Inspector General’s Semiannual Report to Congress

every three years. These reviews are to be performed only by federal auditors. Review results

are posted to the U.S. Election Assistance Commission webpage.

Significant Management Decisions

If the IG disagrees with any significant management decision, Section 5(a)(12) of the
Inspector General Act requires that such disagreement be reported in the semiannual report.
Further, Section 5(a)(11) of the Act requires that any decision by management to change its
response to a significant resolved audit finding must also be disclosed in the semiannual report.
For this reporting period, there were no significant management decisions made on which the IG

disagreed, and management did not revise an earlier decision on an OIG audit recommendation.
Access to Information

The IG is to be provided with ready access to all agency records, information or
assistance when conducting an investigation or audit. Section 6(b)(2) of the IG Act requires the
IG to report to the agency head, without delay, if the IG believes that access to required
information, records or assistance has been unreasonably refused, or otherwise has not been
provided. A summary of each report submitted to the agency head in compliance with Section
6(b)(2) must be provided in the semiannual report in accordance with Section 5(a)(5) of the Act.

During the reporting period, the OIG did not encounter any difficulties in obtaining
assistance or access to agency records. Consequently, no report was issued by the IG to the

agency head in accordance with Section 6(b)(2) of the IG Act.

Audit Resolution

As of the end of this reporting period, all OIG audit recommendations for reports issued

in prior periods have been resolved. That is, management and the OIG have reached agreement

= Se
April 1, 2009 to September 30, 2009 Page 10


Inspector General’s Semiannual Report to Congress

EXECUTIVE SUMMARY

This Semiannual Report to the Congress summarizes the activities and accomplishments
of the Federal Maritime Commission (FMC or Commission), Office of Inspector General (OIG
or Office), for the period April 1, 2009, through September 30, 2009. During this period we
issued five audits of FMC operations and performed a desktop scan for prohibited (Internet
surfing) activities. The OIG also revisited Commission fee-setting processes with the Office of
Administration and met with the FMC webmaster to discuss best practices regarding webpage
design. The OIG performed fieldwork on the annual financial statement audit and the Federal
Information Security Management Act evaluation and opened one additional audit of contract

administration on two technology-related contracts.

Also during this reporting period, the OIG processed 18 complaints and numerous
information requests. Of the 18 complaints received, we forwarded 15 complaints to the
appropriate FMC program area for disposition and two complaints to other agency OIGs with
jurisdiction over the subject of the complaint. The remaining one complaint led to a preliminary
investigation that was closed in the reporting period. The OIG referred no matters to

prosecutorial authorities during this period.

The OIG responded to the House Committee on Oversight and Government Reform,
Ranking Minority Member’s request regarding open (unimplemented) OIG recommendations.
On a separate matter, the Inspector General briefed Senate Commerce Committee staff, at staff's

request, on background information concerning agency and OIG program activities.

In addition to these audit and investigative activities and outcomes, the Inspector General
participated in several activities pertaining to the Council of Inspectors General on Integrity and
Efficiency (CIGIE), including actively serving on the Legislation Committee where the IG
reviewed and commented on several legislative initiatives affecting the OIG community. The

===
April 1, 2009 to September 30, 2009 Page1



Inspector General’s Semiannual Report to Congress

TABLE II

INSPECTOR GENERAL ISSUED REPORTS
WITH RECOMMENDATIONS
THAT FUNDS BE PUT TO BETTER USE

Number Dollar Value
. For which no management decision has been made 0 0
by the commencement of the reporting period
. Which were issued during the reporting period 0 0
Subtotal (A +B) 0 0
. For which a management decision was made during
the reporting period 0 0
@ dollar value of recommendations that were
agreed to by management 0 0
(ii) dollar value of recommendations that were 0 0
not agreed to by management
. For which no management decision has been made 0 0
by the end of the reporting period
. Reports for which no management decision was 0 0

made within six months of issuance

a
April 1, 2009 to September 30, 2009 Page 14


Inspector General’s Semiannual Report to Congress

has a zero-tolerance policy for use of agency equipment to gamble or view pornographic images.
The OIG was assisted on this scan by special agents of the U. S. Social Security Administration
OIG.

