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pursuant to section 606 (5) of the Merchant Marine Act, 1936, as amended (46 U. S. C. 1176 (5)), as said section is construed by the Administration.

(g) Effective date. The effective date of this section, as amended, shall be as follows:

(1) The day next following the termination of the recapture period which was current on December 31, 1946, with respect to an operating-differential subsidy resumption addendum executed prior to May 1, 1951;

(2) January 1, 1947, with respect to an operating-differential subsidy resumption addendum executed after April 30, 1951; and

(3) The effective date of the contract, with respect to an operating-differential subsidy contract executed after December 31, 1946.

Effective as of January 1, 1958, the definition in this part shall not be applicable with respect to capital necessarily employed determinations required to be made for accounting periods commencing on or after said date, but shall be superseded by the definition contained in Part 286 of this chapter.

(Sec. 607, 49 Stat. 2005, as amended; 46 U. S. C. 1177) [G. O. 71, 14 F. R. 7936, Dec. 81, 1949, as amended by Amdt. 1, 17 F. R. 8691, Oct. 1, 1952; Amdt. 2, 18 F. R. 8809, Dec. 28, 1953; Amdt. 3, 23 F.R. 5308, July 12, 1958]

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§ 292.1

Annual and final accountings by operators under operating-differential subsidy agreements; procedure. Every holder of an operating-differential subsidy agreement executed with the Maritime Commission or the Federal Maritime Board shall (a) within ninety (90) days after publication of this part in the FEDERAL REGISTER, prepare and submit to the Maritime Administration, in the form and manner prescribed in §§ 292.2 to 292.8, inclusive, a separate accounting of its operations for each accounting period commencing with the resumption or commencement of its subsidized operations on or after January 1, 1947 through December 31, 1950: Provided, That such accounting shall not be required with respect to any accounting period included in a terminated "recapture period" (as defined in § 291.5 (f) of this chapter (General Order 71 of the United States Maritime Commission)) with respect to which all accrued operating-differential subsidy was recaptured or is recapturable by the Administration: Provided further, That upon application of the Operator the Administration may extend, for such further period as in its judgment is warranted by the circumstances in any instance, the time limit prescribed in this section for the submission of such accountings, and (b) within one hundred and eighty (180) days after termination of each subsequent accounting period (as defined in the said annexed procedure) prepare and submit to the Maritime Administration a similar accounting for such accounting period: Provided, however, That upon application of the Operator the Administration may extend, for such further period as in its judgment is warranted by the circumstances in any instance, the time limit prescribed in this section for the submission of such accountings.

§ 292.2 Definitions.

Except where the context clearly indicates otherwise, as used in this part:

(a) "Commission" or "Administration" refers to the United States of America acting by and through the Maritime Administration, as successor to the United States Maritime Commission.

(b) "Operator" refers to the holder of an Operating-Differential Subsidy Agreement with the Federal Maritime Board.

(c) "Agreement" refers to an Agreement providing for the payment of an operating-differential subsidy pursuant to Title VI or to section 708 of Title VII of the Merchant Marine Act, 1936, as amended. (References in this part to particular articles of the Agreement relate to such articles of Part II-General Provisions of the standard form of Operating-Differential Subsidy Agreement adopted by the United States Maritime Commission on December 21, 1949.)

(d) "Uniform System of Accounts" refers to the "Uniform System of Accounts for Operating-Differential Subsidy Contractors" (1) prescribed by the United States Maritime Commission in General Order No. 22, January 1, 1938, as supplemented, with respect to accountings for periods through December 31, 1950, and (2) prescribed by the Maritime Administration in Part 282 of this chapter (General Order 22, revised October 16, 1950), with respect to accountings for periods commencing on or after January 1, 1951.

(e) "Accounting period" refers to the calendar year, or applicable portion thereof, with respect to which a separate determination of "capital necessarily employed in the business" is required to be made.

§ 292.3 Accounting requirements.

(a) Contract provisions. (1) Article II-24 of the Agreement provides, among other things, that there shall be a final accounting thereunder between the Operator and the Commission as soon as practicable after the end of each calendar year and upon termination of the Agreement (whether such termination shall occur by expiration of the stated period thereof or otherwise).

