Federal Maritime Commission

Performance and 

Accountability Report

Fiscal Year 2011
The United States

Federal Maritime Commission

Our Mission

__________________________________________

To foster a fair, efficient, and reliable 

international ocean transportation system 

and to protect the public 

from unfair and deceptive practices
This Fiscal Year 2011 Performance and Accountability Report is 

published by the Federal Maritime Commission

An electronic version of this report can be found at 

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

Please refer any questions concerning this report to the

Office of the Managing Director

Federal Maritime Commission 

at (202) 523-5800

Published in Washington, D.C.

November 15, 2011
The Federal Maritime Commission’s Performance and Accountability Report provides program and 

financial information that enables the President, Congress, and the public to assess the performance of 

the agency relative to its mission and the resources entrusted to it. This PAR satisfies the following 

legislation:

• The Federal Manager’s Financial Integrity Act of 1982 requires continuous evaluations and reporting of the 

adequacy of the systems of internal accounting and administrative controls. The Act can be found at the 

following URL:

http://www.whitehouse.gov/omb/financial/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 Inspector General Reform Act of 2008 amends the Inspector General Act of 1978 to enhance the 

independence of the Inspectors General, to create a Council of the Inspectors General on Integrity and 

Efficiency, and for other purposes. The Act can be found at the following URL:

http://www.govtrack.us/congress/billtext.xpd?bill=s110-2324

• The Government Performance and Results Modernization Act of 2010 (GPRA Modernization Act) requires an 

annual report that measures the performance results of the agency against the established agency goals. The 

Act can be found at the following URL:

http://www.whitehouse.gov/omb/performance/gprm-act

• The Government Management Reform Act of 1994 requires the submission of audited financial statements. 

The Act can be found at the following URL:

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

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

payments by Federal agencies. The Act can be found at the following URL:

http://www.govtrack.us/congress/billtext.xpd?bill=h111-3393
TABLE OF CONTENTS

A Message from the Chairman

Chapter One: Management’s Discussion and Analysis 

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

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

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

Program Performance Overview ................................................................................ 6

President’s Management Agenda............................................................................... 7

Financial Performance Overview................................................................................ 9

Financial Statement Highlights................................................................................... 11

Systems, Controls, and Legal Compliance .................................................................. 14

Chairman’s FMFIA Statement of Assurance ............................................................... 17

Chapter Two: Program Performance

Annual Performance Report....................................................................................... 19

Performance Measure Summary Tables..................................................................... 20

Chapter Three: Auditor’s Report and Financial Statements

A Message from the Chief Financial Officer ............................................................... 26

Principal Statements - Limitations of the Financial Statements................................. 27

Independent Auditor’s Report ................................................................................... 30

Balance Sheet.............................................................................................................. 34

Statement of Net Cost ................................................................................................ 35

Statement of Changes in Net Position........................................................................ 36

Statement of Budgetary Resources ........................................................................... 37

Statement of Custodial Activity .................................................................................. 38

Notes to the Financial Statements.............................................................................. 39

Chapter Four: Other Accompanying Information

Inspector General-Identified Management and Performance Challenges................. 53

Comments on Management and Performance Challenges Identified 

by the Inspector General ............................................................................... 59

Improper Payments Information Act.......................................................................... 62

Summary of Financial Statement Audit ..................................................................... 64
A MESSAGE FROM THE CHAIRMAN

As the Chairman, I am pleased to submit this Performance and 

Accountability Report for Fiscal Year 2011, the 50th anniversary 

of the Federal Maritime Commission. It is the role of the FMC, 

through its regulatory authority, to oversee the nation’s foreign 

oceanborne commerce, facilitating the growth of U.S. importers 

and exporters through a highly-efficient, effective ocean 

transportation system. The economic benefits and foreign trade 

impact of strong shipping lines, ports, support industries, onboard and dockside labor, truckers and railroads, cannot be 

overstated. The ocean transportation system is the lifeline of U.S. 

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

foreign trade to and from other continents. During fiscal year 

2011, the FMC continued to strive to maintain a viable ocean 

highway for efficiently transporting U.S. imports and exports. We continued to meet legislative 

mandates, overseeing dominant and emerging ocean shipping trades and monitoring the impact 

on the United States of actions by other nations in regulating their ocean carriers. We continued 

to ensure that shippers and regulated entities such as ocean common carriers, ocean 

transportation intermediaries, ports, and other participants involved in the entire maritime 

logistics chain were provided with an efficient and reliable ocean transportation system. 

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

maintaining an efficient and competitive international ocean transportation system and protecting 

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

accomplishment of these strategic goals is critical to the President’s goals to encourage economic 

growth, invest in the future, and responsibly govern the nation and especially to the National 

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

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

imported goods for domestic production and consumption. 

The commercial ocean transportation system returned to a more normal state in fiscal year 2011, 

as major shipping lines returned vessel capacity to service the U.S. inbound and outbound trades, 

reflecting the recovery begun in fiscal year 2010 from the industry’s worst recession in over 60 

years. Additional vessel capacity was brought back on line and foreign container manufacturers 

began to produce containers again, after having shut down as a result of the recession. The 

shortage of both vessel capacity and containers during fiscal year 2010 had severely impacted 

U.S. importers and exporters, who experienced difficulty arranging for shipment of their cargo 

reportedly impacting sales. In addition, shippers frequently faced rapid and substantial increases 

in transportation costs from the lows of 2009, often with little advance warning. Throughout the 

first three quarters of fiscal year 2011, that strain on our transportation system was reduced by 

the additional vessels and containers placed in service by ocean carriers. By the fourth quarter of 

the fiscal year, however, ocean carriers again had begun to scale back vessel capacity, stating 

that existing capacity then far exceeded demand. At the same time, alarms were sounded that 

soon shippers would again encounter significant container shortages. To more closely monitor 

concerted activity, the Commission, in fiscal year 2011, imposed additional reporting 
requirements on the major outbound and inbound transpacific agreements and on global 

alliances. Significant staff resources were committed to closely monitor those agreements and 

alliances. The need for the Commission to become a stronger, more effective agency continues 

to be abundantly clear. 

Effective implementation of the Federal Maritime Commission’s (FMC) mission to foster a fair, 

efficient, and reliable international ocean transportation system and protect the public from 

unfair and deceptive practices was especially important this fiscal year. The nation’s importers 

and exporters experienced turmoil when demand returned more quickly than the maritime 

industry’s services. The efficiencies resulting from my January 2010 reorganization of the 

agency ensured that the Commission’s major offices were cohesively directed toward achieving 

fair and efficient ocean transportation that helped to improve the nation’s economy. The 

highlighted actions provide an overview of agency activities and notable achievements during 

the fiscal year. 

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

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

conditions. To this end, during fiscal year 2011 the Commission streamlined its Rules of 

Practice and Procedure, exempted licensed non vessel operating common carriers from the 

requirement to publish individual tariff rates, potentially leading to significant tariff publication 

cost savings for that industry. Further reviews have been initiated of the Commission’s Rules of 

Practice and Procedure, its regulations governing financial responsibility of passenger vessel 

operators, and its regulations governing the licensing of Ocean Transportation Intermediaries. 

Shortly, the Commission will complete its study of the impact of the European Union’s (EU) 

removal of its block exemption of antitrust immunity for ocean carriers. 

The Commission is striving to provide increased consumer protection by integrating the use of 

various tools in order to address shipping difficulties and malpractices in the ocean transportation 

system that are encountered by importers and exporters. The Commission will provide a variety 

of alternative dispute resolution (ADR) services to resolve disputes without encumbering 

commercial relationships with the time, expense and acrimony of litigation or enforcement 

activity. Significantly, the Commission’s Ombuds program and Rapid Response Teams provide 

opportunity for quick resolution of transportations impediments. At the same time, we will 

strengthen our enforcement activity to provide deterrence by penalizing those who pursue 

unlawful malpractices. Through the administrative process, the Commission will also continue 

to provide a forum for adjudication of Shipping Act violations and redress through reparations.

Finally, we will focus on achieving compliance with OTI licensing requirements.

The Commission is targeting operating efficiencies through improved technology for the 

Commission and users of Commission services. Our goal will be to continue implementing 

technological advances that will increase Commission productivity and provide for electronic 

submission of license applications, agreements and other filings.

The Commission is also providing increased public and international trade presence. To this 

end, the Commission will continue to openly dialogue with U.S. trading partners to ensure U.S. 

trade is not hampered by regulatory or other actions of those trading partners.
This Report covers the Commission’s efforts in fiscal year 2011 to foster an equitable, secure, 

and market-driven ocean transportation industry. Fiscal year 2011 was the third year in which 

the FMC undertook quantitative measurement of performance goals, employing measures and 

targets. The Commission’s actual performance in fiscal year 2011 is compared with the targeted 

levels of performance established in the agency’s Strategic Plan for Fiscal Years 2010-2015. 

During the year, the agency focused on eight performance goals, while continuing its various 

ongoing day-to-day activities.

The fiscal year 2011 independent financial audit resulted in the FMC’s eighth consecutive 

unqualified opinion. The independent auditors did not identify any material weaknesses, 

significant deficiencies, or instances of non-compliance with laws and regulations. In the 

Management Assurances section (see page 17), I provide my assurances that the FMC has no 

material weaknesses to report. I am also pleased to report that the FMC financial and 

performance data presented in this Report are complete, reliable, and accurate in keeping with 

the guidance from the Office of Management and Budget.

On August 12, 2011, the Commission marked its 50th year anniversary of becoming an 

independent agency charged with administration of the regulatory provisions of the shipping 

laws. I look forward to working with our dedicated staff, my four fellow Commissioners and 

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

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

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

economy. 

Sincerely,

Richard A. Lidinsky, Jr.

Chairman

November 15, 2011
FEDERAL MARITIME COMMISSION

Chapter One

MANAGEMENT’S DISCUSSION and ANALYSIS

Fiscal Year 2011
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

1

Introduction

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

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

2011, which began with mission and program planning, continued with the formulation and 

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

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

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

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

Circular No. A-136, Financial Reporting Requirements (Revised October 27, 2011), and covers 

the Commission’s activities from October 1, 2010 through September 30, 2011.

Chapter One 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; Systems, Controls, and 

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

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

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

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

controls.

About the FMC

The Federal Maritime Commission (FMC or agency) is an independent 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 sections 2 and 3 of Public Law (P.L.) 

89-777 (46 U.S.C. §§ 44102 and 44103) (passenger vessel certification). The Commission: 

monitors the activities of ocean common carriers, marine terminal operators (MTOs), 

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 trade monitoring, enforcement and dispute 

resolution programs designed to assist regulated entities in achieving compliance and to detect 

and appropriately remedy malpractices and violations of the prohibited acts set forth in section 

10 of the 1984 Act; monitors the laws and practices of foreign governments which could have a 

discriminatory or otherwise adverse impact on shipping conditions in U.S. trades, and imposes 

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

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

processes and reviews agreements, service contracts, and service arrangements pursuant to the 

1984 Act for compliance with statutory requirements; and reviews common carriers’ privately 

published tariff systems for accessibility, accuracy, and reasonable terms. The Commission also 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

2

issues licenses to qualified ocean transportation intermediaries (OTIs) in the U.S., ensures that all 

OTIs are bonded or maintain other evidence of financial responsibility, and ensures that 

passenger vessel operators (PVOs) demonstrate adequate financial responsibility in case of 

nonperformance of voyages or 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 Commissioner to serve as Chairman, the 

Chief Executive and Administrative Officer of the agency. 

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

Counsel (OGC); Office of the Secretary (OS); Office of Consumer Affairs and Dispute 

Resolution Services (CADRS); Office of Administrative Law Judges (OALJ); Office of Equal 

Employment Opportunity (EEO); Office of the Inspector General (OIG); Office of the Managing 

Director (OMD); the Bureaus of Certification and Licensing (BCL), Enforcement (BOE), and 

Trade Analysis (BTA); the Offices of Budget and Finance (OBF), Human Resources (OHR), 

Information Technology (OIT), Management Services (OMS), and Area Representatives (ARs). 

The majority of FMC personnel are located in Washington, D.C., with ARs stationed in Houston,

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

3

COMMISSIONER 

DYE

COMMISSIONER 

BRENNAN

COMMISSIONER 

CORDERO

CHAIRMAN 

LIDINSKY

Office of the 

Inspector 

General

Office of Equal 

Employment 

Opportunity

Office of the 

Managing 

Director

COMMISSIONER 

KHOURI

Office of the 

General 

Counsel

Office of the 

Secretary

Office of 

Administrative 

Law Judges

Office of Consumer 

Affairs and Dispute 

Resolution Services

Office of 

Budget and 

Finance

Office of 

Human 

Resources

Office of 

Management 

Services

Office of 

Information 

Technology

Bureau of 

Certification 

and 

Licensing

Bureau of 

Enforcement

Bureau of 

Trade 

Analysis

Area Representatives 

Houston, TX 

Los Angeles, CA 

New Orleans, LA 

New York, NY 

Seattle, WA 

South Florida

FEDERAL MARITIME COMMISSION 

ORGANIZATION CHART 

as of 

SEPTEMBER 30, 2011

Administrative Direction

Technical Direction
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

4

Regulatory Responsibility

The Commission’s principal regulatory responsibilities include:

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

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

substantial increases in transportation costs or decreases in transportation services.