The OIG selected 27 desktops for review. Due to technical problems concerning the
compatibility of the scan tool with select desktop computers, we were only able to thoroughly
review 12 (about 10 percent) of the agency’s desktops. The OIG found no instances where
employees visited either pornographic or gambling sites on agency computers. However, we did
note that, unlike many other federal agencies, the FMC does not block any sites, including the
aforementioned-forbidden sites. While the results of our inspection indicate that blocking
software may not be needed, the OIG notes that the sample included only 10 percent of the
employees and plans to do similar scans in the future to ensure compliance with agency

prohibitions.

Also during the period, the OIG met with representatives from the Office of the Secretary
(OS), at the OS’s request, to discuss (i) a large scale acquisition for the agency’s webpage
reconstruction and (ii) OIG suggestions for improvements of the webpage. Regarding the
former, OS managers sought acquisition advice from the OIG to ensure procurement regulations

were not violated in a complicated procurement transaction.

Audits and Reviews in Process

The OIG commenced fieldwork on two agency-wide audits and evaluations required by
legislation. The objective of the OIG’s annual financial statement audit is to opine on whether
the FMC’s FY 2009 financial statements fairly present the financial position of the agency. As
part of the audit, the OIG also reviews internal control over financial reporting and agency
compliance with laws and regulations. The OIG also commenced fieldwork on agency

compliance with the Federal Information Security Management Act of 2002. The objective of

a
April 1, 2009 to September 30, 2009 Page 6


Inspector General’s Semiannual Report to Congress

Chairman of the FMC. To aid the FMC in accomplishing its mission, the OIG was provided two
full-time staff, one part-time staff and a budget of $572,000 for Fiscal Year 2009.

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.
OIG investigations seek out facts related to allegations of wrongdoing on the part of FMC
employees and individuals, or entities having contracts with, or obtaining benefits from, the
agency. The Inspector General 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 a report summarizing OIG audits and investigations
during the immediately preceding six-month period. The report is sent to the FMC Chairman,
the President of the Senate, the Speaker of the House and FMC’s appropriating and authorizing
committees. This dual reporting requirement facilitates and ensures the independence of the
Office.

AUDITS/EVALUATIONS

During this semiannual period, the OIG issued five audits of select FMC bureau / office
time and attendance practices and performed a desktop scan for prohibited (Internet surfing)
activities. The OIG also revisited agency fee-setting activities with the Office of Administration
and performed fieldwork on the annual financial statement audit and the Federal Information
Security Management Act (FISMA) evaluation. Also during this reporting period, the OIG

began fieldwork on an audit of contract administration of two technology-related contracts.

ae —— ee a
April 1, 2009 to September 30, 2009 Page 3


Inspector General’s Semiannual Report to Congress

OIG also performed a peer review of a sister OIG at the U.S. Election Assistance Commission.
The objectives of a peer review are to determine whether an effective quality control system has
been established in the office and if policies, procedures and applicable Government Auditing
Standards are being followed.

Details on these and other activities are provided below.

BACKGROUND

The FMC is an independent agency responsible for the regulation of ocean-borne
transportation in the foreign commerce of the United States. The principal statutes or statutory
provisions administered by the Commission are the Shipping Act of 1984, as amended by the
Ocean Shipping Reform Act of 1998; the Foreign Shipping Practices Act of 1988; and Section
19 of the Merchant Marine Act of 1920.

The FMC is headed by five Commissioners nominated by the President and confirmed by
the Senate, each serving five-year terms. For Fiscal Year (FY) 2009, the Commission was
appropriated $22.8 million to fund 124 full-time equivalent positions.

