accordingly, the FMC has established the following five strategic goals to carry out its 

statutory mandates. 

Appendix E 

 Final Annual Performance Plan 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 76

FMC STRATEGIC GOALS

1. Provide a timely, efficient and decisive regulatory process, including alternative dispute resolution, to 

 enable all segments of the industry to operate more effectively, with a minimum of regulatory costs. 

2. Promote efficiency and fairness in U.S. foreign waterborne commerce through various means, including 

 outreach and monitoring, to protect the public and assist stakeholders in achieving compliance with ocean 

 transportation statutes administered by the FMC. 

3. Foster economic efficiencies, reliance on marketplace factors and maritime security by administering 

 U.S. shipping statutes in a balanced and equitable manner to redress excessive anticompetitive actions 

 and other unlawful activities. 

4. Employ technological enhancements to improve efficiency and to facilitate the exchange of information. 

5. Ensure the FMC has the appropriate organizational framework and management systems to carry out 

 its statutory mandates. 

 

Appendix E 

 Final Annual Performance Plan 2006 
 77 

APPENDIX E 

ANNUAL PERFORMANCE PLAN 

LINKAGE BETWEEN MISSION STATEMENTA ND STRATEGIC GOALS

Our strategic goals address essential FMC statutory, programmatic, and management responsibilities. They were 

developed with a specific focus on accomplishing the basic purposes of our mission and attaining the competitive, 

nondiscriminatory shipping environment envisioned by the 1984 Act, as amended by OSRA. 

The primary intention of Strategic Goal 1 is to minimize regulatory costs by maintaining timely and decisive 

regulatory processes, and providing various dispute resolution services. This will render the FMC more effective in 

addressing matters that perpetuate discrimination or preclude industry efficiency, while reducing the costs of 

pursuing matters before the Commission. Decisive action and effective assistance in resolving informal complaints 

or disputes will help to remove uncertainties as to statutory interpretations or the application of FMC rules. Such 

uncertainties may impede operational efficiencies or technological changes, each of which can foster a more 

economical ocean shipping system. 

Our second strategic goal centers on achieving compliance with the substantive provisions of the shipping statutes 

the FMC administers, and protecting those involved in U.S. ocean commerce from unfair practices. We will address 

this goal particularly by interacting with all sectors of the industry, and by vigilant monitoring of ongoing 

commercial activities. Accomplishing this goal should minimize the unjust discrimination and undue preference or 

prejudice that precludes certain shipping interests from obtaining rates or service levels that can render their 

businesses more economic and efficient. Increasing industry compliance should enable stakeholders to concentrate 

on fair and legal means of enhancing operational efficiency, secure in the knowledge that competitors are not 

engaging in widespread illegal actions aimed at improving short-term profits. The agency’s focus on the 

qualifications of intermediaries operating in the U.S. trades will afford greater protection to our stakeholders and 

contribute to national maritime security. And cruise passengers also will be protected through the demonstration of 

financial responsibility by passenger vessel operators. 

Strategic Goal 3 is designed to foster economic efficiencies, assist maritime security initiatives, promote reliance on 

marketplace factors, and redress excessive anticompetitive practices harmful to international commerce. This is a 

direct link to our mission statement’s call for an efficient, secure, competitive, market-driven ocean transportation 

system. Our continuing efforts to address the actions of foreign governments that adversely affect U.S. interests and 

our foreign trade comport with that aspect of our mission aimed at creating an environment “free of unfair foreign 

maritime trade practices.” Our focus on commercial malpractices enhances our objective of limiting unlawful 

activities. 

We also have a specific strategic goal that focuses on making effective use of advancements in IT to improve the 

efficiency of our operations and enhance our exchange of information with external parties. Carrying out the 

agency’s mission in times of budgetary limitations dictates that we appropriately utilize all available resources. 

Dynamic changes continue to be made in this area, and the Commission intends to take advantage of any 

improvement that can enable it to perform its functions more effectively. We hope to improve our business 

operations so as to add efficiency to the Commission’s dissemination and receipt of information. We intend to 

perform the research and analysis necessary to identify the best options for implementing technical enhancements to 

facilitate our efforts to achieve our mission. 