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

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

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

in private, electronically accessible systems.

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

that they are just and reasonable.

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

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

nonperformance of a voyage or cruise.

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

companies.

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

from financial loss.

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

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

commerce of the U.S.

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

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

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

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

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

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

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

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

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

5

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

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

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

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

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

increase in transportation cost or unreasonable reduction in service.

 

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

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

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

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

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

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

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

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

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

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

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

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

carriers.

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

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

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

upon the submission of satisfactory evidence of financial responsibility. 

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

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

licenses all U.S. OTIs.

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

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

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

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

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

individuals or interest groups.

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

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

The FMC oversees more than 6,250 regulated persons (passenger vessel operators, vesselowning common carriers, marine terminal operators, conferences, OTIs, etc.).
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

6

Future Challenges

During fiscal year 2011, major shipping lines returned vessel capacity to service in the U.S. 

inbound and outbound trades. The commercial ocean transportation system returned to a more 

normal state, reflecting the recovery begun in fiscal year 2010 from the industry’s worst 

recession in over 60 years. Additional vessel capacity was brought back on line and foreign 

container manufacturers began to produce containers again, after having shut down as a result of 

the recession. The shortage of both vessel capacity and containers during fiscal year 2010 had 

severely impacted U.S. importers and exporters, who experienced difficulty arranging for 

shipment of their cargo reportedly impacting sales. In addition, shippers frequently faced rapid 

and substantial increases in transportation costs, often with little advance warning. Throughout 

the first three quarters of fiscal year 2011, that strain on our transportation system was reduced 

by the additional vessels and containers placed in service by ocean carriers. By the fourth 

quarter of the fiscal year, however, ocean carriers again had begun to scale back vessel capacity, 

stating that existing capacity then far exceeded demand. At the same time, alarms were sounded 

that soon shippers would again encounter significant container shortages. To more closely 

monitor concerted activity, the Commission imposed additional reporting requirements on the 

major outbound and inbound transpacific agreements and on global alliances. During fiscal year 

2012, significant staff resources will continue to be committed to closely monitoring those 

agreements and alliances. The need for the Commission to become a stronger, more effective 

agency continues to be abundantly clear. 

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

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

Commission’s technology to enhance the efficiency of Commission operations; 

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

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

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

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

updating Commission regulations governing OTIs and passenger vessel operators

The Commission will focus on actions that will facilitate efficient international transportation of 

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

nation’s exporters to compete in global markets.

Program Performance Overview

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

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

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

2015 (Revised) is available on the FMC’s website. The complete FY 2011 Program Performance 

Report is contained in Chapter 2, Program Performance. In FY 2011, the Commission 

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

procedures in line with the amendment of Commission regulations. This includes facilitating the 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

7

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

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

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

Management Agenda initiative to expand electronic government by increasing transparency and 

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

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

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

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

Achieving Strategic Goal Results

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

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

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

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

performance. Fiscal year 2011 was the third year in which the FMC undertook to quantify and 

measure performance goals. The Commission’s actual performance in FY 2011 is compared

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

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

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

to its ideal of full achievement of its strategic goals. Our experience in establishing 2009 and 

2010 goals enabled us to set more realistic targets for fiscal year 2011 in the revised strategic 

plan.

President’s Management Agenda

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

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

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

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

discusses our activities in these important areas in more detail.

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

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

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

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

continued to focus on workforce and succession planning during FY 2011.

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

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

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

recruitment pools and areas of consideration to increase the diversity of applicants; and the 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

8

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

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

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

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

Recently, the Commission made a significant transition in its approach to achieving its mission.

In addition to traditional regulatory methods, the Commission became more involved in 

facilitation of major shipping issues and mediation of disputes. In pursuit of its new strategy, 

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

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

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

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

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

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

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

technical skills, the FMC is utilizing strategic workforce planning as a tool to assess whether 

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

requirements. The Commission launched an SES Candidate Development Program class in 2010 

in anticipation of the loss of individuals in senior leadership positions. This 18-month program 

will result in increased bench strength to facilitate continuity of leadership. With regard to 

recruitment for technical skills, FMC management officials participated in various data 

collection processes to provide information identifying mission priorities, current workforce 

skills, mission critical occupations and skills needed to support mission accomplishment, mission 

and workforce trends, recruitment strategies, and communication issues. The resulting 

workforce and succession plans help define and shape FMC’s overall present and future 

recruitment strategies.

Competitive Sourcing - The FMC submitted its FY 2011 Federal Activities Inventory Reform 

Act (FAIR Act) Inventory to OMB in June 2011. The Inventory identified 79 of the agency’s 

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

been received.

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

unqualified opinion on its financial statements in FY 2011. The FMC will continue to strive to 

achieve unqualified audit opinions.

Expanded E-Government - The FMC continues to expand electronic government (egovernment). During FY 2011, a project to scan Annual Reports from 1917 through 1999 was 

completed, and now all agency Annual Reports through the present time are available on the 

website. Work continued on another large scale scanning project to post the contents of 28 

bound volumes of Commission decisions issued between 1919 and 1987. When completed, the 

entire body of historical Commission decisions will be available on the FMC website, a useful 

and cost effective resource for the public as well as attorneys practicing before the Commission. 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

9

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

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

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

on an annual basis. In anticipation of launching a new website during fiscal year 2011, the FMC 

began work to upgrade its website operating platform to make more information proactively 

available to the public in support of the Administration’s initiative for a more open and 

transparent government. The agency is committed to continuing its integration of information 

technology policies and procedures, and to expand opportunities for e-government activities. 

Performance Improvement – The Strategic Plan continues to represent the fundamental 

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

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

to identify clearly the budgetary and staff resources that are committed to each goal.

Financial Performance Overview

The FMC’s financial condition as of September 30, 2011 is sound, and the Commission has 

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

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

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

Accountability of Tax Dollars Act of 2002. They have been prepared from, and are fully 

supported by, the books and records of FMC in accordance with the hierarchy of accounting 

principles generally accepted in the United States of America, standards approved by the Federal 

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

Reporting Requirements.

Source of Funds 

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

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

authority was granted. The FMC’s appropriation level for FY 2011 was $24,086,730, a reduction 

of $48,270 below the FY 2010 funding level. Additionally, the Commission had reimbursable 

budget authority of $59,192 for work performed by FMC staff for other government entities. 

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

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

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

which can be found in Chapter Three, Auditor’s Reports and Financial Statements.
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

10

Appropriation History

Full-time Equivalent History

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

however, for the past several years unanticipated vacancies in the Offices of the Commissioners 

have remained unfilled. The FMC acquired a full complement of Commissioners in June 2011. 

Modest FTE growth was experienced from 2001 through 2004. This was followed by annual 

declines through 2008, with increases in 2009 through 2011. The agency has endeavored to 

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

accomplishment of our mission. 

15,46616,477 16,591 18,362 19,340 20,294 20,427

22,072 22,80024,135 24,087

0

5,000

10,000

15,000

20,000

25,000

30,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

FISCAL YEAR

APPROPRIATION HISTORY 

FISCAL YEARS 2001 - 2011

121 127 129 129 124 121 119 115 120 127 128

0

75

150

225

300

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

FISCAL YEAR

FULL-TIME EQUIVALENT HISTORY 

FISCAL YEARS 2001 - 2011
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

11

Uses of Funds by Expense Category

Congress approved FY 2011 appropriations for the FMC in the amount of $24,086,730 through 

P.L. 112-10. During FY 2011, obligations against the appropriation totaled $24,061,355, 

representing 99.89% of the approved funding level. The Commission spent $24.061 million as 

follows: 74.33% for salaries and benefits, .87% for official travel expenses, and 24.80% for 

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

and equipment maintenance). The unobligated balance of $25,375 will remain available for

legitimate increases to existing FY 2011 obligations. 

Audit Results

The FMC again received an unqualified opinion on its FY 2011 financial statements from the 

auditing firm of Dembo, Jones, Healy, Pennington & Marshall, P.C. under contract through the 

FMC’s OIG. Comparative statements are located in Chapter Three, Auditor’s Reports and 

Financial Statements.

Financial Statement Highlights

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

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

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

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

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

17,885

208

5,968

17,025

285

6,814

$0

$5,000

$10,000

$15,000

$20,000

FY 2011 FY 2010

Salaries & Expenses Travel Administrative

Utilization of Funds by Expense Categories ($000s)
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

12

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

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

without legislation that provides resources to do so. 

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

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

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

Statements. A brief analysis of the principal statements follows.

Summary of Assets

The FMC’s assets were $4,318,971 as of 

September 30, 2011. This represents a 

decrease from FY 2010 of $1,174,608. The 

FMC’s assets reported in the balance sheet 

are summarized in the accompanying table. 

The Fund Balance with Treasury of 

$3,792,671 represents the FMC’s largest 

asset and represents 87.8% of the agency’s 

total assets. This is a decrease of $1,069,347 from FY 2010. The Fund Balance with Treasury is 

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

address current liabilities.

Accounts Receivable as of September 30, 2011 was $979 for outstanding receivables billed to 

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

Capital Assets, also known as Property, Equipment and Software, accounts for 12.2% of the 

FMC’s total assets as of September 30, 2011. The net value of $525,021 accounts for the 

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

Summary of Liabilities

The FMC’s Liabilities totaled $2,653,483 as of 

September 30, 2011, a decrease of $793,136 

total liabilities from FY 2010. Approximately 

$700,000 of the reduction is attributed to a 

decrease in accrued liabilities at FY 2011 year 

end. The majority of the decrease is related to 

prior years’ open obligations that were paid in 

FY 2011 for rent and capitalized leasehold 

improvements, including VOIP telephone 

services and video conferencing system. 

FY 2011 FY 2010

Fund Balance with Treasury $3,792,671 $4,862,018

Accounts Receivable $979 $114

Capital Assets $525,021 $629,719

Other $300 $1,728

Total Assets $4,318,971 $5,493,579

Summary of Assets as of 

September 30, 2011

FY 2011 FY 2010

Accounts Payable $249,998 $960,639

Payroll Taxes $213,544 $204,092

Federal Employee Benefits $8,736 $13,562

Custodial Liabilities $979 $114

Accrued Liabilities $2,180,226 $2,268,212

Total Liabilities $2,653,483 $3,446,619

Summary of Liabilities as of 

September 30, 2011
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

13

Accounts Payable represents the total goods and services received by the FMC as of September 

30, 2011. 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 residual difference between assets and liabilities and is comprised of 

unexpended appropriations and cumulative results of operations. Unexpended appropriations 

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

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

obligations from the amount available for obligation. The cumulative results of operations are

the net result of FMC’s operations since inception.

Analysis of Changes in Net Position Summary

The Changes in Net Position Summary reports 

the change in the agency’s net position during 

the reporting period. The statement is a 

summary of two factors, Unexpended 

Appropriations and Cumulative Results in 

Operations. The total net position for FY 2011 

is a decrease of $381,472 from FY 2010. The 

$381,000 change from FY 2010 to FY 2011 on 

the Statement of Changes in Net Position can 

be attributed to a rescission of funds and a reduction in capitalized asset expenditures in FY 

2011. 

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

not expended as of September 30, 2011. Cumulative Results of Operations represents the net 

results of all operations of the FMC.

 

Analysis of Net Cost Summary

The analysis of Net Cost Summary presents the 

net cost of FMC’s Programs as identified in the 

Annual Report. The four agency programs are 

Operational and Administrative, Formal 

Proceedings, Inspector General and Equal 

Employment Opportunity. The Statement of 

Net Costs shows the net cost of operations for 

the agency as a whole and its sub-organizations 

and/or programs. Net Costs compared to 

Budgetary Resources can be found in Chapter 

Three, Auditor’s Report and Financial Statements. 

FY 2011 FY 2010

Unexpended Appropriations $2,378,313 $2,647,804

Cumulative Results of 

Operation ($712,825) ($600,844)

Total Net Position $1,665,488 $2,046,960

Changes in Net Position Summary as of 

September 30, 2011

FY 2011 FY 2010

Operational and Adminstrative $17,474,598 $17,931,656

Formal Proceedings $7,536,633 $7,109,228

Office of Inspector General $701,773 $675,785

Office of Equal Employment 

Opportunity $198,706 $206,652

Net Cost of Program Services $25,911,710 $25,923,321

Net Cost Summary

as of September 30, 2011
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

14

Analysis of the Statement of Budgetary Resources

The Statement of Budgetary Resources 

(SBR) shows the source of the agency’s 

budgetary resources and the status of those 

resources at the end of the reporting period. 