(2) Article II-20 of the Agreement provides, among other things, that:

(i) The Operator and every affiliate, domestic agent, subsidiary, or holding company connected with, or directly or indirectly controlling or controlled by, the Operator (a) shall keep its books, records, and accounts relating to the property and to the maintenance, operation, and servicing of the vessel(s), service(s), route (s), and line(s) covered by the Agreement in such form and under such rules and regulations as may be prescribed by the Commission, but the Commission shall not require the duplication of books, records, and accounts

required to be kept in some other form by the Interstate Commerce Commission; and (b) shall file, upon notice from the Commission, balance sheets, profit and loss statements, and such other statements of financial operations, special reports, memoranda of any facts and transactions, as in the opinion of the Commission affect the financial results in, the performance of, or transactions or operations under, the Agreement. The Commission reserves the right to require that all or any of such statements, reports and memoranda shall be certified by independent certified public accountants acceptable to the Commission.

(ii) The Commission is authorized to examine and audit the books, records, and accounts of all persons referred to above in this Article whenever it may deem it necessary or desirable, including but without limitation an analysis of the surplus and all supporting accounts. The Operator agrees that any and all auditors, inspectors, attorneys, and other employees designated by the Commission, shall have full, free and complete access at all reasonable times to all vessels owned by the Operator when in port or undergoing repairs and to all books, records, papers, memoranda or other documents of the Operator wherever located or of any holding company, subsidiary company or affiliated company of the Operator pertaining to any activities relating in any way to the vessel(s), service(s), route(s), or line(s) covered by the agreement, and further agrees to permit the making of photostatic or other copies of any such books, records, papers, memoranda or other documents and to furnish without charge adequate office space and other facilities reasonably required by such auditors, inspectors, attorneys and other employees in the performance of their duties.

(b) Annual and final accountings. Pursuant to the applicable provisions of the Agreement, the Administration hereby requires that each Operator submit a separate accounting of its operations for each accounting period commencing with the resumption or commencement of its subsidized operations on or after January 1, 1947, including, but not limited to, the Operator's determinations of:

(1) Profits in excess of ten percentum per annum on "capital necessarily employed" which are subject to recapture by the Administration;

(2) Requirements with respect to deposits in the statutory Capital and Special Reserve Funds of the Operator;

(3) The amount, if any, of unpaid subsidy accrued with respect to operations after December 31, 1946, during the then current recapture period in excess of any amount of the recapture accrual required by law to be withheld by the Administration;

(4) The amount, if any, of subsidy payments theretofore made to the Operator with respect to operations under the Agreement after December 31, 1946, during the then current recapture period (and not previously repaid) in excess of the sum by which the cumulative amount of subsidy then estimated to have accrued to the Operator on account of such operations is greater than any amount of the then estimated recapture accrual required by law to be withheld by the Administration;

Provided, That, such accounting shall not be required with respect to any accounting period included in a terminated "recapture period" (as defined in § 291.5 (f) of this chapter (General Order 71 of the United States Maritime Commission)) with respect to which all accrued operating-differential subsidy was recaptured or is recapturable by the Administration.

The accounting comprising the statements prescribed in § 292.6 (Statements required by the Administration) shall be submitted in sextuplicate to the Administration through the local District Comptroller, or Area or Port Auditor in the district, area, or port in which the home office of the Operator is located, or (if there be no such Comptroller, or Auditor of the Administration in the district, area, or port in which the home office of the Operator is located) to the Comptroller, Maritime Administration, Washington 25, D.C. While it is preferable that the required statements be typewritten, completely legible original handwritten statements accompanied by five photostatic copies thereof (which likewise must be completely legible) will be acceptable.

(c) Subsequent adjustments. (1) At the time of the submission of the accounting for each accounting period as required under this part, the Operator shall determine whether adjustments during such period affecting any preceding accounting period or periods would, if carried back to such preceding

period or periods, operate to increase or decrease to the extent of $10,000 or more, (i) the amount otherwise recapturable and/or (ii) the amount otherwise required to be deposited in the Special Reserve Fund and, if so, the Operator shall either (a) submit a revised accounting for such preceding accounting period or periods taking such adjustments into account or (b) include in the current accounting an adjustment of amounts recapturable and/or required to be deposited in the Special Reserve Fund with respect to such prior period or periods that will produce the same result as though a revised accounting were submitted for such prior period or periods: Provided, That, except as otherwise provided herein, adjustments applicable to a preceding accounting period shall be taken into account in the year in which recorded; And provided further, That, notwithstanding the foregoing, any subsidy payable must be calculated at the rates established for the voyages on which the subsidizable expense involved was incurred.

(2) If, in any instance, at the time of the submission of an accounting, no such adjustment affecting any preceding accounting period has occurred subsequent to the submission of the accounting for such period, the Operator shall submit to the Administration an appropriate certification to that effect over the signature of a duly authorized officer. The books, records and accounts referred to in this section shall be retained in accordance with the provisions of § 380.24 of this chapter.