Finally, our fifth strategic goal addresses Commission management and operations. In order to achieve the 

objectives of our mission, we must maintain effective processes that enhance efficiency, without serving as ends in 

themselves. It is essential that we manage for results, and that we effectively tie our budget needs to our 

performance. This strategic goal serves as the internal underpinning that enables us to accomplish the policy 

objectives set forth in our mission statement. This goal also ensures continuation of a comprehensive approach to 

the strategic management of our human capital. 

Achieving these mission-driven goals will enable us to address the external factors we face, while assuring an 

equitable and efficient administration of the shipping statutes under our jurisdiction. Our processes and procedures 

will be refined or updated as necessary. We are committed to accomplishing our strategic goals and the outcome 

goals related to them. Therefore, specific means have been identified to enable the FMC to achieve these goals in 

the most cost-efficient and least disruptive manner possible. 

Appendix E 

 Final Annual Performance Plan 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 78

I. STRATEGIC GOAL: Efficient Regulatory Process 

37 FTEs and $6,032,075 will be required to accomplish this goal. 

2006 Steady State Activities:

• Adjudication and resolution of complaints. 

• Adjudication and resolution of investigatory proceedings, including fact-findings and show cause proceedings. 

• Issuance of rules through the rulemaking process. 

• Commission decision-making activities through meetings (formal and notation) that comply with the 

Government in the Sunshine Act. 

• Public information and assistance processes such as press relations, responses to legislative and regulatory 

inquiries, and compliance with Freedom of Information Act and Privacy Act requirements. 

• Other regulatory processes, including activities such as appeals of delegated authority actions, policy 

issuances, and formal petition processes. 

• Providing timely legal counsel to the Commission in order to facilitate regulatory action that is consistent with 

statutory mandates, representing the Commission’s interest in matters before Congress and OMB. 

• Reviewing and refining Commission rules to determine their economic impact and ensure that they reflect the 

current industry environment, as well as meet the needs of the Commission’s regulatory mandate. 

• Compiling, organizing, and maintaining Commission records. 

• Monitor, review and modify, as necessary, Commission regulations to address changing trade conditions, 

industry practices or statutory modifications. 

Appendix E 

 Final Annual Performance Plan 2006 
 79 

APPENDIX E 

ANNUAL PERFORMANCE PLAN 

Performance 

Goal 

Related Strategic 

Goals/Outcomes/

Means 

Outcome Performance 

Indicator 

Process/Activity Performance 

Measure/

Evaluation 

1. By 9/30/06, 

make selected 

Opening/ 

Reply Briefs & 

Exceptions & 

Replies in 

docketed 

proceedings 

available to the 

public through the 

Commission=s 

website. 

Encourage use of 

electronic filing. 

-Reduce 

duplicating costs & 

costs associated 

with responding to 

public requests for 

copies of filings. 

-Provide for 

quicker access to 

such document 

filings. 

-Improve efficiency 

of providing 

Commission staff 

with access to 

public filings. 

-Selected Opening 

Briefs & Reply 

Briefs & 

Exceptions & 

Replies, if any, are 

made available 

through the 

website. 

-Filings & 

proceedings are 

placed on the 

homepage & are 

readily accessible 

in electronic 

format. 

OS requests 

litigants to submit 

filings in 

electronic form or 

scans filings 

which are received 

in hard-copy form. 

-OS reviews the 

number of briefs, 

exceptions & replies 

available to the 

public. 

-Assess feedback 

from external & 

internal users. 

2. By December 

2005, complete 

project for 

scanning & 

posting historical 

Commission 

decisions issued 

between 1989 & 

1996. 

Encourage use of 

electronic filing. 

The maritime & 

legal communities 

will have greater 

access to the 

Commission=s 

decisions, which 

provide the basis 

for its policies & 

precedent. 

Historical 

Commission 

decisions issued 

between 1989 & 

1996, when the 

Commission began 

posting its 

decisions on the 

web, will be made 

available through 

the website. 

-Commission staff 

will identify, 

compile & scan 

decisions/rulings 

issued between 

1989 and 1996. 

-Scanned 

documents will be 

posted on the 

Commission=s 

website. 