The statement also shows the relationship 

between budgetary resources and the status 

of those resources. Total budgetary resources must be equal to the status of 

budgetary resources at all times. A more 

detailed SBR can be found in Chapter 

Three, Auditor’s Report and Financial 

Statements. For FY 2011, the FMC had total budgetary resources available of $25,433,649. This 

represents a decrease of $197,905. The FMC incurred total obligations of $24,187,745 in 

FY 2011. 

Systems, Controls, and Legal Compliance

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

Federal Managers’ Financial Integrity Act

Prompt Payment Act

Debt Collection Improvement Act

Biennial Review of User Fees

Performance Measure Summary

Inspector General Act

 

Federal Managers’ Financial Integrity Act

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

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

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

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

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

systems with Government standards.

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

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

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

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

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

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

FY 2011 FY 2010

Total Budgetary Resources $25,433,649 $25,631,554

Obligations Incurred $24,187,745 $24,327,627

Unobligated Balance Unavailable $1,220,529 $1,293,654

Unobligated Balance Available $25,375 $10,273

Total Status of Budgetary Resources $25,433,649 $25,631,554

Statement of Budgetary Resources as of

September 30, 2011
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

15

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

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

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

Information Officer (CIO).

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

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

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

the OIG agreed as to the actions that management needs to take on 20 recommendations from 

2011 and prior years, but management has not yet taken the action to close the recommendations.

Debt Collection Improvement Act of 1996

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

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

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

Service through the Treasury Offset Program where the names and taxpayer identification 

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

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

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

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

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

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

Prompt Payment Act of 1982

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

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

discounts when they are economically justified. In FY 2011, the FMC maintained a percentage 

of on-time payments of over 96%. This is a slight improvement over FY 2010. The FMC has 

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

In FY 2011, the FMC paid interest payments in the amount of $56.00. The three late payments 

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

payments in future years.

Biennial Review of User Fees

The Chief Financial Officers Act requires that agencies 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 2008, the Commission completed its biennial review of user fees, and 

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

fees.
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

16

A revised methodology for calculating user fees was developed in FY 2010 and was further 

refined in 2011. Based upon an outstanding study of the impact of the new fees upon small 

business entities, the fees will be re-calculated based upon final FY 2011 costs and implemented 

in FY 2012.

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 travel, procurement, accounting and financial 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 of 1978, as amended in 1988, and the Inspector General Reform Act of 

2008

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

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

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

Briefly, during FY 2011, the Inspector General completed the following audits and reviews:

• FMC’s Audited Financial Statements FY 2010

• FY 2010 Financial Statements Management Letter

• Independent Evaluation Report of FMC’s FY 2010 Implementation of 

FISMA

• Review of the FMC’s FY 2010 Privacy and Data Protection

• Review of the Office of Consumer Affairs and Dispute Resolution Services 

Processing of Informal Dockets 

• Review of the FMC’s Ocean Transportation Intermediary Financial 

Responsibility Program

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

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

remaining open recommendations will be resolved during FY 2012. 

During FY 2011, no significant deficiencies were identified. 
Chapter One MANAGEMENT’S DISCUSSION and ANALYSIS

17

CHAIRMAN’S FMFIA STATEMENT OF ASSURANCE

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

maintaining effective internal control and financial management systems that meet the 

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

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

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

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

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

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

financial systems requirements.

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

September 30, 2011, that its internal controls over the effectiveness and efficiency of 

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

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

operation of our internal controls.

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

conforms to applicable financial systems requirements.

Signed 

Richard A. Lidinsky, Jr.

__/Richard A. Lidinsky, Jr./_

November 15, 2011
Chapter Two

Program Performance
Chapter Two PROGRAM PERFORMANCE 

19

Annual Performance Report

Introduction

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

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

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

towards performance targets in 2011 in furtherance of the Commission’s mission to foster a 

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

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

• Maintain an Efficient and Competitive International Ocean Transportation System.

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

unfavorable conditions in U.S. trades.

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

and Resolve Shipping Disputes.

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

• Prevent public harm through licensing and financial responsibility requirements.

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

through education and outreach.

• Impartially resolve international shipping disputes through alternative dispute 

resolution and adjudication.

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

reached target goals with four exceeding FY 2011 targets. Each measure, target, and actual 

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

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

and ensure integrity of the reported result.

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

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

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

provides a status update on unmet targets for FY 2009 and 2010.

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

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

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

important functions is subject to its own stringent planning and measuring regimes pursuant to 
Chapter Two PROGRAM PERFORMANCE 

20

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

referenced and described therein.

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

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

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

have been advised to review this report. 

Table 1: Summary of Performance Measure Results – FY 2011

Targeted performance compared to actual results.

Strategic Goal No. 1: Maintain an efficient and competitive

international ocean transportation system.

Performance Measure FY 2011

Target

FY 2011

Actual

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

moved by containership as an indicator of liner shipping efficiency.

2011 Target: 18.5%

2011 Target Unmet: 17.9%

The containership sector fell short in fiscal year 2010 because the global 

recession affected consumer-related goods (usually transported by 

containership) more so than raw materials and semi-finished products (most 

often carried in other types of ships). In 2011, a 0.5% increase in the 

containership sector was achieved as projected. However, this increase was 

not sufficient to make up for the share lost in 2010. (Note: The result is 

based on fiscal year data through August 2011; September data is not yet 

available.) 

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

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

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

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

downloaded into MS Excel from the Harmonized System (HS) Port-level Data.

The monthly values for Imports and Exports were then combined and 

aggregated for FY 2011. The percentage share of total U.S. international 

oceanborne trade moved by containership is calculated as the “Containerized 

Vessel” weight divided by “Total Vessel” weight, multiplied by 100.

18.5% 17.9%
Chapter Two PROGRAM PERFORMANCE 

21

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

ocean transportation practices and resolve shipping disputes.

Performance Measure FY 2011

Target

FY 2011

Actual

Measure: Percentage of enforcement actions taken under the Shipping Act 

of 1984 successfully resolved through favorable judgment, settlement, 

issuance of default judgment, or compliance letter or notice.

2011 Target: 72%

Validation: This outcome goal is measured by examining enforcement case 

inventory and physically counting the number of cases resolved. The 

inventory is maintained for case load management, and monthly and 

quarterly reporting purposes. The data is constantly under review and 

frequently updated.

72% 82%

Measure: Percentage of decisions on completed OTI license applications 

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

OTIs with the appropriate character and experience requirements.

2011 Target: 60%

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

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

license application is accepted for processing and the date a licensing 

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

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

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

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

The data is constantly under review and frequently updated.

60% 77%

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

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

from non-performance or casualty.

2011 Target: 91%

Validation: This outcome goal is measured by comparing reported financial 

coverage amounts against required coverage amounts. Approximately 200 

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

Passenger Vessel (Cruise) Operator program. Operators covered by this 

program file semi-annual, monthly, and weekly unearned passenger revenue 

reports. This information is used to compare reported coverage against 

required coverage amounts.

91% 91%
Chapter Two PROGRAM PERFORMANCE 

22

Measure: Percentage of attendees at agency sponsored outreach 

presentations that rate the program as “Useful” or “Extremely Useful” in 

their compliance efforts.

2011 Target: 75%

Validation: N/A

75% N/A1

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

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

2011 Target: 72%

Validation: This outcome goal is measured by reviewing the workflow 

processes for posting documents to the Commission’s website docket activity 

logs. The date that each docket activity log is updated with new filings or 

issuances is compared to the date the document is filed with or issued by the 

Commission in a particular proceeding. The case logs are used on a daily 

basis by agency staff and by the public, and as such, any discrepancies are 

discovered and remedied quickly.

72% 72%

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

and ADR services assisting consumers to recover goods or funds.

2011 Target: 625

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

Commission on each such case opened.

625 631

Measure: Percentage of formal complaints or Commission initiated orders of 

investigation completed within two years of filing or Commission initiation.

2011 Target: 52%

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

maintained by the Commission and used for docket management, and 

monthly and annual reporting purposes. The docket logs are used on a daily 

basis by agency staff and by the public, and as such, any discrepancies are 

discovered and remedied quickly.

52% 60%

 1 In consultation with OMB, this outcome goal was removed for FY 2011 – 2015: “Percentage of 

attendees at agency sponsored outreach presentations that rate the program as ‘Useful’ or ‘Extremely 

Useful’ in their compliance efforts.” The measure is not reflective of current agency outreach practices. It 

also proved logistically difficult to execute because most outreach is performed by FMC staff as invitees 

at non-FMC sponsored events.
Chapter Two PROGRAM PERFORMANCE 

23

Table 2: Status of 2009 & 2010 Unmet Targets

Performance Measure (2009) FY 2009

Target

FY 2009

Actual

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

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

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

successful resolution of enforcement actions has exceeded targets in both 2010 and 2011. 60% 55%

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

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

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

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

85% 55%

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

extension. Strategic Goal 2: Compliance (2009) 2009 Report Status Update: This measure is no longer 

tracked.

95% 72-91%

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

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

completed within 45 calendar days for FY 2009 was updated in the FY 2010 – 2015 Strategic Plan to 90 

business days. The measure exceeded the target in FY 2010. BCL is now tracking OTI licensing with a

target of 60 calendar days and exceeded that target in FY 2011.

80% 5%

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

Act violations. Strategic Goal 2: Compliance (2009) Status Report Update: This measure is no longer 

tracked.

50 34

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

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

Strategic Goal 4: Technological Efficiencies (2009) Report Status Update: This measure is no longer 

tracked by this report.

6 0

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

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

systems since FY 2007 (including current fiscal year). Strategic Goal 4: Technological Efficiencies (2009)

Report Status Update: This measure is no longer tracked by this report.

12 0

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

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

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

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

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

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

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

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

measure is no longer tracked.

25% 0

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

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

was complete in November 2009 and received “unqualified audit opinion”. This measure is no longer 

tracked by this report.

Yes Not 

available

Performance Measure (2010) FY 2010

Target

FY 2010

Actual

Measure: Percentage share of total U.S. international oceanborne trade moved by containership as an 

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

International Ocean Transportation System (2010) 2010 Report Status Update: This target was unmet in 

2011 (see Table 1 above).

18% 17.4%
Chapter Two PROGRAM PERFORMANCE 

24

Table 3: Performance Measure Trends FY 2010-2011

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

Performance Measure FY 2010

Target

FY 2010

Actual

FY 2011

Target

FY 2011

Actual

Measure: Percentage share of total U.S. international 

oceanborne trade moved by containership as an indicator 

of liner shipping efficiency.

18% 17.4% 18.5% 17.9%

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

resolve shipping disputes.

Measure: Percentage of enforcement actions taken under 

the Shipping Act of 1984 successfully resolved through 

favorable judgment, settlement, issuance of default 

judgment, or compliance letter or notice.

70% 72.9% 72% 82%

Measure: Percentage of decisions on completed OTI 

license applications rendered within 60 calendar days of 

receipt, facilitating lawful operation of OTIs with the 

appropriate character and experience requirements.

55% 65% 60% 77%

Measure: Percentage of cruise line operators examined 

during the year that have the full financial coverage 

required by regulation to protect against loss from nonperformance or casualty.

90% 90 % 91% 91%

Measure: Percentage of attendees at agency sponsored 

outreach presentations that rate the program as “Useful” 

or “Extremely Useful” in their compliance efforts.

70% 100% 75% N/A*

Measure: Percentage of key Commission issuances, orders 

and reports are available through the Commission’s 

website within 5 working days of receipt.

70% 77.1% 72% 72%

Measure: Number of cases opened and closed each fiscal 

year using ombuds and ADR services assisting consumers to 

recover goods or funds.

550 556 625 631

Measure: Percentage of formal complaints or Commission 

initiated orders of investigation completed within two years 

of filing or Commission initiation.

50% 56% 52% 60%

* See Table 1: Summary of Performance Measure Results – FY 2011, regarding status of this measure.
Chapter Three

Auditor’s Reports and Financial Statements
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

26

Message from the Chief Financial Officer

I am pleased to present the Federal Maritime Commission’s 

consolidated financial statements for the fiscal year 2011

Performance and Accountability Report. I am proud to report that an 

independent auditor has once again rendered an unqualified opinion 

on the FMC’s financial statements, which highlights for the 

President, the Congress and the American people the continuing 

commitment of the Federal Maritime Commission to maintain sound 

financial management of the resources entrusted to us. The FMC 

now has received an unqualified opinion in each of the eight years in 

which independent financial audits have been conducted, attesting to 

the FMC’s commitment to high quality financial management.