Although the majority of the Commission’s personnel are located in Washington, D.C., it
also maintains a presence in Los Angeles, Seattle, New York, New Orleans, Houston and South
Florida, through area representatives who serve the major ports and transportation centers within
their respective geographic areas. In addition, two at-large area representatives operate from
Washington, D.C.

The FMC’s Office of Inspector General was established in 1989 as required by the
Inspector General Act Amendments of 1988 (5 U.S.C. app. §8G). The OIG is an independent
audit and investigative unit headed by an Inspector General (IG) who reports directly to the

ao
April 1, 2009 to September 30, 2009 Page 2


HOTLINE COMPLAINTS

The success of the OIG mission to prevent fraud, waste and abuse
depends on the cooperation of FMC employees and the public.

A ComPLAINT CAN BE REPORTED BY CALLING OuR 24-HR DIRECT LINE

(202) 523-5865

AN ANONYMOUS COMPLAINT TO THE INSPECTOR GENERAL CAN BE MADE ON THE
INTERNET AT:

https://www2.fmc.gov/OIGComplaints/

HOWEVER, CALLERS ARE ENCOURAGED TO AssSIST THE INSPECTOR GENERAL
By SupPLyING INFORMATION As To How THEY May BE CONTACTED FoR
ADDITIONAL INFORMATION

To PLACE A COMPLAINT IN WRITING PLEASE MAIE To:

Federal Maritime Commission
Office of Inspector General
Room 1054

800 North Capitol Street, NW
Washington, DC 20573

To Be Opened By the IG Only


Inspector General’s Semiannual Report to Congress

(this was done on an exception basis when alternate timekeepers were not available to enter the
information), they could, at any time, access their records to alter, for example, leave usage
records. We also identified numerous instances across the offices reviewed where employees did
not submit leave slips prior to taking leave. In all instances, staff and office heads told the OIG
that, although leave was not recorded on leave slips, it was recorded on daily arrival/departure

records submitted by employees at the conclusion of each pay period.

Overall the OIG noted little uniformity among the bureaus / offices in implementing their
T&A procedures. Some staff requested leave on OPM leave slips, others used agency
arrival / departure records; still others used email to report leave planned or used. The OIG
noted outdated employee work schedules on file identifying incorrect arrival / departure times,
alternative work schedules and work-at-home schedules. We also identified inadequate guidance
for employees on the use of worker’s compensation time off requests. The OIG identified two
instances where employees erred in following regulations, resulting in the employees using

personal sick leave for work-related injuries.

The OIG made several recommendations to address both systemic vulnerabilities that cut
across bureaus and offices and those that pertain to individual -offices. The OIG is also
compiling best practices used among FMC bureaus and offices to efficiently and effectively
implement controls over time and attendance reporting. The report will be provided to agency
managers and the agency’s Office of Financial Management as a source document for planned

revisions to the agency’s T&A manual.

The OIG also performed an inspection of agency desktop computers to look for abusive
practices, to include “surfing” the Internet for pornography and gambling sites. While the FMC

allows for de minimis usage of agency equipment before or after work, or during lunch breaks, it

ae
April 1, 2009 to September 30, 2009 Page 5


Office of Inspector General

Semiannual Report
to the Congress

Covering the Period
April 1, 2009 to September 30, 2009

FEDERAL MARITIME COMMISSION



Inspector General’s Semiannual Report to Congress

During this reporting period, the OIG received 18 complaints. We forwarded 15
complaints to the appropriate FMC program area for disposition and two complaints to other
agency OIGs with jurisdiction over the subject matter of the complaint. The remaining

complaint was investigated by the OIG and was closed without further action.