Assess feedback 

from external & 

internal 

sources. 

3. By 6/30/06, 

provide the option 

of filing carrier & 

marine terminal 

agreements 

online. 

 Update agreement 

content, monitoring 

rules. 

-Reduction in hour 

burden & costs on 

the public 

associated with 

filing agreements 

with the agency. 

-Quicker 

dissemination & 

availability of 

documents within 

the agency & to the 

general public. 

-Reduction in 

agency resources 

needed to handle & 

process the filing of 

paper documents. 

-Reduced agency 

costs in handling 

filing fees through 

direct deposit of 

filing fees. 

-The number of 

filings 

accomplished 

online as a 

percentage of total 

filings. 

-Availability of 

staff resources for 

other projects. 

-Industry interest in 

the possibility of 

extending a similar 

option to other 

applications. 

-Develop IT 

systems to 

accommodate the 

online submission 

of agreements & 

accompanying 

documents. 

-Have necessary 

safeguards & 

security 

protections in 

place, including esignature, to 

ensure 

confidentiality of 

documents where 

required. 

-Develop filing 

procedures & 

software standards 

to be employed in 

conjunction with 

industry 

suggestions & 

views. 

-Feedback from the 

filing public on the 

efficacy of online 

filing. 

-Level of interest 

shown in obtaining 

copies of filings. 

Appendix E 

 Final Annual Performance Plan 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 80

II. STRATEGIC GOAL: Compliance 

39 FTEs and $6,165,243 will be required to accomplish this goal. 

2006 Steady State Activities:

• Reviewing and maintaining a database of SCs between ocean common carriers and shippers, and using this 

database to guard against anticompetitive practices and other unfair prohibited activities under the 1984 Act. 

• Ensuring that common carriers’ rates and charges are accessible to the shipping public in private, 

electronically accessible systems. 

• Ensuring that OTIs maintain bonds that protect the shipping public from financial losses. 

• Providing formal and informal legal opinions and guidance to the Commission’s staff and the general public to 

ensure clarity and understanding of Commission rules and regulations. 

• Administering the Commission’s international affairs program. 

• Liaisoning with other agencies regarding maritime security. 

• Reviewing operational and pricing agreements among ocean common carriers and marine terminals to ensure 

that they do not unduly restrict competition. 

• Issuing passenger vessel certificates evidencing financial responsibility of vessel owners or charterers to pay 

judgments for personal injury or death or to repay fares for the nonperformance of voyage or cruise. 

• Licensing OTIs to protect the public from unqualified, insolvent, or dishonest companies. 

• Responding to informal complaints and informal inquiries from Congress and the public relating to 

Commission responsibilities. 

• Acting as a liaison between the FMC and the public by responding and/or coordinating agency responses to 

public inquiries. 

• Maintaining a specialized maritime law library for agency and public use. 

• Conduct audit activity of regulated entities, including OTIs and VOCCs, to promote and ensure compliance 

with applicable statutes and Commission regulations. 

• Respond to inquiries and complaints from the regulated industry and shipping public. Provide information, 

assistance and forms necessary to comply with applicable statutes and Commission regulations including 

educational seminars. 

Appendix E 

 Final Annual Performance Plan 2006 
 81 

APPENDIX E 

ANNUAL PERFORMANCE PLAN 

Performance 

Goal 

Related Strategic 

Goals/Outcomes/

Means 

Outcome Performance 

Indicator 

Process/Activity Performance 

Measure/

Evaluation 

1. By 9/30/06, 

enhance use of SC 

and NSA data, and 

evaluate 

SERVCON system 

functionality.

 

Enhance 

monitoring 

program. 

-Consistent 

retrieval of accurate 

SC and NSA data. 

-Access to certain 

data in standard 

format. 

-Increase 

confidence level of 

statistics & 

SERVCON query 

results used in 

analyses for reports 

& enforcement 

actions. 

-Increase accuracy 

of SC and NSA 

information being 

filed into the 

system. 

-More user-friendly 

features for 

industry & 

government. 

-Better ability to 

manage data in the 

database & IT 

resources. 

-Easy access to 

efficient & useful 

data. 