The FMC’s financial condition is sound, and the Commission has 

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

are utilized efficiently and effectively. 

During FY 2011, the FMC continued its focus on internal controls, as mandated by OMB 

Circular A-123. Our financial management staff is to be commended for consistently finding 

ways to provide budget information in concise, reliable, and understandable formats. In 2011, 

we completed corrective actions on a number of audit recommendations. Quarterly financial 

statements were issued 15 days after the end of each quarter, and our FY 2011 PAR is being 

published on November 15, 2011.

I wish to acknowledge our staff and financial service provider for their dedication to the FMC’s 

mission and their diligent efforts in maintaining the unqualified opinion on our financial 

statements. Even as financial oversight and accountability requirements grow more complex and 

challenging, the FMC is steadfastly committed to improving financial management and 

producing accurate and reliable financial statements. We will focus in fiscal year 2012 on 

maintaining an unqualified audit opinion and will continue to use timely, reliable, and 

comprehensive financial information when making agency decisions. I anticipate that the FMC 

will continue its high level of quality financial management.

Sincerely,

Ronald D. Murphy

Chief Financial Officer

November 15, 2011
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

27

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 Dembo, Jones, 

Pennington, Healy & Marshall, P.C., under contract to the FMC’s Office of the Inspector 

General.
FEDERAL MARITIME COMMISSION

Office of Inspector General 

Washington, DC 20573-0001 

November 9, 2011 

Office of Inspector General

The Honorable Richard A. Lidinsky, Jr. 

Chairman 

Federal Maritime Commission 

I am pleased to provide you with the attached audit report required by the Accountability 

for Tax Dollars Act of 2002 (ATDA), which presents an unqualified opinion on the 

Federal Maritime Commission’s (FMC) FY 2011 financial statements. The audit results 

indicate that FMC has established an internal control structure that facilitates the 

preparation of reliable financial and performance information. We commend FMC for the 

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

consecutive year. 

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

accounting firm of Dembo Jones Healy Pennington & Marshall, P.C. (DJHPM) to 

perform the audit of the FMC’s financial statements for the fiscal year ended 

September 30, 2010. The contract required that the audit be performed in accordance with 

U.S. Generally Accepted Government Auditing Standards and Office of Management and 

Budget (OMB) audit guidance. 

In its audit of the Federal Maritime Commission, DJHPM found: 

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

with U.S. generally accepted accounting principles; 

• there were no material weaknesses in internal control over financial reporting 

(including safeguarding assets) and compliance with laws and regulations; and 

• no reportable noncompliance with laws and regulations tested. 

To fulfill our responsibilities under ATDA and related legislation for ensuring the quality 

of the audit work performed, the OIG monitored DJHPM’s audit of FMC’s FY 2011 

financial statements by: 

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

• evaluating the qualifications and independence of its auditors; 
2 

• monitoring the progress of the audit at key points; 

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

control, and substantive testing; 

• reviewing DJHPM’s audit report to ensure compliance with Government Auditing 

Standards and OMB Bulletin No. 07-04, as amended; 

• coordinating the issuance of the audit report; and 

• performing other procedures we deemed necessary. 

Our review disclosed no instances where DJHPM did not comply, in all material respects, 

with U.S. Generally Accepted Government Auditing Standards. However, our review 

cannot be construed as an audit in accordance with U.S. Generally Accepted Government 

Auditing Standards. It was not intended to enable us to express, and we do not express, 

any opinion on FMC’s financial statements, conclusions about the effectiveness of 

internal control, or conclusions on compliance with laws and regulations. DJHPM is 

solely responsible for the attached auditor’s report dated November 8, 2011, and the 

conclusions expressed in the report. 

We appreciate the cooperation and courtesies extended to both DJHPM and OIG staff 

during the audit. 

Sincerely, 

/Adam R. Trzeciak/ 

Inspector General 

 

Attachment 

cc: Commissioners 

 Managing Director 
Certified Public Accountants and Consultants

Dembo, Jones, Healy, Pennington & Marshall, P.C.

Chairman Lidinsky: 

We have audited the accompanying balance sheet of the Federal Maritime Commission (FMC) 

as of September 30, 2011 and 2010, and the related statements of net cost, changes in net 

position, budgetary resources, and custodial activity for the years then ended. In our audits of 

the Federal Maritime Commission for the fiscal years September 30, 2011 and 2010, we found 

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

U.S. generally accepted accounting principles, 

• no material weaknesses or significant deficiencies in internal control over financial 

reporting (including safeguarding assets), 

• no reportable noncompliance with laws and regulations we tested. 

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

scope, and methodology. 

Opinion on Financial Statements

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

material respects, in conformity with U.S. generally accepted accounting principles, the Federal 

Maritime Commission's assets, liabilities, and net position as of September 30, 2011 and 2010; 

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

then ended. 

Consideration of Internal Control

In planning and performing our audit, we considered the Federal Maritime Commission's internal 

control over financial reporting as a basis for designing our auditing procedures and to comply 

with the Office of Management and Budget (OMB) audit guidance for the purpose of expressing 

our opinion on the financial statements, but not for the purpose of expressing an opinion on 

internal control and compliance or on management’s assertion on internal control included in 

MD&A. Accordingly, we do not express an opinion on internal control over financial reporting 

and compliance or on management's assertion on the effectiveness of the entity’s internal control 

over financial reporting. 

Our consideration of internal control over financial reporting was for the limited purpose 

described in the preceding paragraph and would not necessarily identify all deficiencies in 

internal control over financial reporting that might be significant deficiencies or material 

weaknesses. 

6010 Executive Boulevard ∙ Suite 900 ∙ Rockville, Maryland 20852

301 770‐5100 ∙ 888 283‐5472 ∙ Fax 301 770‐5202 ∙ djhpm@djhpm.com

MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 

DJHPM IS A MEMBER FIRM OF THE PKF INTERNATIONAL LIMITED NETWORK OF LEGALLY INDEPENDENT FIRMS AND DOES NOT ACCEPT 

ANY RESPONSIBILITY OR LIABILITY FOR THE ACTIONS OR INACTIONS ON THE PART OF ANY OTHER INDIVIDUAL MEMBER FIRM OR FIRMS
A control deficiency exists when the design or operation of a control does not allow management 

or employees, in the normal course of performing their assigned functions, to prevent or detect 

misstatements on a timely basis. A significant deficiency is a control deficiency, or combination 

of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, 

process, or report financial data reliably in accordance with generally accepted accounting 

principles such that there is more than a remote likelihood that a misstatement of the entity’s 

financial statements that is more than inconsequential will not be prevented or detected by the 

entity’s internal control. 

A material weakness is a significant deficiency, or combination of significant deficiencies, that 

results in more than a remote likelihood that a material misstatement of the financial statements 

will not be prevented or detected by the entity’s internal control. 

Our consideration of internal control over financial reporting was for the limited purpose 

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

in the internal control that might be material weaknesses or significant deficiencies. We did not 

identify any deficiencies in internal control over financial reporting that we consider to be 

material weaknesses or significant deficiencies, as defined above. 

We noted other non-reportable matters involving internal control and its operation that we will 

communicate in a separate management letter to FMC management. 

Compliance With Laws and Regulations

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

regulations for fiscal year 2011 disclosed no instances of noncompliance that would be 

reportable under U.S. generally accepted government auditing standards or OMB audit guidance. 

However, the objective of our audit was not to provide an opinion on overall compliance with 

laws and regulations. Accordingly, we do not express such an opinion. 

Objectives, Scope, and Methodology

The Federal Maritime Commission's management is responsible for (1) preparing the financial 

statements in conformity with U.S. generally accepted accounting principles, (2) establishing, 

maintaining, and assessing internal control to provide reasonable assurance that the broad control 

objectives of the Federal Managers' Financial Integrity Act are met, and (3) complying with 

applicable laws and regulations. 

We are responsible for obtaining reasonable assurance about whether the financial statements are 

presented fairly, in all material respects, in conformity with U.S. generally accepted accounting 

principles. We are also responsible for (1) obtaining a sufficient understanding of internal 

control over financial reporting and compliance to plan the audit, (2) testing compliance with 

selected provisions of laws and regulations that have a direct and material effect on the financial 

statements and laws for which OMB audit guidance requires testing. 

Dembo, Jones, Healy, Pennington & Marshall, P.C. 

Certified Public Accountants and Consultants
In order to fulfill these responsibilities, we 

• examined, on a test basis, evidence supporting the amounts and disclosures in the 

financial statements; 

• assessed the accounting principles used and significant estimates made by management; 

• evaluated the overall presentation of the financial statements; 

• obtained an understanding of the FMC and its operations, including its internal control 

related to financial reporting (including safeguarding assets), and compliance with laws 

and regulations (including execution of transactions in accordance with budget authority); 

• tested relevant internal controls over financial reporting and compliance, and evaluated 

the design and operating effectiveness of internal control; 

• considered the design of the process for evaluating and reporting on internal control and 

financial management systems under the Federal Managers' Financial Integrity Act; and 

• tested compliance with selected provisions of laws and regulations. 

We did not evaluate all internal controls relevant to operating objectives as broadly defined by 

the Federal Managers' Financial Integrity Act, such as those controls relevant to preparing 

statistical reports and ensuring efficient operations. We limited our internal control testing to 

controls over financial reporting and compliance. Because of inherent limitations in internal 

control, misstatements due to error or fraud, losses, or noncompliance may nevertheless occur 

and not be detected. We also caution that projecting our evaluation to future periods is subject to 

the risk that controls may become inadequate because of changes in conditions or that the degree 

of compliance with controls may deteriorate. In addition, we caution that our internal control 

testing may not be sufficient for other purposes. 

We did not test compliance with all laws and regulations applicable to the Federal Maritime

Commission. We limited our tests of compliance to selected provisions of laws and regulations 

that have a direct and material effect on the financial statements and those required by OMB 

audit guidance that we deemed applicable to the Federal Maritime Commission's financial 

statements for the fiscal year ended September 30, 2011. We caution that noncompliance may 

occur and not be detected by these tests and that such testing may not be sufficient for other 

purposes. 

Dembo, Jones, Healy, Pennington & Marshall, P.C. 

Certified Public Accountants and Consultants
Dembo, Jones, Healy, Pennington & Marshall, P.C. 

Certified Public Accountants and Consultants

We performed our audit in accordance auditing standards generally accepted in the United 

States; the standards applicable to the financial audits contained in Government Auditing

Standards, issued by the Comptroller General of the United States; and OMB guidance. 

Rockville, Maryland 

November 8, 2011 
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

29

FEDERAL MARITIME COMMISSION

BALANCE SHEET

AS OF SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

Assets:

Intragovernmental

Fund Balance With Treasury (Note 2) $ 3,792,671 $ 4,862,018 

Total Intragovernmental 3,792,671 4,862,018 

Accounts Receivable, Net (Note 3) 979 114 

Property, Equipment, and Software, Net (Note 4) 525,021 629,719 

Other (Note 5) 300 1,728 

Total Assets $ 4,318,971 $ 5,493,579 

Liabilities:

Intragovernmental

Accounts Payable (Note 6) $ 146,636 $ 687,333 

Employer Contributions and Payroll Taxes Payable 188,998 181,479 

Unfunded FECA Liability (Note 7) 1,956 1,741 

Other 870 -

Custodial Liability 979 114 

Total Intragovernmental 339,439 870,667 

Accounts Payable (Note 6) 103,362 273,306 

Accrued Payroll and Leave 951,116 1,051,210 

Employer Contributions and Payroll Taxes Payable 24,546 22,613 

Unfunded Leave (Note 7) 1,229,110 1,217,002 

Actuarial FECA Liability (Note 7) 5,910 11,821 

Total Liabilities $ 2,653,483 $ 3,446,619 

Net Position:

Unexpended Appropriations $ 2,378,313 $ 2,647,804 

Cumulative Results of Operations (712,825) (600,844)

Total Net Position $ 1,665,488 $ 2,046,960 

Total Liabilities and Net Position $ 4,318,971 $ 5,493,579 

The accompanying notes are an integral part of these financial statements.
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

30

FEDERAL MARITIME COMMISSION

STATEMENT OF NET COST

FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

Program Costs:

Operational and Administrative (Note 10)

Gross Costs $ 17,474,598 $ 17,931,656 

Net Program Costs $ 17,474,598 $ 17,931,656 

Formal Proceedings (Note 10)

Gross Costs $ 7,576,489 $ 7,227,972 

Less: Earned Revenue (39,856) (118,744)

Net Program Costs $ 7,536,633 $ 7,109,228 

Office of Inspector General (Note 10)

