Office of Inspector General 

Semiannual Report to Congress 

Covering the Period 

 

October 1, 2018 – March 31, 2019 

FEDERAL MARITIME COMMISSION 
Office of Inspector General

FEDERAL MARITIME COMMISSION

Washington, DC 20573

April 30, 2019 

Dear Chairman Khouri and Commissioners Dye, Maffei, and Sola: 

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

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

Commission (FMC) Office of Inspector General (OIG) for the period October 1, 2018 to March 

31, 2019. 

During this reporting period, the OIG completed one audit and one evaluation; initiated a 

new audit; and completed the required annual risk assessment of the FMC’s purchase card 

program. Specifically, the OIG completed the FY 2018 annual financial statement audit and the 

FY 2018 annual evaluation of the FMC’s compliance with the Federal Information Security 

Management Act. The OIG also initiated a compliance audit of the DATA Act, and completed the 

risk assessment of the purchase card program. 

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

leadership and staff. 

 Respectfully submitted,

 Jon Hatfield 

 Inspector General

Enclosure 
Table of Contents

Transmittal Letter

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

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

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

OFFICE OF INSPECTOR GENERAL ACTIVITIES ............................................................................................ 4

Completed Audit, Evaluation, and Other Review ..................................................................................................... 4

Open Audit................................................................................................................................................................ 5

Hotline and Investigations........................................................................................................................................ 6

Memorandum of Understanding.............................................................................................................................. 6

Review of Legislation ................................................................................................................................................ 7

Council of the Inspectors General on Integrity and Efficiency (CIGIE) Activities ...................................................... 7

SUMMARY OF INSPECTOR GENERAL REPORTING REQUIREMENTS ........................................................... 8

TABLE I - Summary of Reports with Corrective Actions Outstanding for More than 6 Months ................. 9

TABLE II - Listing of Reports Issued ......................................................................................................10

TABLE III - Reports with Questioned Costs...........................................................................................10

TABLE IV - Recommendations that Funds be Put to Better Use............................................................. 11

Appendix A - Peer Review Activity.......................................................................................................12

Pictured: Port of Seattle, Washington. 

 

Photo courtesy of the Port of Seattle.
EXECUTIVE SUMMARY

This semiannual report summarizes the activities and accomplishments of the Federal 

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

October 1, 2018 through March 31, 2019. The most significant activities of the OIG during the first

half of fiscal year (FY) 2019 are summarized below and additional details can be found in subsequent 

sections of this report. 

During this reporting period, the OIG completed one audit and one evaluation; initiated a new 

audit; and completed the required annual risk assessment of the FMC’s purchase card program. 

Specifically, the OIG completed the FY 2018 annual financial statement audit (A19-01) and the FY 

2018 annual evaluation of the FMC’s compliance with the Federal Information Security Management 

Act (A19-02). The OIG also initiated a compliance audit of the DATA Act, and completed the risk 

assessment of the purchase card program. All of these assignments are discussed in more detail later 

in this report. 

At the beginning of this period, there was one hotline complaint open. There were no new 

hotline complaints received during the period and the one hotline complaint remained open at the end 

of the reporting period. There were no new investigations or matters referred to prosecutorial 

authorities during this period and no investigations open at the end of the period. 

FEDERAL MARITIME COMMISSION

The FMC is an independent federal agency responsible for ensuring a competitive and reliable 

ocean transportation supply system that supports the U.S. economy and protects the public from unfair 

and deceptive practices. The principal statutes or statutory provisions administered by the 

Commission are: the Shipping Act of 1984, as amended by the Ocean Shipping Reform Act of 1998; 

the Foreign Shipping Practices Act of 1988; and Section 19 of the Merchant Marine Act of 1920. 

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

U.S. Senate, each serving five-year terms. In January 2019, two of the three previously vacant 

Commissioner positions were filled. Commissioners Mr. Louis E. Sola and Mr. Daniel B. Maffei 

were both nominated by President Trump on November 15, 2018, confirmed by the United States 

Senate on January 2, 2019, and appointed to the Commission by the President on January 15, 2019. 