-Data retrieved in 

organized manner. 

-Reduction in 

number of inquiries 

received for SC and 

NSA filing 

assistance. 

-Increased 

awareness of 

certain terms & 

conditions provided 

in SCs and NSAs. 

-Increased ability to 

keep abreast of 

issues involving 

specific SC and 

NSA activities. 

-More disk storage 

space & fewer 

indexing & other 

related problems. 

-Contact filer users 

to obtain relevant 

information. 

-Confer with 

government users 

for input. 

-Collect relevant 

information. 

-Prepare any 

rulemaking as may 

be needed to 

present to FMC. 

-Monitor & 

analyze terms & 

conditions in 

larger volume of 

SC and NSA 

filings. 

-Report persistent 

compliance 

problems to BOE. 

-Create, update & 

enter results of SC 

& NSA/ET review 

& analysis in 

Tariff Profile 

System, SC & 

NSA/ETs section. 

-Industry & 

government user 

feedback regarding 

ongoing efforts. 

-Overall efficiency 

of SERVCON 

system. 

-Periodic assessment 

& ability to 

determine 

compliance. 

-BTA Director 

manages ongoing 

staff efforts. 

2. Evaluate OTI 

rules & suggest 

changes, if 

necessary, to 

address industry & 

agency concerns. 

Enhance 

monitoring 

program. 

-Recommendations 

for up-to-date rules 

that reflect current 

industry 

environment. 

-Improved 

compliance with 

regulations. 

-Less uncertainty 

among regulated 

entities regarding 

requirements. 

-Recommendation 

to Commission. 

-Positive feedback 

from stakeholders 

& the public. 

-Discussion with 

staff & industry 

experts. 

-Internal analysis 

of rulemaking. 

-Final Commission 

determination on 

staff 

recommendations. 

-Assess impact of 

any proposals 

finalized. 

Appendix E 

 Final Annual Performance Plan 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 82

III. STRATEGIC GOAL: Balanced Enforcement

15 FTEs and $2,208,948 will be required to accomplish this goal. 

2006 Steady State Activities:

• Investigating discriminatory rates, charges, classifications, and practices of common carriers, terminal 

operators, and OTIs operating in the foreign commerce of the U.S. 

• Representing the FMC before U.S. courts and other administrative agencies. 

• Reviewing staff recommendations and initial decisions for legal sufficiency and preparing final decisions and 

orders. 

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

and reasonable and are not unfairly undercutting private competitors. 

• Protecting shippers and carriers engaged in the foreign commerce of the U.S. from restrictive or unfair foreign 

laws, regulations or business practices that harm U.S. shipping interests or ocean trade. 

• Prosecute formal proceedings initiated by the Commission. 

• Monitor activities and conduct investigations of regulated entities and of SC activity to ensure compliance 

with statutes and regulations administered by the Commission. 

• Conduct non-adjudicatory fact-finding proceedings as directed by the Commission. 

• Provide liaison between the Commission and the shipping industry, the public and other governmental 

entities. 

• Coordinate and cooperate with other government entities to improve homeland security by effective exchange 

of information and assistance regarding foreign ocean transportation. 

Appendix E 

 Final Annual Performance Plan 2006 
 83 

APPENDIX E 

ANNUAL PERFORMANCE PLAN 

Performance 

Goal 

 

Related 

Strategic 

Goals/

Outcomes/

Means 

Outcome Performance 

Indicator 

Process/Activity Performance 

Measure/

Evaluation 

1. By 9/30/06, 

align BTA=s MR 

program for 

carrier 

agreements with 

the amended 

MR regulations 

in FMC Docket 

No. 03-15. 

Monitor 

competitive 

trade conditions. 

-Compliance by all 

applicable 

agreement parties 

with the 

Commission=s MR 

regulations. 

-Access to 

quarterly MR data 

& info for use by 

the Commission on 

carrier agreement 

matters, including: 

analyses of carrier 

competition in 

trades; support for 

recommendations 

on agreement 

matters; 

background 

information to 

address complaints, 

investigations, or 

petitions on 

agreements before 

the Commission. 

-An increased 

understanding & 

awareness of 

economic 

conditions, 

agreement 

activities & carrier 

competition in the 

major trades. 