Gross Costs $ 721,109 $ 679,070 

Less: Earned Revenue (19,336) (3,285)

Net Program Costs $ 701,773 $ 675,785 

Office of Equal Employment Opportunity (Note 10)

Gross Costs $ 198,706 $ 206,652 

Net Program Costs $ 198,706 $ 206,652 

Net Cost of Operations $ 25,911,710 $ 25,923,321 

The accompanying notes are an integral part of these financial statements.
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

31

FEDERAL MARITIME COMMISSION

STATEMENT OF CHANGES IN NET POSITION

FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

Cumulative Results of Operations:

Beginning Balances $ (600,844) $ (879,264)

Budgetary Financing Sources:

Appropriations Used 24,236,436 24,626,223 

Other Financing Sources (Non-Exchange):

Imputed Financing Sources (Note 11) 1,563,293 1,575,518 

Total Financing Sources 25,799,729 26,201,741 

Net Cost of Operations (25,911,710) (25,923,321)

Net Change (111,981) 278,420 

Cumulative Results of Operations $ (712,825) $ (600,844)

Unexpended Appropriations:

Beginning Balances $ 2,647,804 $ 3,214,566 

Budgetary Financing Sources:

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

Other Adjustments (168,055) (75,539)

Appropriations Used (24,236,436) (24,626,223)

Total Budgetary Financing Sources (269,491) (566,762)

Total Unexpended Appropriations $ 2,378,313 $ 2,647,804 

Net Position $ 1,665,488 $ 2,046,960 

The accompanying notes are an integral part of these financial statements.
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

32

FEDERAL MARITIME COMMISSION

STATEMENT OF BUDGETARY RESOURCES

FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

Budgetary Resources:

Unobligated Balance:

Unobligated Balance Brought Forward, October 1 $ 1,303,927 $ 867,458 

Recoveries of Prior Year Unpaid Obligations 103,585 582,606 

Budget Authority

Appropriation 24,135,000 24,135,000 

Spending Authority From Offsetting Collections

Earned

Collected 59,192 122,029 

Subtotal 24,194,192 24,257,029 

Permanently Not Available (168,055) (75,539)

Total Budgetary Resources $ 25,433,649 $ 25,631,554 

Status of Budgetary Resources:

Obligations Incurred

Direct $ 24,128,553 $ 24,205,598 

Reimbursable 59,192 122,029 

Subtotal 24,187,745 24,327,627 

Unobligated Balance

Apportioned 25,375 10,273 

Unobligated Balance Not Available 1,220,529 1,293,654 

Total Status of Budgetary Resources $ 25,433,649 $ 25,631,554 

Change in Obligated Balance:

Obligated Balance, Net

Unpaid Obligations, Brought Forward, October 1 $ 3,558,091 $ 3,910,216 

Obligations Incurred Net (Note 13) 24,187,745 24,327,627 

Gross Outlays (25,095,485) (24,097,146)

Recoveries of Prior Year Unpaid

Obligations, Actual (103,585) (582,606)

Total, Unpaid Obligated Balance, Net, End of Period $ 2,546,766 $ 3,558,091 

Net Outlays:

Gross Outlays $ 25,095,485 $ 24,097,146 

Offsetting Collections (59,192) (122,029)

Distributed Offsetting Receipts 2,430,482 1,250,668 

Net Outlays $ 27,466,775 $ 25,225,785 
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

33

The accompanying notes are an integral part of these financial statements.

FEDERAL MARITIME COMMISSION

STATEMENT OF CUSTODIAL ACTIVITY

FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010

(In Dollars)

2011 2010

Revenue Activity:

Sources of Cash Collections:

Miscellaneous 2,430,482 1,250,668 

Total Cash Collections (Note 15) 2,430,482 1,250,668 

Accrual Adjustments 865 (69,122)

Total Custodial Revenue 2,431,347 1,181,546 

Disposition of Collections:

Transferred to Others (by Recipient) 2,430,482 1,250,668 

Retained by the Reporting Entity 865 (69,122)

Total Disposition of Collections 2,431,347 1,181,546 

Net Custodial Activity $ - $ -

The accompanying notes are an integral part of these financial statements.
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

35

FEDERAL MARITIME COMMISSION

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT 

ACCOUNTING POLICIES

A. Reporting Entity

The Federal Maritime Commission (FMC) was 

established as an independent regulatory agency 

on August 12, 1961. FMC is responsible for the 

regulation of oceanborne transportation in the 

foreign commerce of the United States (U.S.). 

The principal statutes or statutory provisions 

administered by the Commission are the 

Shipping Act of 1984, the Foreign 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. 

The Commission: monitors the activities of 

ocean common carriers, marine terminal 

operators (MTOs), conferences, ports and ocean 

transportation intermediaries (non-vesseloperating common carriers and ocean freight 

forwarders) who operate in the U.S. foreign 

commerce to ensure they maintain just and 

reasonable practices; maintains trade monitoring, enforcement and dispute resolution programs 

designed to assist regulated entities in achieving 

compliance and to detect and 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 

contracts, and service arrangements pursuant to 

the 1984 Act for compliance with statutory 

requirements; and reviews common carriers’ 

privately published tariff systems for 

accessibility and accuracy, as required by OSRA. 

The Commission also issues licenses to qualified 

ocean transportation intermediaries (OTIs) in the 

U.S., ensures that all OTIs are bonded or 

maintain other evidence of financial 

responsibility, and ensures that passenger vessel 

operators (PVOs) demonstrate adequate financial 

responsibility in case of nonperformance of 

voyages or injury to passengers.

The FMC is composed of five Commissioners 

appointed for five-year terms by the President 

with the advice and consent of the Senate. The 

President designates one of the Commissioners 

to serve as Chairman, who is also the chief 

executive and administrative officer of FMC.

The FMC reporting entity is comprised of 

General Funds and General Miscellaneous 

Receipts.

General Funds are accounts used to record 

financial transactions arising under congressional 

appropriations or other authorizations to spend 

general revenues.

General Fund miscellaneous receipts are accounts established for receipts of non-recurring 

activity, such as fines, penalties, fees and other 

miscellaneous receipts for services and benefits.

The FMC makes custodial collections and holds 

custodial receivables that are non-entity assets 

and are transferred to Treasury at fiscal year end. 
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

36

B. Basis of Presentation

The financial statements have been prepared to 

report the financial position, net cost of 

operations, changes in net position, and the status 

and availability of budgetary resources of the 

FMC. The statements are a requirement of the 

Accountability of Tax Dollars Act of 2002. They 

have been prepared from, and are fully supported 

by, the books and records of FMC in accordance 

with the hierarchy of accounting principles 

generally accepted in the United States of 

America, standards approved by the Federal 

Accounting Standards Advisory Board 

(FASAB), OMB Circular A-136, Financial 

Reporting Requirements, and FMC accounting 

policies which are summarized in this note. 

These statements, with the exception of the 

Statement of Budgetary Resources, are different 

from financial management reports, which are 

also prepared pursuant to OMB directives that 

are used to monitor and control the 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, 

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. Unless 

specified otherwise, all amounts are presented in 

dollars.

C. Budgets and Budgetary Accounting

Congress usually enacts appropriations to permit 

the FMC to incur obligations for specified 

purposes. In fiscal years 2011 and 2010, the 

FMC was accountable for General Fund 

appropriations. The agency 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.

D. Basis of Accounting

Transactions are recorded on both an accrual 

accounting basis and a budgetary basis. Under 

the accrual method, revenues are recognized 

when earned, and expenses are recognized when 

a liability is incurred, without regard to receipt or 

payment of cash. Budgetary accounting 

facilitates compliance with legal requirements on

the use of Federal funds. 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 the FMC's use of budgetary resources.

E. Revenues & Other Financing Sources

Congress enacts annual appropriations to be 

used, within statutory limits, for operating and 

capital expenditures. Additional revenues are 

obtained from service fees and reimbursements 

from other government entities and the public, 

but these revenues are not available to the agency 

to fund operating expenses. 

Appropriations are recognized as a financing 

source when expended. Revenues from service 

fees associated with reimbursable agreements are 

recognized concurrently with the recognition of 

accrued expenditures for performing the services. 

Appropriations expended for capitalized property 

and equipment are recognized as expenses when 

an asset is consumed in operations. 

The FMC recognizes as an imputed financing 

source the amount of accrued pension and postretirement benefit expenses for current 

employees paid on its behalf by the Office of 

Personnel Management (OPM).

F. Taxes 

The 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.

G. 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. 

H. Accounts Receivable

Accounts receivable consists of amounts owed to 

the FMC by other Federal agencies, its 

employees and the general public. Accounts 

receivable in the Salaries and Expense Fund 
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

37

represent employee-related receivables. An 

allowance for uncollectible accounts receivable 

from the public is established when, based upon 

a review of outstanding accounts, management 

determines that collection is unlikely to occur 

considering the debtor’s ability to pay. Debts six 

months or more past due are referred to the 

Department of Treasury for follow-up collection 

efforts in keeping with the Debt Collection 

Improvement Act of 1996 (DCIA). Treasury’s 

Debt Management Services (DMS) administers 

the program and adds a fee equal to 28 percent of 

the amount of debt that is less than 2 years 

delinquent or 30 percent of debts delinquent by 2 

years or more. Collections, net of fees, are 

returned to the FMC for remittance to the general 

fund of the Treasury. 

I. Property, Equipment, and Software

Property, equipment and software represent 

furniture, fixtures, equipment, and information 

technology (IT) hardware and software which are 

recorded at original acquisition cost and are 

depreciated or amortized using the straight-line 

method over their estimated useful lives. Major 

alterations and renovations are capitalized, 

except wherein the tenant improvement 

allowance specified in lease agreements covers 

the costs of certain renovations. Maintenance 

and repair costs are expensed as incurred. The 

FMC's capitalization threshold is $25,000 for 

individual purchases. Applicable standard 

governmental guidelines regulate the disposal 

and convertibility of agency property, equipment 

and software. The useful life classifications for 

capitalized assets are as follows:

Description

Leasehold Improvements

Useful Life (years)

5

Office Furniture 5

Computer Equipment 5

Office Equipment 5

IT Software 5

J. Advances and Prepaid Charges

Advance payments are generally prohibited by 

law. There are exceptions, such as some 

reimbursable agreements, subscriptions, and 

payments to contractors and employees. 

Payments made in advance of the receipt of 

goods and services are recorded as advances or

prepaid charges at the time of prepayment and 

recognized as expenses when the related goods 

and services are received.

K. Liabilities

Liabilities represent the amount of monies or 

other resources likely to be paid by the FMC as a 

result of transactions or events that have already 

occurred. No liability can be paid, however, 

absent an appropriation or other funding. 

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 for 

which an appropriation has not been enacted or 

other funds received are, therefore, classified as 

not covered by budgetary resources. The 

liquidation of liabilities not covered by budgetary 

or other resources is dependent on future 

congressional appropriations or other funding. 

There is no certainty that the appropriation will 

be enacted. Intragovernmental liabilities are 

claims against the FMC by other Federal

agencies. Additionally, the government, acting 

in its sovereign capacity, can abrogate liabilities. 

L. Accounts Payable 

Accounts payable consists primarily of amounts 

owed to other Federal agencies and the public for 

contracts for goods or services, such as leases, 

utilities, telecommunications and consulting and 

support services. 

M. 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. 
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

38

Funding will be obtained from future financing 

sources to the extent that current or prior year 

appropriations are not available to fund annual 

and other types of vested leave earned but not

taken. Nonvested leave is expensed when used. 

Any liability for unused sick leave that is accrued 

but not taken by a Civil Service Retirement 

System (CSRS)-covered employee is transferred 

to the OPM upon the retirement of that 

individual. Credit is given for sick leave 

balances in the computation of annuities upon the 

retirement of Federal Employees Retirement 

System (FERS)-covered employees effective at 

50% beginning FY2010 and 100% in 2014.

N. Accrued and Actuarial Workers’ 

Compensation

The Federal Employees' Compensation Act 

(FECA) administered by the U.S. Department of 

Labor (DOL) addresses all claims brought by 

FMC employees for on-the-job injuries. The 

DOL bills each agency annually as its claims are 

paid, and the actual costs incurred are reflected 

as a liability to the agency. Payment of these 

bills is deferred for two years to allow for 

funding through the budget process. Similarly, 

employees that the FMC terminates without 

cause may receive unemployment compensation 

benefits under the unemployment insurance 

program also administered by the DOL, which 

bills each agency quarterly for paid claims. 

Future appropriations will be used for the 

reimbursement to DOL. The liability consists of 

(1) the net present value of estimated future 

payments calculated by the DOL, and (2) the 

unreimbursed cost paid by DOL for 

compensation to recipients under the FECA.

