Message from the Chief Financial Officer
I am pleased to present the USPTO’s FY 2011 financial information. For the 19th consecutive year we have received an unqualified opinion on the Agency’s financial statements. Along with the unqualified opinion, the auditors reported no material weaknesses or significant deficiencies in the design and operation of the USPTO’s system of internal control over financial reporting. Also, the auditors reported that our financial system complies with federal financial systems requirements. Finally, for the ninth consecutive year, the Association of Government Accountants awarded the USPTO the Certificate of Excellence in Accountability Reporting for our FY 2010 Performance and Accountability Report, clearly demonstrating our excellence in integrating performance and accountability reporting.
The financial planning challenges of fiscal years 2009 and 2010 continued into FY 2011. Implementation of the USPTO 2010-2015 Strategic Plan was predicated on enactment of the FY 2011 President’s Budget, which included a proposed 15 percent interim patent fee surcharge. However, the USPTO’s final FY 2011 appropriation did not include this surcharge. As a result, the USPTO operated at a level that was about 10 percent below its FY 2011 requirements. This resulted in the need to limit or postpone the implementation of many strategic plan initiatives, such as hiring additional patent examiners to reduce patent pendency and backlog, opening our first field office, and investing in information technology.
In our 2010-2015 Strategic Plan, we identified funding authority to support agency performance objectives as a significant challenge in accomplishing our vision and mission. To address this challenge, we have proposed the establishment of a sustainable funding model that spans multiple years. Such a funding model would provide the USPTO with authority to set fees at the rates necessary to recover the cost of operations, spend the fees collected to support the Agency’s objectives, and the ability to adapt and manage Agency funding and spending as needs and workload demands change, thereby protecting the Agency against unforeseen disruptions in revenue.
The USPTO continues to work with the Administration and Congress to identify a funding model that is agile and employs a tolerance for variables and the inherent characteristics of forecasting workload demand, operations requirements, and resulting fee estimates. Recently, the Congress passed – and the President signed into law – the AIA (Pub. L. No. 112-29). The Act gives the USPTO, for the first time, the authority to set its fees by rule. In addition, the Act authorizes the USPTO to implement a 15 percent surcharge on most patent fees to provide for additional financial resources in the interim until the USPTO exercises its fee setting authority and develops a new fee structure that will provide better alignment of fees with the cost of operations over the long term. Further, to address our stakeholder’s concerns about unavailable fee collections, the Act creates the Patent and Trademark Fee Reserve Fund. Going forward, all fees that the Agency collects above our appropriated spending authority will be deposited in this Fee Reserve Fund, and will be available for spending to the extent provided for by annual appropriations acts.
The AIA was a huge step towards helping the USPTO to achieve financial stability. However, due to the mid-September timing of enactment, the Agency experienced an unanticipated surge in fee collections during the final two weeks of the fiscal year, as stakeholders rushed to pay fees in advance of the 15 percent surcharge taking effect. Unfortunately, this surge in fees collected was all in excess of our FY 2011 appropriation and therefore unavailable for expenditure. Additionally, these same fees were originally included in our FY 2012 projections. They will now not be collected and available to the agency in FY 2012 as originally expected. The USPTO continues to adjust our FY 2012 plans to account for this change.
Toward this end, we have already begun making advances in other areas of our sustainable funding model. During FY 2011, even faced with funding challenges, we maintained an operating reserve to manage multi-year plans and undertake long-term strategies for improvement in a financially viable way. This operating reserve is helping the USPTO to adapt to the changing FY 2012 funding outlook while continuing to focus scarce resources on the Administration’s goals to reduce patent pendency and the application backlog.
Our talented and committed employees continue to display great dedication toward producing a high standard of financial management at the USPTO. We look forward to the future with confidence as we continue to support the strategic direction of the USPTO by working as a trusted partner within the organization and providing sound advice to enable informed program and financial decision-making into FY 2012.
Anthony P. Scardino
Chief Financial Officer
November 4, 2011