1 
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Currently one of the five Commissioner positions is vacant. On March 7, 2019, the White House 

notified the FMC that President Trump designated Michael A. Khouri as Chairman of the FMC. 

Chairman Khouri had been serving previously as Acting Chairman since January 2017, and as a 

Commissioner since January 2010. 

Although the majority of FMC personnel are located in Washington, D.C., the FMC also 

maintains a presence in Los Angeles, Seattle, New York, New Orleans, Houston, and South Florida 

through Area Representatives. These Area Representatives serve the major ports and transportation 

centers within their respective geographic areas, and provide information, liaison and investigatory 

services on behalf of the FMC. 
OFFICE OF INSPECTOR GENERAL

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

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

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

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

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

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

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

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

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

an audit or investigation. 

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

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

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

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

independence of the OIG. 

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

the IG and an auditor. During this reporting period, the OIG was pleased to welcome Mr. Parker 

Skaats to the OIG as a full-time permanent employee. Mr. Skaats was previously a Pathways 

Program auditor intern with the office since May 2018. Following Mr. Skaats’ graduation in 

December 2018 from American University, and completion of the Pathways Program, he was 

converted to the OIG’s vacant auditor position. The OIG is appreciative of the support from the 

FMC’s Office of Human Resources that enabled the OIG to utilize the Pathways Program; Mr. 

Skaats is the first Pathways intern converted to a full-time position for the agency. The OIG is 

hopeful the agency will continue to utilize the Pathways Program for future agency positions. 

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OFFICE OF INSPECTOR GENERAL ACTIVITIES

Completed Audit, Evaluation, and Other Review

Independent Auditors’ Report of the FMC’s FY 2018 Financial Statements, A19-01. 

The audit report was issued on November 7, 2018. The OIG contracted with Dembo Jones, P.C. 

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

contractor. The audit objectives were to opine on whether the FMC’s FY 2018 financial statements 

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

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

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

balance sheet as of September 30, 2018, and the related statements of net cost, changes in net 

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

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

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

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

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

audit report. 

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

Act (FISMA) FY 2018, A19-02. The evaluation report was issued on October 31, 2018. The OIG 

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

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

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

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

standards, and guidelines. 

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

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

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

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

4 
Technology’s (NIST) 800-53, Recommended Security Controls for Federal Information Systems 

and Organizations, Revision 4. The evaluation report contained five recommendations to address 

four findings; FMC management agreed with the five recommendations. In addition, the OIG 

concluded the FMC had effectively implemented one of the two prior year FISMA 

recommendations. 

2018 Risk Assessment of the FMC’s Purchase Card Program. Executive agencies, 

including the FMC, use purchase cards to purchase needed goods and services for the agency. In 

accordance with the Government Charge Card Abuse Prevention Act of 2012 (Charge Card Act), 

Public Law 112‐194, federal agencies are required to establish and maintain safeguards and 

internal controls for purchase cards. The Charge Card Act and Office of Management and Budget 

(OMB) implementing guidance for the Act require the Inspector General (IG) of each executive 

agency to conduct an annual risk assessment of the agency’s purchase card program. The objective 

of the risk assessment was to assess the risk of illegal, improper, or erroneous use of the purchase 

cards to determine the scope, frequency, and number of future audits and reviews to be conducted 

by the OIG. The OIG concluded the risk of illegal, improper, or erroneous use in the FMC’s 

purchase card program is “low.” Subsequent to the completion of the risk assessment, the agency 

planned additional internal controls for the program; the OIG also suggested two additional 

controls for the program. 

Open Audit

DATA Act Audit, 2019. The Digital Accountability and Transparency Act of 2014 (DATA 

Act), in part, requires federal agencies to report financial and award data in accordance with the 

established Government-wide financial data standards. In May 2015, the OMB and the Department 

of Treasury published 57 data definition standards and required federal agencies to report financial 

data in accordance with these standards for DATA Act reporting, beginning January 2017. Once 

submitted, the data will be displayed on USAspending.gov for taxpayers and policy makers to 

understand how taxpayer dollars are being spent. 