O. Retirement Plans

FMC employees participate in either the CSRS 

or the FERS. The employees who participate in 

CSRS are beneficiaries of FMC's contribution, 

equal to seven percent of pay, distributed to their 

annuity account in the Civil Service Retirement 

and Disability Fund.

Prior to December 31, 1983, all employees were 

covered under the CSRS program. From January 

1, 1984 through December 31, 1986, employees 

had the option of remaining under CSRS or 

joining FERS and Social Security. Employees 

hired as of January 1, 1987 are automatically 

covered by the FERS program. All employees 

are eligible to contribute to the Thrift Savings 

Plan (TSP). For those employees participating in 

the FERS, a TSP account is automatically 

established and FMC makes a mandatory one 

percent contribution to this account. In addition, 

FMC makes matching contributions, ranging 

from one to four percent, for FERS eligible 

employees who contribute to their TSP accounts. 

Matching contributions are not made to the TSP 

accounts established by CSRS employees. For 

FERS participants, FMC also remits the 

employer's share of the required contribution. 

FERS employees and certain CSRS 

reinstatement employees are eligible to 

participate in the Social Security program after 

retirement. 

The FMC recognizes the imputed cost of pension 

and other retirement benefits during the 

employees’ active years of service. OPM 

actuaries determine pension cost factors by 

calculating the value of pension benefits 

expected to be paid in the future and 

communicate these factors to FMC for current 

period expense reporting. OPM also provides 

information regarding the full cost of health and 

life insurance benefits. FMC recognized the offsetting revenue as imputed financing sources to 

the extent these expenses will be paid by OPM.

The FMC does not report on its financial 

statements information pertaining to the retirement plans covering its employees. Reporting 

amounts such as plan assets, accumulated plan 

benefits, and related unfunded liabilities, if any, 

is the responsibility of the OPM.

P. Other Post-Employment Benefits

FMC employees eligible to participate in the 

Federal Employees Health Benefits Plan 

(FEHBP) and the Federal Employees Group Life 

Insurance Program (FEGLIP) may continue to 

participate in these programs after their 

retirement. The OPM has provided FMC with 

certain cost factors that estimate the true cost of 

providing the post-retirement benefit to current 

employees. FMC recognizes a current cost for 

these and Other Retirement Benefits (ORB) at 

the time the employee's services are rendered. 

The ORB expense is financed by OPM, and 

offset by FMC through the recognition of an 

imputed financing source. 
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

39

Q. Use of Estimates

The preparation of the accompanying financial 

statements in accordance with generally accepted 

accounting principles requires management to 

make certain estimates and assumptions that 

affect the reported amounts of assets 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. 

R. 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 are the net result of the FMC’s 

operations since inception.

S. 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 2011 and 2010 to the 

extent directed by OMB.

T. Contingencies

The FMC recognizes contingent liabilities when 

a past event or exchange transaction has 

occurred, a future outflow or other sacrifice of 

resources is probable, and the future outflow or 

sacrifice of resources is measurable. 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. 

U. 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.
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

40

NOTE 2. FUND BALANCE WITH TREASURY

Fund balance with Treasury account balances as of September 30, 2011 and 2010 were as follows:

The available unobligated fund balances represent the current-period amount available for obligation or 

commitment. At the start of the next fiscal year, this amount will become part of the unavailable balance 

as described in the following paragraph.

The unavailable unobligated fund balances represent the amount of appropriations for which the period of 

availability for obligation has expired. These balances are available for upward adjustments of 

obligations incurred only during the period for which the appropriation was available for obligation or for 

paying claims attributable to the appropriations.

The obligated balance not yet disbursed includes accounts payable, accrued expenses, and undelivered 

orders that have reduced unexpended appropriations but have not yet decreased the cash balance on hand. 

(See also Undelivered Orders at the End of the Period, Note 14.)

NOTE 3. ACCOUNTS RECEIVABLE

Accounts receivable balances as of September 30, 2011 and 2010 were as follows:

The accounts receivable is primarily made up of custodial collections.

2011 2010

Fund Balances:

Appropriated Funds $ 3,792,671 $ 4,862,018 

Total $ 3,792,671 $ 4,862,018 

Status of Fund Balance with Treasury:

Unobligated Balance

 Available $ 25,375 $ 10,273 

 Unavailable 1,220,529 1,293,654 

Obligated Balance Not Yet Disbursed 2,546,767 3,558,091 

Total $ 3,792,671 $ 4,862,018 

2011 2010

With the Public

Contractor/Vendor Receivables $ 979 $ 114

Total Accounts Receivable $ 979 $ 114
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

41

Historical experience has indicated that the majority of the receivables are collectible. There are no 

material uncollectible accounts as of September 30, 2011 and 2010.

NOTE 4. PROPERTY, EQUIPMENT, AND SOFTWARE

Schedule of Property, Equipment, and Software as of September 30, 2011:

Schedule of Property, Equipment, and Software as of September 30, 2010:

NOTE 5. OTHER ASSETS

Other asset account balances as of September 30, 2011 and 2010 were as follows:

FMC has one travel-related advance remaining at fiscal year end.

NOTE 6. ACCOUNTS PAYABLE

Liabilities include both intragovernmental accounts payable and other accounts payable. 

Intragovernmental liabilities are owed to other Federal entities for rent, printing costs, services of other 

agencies and leasehold improvements. In FY10, intragovernmental accounts payable also includes 

liabilities incurred for a video conferencing system and a telephone system. For the years ending 

September 30, 2011 and 2010, intragovernmental accounts payable totals $146,636 and $687,333, 

respectively. Other accounts payable are owed to non-Federal sources or to the general public, and 

Major Class

Acquisition 

Cost

Accumulated 

Amortization/

Depreciation

Net Book 

Value

Leasehold Improvements $ 225,000 $ 112,500 $ 112,500

Furniture & Equipment 520,566 288,624 231,942

Software-in-Development 180,579 - 180,579

Total $ 926,145 $ 401,124 $ 525,021

Major Class

Acquisition 

Cost

Accumulated 

Amortization/

Depreciation

Net Book 

Value

Leasehold Improvements $ 225,000 $ 67,500 $ 157,500

Furniture & Equipment 520,566 228,926 291,640

Software-in-Development 180,579 - 180,579

Total $ 926,145 $ 296,426 $ 629,719

2011 2010

With the Public

Advances and Prepayments $ 300 $ 1,728

Total Public Other Assets $ 300 $ 1,728
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

42

includes liabilities for general supplies, training, studies, analysis, and/or evaluations, miscellaneous 

services, and operation and maintenance of equipment. For the years ending September 30, 2011 and 

2010, the non-Federal accounts payable totals $103,362 and $273,306, respectively.

NOTE 7. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

The liabilities for FMC as of September 30, 2011 and 2010 include liabilities not covered by budgetary 

resources. Congressional action is needed before budgetary resources can be provided. Although future 

appropriations to fund these liabilities are likely and anticipated, it is not certain that appropriations will 

be enacted to fund these liabilities. 

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

compensation claims paid on FMC's behalf and payable to DOL. FMC also records an actuarial liability 

for future workers compensation claims based on the liability to benefits paid (LBP) ratio provided by 

DOL and multiplied by the average of benefits paid over three years.

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

the accrued annual leave account is reviewed quarterly and adjusted as needed to accurately reflect the 

liability at current pay rates and leave balances. Accrued annual leave is paid from future funding sources 

and, accordingly, is reflected as a liability not covered by budgetary resources. Sick and other leave is 

expensed as taken.

2011 2010

Intragovernmental – FECA $ 1,956 $ 1,741

Intragovernmental – Unemployment Insurance 870 -

Unfunded Leave 1,229,110 1,217,002

Actuarial FECA 5,910 11,821

Total Liabilities Not Covered by Budgetary Resources $ 1,237,846 $ 1,230,564

Accounts Payable 249,998 960,639

Accrued Funded Payroll and Leave 951,116 1,051,210

Employer Contributions and Payroll Taxes Payable 213,544 204,092

Custodial Liability 979 114

Total Liabilities Covered by Budgetary Resources $ 1,415,637 $ 2,216,055

Total Liabilities $ 2,653,483 $ 3,446,619
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

43

NOTE 8. OPERATING LEASES

FMC occupies office space in seven locations, of which six of the lease agreements are required to be 

accounted for as operating leases. Lease payments are increased annually based on the adjustments for 

operating cost and real estate tax escalations. The lease locations and terms are listed below: 

The lease amounts vary from year to year depending on the specific lease. The schedule of future 

payments for the term of the leases is as follows:

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

Real estate taxes included in the Washington, D.C. lease may escalate depending on the market during the 

year they are due. 

NOTE 9. CONTINGENCIES

FMC recognizes contingent liabilities when a past event or exchange transaction has occurred, a future 

outflow or other sacrifice of resources is probable and the future outflow or sacrifice of resources is 

measurable. There is one legal action pending against FMC in which claims have been asserted that may 

be based on action taken by FMC. Management intends to vigorously contest all such claims. 

Management believes, based on information provided by legal counsel, that losses, if any, for the case 

would not have a material impact on the Financial Statements. No loss accrual has been made for the 

case outstanding at September 30, 2011.

Location Term Lease Expiration Date

Washington DC 10 years 10/31/2012

Jamaica, NY 5 years 07/01/2013

Houston, TX 10 years 09/14/2018

Tacoma, WA 10 years 06/30/2019

Hollywood, FL 10 years 05/31/2020

San Pedro, CA 10 years 09/30/2021

Fiscal Year Totals

2012 $ 2,970,399

2013 347,931

2014 71,819

2015 73,070

2016 74,665

Thereafter 264,886

Total Future Payments $ 3,802,770
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

44

NOTE 10. INTRAGOVERNMENTAL COSTS AND EXCHANGE REVENUE

Intragovernmental costs and exchange revenue represent goods and services exchange transactions made 

between two reporting entities within the Federal government, and are in contrast to those with nonFederal entities (the public). Intragovernmental costs include payments to other Federal agencies for 

personnel benefits ($4,662,227 in FY2011), rent ($3,319,260 in FY2011), utilities, and other services. 

Payments made to non-Federal entities (the public) are comprised primarily of employee salaries and 

benefits ($14,842,054 in FY2011) and other services. Such costs are summarized as follows:

2011 2010

Operational and Administrative

 Intragovernmental Costs $ 5,107,709 $ 6,782,806

 Public Costs 12,366,889 11,148,850

 Total Program Costs 17,474,598 17,931,656

 Net Program Costs 17,474,598 17,931,656

Formal Proceedings

 Intragovernmental Costs 1,553,388 2,145,204

 Public Costs 6,023,101 5,082,768

 Total Program Costs 7,576,489 7,227,972

 Less: Intragovernmental Earned Revenue (39,856) (118,744)

 Net Program Costs 7,536,633 7,109,228

Office of Inspector General

 Intragovernmental Costs 129,943 185,426

 Public Costs 591,166 493,644

 Total Program Costs 721,109 679,070

 Less: Intragovernmental Earned Revenue (19,336) (3,285)

 Net Program Costs 701,773 675,785

Office of Equal Employment Opportunity

 Intragovernmental Costs 33,614 55,943

 Public Costs 165,092 150,709

 Total Program Costs 198,706 206,652

 Net Program Costs 198,706 206,652

Total Intragovernmental Costs 6,824,654 9,169,379

Total Public Costs 19,146,248 16,875,971

 Total Costs 25,970,902 26,045,350

Less: Total Intragovernmental Earned Revenue (59,192) (122,029)

 Total Net Cost $ 25,911,710 $ 25,923,321
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

45

NOTE 11. IMPUTED FINANCING SOURCES

FMC recognizes as imputed financing the costs of future benefits which include health benefits, life 

insurance, pension and post-retirement benefit expenses for current employees. The assets and liabilities 

associated with such benefits are the responsibility of the administering agency, OPM. For the years 

ended September 30, 2011 and 2010 imputed financing was as follows:

NOTE 12. BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE UNITED 

STATES GOVERNMENT

The President’s Budget that will include FY11 actual budgetary execution information has not yet been 

published. The President’s Budget is scheduled for publication in February 2012 and can be found at the 

OMB Web site: http://www.whitehouse.gov/omb/. The 2012 Budget of the United States Government, 

with the "Actual" column completed for 2010, has been reconciled to the Statement of Budgetary 

Resources and there were no material differences. 

NOTE 13. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

Obligations incurred and reported in the Statement of Budgetary Resources as of September 30, 2011 and 

2010 consisted of the following:

Category A apportionments distribute budgetary resources by fiscal quarters. 