-Timely & accurate 

MR data & info on 

carrier agreements. 

-Reduction in the 

number of 

problems relating 

to compliance of 

agreement parties 

with the MR 

regulations. 

-Greater use of MR 

data & info on 

agreement matters 

before the 

Commission. 

-Reduction in the 

number of internal 

Commission 

inquiries for further 

info or clarification 

on agreement/ 

trade activities. 

-Increased 

Commission 

awareness of the 

specific economic 

& competitive 

issues affecting 

conditions in the 

major trades. 

-Inform all carrier 

agreements of their 

reporting obligations 

when final rule becomes 

effective. 

-On annual/as needed 

basis, inform all 

applicable agreements 

of any changes in their 

reporting obligations. 

-Assign all carrier 

agreements required to 

submit MR to BTA 

staff to review parties=

compliance w/the regs. 

Record info on receipt 

& compliance of each 

MR in BTA=s database. 

Promptly inform 

agreement rep. of any 

problems relating to 

parties= compliance w/

the regs. When 

compliance problems 

persist & parties are 

uncooperative, forward 

matter to BOE for 

formal review. 

-Add quarterly MR data 

to latest Trade Profile 

for distribution to FMC. 

Post latest Trade Profile 

on Intranet website for 

greater access by FMC 

staff. 

-Update and maintain 

MR in Bureau files for 

easy access for use on 

agreement/trade 

matters. 

-BTA Director 

manages ongoing 

staff efforts. 

-Periodically assess 

agreement parties=

compliance with the 

regulations. 

-Assess the use & 

dissemination of 

MR data & 

information in 

BTA=s projects & 

analyses on 

agreement related 

matters, & the 

responsiveness to 

internal inquiries on 

agreements. 

-Determine whether 

MR data and info is, 

or can be, 

incorporated in 

other Commission 

programs, projects, 

& analyses. 

2. Participate 

effectively in 

ITDS program. 

Cooperate with 

government 

agencies for 

marine security. 

-ITDS-based trade 

data becomes 

available for BTA 

competitive 

analyses. 

-ITDS-based trade 

data becomes 

available for 

investigative & 

enforcement 

purposes. 

-Timely 

incorporation of 

ITDS trade data for 

use in BTA 

agreement reviews. 

-Integration of 

ITDS search results 

into preliminary 

reviews & in more 

comprehensive 

investigative 

efforts. 

-Identify budgetary 

impacts of ITDS (w/

OBFM & BTA). 

-Identify IT 

requirements & 

implications of ITDS 

(w/OIT & BTA). 

-Identify security 

implications of ITDS 

participation. 

-Request for 

supplemental 

funding, if any, 

required to 

implement ITDS. 

-Commission enters 

initial agreement for 

ITDS participation. 

-Review of ITDS 

program upon rollout of new ITDS 

modules. 

Appendix E 

 Final Annual Performance Plan 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 84

IV. STRATEGIC GOAL: Technological Efficiencies 

17 FTEs and $2,422,485 will be required to accomplish this goal. 

2006 Steady State Activities:

• Implementing a wide range of IT programs and services, including operating the agency’s local area network, 

strategic planning for short- and long-term IT initiatives, IT security, data telecommunications, database 

development and management, and Internet page development and maintenance to enhance productivity and 

efficiency. 

• Maintaining and updating internal databases to enhance the ability of the public and Commission to obtain 

relevant program-related information and enhance staff productivity. 

• Converting Commission records into electronic format to enable easier public access to information. 

Appendix E 

 Final Annual Performance Plan 2006 
 85 

APPENDIX E 

ANNUAL PERFORMANCE PLAN 

Performance 

Goal 

Related 

Strategic 

Goals/

Outcomes/

Means 

Outcome Performance 

Indicator 

Process/Activity Performance 

Measure/

Evaluation 

1. Electronic 

payment of user 

fees. 

Use 

technology to 

improve 

agency work 

processes to 

the extent 

possible and 

practical. 

Existence of webbased system to 

permit electronic 

payment of user 

fees to the extent 

possible and 

practical. 