[G.O. 74, 16 F.R. 6716, July 11, 1951, as amended at 21 F.R. 9408, Dec. 1, 1956; 30 F.R. 12356, Sept. 28, 1965]

§ 292.4 "Capital necessarily employed." (a) Article II-29 of the Agreement provides that, for the purposes thereof:

(1) Capital necessarily employed in the business" and "capital investment necessarily employed in the operation of the subsidized vessel(s), service(s), route(s), and line (s)" shall, with respect to all annual or other accounting periods which terminated concurrently with or prior to the termination of the recapture period which was current on December 31, 1946, be determined as provided in the applicable rules and regulations as adopted and prescribed by the United States Maritime Commission in Part 286 of this chapter (General Order 31, as amended), exclusive, however, of the

provisions of Part 291 of this chapter (General Order 71);

(2) With respect to all annual or other accounting periods terminating subsequent to the annual or other accounting periods mentioned in subparagraph (1) of this paragraph and in the case of contracts taking effect on or after January 1, 1947, the provisions of Part 291 of this chapter (General Order 71, as amended from time to time), defining the terms "capital necessarily employed in the business" and "capital investment necessarily employed in the operation of the subsidized vessel(s), service(s), route(s), and line(s)", shall be controlling, and the provisions of Part 286 of this chapter (General Order 31, as amended from time to time), shall be applicable only to the extent that such provisions are consistent with the provisions of Part 291 of this chapter (General Order 71, as amended from time to time).

(b) Should any change be made in the provisions of the Agreement or in Part 291 of this chapter (General Order 71), with respect to the effective date of that part, this procedure will be deemed to be automatically modified to correspond with such change.

§ 292.5 Net profit.

Article II-29 of the Agreement provides that, for the purposes thereof, "net earnings" or "net profit" shall be determined as provided in the applicable rules and regulations adopted and prescribed by the United States Maritime Commission in Part 286 of this chapter (General Order 31, as amended from time to time). § 292.6 Statements required by the Administration.

The accountings required under this part, as referred to in paragraph (b) of § 292.3, shall include the following statements (Illustrative examples of such statements, based on hypothetical figures, will be supplied by the Comptroller. The Operator may change or vary the design of any of these statements: Provided, That the statements substituted will produce the same results and reflect all of the information required. And provided further, That no substantial change or variation in the design of such statements shall be made without the prior concurrence of the local District Comptroller, or Area or Port Auditor of the Administration or, if there be no such Comptroller or auditor

of the Administration in the District, area, or port in which the home office of the Operator is located, then the request for such concurrence should be addressed to the Comptroller, Maritime Administration, Washington, D.C., 20235. These examples have been based on the Uniform System of Accounts prescribed by the United States Maritime Commission in General Order 22, January 1, 1938, as supplemented, and are, therefore, applicable to accountings for periods through December 31, 1950. respect to accountings for subsequent periods, the statements should be conformed to the Uniform System of Accounts prescribed by the Maritime Administration in Part 282 of this chapter (General Order 22, Revised October 16, 1950)):

With

EXHIBIT A-ANALYSIS OF ADJUSTED NET WORTH, ALLOCATION OF "CAPITAL NECESSARILY EMPLOYED", AND DISTRIBUTION OF "NET EARNINGS" FOR THE PURPOSES OF APPLYING THE RESERVE AND RECAPTURE PROVISIONS OF THE OPERATING-DIFFERENTIAL SUBSIDY AGREEMENT, AS DETERMINED IN ACCORDANCE WITH PART 286 OF THIS CHAPTER (GENERAL ORDER 31) (FOR PERIOD, IF ANY, PRIOR TO EFFECTIVE DATE OF PART 291 OF THIS CHAPTER (GENERAL ORDER 71))

The procedure for the preparation of this statement contemplates that "capital necessarily employed in the business", with respect to all annual or other accounting periods which terminated concurrently with or prior to the termination of the recapture period which was current on December 31, 1946, shall be determined as provided in the applicable rules and regulations as adopted and prescribed by the Commission in Part 286 of this chapter (General Order 31, as amended).

EXHIBIT A-ALLOCATION OF "CAPITAL NECESSARILY EMPLOYED" AND DISTRIBUTION OF "NET EARNINGS" FOR THE PURPOSES OF APPLYING THE RESERVE AND RECAPTURE PROVISIONS OF THE OPERATING-DIFFERENTIAL SUBSIDY AGREEMENT, AS DETERMINED IN ACCORDANCE WITH PART 291 OF THIS CHAPTER (GENERAL ORDER 71) AND PART 286 OF THIS CHAPTER (GENERAL ORDER 31) (FOR PERIOD AFTER EFFECTIVE DATE OF PART 291 OF THIS CHAPTER (GENERAL ORDER 71))

The procedure for the preparation of this statement contemplates that "capital necessarily employed in the business", with respect to all annual or other accounting periods terminating subsequent to the termination of the recapture period which was current on December 31, 1946 and in instances of agreements taking effect on or after January 1, 1947, shall be determined as provided in Part 291 of this chapter (General Order 71, as amended from time to time).