NOTE 14. UNDELIVERED ORDERS AT THE END OF THE PERIOD

Undelivered orders represent goods and services which have been ordered but not yet received at fiscal 

year end. Statement of Federal Financial Accounting Standards No. 7, Accounting for Revenue and 

Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, states that 

the amount of budgetary resources obligated for undelivered orders at the end of the period should be 

disclosed. For the years ending September 30, 2011 and 2010, respectively, undelivered orders amounted 

to the following: 

2011 2010

Office of Personnel Management $ 1,563,293 $ 1,575,518 

Total Imputed Financing Sources $ 1,563,293 $ 1,575,518 

2011 2010

Direct Obligations, Category A $ 24,128,553 $ 24,205,598

Reimbursable Obligations, Category A 59,192 122,029

Total Obligations Incurred $ 24,187,745 $ 24,327,627
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

46

NOTE 15. CUSTODIAL ACTIVITY

FMC is an administrative agency collecting for the General Fund. As a collecting entity, FMC measures 

and reports cash collections and refunds as custodial activity on the Statement of Custodial Activity. 

Cash collections result primarily from FMC regulatory activities to include the assessment of fines and 

penalties and the payment of license application fees by ocean transportation intermediaries. A small 

portion of amounts collected is for interest on past due fines, petitions, status changes and special 

permission fees. 

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

2011 2010

Undelivered Orders $ 1,132,410 $ 1,343,878 

Total Undelivered Orders $ 1,132,410 $ 1,343,878 

2011 2010

Fines and Penalties $ 2,097,500 $ 1,041,250 

License Fees 336,252 213,492 

User Fees, Net of Refunds (3,270) (4,074)

Total Custodial Collections $ 2,430,482 $ 1,250,668 
Chapter Three AUDITOR’S REPORT and FINANCIAL STATEMENTS

47

NOTE 16. RECONCILIATION OF NET COST OF OPERATIONS TO BUDGET 

FMC has reconciled its budgetary obligations and non-budgetary resources available to its net cost of 

operations.

2011 2010

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations Incurred $ 24,187,745 $ 24,327,627

Spending Authority From Offsetting Collections and Recoveries (162,777) (704,635)

Obligations Net of Offsetting Collections and Recoveries 24,024,968 23,622,992

Offsetting Receipts 2,430,482 1,250,668

Net Obligations 26,455,450 24,873,660

Other Resources

Imputed Financing From Costs Absorbed By Others 1,563,293 1,575,518

Net Other Resources Used to Finance Activities 1,563,293 1,575,518

Total Resources Used to Finance Activities 28,018,743 26,449,178

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 211,467 1,003,229

Resources That Fund Expenses Recognized In Prior Periods 1,086 759

Budgetary Offsetting Collections and Receipts That Do

Not Affect Net Cost of Operations

Other (2,430,482) (1,250,668)

Resources That Finance the Acquisition of Assets - (479,066)

Total Resources Used to Finance Items Not Part of Net Cost of Operations (2,217,929) (725,746)

Total Resources Used to Finance the Net Cost of Operations 25,800,814 25,723,432

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 12,109 141,469

Other (5,911) 6,572

Total Components of Net Cost of Operations That Will Require or

Generate Resources In Future Periods 6,198 148,041

Components Not Requiring or Generating Resources

Depreciation and Amortization 104,698 51,848

Total Components of Net Cost of Operations That Will Not Require or

Generate Resources 104,698 51,848

Total Components of Net Cost of Operations That Will Not Require or

Generate Resources In The Current Period 110,896 199,889

Net Cost of Operations $ 25,911,710 $ 25,923,321
Chapter FOUR

Other Accompanying Information
Chapter Four OTHER ACCOMPANYING INFORMATION

49

FEDERAL MARITIME COMMISSION

800 North Capitol Street, N.W.

Washington, DC 20573

Office of Inspector General

October 31, 2011

TO: Chairman Lidinsky

Commissioner Brennan

Commissioner Cordero

Commissioner Dye

Commissioner Khouri

FROM: Inspector General

SUBJECT: Inspector General’s Statement on the Federal Maritime Commission’s 

Management and Performance Challenges

On November 22, 2000, the President signed the Reports Consolidation Act of 2000 (Public 

Law 106-531), an amendment to the Chief Financial Officers (CFO) Act of 1990. The Reports 

Consolidation Act requires inspectors general to provide a summary and assessment of the 

most serious management and performance challenges facing Federal agencies and their 

progress in addressing these challenges. The attached document responds to the requirements 

and provides the annual statement on Commission challenges to be included in the Federal 

Maritime Commission’s (FMC) Performance and Accountability Report (PAR) for Fiscal Year 

2011. 

This year, the Office of Inspector General (OIG) has identified four management and 

performance challenges for inclusion in the FMC’s FY 2011 PAR. These assessments are 

based on information derived from a combination of sources, including OIG audit and inspection 

work, Commission reports, and a general knowledge of the Commission’s programs. 

The Reports Consolidation Act of 2000 permits agency comment on the inspector general’s 

statements. Agency comments, if applicable, are to be included in the final version of the PAR 

that is due on November 15, 2011.

 

 

Adam R. Trzeciak

Attachment
Chapter Four OTHER ACCOMPANYING INFORMATION

50

Office of Inspector General

FY 2011 Management Challenges

The Management Challenge

Develop a user fee system that reflects total costs of providing an activity, consistent with 

Generally Accepted Accounting Principles. (This challenge was discussed in the prior year 

Management Challenge report by the IG.)

: Financial Issues

Agency Progress in Addressing the Challenge:

In 2007, the Office of Inspector General (OIG) initiated a review of various aspects of the 

agency’s process to establish user fees. During the initial weeks of the audit, the OIG 

determined that the agency followed a process that incorrectly set its user fees for various 

services, resulting in user fees that understated the agency’s costs to provide these services. The 

OIG reported the finding to management which then took steps to reexamine its calculations in 

light of our finding. We suspended further audit steps while the agency amended its fee-setting 

formulas. No changes were made to the agency’s fee-setting processes. 

 The Office of Management and Budget (OMB) 

requires agencies to charge a fee reflecting total costs for agency activities that convey special 

benefits to recipients beyond those accruing to the general public. These costs include, but are 

not limited to, an appropriate share of: (i) direct and indirect personnel costs, including salaries 

and fringe benefits, such as medical insurance and retirement; and (ii) physical overhead, 

consulting and other indirect costs including material and supply costs, utilities, insurance, travel 

and rents or imputed rents on land, buildings or equipment. Every two years, the FMC updated 

its user fees to reflect what it considered the true costs of providing various services, such as 

license application fees, service contract filing fees and Freedom of Information Act document 

requests. However, the last update occurred in 2005.

In early FY 2010, a new chairman was appointed by the President who, shortly thereafter, made 

changes to the organizational structure of the agency. Based on fee computation discussions 

between the newly appointed managing director and the inspector general, the OIG’s analysis 

was revisited and a final report issued. In its response to the audit, management agreed that a reevaluation of existing user fees should be made, and according to management’s response, 

initiated a process to determine the full cost of services for which the agency assesses user fees, 

in accordance with the OMB requirements and applicable Federal financial accounting standards. 

The agency set a goal of December 31, 2010 to issue a final rule.

The Challenge Ahead: Almost two years later, the agency has made some progress in 

addressing issues and concerns surrounding implementation of user fees consistent with OMB 

guidelines. As of March 2011, the agency informed the OIG that it was performing an analysis 

on the impact of likely fee increases on industries regulated by the FMC and subject to the fees 

in question. While this analysis is worthwhile, there is little to suggest that the agency considers 
Chapter Four OTHER ACCOMPANYING INFORMATION

51

fees a priority. The OIG continues to recommend that the FMC request an exemption from 

OMB, enabling it to maintain fees at or near current levels if it believes, for policy reasons, that 

setting fees to capture full costs would not be in the best interest of the public or the industry. 

The OIG also believes that the agency should eliminate all fees charged to users where the total 

annual fee collection is less than $1,000. Currently the FMC collects user fees for 28 different 

services; eleven of these collections average less than $1,000 per year. 

The Management Challenge:

To replace labor-intensive, manual processes with automated processes to enable the agency to 

do more with less.

 Information Technology 

Agency Progress in Addressing the Challenge:

In the last year, the agency entered into a contract with a vendor to implement systems to 

improve FMC processes and procedures with regard to electronic document and records 

management capacity and functional capabilities for the agency. Specifically, one objective of 

the contract was to modernize the agency’s document, workflow and records management 

systems to manage its organizational processes and business units. However the contract was 

scrapped just a few months into the performance period due to a disagreement between the 

agency and the vendor over the scope of work. The agency has since hired another contractor 

who, working with FMC technical and program staff, will start by defining business processes 

for each FMC bureau and office, assess existing database structures and processes to see where 

the agency needs to improve – and importantly, identify costs so that the agency can prioritize 

these improvements. 

 While the agency has made some progress in 

automating its many processes, it continues to operate largely in a paper-based, manual process 

environment. For example, the FMC has automated the front end of the license process, 

enabling applicants to apply for a license over the internet. On the other hand, the agency still 

lags behind many other Federal entities in automating basic business processes. The FMC is one 

of the few Federal agencies that does not accept “pay.gov” or electronic transfer of payments by 

the public for services it provides. The OIG recommended in 2006 that the agency transition to 

an electronic payment option, but as of October 2011, the agency is still working with Treasury 

officials for assistance in implementing such a system. So while license applicants can apply on 

line, they still must send in a check to cover application fees.

The Challenge Ahead:

Business processes currently used by agency staff did not arise overnight and they will not be 

changed without management support, training and an infusion of new employees. Often 

Modernizing an agency that has been dependent on manual, paper-based 

processes is not an easy task. New technology provided to the shipping community has created 

escalating demands on staff resources and staff capacity to meet these demands needs to be 

effectively managed. Funding for these projects has to compete with mission-critical needs. 

Changing people’s habits may be even more of an obstacle. 
Chapter Four OTHER ACCOMPANYING INFORMATION

52

functions are built into applications that no longer serve a business need and continue to exist 

because “it’s always been that way.” 

Based on projected workforce losses through retirement, hiring staff with the right mix of skills 

and abilities for the future will likely bring new, technologically-based approaches to the 

Commission’s business processes. But existing staff possess an abundance of information and 

institutional knowledge and its input is critical to any modernization project. Decisions to 

modernize should only be made after a comprehensive plan is in place, allowing managers to 

make incremental improvements (due to budget realities) while ensuring all decisions are based 

on a common blueprint.

The Management Challenge:

The FMC, like all government agencies, has increased its dependence on information systems 

and the interconnectivity with the public and other external organizations, both foreign and 

domestic. With the increased dependence comes an increase in the number and severity of 

threats that can have adverse impacts on operations, assets and individuals. Given the potential 

for harm that can arise from environmental disruptions, human errors and purposeful attacks by 

hostile entities and other threats, the agency must place greater emphasis on the management of 

risk associated with information systems as it attempts to carry out its mission and business 

processes. The cornerstone of any effort to manage organizational risk related to information 

systems is an effective information security program. 

IT Security

While Federal laws and regulations provide a comprehensive structure for establishing an 

information security program, it is incumbent upon individual organizations to implement these 

directives in a manner that provides adequate security for protecting information and information 

systems. As threats continue to evolve in an environment where organizations have finite 

resources with which to protect themselves, security must become a risk-based activity where the 

operational and economic costs of guarding against potential threats are balanced against other 

short and long term requirements of the agency. Given limited resources, risk management is 

fundamental to an information security program. 

Consideration must be given to how a range of diverse threats can expose existing vulnerabilities 

and cause harm to the organization. In the management of risk, organizations often have very 

little control over the threat side of the equation. This reality was driven home at the FMC this 

past summer when a massive power outage disabled all FMC-housed information systems, 

including email and other mission-critical applications. 

Agency Progress in Addressing the Challenge: In the past four years, the FMC has taken 

concrete steps to protect the agency’s systems – the most important being the accreditation of its 

Network and SERVCON applications - and has made progress in mitigating weaknesses which 

led to prior years’ significant deficiencies concerning IT risk and recovery planning. The agency 

now has documented policies and procedures for many of its IT processes, and its annual 

security training program has been revamped to include protection of personally-identifiable 
Chapter Four OTHER ACCOMPANYING INFORMATION

53

information (PII) and other privacy-related issues. The agency installed scan software, enabling 

security staff to scan the FMC network for harmful activities and vulnerabilities. Just recently, 

the agency developed, for the first time in years, a system inventory.

Although progress has been noted, there are other areas where improvement is possible. Annual 

security training is beginning to show signs of noncompliance. Eight staff (6 percent) did not 

attend training this year. Patch software installed by the agency is not being used to identify 

needed patches. The OIG identified 3,400 critical and important patches that should have been 

assessed to determine whether they could safely be installed on the network. Audit logs are not 

being reviewed. These logs would identify adverse actions against the agency’s network in time 

to take necessary evasive actions. The agency’s contingency plan is still a draft and has not been 

tested. When the agency lost power in the summer of 2011, internal FMC systems, to include 

email and SERVCON, did not work. Access rights to agency systems are not reviewed. We 

identified access rights granted to external users who have not logged on in years (yet still 

maintain their rights to FMC systems). 