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The DATA Act also requires the IG of each federal agency to review a statistically valid 

sample of the spending data submitted by its federal agency and to submit to Congress a publicly 

available report assessing the completeness, timeliness, quality, and accuracy of the data sampled 

and the implementation and use of the Government-wide financial data standards by the federal 

agency. The OIG commenced the audit in March 2019 and plans to issue the final audit report by 

November 8, 2019. This is the second of three required DATA Act audits; the first audit was 

completed in November 2017 and included one audit recommendation.

Hotline and Investigations

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

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

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

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

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

At the beginning of this period, there was one hotline complaint open. There were no new 

hotline complaints received during the period and the one hotline complaint remained open at the 

end of the reporting period. There were no new investigations or matters referred to prosecutorial 

authorities during this period and no investigations open at the end of the period. 

Memorandum of Understanding

In accordance with Section 6 of the Inspector General Reform Act of 2008, each Inspector 

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

and directly reporting to another Inspector General or the Council of the Inspectors General on 

Integrity and Efficiency (CIGIE) on a reimbursable basis. The OIG has a memorandum of 

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

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

6 
Review of Legislation

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

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

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

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

abuse. 

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

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

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

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

agencies; and 

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

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

workforce in the Office of Inspectors General. 

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

Committee is responsible for coordinating government-wide activities that promote economy and 

efficiency in federal programs and operations, and to address areas of weakness and vulnerability 

with respect to fraud, waste, abuse, and mismanagement. The Audit Committee serves as a 

resource for the federal audit community, maintains professional audit standards, and develops 

auditor training requirements. 

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

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

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

monthly CIGIE meetings, and periodically assists CIGIE on special projects. 

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SUMMARY OF INSPECTOR GENERAL REPORTING REQUIREMENTS

IG Act Reference Reporting Requirement Pages

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

Section 5(a)(2) Recommendations with respect 

abuses, or deficiencies

to significant problems, None

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

actions have not been completed

None

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

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

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

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

unsupported costs, and funds put to better use

10

Section 5(a)(7) Summary of each report 3-4

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

and unsupported costs

None

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

that funds be put to better use

None

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

issued before the commencement of this reporting period for 

which no management decision was made by the end of the 

reporting period; for which comments were not returned 

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

any outstanding unimplemented recommendations

None

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

management decisions

revised None

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

general disagrees

None

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

Management Improvement Act (FFMIA) of 1996

None

Section 5(a)(14)(15) Peer review activity on FMC OIG 12, App. A

Section 5(a)(16) Peer review activity by FMC OIG on another OIG 12, App. A

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

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

statistical table under Section 5(a)(17)

the None

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

employee where allegations of misconduct were 

substantiated

None

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

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

with the independence of the OIG

None

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

evaluation, and audit conducted that is closed and was not 

disclosed to the public; and investigation conducted by the 

OIG involving a senior Government employee that is closed 

and was not disclosed to the public

None

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

than 6 Months

Recommendations

Report Title Report 

Number

Issue 

Date Number Open Closed

Evaluation of the FMC’s 

Information Technology 

Inventory

A-18-04 05/31/18 4 4 * 0 

*In a memorandum dated April 24, 2019, the Managing Director informed the IG that the 

agency has already corrected several of the recommendations. The other recommendations 

are being addressed with an asset inventory and tracking system recently purchased by the 

agency that is currently being implemented. The OIG plans to follow-up on the audit 

recommendations after the agency has fully implemented the new asset inventory and 

tracking system; this will enable the OIG to close the recommendations.

DATA Act Audit, 2017 A18-03 11/08/17 1 1** 0 

**In a memorandum dated April 19, 2018, the Managing Director informed the IG that the 

agency considers this recommendation closed. Specifically, management developed and 

implemented a standard operating procedure to ensure accurate DATA Act reporting. The 

OIG plans to follow-up during the 2019 DATA Act audit to ensure the issue has been 

resolved; this will enable the OIG to close this recommendation.