EXHIBIT AA-REVISED ANALYSIS OF ADJUSTED NET WORTH, ALLOCATION OF "CAPITAL NECESSARILY EMPLOYED", AND DISTRIBUTION OF "NET EARNINGS" (FOR PRECEDING YEAR) FOR THE PURPOSES OF APPLYING THE RESERVE AND RECAPTURE PROVISIONS OF THE OPERATINGDIFFERENTIAL SUBSIDY Agreement, as DeTERMINED IN ACCORDANCE WITH PART 286 OF THIS CHAPTER (GENERAL ORDER 31) (FOR PERIOD, IF ANY, PRIOR TO EFFECTIVE DATE OF PART 291 OF THIS CHAPTER (GENERAL ORDER 71))

The procedure for the preparation of this statement contemplates the revision of the statement for the preceding year simultaneously with the preparation of the current year's statement to give effect to subsequent adjustments.

EXHIBIT B-COMPARATIVE BALANCE SHEET

The procedure for the preparation of this statement contemplates:

1. That for each annual or other accounting period there shall be submitted in comparative form a balance sheet as at the end of the month immediately preceding the date of the beginning of such accounting period and as at the end of the last month within such accounting period;

2. That the accounts reflected in each such balance sheet shall be those prescribed in the Uniform System of Accounts and none other; and

3. That the assets reflected in each such balance sheet shall be stated in conformity with generally accepted accounting principles applied on a consistent basis; that adequate reserves shall be shown for accounts receivable doubtful of collection and for such other items as require valuation reserves to reflect their true value; and that there shall be included an adequate statement of all known and ascertainable liabilities.

EXHIBIT C-INCOME SHEET

The procedure for the preparation of this statement contemplates:

1. That there shall be submitted income sheets which accurately reflect the results of all operations for each applicable calendar year or other accounting period;

2. That the income and expenses reflected on such income sheets shall be allocated on the bases prescribed in Part 286 of this chapter (General Order 31);

3. That the items of income and expense reflected in each such income sheet shall be those prescribed in the Uniform System of Accounts and none other; and

4. That such income sheets shall include, with respect to each applicable calendar year or other accounting period, distribution of any "additional charter hire" accrued to the Administration in instances where the operations of the Operator include vessels chartered from the Commission under bareboat charters entered into pursuant to Title VII

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of the Merchant Marine Act, 1936, as amended, or Section 5 of the Merchant Ship Sales Act of 1946, or under the form of agreement known as "Warshipdemiseout 203".

EXHIBIT D-STATEMENT OF OPERATING-DIFFERENTIAL SUBSIDITY ACCRUED DURING THE PERIOD

There shall be submitted for each calendar year or other accounting period with respect to which a separate income sheet is required hereunder a statement reflecting the accrual of operating-differential subsidy (in such detail as is reflected in the illustrative example included among those to be supplied by the Comptroller): Provided, That, until final operating-differential subsidy rates are established, the submission of this statement may be postponed upon the understanding that when, at that time, revised accountings are submitted they will be accompanied by this statement.

EXHIBIT E-WORKING TRIAL BALANCE The procedure for the preparation of this statement contemplates:

1. That there shall be prepared a working trial balance as at each date with respect to which a separate balance sheet is required hereunder;

2. That the balances reflected in the general ledger at the respective dates shall be listed by accounts and distributed to the appropriate columns provided therefor in the illustrative example included among those to be supplied by the Comptroller;

3. That the Operator shall determine that all items included in each asset and liability account have been properly classified and adjusted, that the balances are correct, and do not contain items of income or expense applicable to either a prior or current accounting period (Schedules reflecting the extent of the analysis of such accounts shall be included among the working papers available for examination by the Administration's auditors);

4. That the Operator shall determine that the items included in each income and expense account have been properly classified and adjusted, that the balances are correct, and that such balances are entirely applicable to the accounting period involved (Schedules reflecting the extent of the analysis of such accounts shall be included among the working papers available for examination by the Administration's auditors);

5. That the Operator shall determine that proper accounting disposition has been made of the balance in each clearance account; and

6. That all adjustments to the accounts listed in the working trial balance shall be accomplished by posting thereto journal entries, prepared in numerical sequence and containing a complete description as to the reasons for the adjustment, copies of such journal entries to be made available to the Administration upon request.

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