03 March 2017

US ship-recycling scheme validated by watchdog group

The US Maritime Administration correctly accounted for USD75.9 million made from selling 90 obsolete vessels in 10 years following concerns of mismanagement, federal overseers have found.

The US Government Accountability Office (GAO), in a report published on 23 February, concluded that MarAd had allocated the proceeds from the National Defense Reserve Fleet (NDRF) from FY 2005 to FY 2015 into the Vessel Operations Revolving Fund (VORF) “consistent with applicable law.”

The oversight agency also found that, during the same period, the USD52.6 million disbursed out of the VORF to the country’s six state maritime academies and to the National Park Service (NPS) “were properly supported”.

The GAO’s audit was included as a provision in the US Coast Guard (USCG) funding authorisation in 2015 amid concerns by Washington, DC, lawmakers about the revenue generated from ship-recycling sales and MarAd’s contract solicitation process.

A separate audit conducted in late 2015 by the US Department of Transportation’s Office of Inspector General (OIG) found that America’s ship disposal programme may have been exposed to unnecessary risk due to weaknesses in management oversight.

The audit was conducted as a result of an organisational restructuring at MarAd while the agency was overseeing roughly USD700 million in federal funds.

Two programmes examined by the OIG, MarAd's Ship Disposal Program and its Vessel Transfer Office (VTO), were criticised by lawmakers for allegedly allowing US shipowners to reflag old vessels so that they could be recycled at less cost at foreign shipbreaking facilities.

According to federal law, MarAd has the authority to scrap or sell certain vessels that no longer warrant preservation. Proceeds from the sales deposited in the VORF are allocated to NDRF for maintaining or repairing ships, paying or reimbursing certain expenses of the maritime academies, and providing funding for the NPS’s National Maritime Heritage Grant Program. The timings of the payments made by the VORF are determined by the Maritime Administrator.

Last year US Senate lawmakers amended MarAd’s most recent funding bill to instruct that proceeds from the fund be distributed more frequently. They directed the Maritime Administrator to prepare a report listing all government-owned vessels currently available for dismantlement, a list of vessels expected to be declared obsolete and dismantled in the next five years, and the government's plan for dismantling those vessels in the United States.

Source: fairplay. 27 February 2017

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