OTHER OIG ACTIVITIES

Review of Legislation

As required by the Inspector General Act of 1978, as amended, the Office of Inspector
General 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 and abuse. During this period, the OIG reviewed the following proposed and / or
enacted pieces of legislation with agency and OIG community impact: the Data Breach
Notification Act of 2009, the Whistleblower Protection Enforcement Act of 2009, The
Government Efficiency, Effectiveness and Performance Improvement Act of 2009, the
Government Charge Card Abuse Prevention Act of 2009, Paperwork Reduction Act
Amendments and various proposals to provide inspectors general with testimonial subpoena

authority.

The OIG also reviewed a number of Commission Orders / policy guidelines and
suggested revisions where appropriate. Most notably the OIG revised an internal Commission

Order concerning Audit Follow Up.

Council of Inspectors General on Integrity and Efficiency Activities

The Council of Inspectors General on Integrity and Efficiency (CIGIE) was established
by law as an independent entity by the Inspector General Reform Act of 2008 (P.L. 110-409) to:

———
April 1, 2009 to September 30, 2009 Page 8


Inspector General’s Semiannual Report to Congress

this evaluation is to provide the FMC with information needed to determine the effectiveness of

its information security programs.

In addition to these legislatively-mandated audits / evaluations, the OIG also began
fieldwork on a review of two agency contracts. The objective of these reviews is to assess
whether contract requirements are being met, the agency exercises sufficient oversight over

contractor performance and systems are in place to accurately monitor contractor billing.

Finally, the OIG also reopened a review of various aspects of the FMC’s process to set
user fees for agency activities that convey special benefits to recipients beyond those accruing to
the general public. Guidance for establishing such fees is contained in Office of Management
and Budget (OMB) Circular A-25, User Charges. The Circular requires user charges to be

sufficient to recover the government’s full cost.

During the initial review begun in a prior reporting period, the OIG determined that the
agency followed a process that incorrectly set its user fees for various mission-related services,
resulting in user fees that understated the agency’s costs to provide these services. The OIG
reported the finding to management who then took immediate steps to reexamine its calculations

in light of our findings. This subsequent review will opine on the accuracy of those calculations.

INVESTIGATIVE ACTIVITIES

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. 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.

—
April 1, 2009 to September 30, 2009 Page7


Inspector General’s Semiannual Report to Congress

Issued Audits and Reviews
Audit Report Number Subject of Audit

A09-03 Review of the Office of the General Counsel
Time & Attendance Practices

A09-04 Review of the Bureau of Certification and
Licensing Time & Attendance Practices

A09-05 Review of the Office of the Secretary Time and
Attendance Practices

A09-06 Review of the Bureau of Trade Analysis Time
and Attendance Practices

A09-07 Review of the Office of Consumer Affairs and
Dispute Resolution Services Time and
Attendance Practices

Summary of Audits Issued During the Current Period

In A09-03 through A09-07, (audits of FMC bureau / office time and attendance
practices), the OIG expanded a review, from the prior reporting period, of one FMC bureau. In
that audit, we found internal control vulnerabilities over timé and attendance (T&A) reporting
that would enable timekeepers to alter attendance records with little or no risk of detection.
Based on this and other findings, the OIG broadened its scope to perform similar reviews in
other bureaus and offices to determine if similar vulnerabilities existed and to assess compliance

with Office of Personnel Management (OPM) and FMC T&A reporting regulations.

The OIG found that agency bureaus and offices generally complied with OPM and
agency requirements. We did not identify payroll abuse or fraud, but we did find practices that
bypassed controls designed to ensure the integrity of the T&A process. For example, payroll
clerks have access to their time and attendance records. While we found only very limited
instances where payroll clerks entered their own attendance information into the T&A system

ee we =
April 1, 2009 to September 30, 2009 Page 4



TABLE OF CONTENTS

Transmittal Letter
Executive Summary .......ccsecccsecsseeesssecsssesssessssessnscssseessscssuscssssssvessussssueesssecsavecssusessuseanucssnecesssecssaeeess 1
Background ...yssseccsevescavasvwesusecovesvvvcvotssviststssvwassssciitististstez 0 aBBeSUas NUCLEON ESET sasoosounns seen ses 2)