Evaluation of the FMC’s 

Compliance with the 

Information Security 

Management Act FY 

2017 (FISMA)

A18-02 10/31/17 2 1*** 0 

***For the one open recommendation, in a memorandum dated October 26, 2018, the 

Managing Director informed the IG that the agency has a policy in place to disable the 

accounts of those separating from the FMC within 5 days – OIT disables the account of the 

separating employee at the time of their checkout form (Form FMC-25, Employee 

Clearance Statement) is presented for OIT’s sign off. In the two instances noted during the 

FY 2018 review, OIT promptly changed the passwords on the email accounts, ensuring that 

separated users could not access their accounts. However, the accounts were not disabled 

because of the abrupt nature of their departures from the agency and the immediate need to 

access emails and files necessary for the agency to complete critical tasks. Further, the 

Managing Director advised in her October 26 memorandum that additional procedures had 

been implemented immediately. 

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TABLE II - Listing of Reports Issued

Report Title Assignment 

Number

Issue 

Date 

Questioned 

Costs

Unsupported 

Costs

Funds 

Put to 

Better 

Use

Independent Auditors’ 

Report of the FMC’s FY 

2018 Financial Statements

A19-01 11/7/18 $0 $0 $0

Evaluation of FMC’s 

Compliance with the 

Federal Information 

Security Management Act 

(FISMA) FY 2018

A19-02 10/31/18 $0 $0 $0

TABLE III - Reports with Questioned Costs

Number

of 

Reports

Questioned 

Costs

Unsupported 

Costs

A. For which no management decision has been 

made by the commencement of the reporting 

period. 

0 $0 $0

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

Subtotal (A + B) 0 $0 $0

C. For which a management decision was made 

during the reporting period. 

0 $0 $0

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

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

D. For which no management decision has been 

made by the end of the reporting period. 

0 $0 $0

E. Reports for which no management decision 

was made within six months of issuance. 

0 $0 $0

10 
TABLE IV - Recommendations that Funds be Put to Better Use 

Number

of 

Reports Dollar Value

A. For which no management decision has been made 

by the commencement of the reporting period. 0 $0 

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

Subtotal (A + B) 0 $0

C. For which a management decision was made during 

the reporting period. 0 $0 

(i) dollar value of recommendations that were 

agreed to by management; and

0 $0

(ii) dollar value of recommendations that were not 

agreed to by management. 

0 $0

D. For which no management decision has been made 

by the end of the reporting period. 0 $0 

E. Reports for which no management decision was 

made within six months of issuance. 0 $0 

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Appendix A - Peer Review Activity

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

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

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

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

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

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

An external audit peer review of the FMC OIG audit office was initiated in February 2019 

by the Equal Employment Opportunity Commission OIG. The peer review is expected to be 

complete during the next reporting period. The last external peer review of the FMC OIG audit 

office was completed on March 24, 2016, by the U.S. International Trade Commission OIG. A

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

During a prior reporting period ending September 30, 2016, the OIG conducted an audit 

peer review of the Election Assistance Commission (EAC) OIG and issued a peer review report 

on July 20, 2016. The FMC OIG issued a modified peer review report to the EAC OIG, and the 

peer review report contained no recommendations. 

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HOTLINE COMPLAINTS

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

depends on the cooperation of FMC employees and the public. 

Employees and the public are encouraged to contact the OIG regarding 

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

programs and operations.

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

(202) 523-5865

ONLINE COMPLAINT FORM: 

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

TO PLACE A COMPLAINT IN WRITING PLEASE MAIL TO: 

Federal Maritime Commission

Office of Inspector General

Suite 1054

800 North Capitol Street, NW

Washington, DC 20573

To Be Opened By the IG Only

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

ANONYMOUS; HOWEVER, INDIVIDUALS ARE ENCOURAGED TO ASSIST THE INSPECTOR 

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

ADDITIONAL INFORMATION.

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