Assist stakeholders 

in submitting 

payment 

electronically. 

Development of 

technological tools to 

provide secure Internetbased interface for 

payment of user fees to 

the extent possible and 

practical. 

Lower number of 

paper checks 

received & 

increased usage of 

electronic payment 

system. 

2. Analyze 

information 

collections of 

the agency and 

update them as 

necessary to 

ensure they are 

meeting the 

needs of the 

users in the 

most efficient 

way possible, 

by being 

centralized, 

secure, and 

containing no 

unnecessary 

duplication. 

Automate 

agency 

systems. 

-Enhance 

efficiency of 

various business 

processes. 

-Better utilization 

of agency 

resources. 

-Enables broader, 

more in-depth 

analyses of relevant 

regulatory issues. 

-Information 

provided to senior 

management & 

various 

stakeholders more 

expediently. 

-Relevant 

information more 

readily available 

for access, 

manipulation & 

analysis. 

-Agency managers 

report broader use 

of information 

resulting in 

improved analyses 

& ability to address 

difficult issues. 

-Agency staff 

indicates increased 

effectiveness in 

accomplishing 

relevant tasks 

developing/ 

providing 

information. 

-Reductions in time 

involved in 

completing 

assignments. 

-Task Force with CIO, 

Operations, and 

representatives from 

Bureaus is formed to 

create plan. 

-Task Force identifies, 

documents, and analyzes 

current information 

systems. 

-Task Force conducts a 

user survey to identify 

user needs. 

-Task Force creates 

recommendation paper 

outlining short-, medium-

, and long-term changes. 

-Implementation. 

-Post-implementation 

review. 

-Director of 

Operations monitors 

progress of Task 

Force. 

-Senior management 

assesses results of 

all automation 

efforts. 

-CIO incorporates 

all changes/

refinements 

identified by senior 

management. 

3. Streamline 

agency 

procurement 

procedures, 

including: (1) 

credit card 

micropurchases & (2) 

receiving & 

accepting of 

goods & 

services. 

Automate 

agency 

systems. 

-Complying with 

various government 

regulations, such as 

Prompt Payment 

Act & OMB 

Circular A-123, 

concerning the 

establishment & 

maintenance of 

management & 

controls. 

-Faster invoice 

processing, making 

better use of 

valuable agency 

resources. 

-Prism entries for 

receipt & 

acceptance of 

goods & services 

are captured in a 

timely & 

appropriate 

manner. 

-Blanket purchase 

orders are entered 

into Prism 

replacing 

individual Prism 

requisitions for 

each micropurchase. 

-For micro-purchasing, 

various bureau/offices are 

given a budget as 

reflected in a blanket 

purchase order. 

Purchases are made by 

OMS upon e-mail 

requests from various 

bureaus/offices. 

-When goods are 

delivered to the FMC, 

entries for receipt & 

acceptance are made into 

the Prism system. 

-Various bureaus/

offices are more 

empowered in 

micro-purchasing, 

which under the 

blanket purchase 

order approach, is 

conducted in a 

streamlined manner. 

-The receipt & 

acceptance of 

purchased items is 

tracked in a timely 

manner in the Prism 

system. 

Appendix E 

 Final Annual Performance Plan 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 86

V. STRATEGIC GOAL: Management Capabilities 

25 FTEs and $3,670,249 will be required to accomplish this goal. 

2006 Steady State Activities:

• Executing financial management policies and programs, including developing annual budget justifications for 

submission to the Congress and OMB, managing agency appropriations, administering internal control 

systems for agency funds, travel and cash management, and coordinating with contractors who provide 

accounting and payroll services. 

• Fostering human resources management principles, including recruitment and placement, position 

classification and pay administration, occupational safety and health, employee assistance, employee 

relations, workforce discipline, performance management and incentive awards, employee benefits, career 

transition, retirement, employee development and training, personnel security, and an equal employment 

opportunity. 

• Ensuring the program operations of the agency are administratively supported via telecommunications, 

procurement of administrative goods and services, property management, space, printing and copying, mail 

and records services, facilities and equipment maintenance, and transportation. 

• Promoting economy and efficiency in the administration of, and protecting and detecting waste, fraud and 

abuse in, the agency’s programs via auditing agency operations. 