Audits / Evaluations

Summary of Audits Issued During the Current Period ............ccccesssssssssssesssesseesecssesessesnvecsed 4
Audits and Reviews in Process .........sssscssssssssssssssssscssseessssecssssusecssssecesssusecesseveeessuesesesnnseeced 6

Investigative Activities

Other OIG A cli yt cccsaeesxansscoxswncosssasdpresoaliekaoens Soop ottecrrecctnrtasg pace semsmtsrscsmmmemmmacecere linen aoa ceanl 8

Index of Inspector General Reporting Requirements ..

Table I. Inspector General Issued Reports with Questioned Costs..........c:sscsssesseseeeeeee]3

Table II. Inspector General Issued Reports with Recommendations
that Funds be Put to Better Use sss sescvssscussssvaceuscescs scicpetssstigssceieicOiieiee themes 14


Inspector General’s Semiannual Report to Congress
— = a == a I

on what actions need to be taken. As of the conclusion of the reporting period, 25
recommendations remain open, i.e., management and OIG agree as to the action that

management needs to take but management has not yet taken the action to close them.

Contacting the Office of Inspector General

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. To speak to OIG
staff about suspected wrongdoing, waste or abuse, FMC employees and the public can call the
OIG main line telephone number (202) 523-5863. FMC employees or the public can also report
suspected wrongdoing on the OIG’s hotline (202) 523-5865 where a confidential message can be
left 24 hours a day. Complaints or allegations of fraud, waste or abuse can also be made directly

to the inspector general at https://www2.fmc.gov/OIGComplaints/. This link enables the

sender to remain anonymous.

April 1, 2009 to September 30, 2009 Page 11


Inspector General’s Semiannual Report to Congress
—= <= =

TABLE I

INSPECTOR GENERAL ISSUED REPORTS
WITH QUESTIONED COSTS

Dollar Value

Questioned Unsupported

Number Cost Costs
A. For which no management decision has been
made by the commencement of the reporting 0 0 0
period
B. Which were issued during the reporting 0 0 0
period?
Subtotal (A + B) 0 0 0
C. For which a management decision was made 0 0 0
during the reporting period
@ dollar value of disallowed costs 0 0 0
(ii) _ dollar value of costs not disallowed 0 0 0
D. For which no management decision has been 0 0 0 =:
~ made by the end of the reporting period
E. Reports for which no management decision 0 0 0

was made within six months of issuance

= ee
April 1, 2009 to September 30, 2009 Page 13


In addition to these audit and investigative activities and outcomes, the Inspector General
participated in several activities pertaining to the Council of Inspectors General on Integrity and
Efficiency (CIGIE), including actively serving on the Legislation Committee where the IG
reviewed and commented on several legislative initiatives affecting the OIG community. The
OIG also performed a peer review of a sister OIG at the U.S. Election Assistance Commission.
The objectives of a peer review are to determine whether an effective quality control system has
been established in the office and if policies, procedures and applicable Government Auditing
Standards are being followed.

As in the past, management has been responsive in attempting to implement all OIG
recommendations. I appreciate management’s support and I look forward to working with you in
our ongoing efforts to promote economy and efficiency in agency programs.

Respectfully submitted,

Adam R. Trzeci:
Inspector General


FEDERAL MARITIME COMMISSION
Washington, DC 20573

October 30, 2009

Office of Inspector General

The Honorable Richard A. Lidinsky, Jr.
Chairman

Federal Maritime Commission

800 North Capitol Street, N.W.
Washington D.C., 20573

Dear Chairman Lidinsky:

The attached report is submitted in accordance with Section 5 of the Inspector General
Act of 1978, as amended. It summarizes the activities of the Office of Inspector General (OIG)
for the period April 1, 2009, to September 30, 2009. The Act requires that you transmit the
report to the appropriate Congressional committees within 30 days of receipt. Your transmittal
should also include any comments you consider appropriate and other statistical tables and
reports required by law.