The Challenge Ahead

The challenge for IT managers is, in many respects, unlike those faced in other areas of the 

agency. As we are asked to do more with less, many are turning to IT to streamline processes 

and replace manual tasks. This places great pressure to use scarce IT resources wisely to meet 

the needs of the agency. IT managers must work with program managers to understand their 

needs before developing systems at great expense. There has to be an overall plan to ensure 

systems that need to be are connected and “talk to each other.” As importantly, security needs to 

be considered in the design of these systems, not layered on when the systems are being 

implemented. 

: IT threats are changing daily. Vulnerabilities arise overnight. Attacks 

are made on the IT resources of government organizations hourly, many by “thrill seekers” with 

little or no need or desire for data. Other attacks are more subtle – individuals with the means 

and knowledge from inside the agency can access data without authorization. Systems are 

compromised and data is often lost or destroyed in such cases. Fortunately the FMC has not 

fallen victim to “hackers.” However, the agency must not become complacent.

The Management Challenge

To replace the increasing number of agency employees who are, or will, in the next few years, be 

eligible to retire; using the right combination of staff recruiting, training and retention tools to 

ensure that the agency workforce has the optimum skills to perform its duties. 

: Human Capital

Agency Progress in Meeting the Challenge: The FMC is a small agency that has established 

considerable in-house expertise in the legal, economic and organizational aspects of international 

liner shipping and the intermodal movement of ocean cargo. To continue to accomplish its 

goals, the Commission will need to maintain its relevant expertise through the recruitment, 

training and retention of highly qualified attorneys, economists, industry specialists, and 

information technology experts. The importance of focusing on recruitment and retention issues 
Chapter Four OTHER ACCOMPANYING INFORMATION

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is critical considering that over fifty percent of the agency’s workforce will be eligible for 

retirement in the next five years. In addition, all but two of FMC senior managers are eligible to 

retire in the next two years. The high levels of attrition due to these projected retirements and 

the related loss of institutional knowledge could severely impact the agency’s ability to 

accomplish its mission.

To ensure that the agency’s workforce successfully accomplishes its mission objectives, it has 

employed, or plans to employ, a multifaceted approach to address workforce issues. One 

approach has been on training and developing employees. While there is general training that 

can be provided to employees, much of the knowledge employees must have to do their work 

can only be obtained on the job or by designing specialized, in-house training courses. One 

training and development option under consideration is a consolidated approach including the 

use of individual development plans to assess employees’ career goals, Commission needs, and 

training and developmental activities and options to support these goals and needs. An 

alternative used to temporarily infuse skills to address specific short-term projects or initiatives is 

the excepted service appointment of experts or consultants. 

Part of a successful results-oriented performance culture is a performance management system 

that supports the needs of the agency. A high-performance climate can help attract and retain top 

performers. With this in mind, the agency revamped its performance appraisal systems to better 

tie employee performance to the agency’s strategic goals and objectives. First line supervisors 

now have the tools and training to manage performance and deal with less than successful 

performance. 

The Challenge Ahead:

The FMC must ensure that training dollars are specifically focused on training that addresses 

mission critical skills and competencies and that training programs are aligned with agency 

strategic goals and performance objectives. A consolidated approach to training and 

development should be implemented, including on-the-job training; self development; 

coursework (including tuition reimbursement) and special assignments. 

Moving forward, the increasing rate of change is more prevalent than in 

the past, influencing performance both organizationally and individually. Should a significant 

portion of experienced employees opt for retirement, the resulting skill gaps and loss of 

institutional knowledge in responding to differing circumstances could affect the FMC’s ability 

to realize its mission and goals. Further, the FMC has very high retirement eligibility rates in its 

core of senior management. A robust succession plan with leadership succession as a focus will 

be a useful tool to address this challenge.
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Comments on IG-Identified Management and Performance Challenges

The Inspector General identifies four management and performance challenges facing the FMC, as 

outlined below:

I Financial Issues

The Commission continues to work towards updating its user fees to reflect costs not 

only in accordance with Generally Accepted Accounting Principles, but also in accord 

with Federal Cost Accounting Standards. In that regard, proposed updates to user fees 

have been drafted based on a study of business processes and costs. 

Changing the Commission’s fees will require a rulemaking proceeding. Although 

proposed fee increases are largely nominal, in this time of economic uncertainty, the 

Commission wants to carefully consider the potential impact of increased fees on small 

businesses. 

II Information Technology 

Over the past year, the Commission has made significant progress in revamping its 

approach to information technology, with a significant focus on upgrading existing 

systems and establishing a framework for moving forward to automate Commission 

processes where feasible. The lifecycle cost of such technological improvements, 

however, especially an enterprise system, can be significant. The complex and ever 

changing characteristics of IT also demands significant investment to maintain 

appropriate staff skills. 

At the beginning of FY 2012, the Commission entered into a new effort to assess and 

upgrade the agency’s IT infrastructure. Following the initial assessment, we anticipate 

beginning the process of updating the Commission’s systems. This will include the 

activation of Pay.gov. Preliminary efforts have been underway and recently IT staff met 

with Pay.gov representatives to obtain the technical documentation necessary to 

determine how to integrate the Pay.gov functionality with existing applications.

The Commission must balance the costs of maintaining and developing IT applications 

with the Commission’s appropriations and the attainment of the Commission’s mission. 

IT solutions must facilitate the achievement of the Commission’s mission. As resources 

allow, we are proceeding with all deliberate speed to implement IT solutions without 

sacrificing our mission. 
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III IT Security

Management agrees that IT security is a critical element in IT planning and implementation, and that sound risk management principles are necessary to determine the degree 

of investment in IT security. Accordingly, the Commission has been and will continue to 

take sound steps to improve its information security. 

With respect to the specific points raised in the IG’s challenges, several comments are in 

order. All staff members have now completed the annual IT security awareness training. 

Although 3400 patches seems like a large number, it is not quite indicative of the actual 

circumstances. IT staff used installed software to identify the necessary patches, but at 

the time of the IG’s statement had not scheduled their installation. Because of the 

number of work stations affected, one update could result in 600 to 1,200 patches. It 

would not be unusual to receive 5 to 10 updates at any given time. At this time, 

approximately 400 patches remain to be installed. 

The Commission is continuing its efforts to implement additional security measures, as 

well as exploring cost effective alternatives for addressing the agency’s needs in disaster 

recovery. 

IV Human Capital

This is the most critical challenge facing the Commission over the next few years. A 

significant number of the Commission’s workforce is currently eligible for retirement, 

and that number of retirement eligible employees will continue to grow over the next few 

years. We anticipate losing significant knowledge and skills through staff retirements. 

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

highly qualified and diverse workforce. The Human Capital Plan includes improved 

marketing of the FMC; streamlining of the application process in alignment with Hiring 

Reform; targeting recruitment pools and areas of consideration to increase the diversity of 

applicants; and the potential use of recruitment and retention incentives. The Workforce 

Plan incorporates workforce diversity and succession planning strategies and goals. In 

order to meet mission objectives, the FMC is actively working to define and plan for the 

workforce of the future, consistent with the current Administration’s programs and 

reform initiatives.

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

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

critical leadership and technical skills, the FMC is utilizing strategic workforce planning 

as a tool to assess whether organizational elements have adequate staff and employees’ 

skills align to critical job requirements. The Commission recently launched an SES 

Candidate Development Program class in anticipation of the loss of individuals in senior 

leadership positions. This 18-month program will result in increased bench strength to 
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facilitate continuity of leadership. With regard to recruitment for technical skills, FMC 

management officials participated in various data collection processes to provide 

information identifying mission priorities, current workforce skills, mission critical 

occupations and skills needed to support mission accomplishment, mission and 

workforce trends, recruitment strategies, and communication issues. The resulting 

workforce and succession plans help define and shape FMC’s overall present and future 

recruitment strategies.

It is easy to speak of a robust succession plan and training programs, but it is a much 

more difficult undertaking to implement such plans in the current budgetary environment. 

There has been no growth in the Commission’s budget and, due to lack of funding, the 

Commission has been limited in its ability to hire new personnel to undergo training and 

development for the anticipated loss of knowledge. Accordingly, the Commission plans 

to implement leadership and knowledge management to identify agency leadership 

competencies so that continuity of leadership is ensured, knowledge is shared across the 

organization, and an environment of continuous learning is present. The Commission 

aims for effective management, continuity of leadership, improved accountability, and a 

learning environment that drives continuous improvement in performance.
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Improper Payments Information Act

Narrative Summary of Implementation Efforts for FY 2011

I. The Federal Maritime Commission has not identified any program that in and of itself constitutes 

a high-risk for improper payments. Therefore, the FMC considers all of its payments to fall 

within the realm of low-risk. As such, the FMC has instituted a separation of duties concerning 

payments that has been very successful in curtailing any improper payments. The National 

Finance Center (NFC) became the agency’s payroll provider in 2002 and is responsible for 

monitoring and reporting on any payroll-related payments. Any overpayments made to an FMC 

employee by the NFC on behalf of the FMC would be offset by NFC. In FY 2011, the FMC had 

no overpayments. The FMC did not identify any improper collections through Intergovernmental 

Payments and Collections (IPAC) collections. 

II. The FMC did not use a statistical sample to conduct its improper payment rate. The sample 

contains 100 percent of all disbursements made by the FMC. This was the case for all programs.

III. The FMC will continue to monitor all payments to maintain a zero dollar improper payment 

figure. To this end, the FMC will ensure that there is sufficient segregation of duties pertaining to 

payments concomitantly with closer scrutiny of all IPAC collections made against the 

Commission. The FMC will continue to monitor all disbursements made on its behalf to ensure 

payments are valid and proper.

IV. The table below represents the improper payments made by the FMC in FY 2011 with percentage 

forecasts through FY 2014. 

Improper Payments Information Act Reduction Outlook FY 2011 - 2014

(millions)

 Program FY 11

 Outlays

 FY11

 IP %

 FY11

 IP $

 FY12

 %

 FY13

 %

 FY14

 %

 Formal Proceedings $0.00 0.00 $0.00 0.00 0.00 0.00

 Inspector General $0.00 0.00 $0.00 0.00 0.00 0.00

 Equal Employment Opportunity $0.00 0.00 $0.00 0.00 0.00 0.00

 Operations and Administrative $0.00 0.00 $0.00 0.00 0.00 0.00

Totals $0.00 0.00 $0.00 0.00 0.00 0.00

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

are legitimate expenses of the agency. As of October 1, 2006, original accounts payable invoices 

have been received by BPD and forwarded to OBF via electronic media for internal processing 

and payment authorization. When an invoice is received, it is first verified as a valid invoice 

belonging to the agency. OBF matches the invoice to documentation provided by the COTR 

indicating that goods/services have been received by the Commission and approves the invoice 
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for payment. BPD is advised of the purchase order the invoice is being paid against and the 

payment amount. OBF also ensures that sufficient funds have been obligated to make the 

payment and provides BPD with the period of performance. Once the payment authorization has 

been processed by OBF, the payment information is verified by a second staff member of OBF. 

At that point, the invoice is electronically returned to BPD for processing. When the payment is 

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

against the fund controls set for the FMC and a third OBF staff member audits the payment 

information posted in the financial system. 

The receipt of an invalid IPAC collection must be processed as a payment, as the funds have 

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

Agency Location Code (ALC). Invalid IPACs are then charged back to the billing agency to 

reverse the transaction. The internal controls in place remain unchanged, with close scrutiny of

all invoices and subsequent payments. 

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

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

is responsible for designating a Chief Financial Officer and has delegated financial responsibility 

to the Director, OBF. The Director of OBF has the responsibility to ensure that all disbursements 

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

sufficient funds available to pay the agency’s expenses. The OBF is responsible for reducing and 

recovering improper payments, and keeps senior agency officials apprised of all relevant 

activities.

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

The agency utilizes the infrastructure and financial system maintained in Parkersburg, WV 

by BPD.

b. In FY 2011, the FMC requested funding to maintain the contract between the FMC and BPD 

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

portal. 

VII. There are no statutory or regulatory barriers that limit the agency’s ability to take corrective 

actions to address any improper payments.

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

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

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

The ability to challenge the collection would reduce the number of improper collections made 

against the agency. 
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Summary of Financial Statement Audit

Summary of Financial Statement Audit

Audit opinion Unqualified

Restatement No

Material Weakness Beginning 

Balance New Resolved Consolidated Ending Balance

None 0 0 0 0 0