• Providing guidance to staff regarding administrative matters, including procurement, personnel and 

contracting issues. 

• Ensuring program compliance with various rules and regulations regarding such areas as forms clearance, 

Paperwork Reduction, Small Business Paperwork Reduction Act, and other Federally required reports and 

submissions. 

Appendix E 

 Final Annual Performance Plan 2006 
 87 

APPENDIX E 

ANNUAL PERFORMANCE PLAN 

Performance 

Goal 

Related Strategic 

Goals/Outcomes/

Means 

Outcome Performance 

Indicator 

Process/Activity Performance 

Measure/

Evaluation 

1. Simplify and 

refine the agency=s 

performance 

appraisal system so 

that expectations 

are clearly 

reflected, 

performance 

properly assessed 

via appropriate 

measures, and the 

system facilitates 

growth and 

development. 

Develop & 

monitor 

performance 

plans. 

-Any lingering 

emphases on 

processes & 

productivity are 

replaced with a 

focus on intended 

results. 

-Facilitates 

evaluations based 

on what is actually 

accomplished, as 

opposed to work 

produced. 

-Performance 

appraisal system 

serves as an 

effective tool to 

provide feedback, 

guide careers, and 

offer 

developmental 

advice. 

-Increased 

incentive for all 

agency staff to 

achieve results that 

are aligned with the 

agency=s mission & 

stated policy 

objectives. 

-Clear 

communication 

with employees & 

more candid, 

effective, equitable 

conduct of 

employee 

appraisals. 

-Specific methods/

means agreed to by 

senior 

management. 

-Consensus among 

managers & 

employees that 

performance plans 

clearly convey 

expected results & 

contain viable 

means of 

measuring 

performance. 

-Use of 

performance 

measures is readily 

accomplished & 

performance 

appraisal process 

conducted more 

effectively. 

-System facilitates 

effective feedback 

and developmental 

advice. 

-Employees fully 

engaged in 

development of all 

measures to be 

used. 

-Based on 

recommendations 

of task force 

comprised of unit 

deputies, revised 

system initiated 

early in FY06. 

-Consistent 

approach taken in 

stating goals, 

identifying desired 

outcomes, & 

specifying means 

to be used to 

measure/evaluate 

results. 

-All agency 

officials ensure 

that performance 

goals & employee 

performance 

elements clearly 

specify expected 

outcomes in a 

measurable 

manner, and that 

appropriate 

feedback and 

guidance is 

provided to all 

employees. 

-Senior management 

meets to discuss 

preliminary progress 

under new system. 

-Chairman assesses 

agency progress in 

implementing new 

system. 

-Senior management 

assesses progress at 

mid-year reviews. 

-Chairman reviews 

final appraisals, and 

speaks with a crosssection of 

employees to 

determine success of 

new system in 

meeting objectives. 

2. Develop 

strategic 

succession plan for 

agency senior 

executives & nonSES upper level 

managers. 

Anticipate future 

skill problems & 

recruit. 

-Agency will be 

prepared to fill 

leadership positions 

with trained, 

competent staff as 

vacancies occur. 

-No significant 

reduction in 

effectiveness and 

efficiency of 

agency operations 

upon departure of 

senior managers. 

-No discernible 

shortfalls in 

required employee 

skill sets. 

-Ability of agency 

to absorb expected 

attrition & meet 

current & ongoing 

mission needs. 

-Task force of 

various agency 

staff, led by OA, 

assesses situation 

and recommends 

specific actions. 

-Necessary 

development/

training actions 

initiated. 

-Approved 

succession plan. 

-Existence of 

trained, capable staff 

members ready to 

fill vacant 

leadership positions. 