During this period we issued five audits of FMC operations and performed a desktop scan
for prohibited (Internet surfing) activities. The OIG also revisited agency fee-setting processes
with the Office of Administration and met with the FMC webmaster to discuss best practices
regarding webpage design. The OIG performed fieldwork on the annual financial statement
audit and the Federal Information Security Management Act evaluation and opened one
additional audit of contract administration on two technology-related contracts.

Also during this reporting period, the OIG processed 18 complaints and numerous
information requests. Of the 18 complaints received, we forwarded 15 complaints to the
appropriate FMC program area for disposition and two complaints to other agency OIGs with
jurisdiction over the subject of the complaint. The remaining one complaint led to a preliminary
investigation that was closed in the reporting period. The OIG referred no matters to
prosecutorial authorities during this period.

The OIG responded to the House Committee on Oversight and Government Reform,
Ranking Minority Member’s request regarding open (unimplemented) OJG recommendations.
On a separate matter, the Inspector General briefed Senate Commerce Committee staff, at staff's
request, on background information concerning agency and OIG program activities.


Inspector General’s Semiannual Report to Congress

e 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 offices of the Inspectors General.

The CIGIE is comprised of all inspectors general whose offices are established under
section 2 or section 8G of the Inspector General Act of 1978, i.e., those that are Presidentially-
appointed / Senate confirmed and those that are appointed by agency heads (designated federal
entities), respectively. The OIG remains active in the Council of Inspectors General on Integrity
and Efficiency, and the IG was appointed to CIGIE’s Legislation Committee. The Committee is a
centralized point-of-contact and liaison for CIGIE to ensure regular and ongoing communication
with Congressional committees, committee staff and Government Accountability Office
regarding issues of common interest, and provides input to, and receives feedback from, the

Congress on legislation affecting the IG community as a whole.

The Inspector General and Assistant Inspector General continued to participate in CIGIE
and the Federal Audit Executive Council (FAEC) activities. The FAEC is comprised of senior
audit staff from agency OIGs that discuss and coordinate issues affecting the Federal audit
community - with special emphasis on audit policy and operations of common interest to FAEC

members.

Also in the reporting period, the OIG completed a peer review of a sister OIG at the U. S.
Election Assistance Commission. The objectives of a peer review are to determine whether an
effective quality control system has been established in the office and if policies, procedures and
applicable Government Auditing Standards are being followed. All federal Offices of Inspector

General are required by the IG Act to have a peer review performed on their organization once

April 1, 2009 to September 30, 2009 Page 9


Inspector General’s Semiannual Report to Congress

INDEX OF INSPECTOR GENERAL REPORTING REQUIREMENTS
(G Act Section and Semiannual Report Page Number)
IG Act
Reference Reporting Requirement Page(s)

Section 4(a)(2) Review of legislation and regulations 8

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

Section 5(a)(3) Prior significant recommendations on which 10
corrective actions have not been made

Section 5(a)(4) Matters referred to prosecutive authorities 1-7

Section 5(a)(5) Summary of instances where information was 10
refused

Section 5(a)(6) List of audit reports by subject matter 4

Section 5(a)(7) Summary of each particularly significant report 4-6

Section 5(a)(8) Statistical tables showing number of reports and 13.
dollar value of questioned costs

Section 5(a)(9) Statistical tables showing number of reports and 14
dollar value of recommendations that funds be put Fy
to better use

Section 5(a)(10) Summary of each audit issued before this reporting None
period for which no management decision was
made by the end of the reporting period

Section 5(a)(11) Significant revised management decisions 10

Section 5(a)(12) Significant management decisions with which the 10
inspector general disagrees

April 1, 2009 to September 30, 2009 Page 12