Appendix E 

 Final Annual Performance Plan 2006 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 88

Appendix F 

 GLOSSARY OF ACRONYMS 

-#- 

 1920 Act Merchant Marine Act, 1920

 1984 Act Shipping Act of 1984

-A- 

 ACE/ITDS Automated Commercial Environment/ 

 International Trade Data System

 ADR Alternative Dispute Resolution 

 ALC Agency Location Code 

 ALJ Administrative Law Judge 

-B- 

 BCL Bureau of Certification and Licensing 

 BOE Bureau of Enforcement 

 BPD Bureau of the Public Debt 

 BTA Bureau of Trade Analysis 

-C- 

 CATS Carriers’ Automated Tariff System 

 CADRS Office of Consumer Affairs and Dispute Resolution 

 Services 

 C&A Certification and Accreditation Services 

 CFR Code of Federal Regulations 

 CIO Chief Information Officer 

 CPIC Capital Planning and Investment Control 

 

-D- 

 DC District of Columbia 

 DHS Department of Homeland Security 

 DOT Department of Transportation 

-E- 

 EEO Equal Employment Opportunity 

 EHRI Enterprise Human Resources Integration 

 e-OPF Electronic Official Personnel File 

-F- 

 FACTS Federal Agencies’ Centralized Trial-Balance System 

 FASA Fashion Accessories Shippers Association 

 FFMIA Federal Financial Management Improvement Act 

 FISMA Federal Information Security Management Act 

 FMC/Commission Federal Maritime Commission 
 89 

APPENDIX F 

GLOSSARY OF ACRONYMS 

Appendix F 

 GLOSSARY OF ACRONYMS 

-F- 

 FMFIA Federal Managers’ Financial Integrity Act 

 FOIA Freedom of Information Act 

 FSPA Foreign Shipping Practices Act of 1988 

 FTE Full Time Equivalent 

 FY Fiscal Year 

-G- 

 GPRA Government Performance and Results Act 

 GRI General Rate Increase 

 GSA General Services Administration 

-H- 

 HSPD-12 Homeland Security Presidential Directive 12 

-I- 

 IDP Individual Development Plan 

 IG Inspector General 

 IPAC Intergovernmental Payments and Collections 

 IPv6 Internet Protocol Version 6 

 IRS Internal Revenue Service 

 IT Information Technology 

 

-M- 

 MD&A Management’s Discussion and Analysis 

 MR Monitoring Reports 

 MTO Marine Terminal Operator 

-N- 

 NFC National Finance Center 

 NIST National Institute of Standards and Technology 

 NOI Notice of Inquiry 

 NPRM Notice of Proposed Rulemaking 

 NSA NVOCC Service Arrangements 

 NVOCC Non-Vessel Operating Common Carrier 

-O- 

 OA Office of Administration 

 OFM Office of Financial Management 

 OGC Office of General Counsel 

 OHR Office of Human Resources 

 OIG Office of the Inspector General 

 OIT Office of Information Technology 

 OMB Office of Management and Budget 

 OMS Office of Management Services 
FEDERAL MARITIME COMMISSION 

FY2006 PERFORMANCE AND ACCOUNTABILITY REPORT 

 90

Appendix F 

 GLOSSARY OF ACRONYMS 

-O- 

 OPM Office of Personnel Management 

 OPS Office of Operations 

 OPVIP Office of Passenger Vessels and Information Processing 

 OS Office of the Secretary 

 OSRA Ocean Shipping Reform Act of 1988 

 OTI Ocean Transportation Intermediary 

-P- 

 P.L. Public Law 

 PAR Performance and Accountability Report 

 PIERS Port Import Export Reporting Service 

 PMA President’s Management Agenda 

 POA&M Plan of Action and Milestones 

 PRC People’s Republic of China 

 PVO Passenger Vessel Operator 

-R- 

 RPI Regulated Persons Index 

-S- 

 SBPRA Small Business Paperwork Relief Act of 2002 

 SBR Statement of Budgetary Resources 

 SC Service Contract 

 SERVCON Service Contracts Filing System 

 SES Senior Executive Service 

 Shipping Act Shipping Act of 1984 

 STB Surface Transportation Board 

 SQL Structured Query Language 

 SSL Secure Socket Layer 

-T- 

 TEU Twenty-foot Equivalent Unit (container) 

 TIN Taxpayer Identification Number 

 TMF Traffic Mitigation Fee 

-U- 

 URL Uniform Resource Locator 

 U. S. United States 

 -V- 

 VOCC Vessel-Operating Common Carrier 

 VPN Virtual Private Network