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Report of Independent Auditors

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KPMG LLP
2001 M Street NW
Washington, DC 20036-3389

 

Inspector General, U.S. Department of Commerce and
Under Secretary of Commerce for Intellectual Property and
  Director of the U.S. Patent and Trademark Office:

We have audited the accompanying consolidated balance sheets of the United States Patent and Trademark Office (USPTO) as of September 30, 2011 and 2010, and the related consolidated statements of net cost and changes in net position and, combined statements of budgetary resources for the years then ended (hereinafter referred to as “consolidated financial statements”). The objective of our audits was to express an opinion on the fair presentation of these consolidated financial statements. In connection with our fiscal year 2011 audit, we also considered the USPTO’s internal control over financial reporting and tested the USPTO’s compliance with certain provisions of applicable laws, regulations, and contracts that could have a direct and material effect on these consolidated financial statements.

Summary

As stated in our opinion on the consolidated financial statements, we concluded that the USPTO’s consolidated financial statements referred to above are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles.

Our consideration of internal control over financial reporting was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses as defined in the Internal Control Over Financial Reporting section of this report.

The results of our tests of compliance with certain provisions of laws, regulations, and contracts disclosed no instances of noncompliance or other matters that are required to be reported herein under Government Auditing Standards and OMB Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as amended.

The following sections discuss our opinion on the USPTO’s consolidated financial statements; our consideration of the USPTO’s internal control over financial reporting; our tests of the USPTO’s compliance with certain provisions of applicable laws, regulations, and contracts; and management’s and our responsibilities.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of the United States Patent and Trademark Office as of September 30, 2011 and 2010, and the related consolidated statements of net cost and changes in net position and the combined statements of budgetary resources for the years then ended.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the United States Patent and Trademark Office as of September 30, 2011 and 2010, and its net costs, changes in net position, and budgetary resources for the years then ended, in conformity with U.S. generally accepted accounting principles.

The information in the Management’s Discussion and Analysis and Required Supplementary Information sections is not a required part of the consolidated financial statements, but is supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this information. However, we did not audit this information and, accordingly, we express no opinion on it.

Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The consolidated statements of cash flow for the years ended September 30, 2011 and 2010 are presented for purposes of additional analysis of the consolidated financial statements and are not a required part of the consolidated financial statements. The consolidated statements of cash flow for the years ended September 30, 2011 and 2010 have been subjected to the auditing procedures applied in the audit of the consolidated financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the consolidated financial statements taken as a whole. The information in the Message from the Under Secretary of Commerce for Intellectual Property and Director of the USPTO section, the Message from the Chief Financial Officer section, and the Other Accompanying Information section are presented for purposes of additional analysis and are not required as part of the consolidated financial statements. This information has not been subjected to auditing procedures and, accordingly, we express no opinion on it.

Internal Control Over Financial Reporting

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose described in the Responsibilities section of this report and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. In our fiscal year 2011 audit, we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

Exhibit I presents the status of the prior year significant deficiency.

We noted certain additional matters that we have reported to management of the USPTO in a separate letter.

Compliance and Other Matters

The results of our tests of compliance described in the Responsibilities section of this report disclosed no instances of noncompliance or other matters that are required to be reported herein under Government Auditing Standards or OMB Bulletin No. 07-04.

* * * * * * *

Responsibilities

Management’s Responsibilities. Management is responsible for the consolidated financial statements; establishing and maintaining effective internal control; and complying with laws, regulations, and contracts applicable to the USPTO.

Auditors’ Responsibilities. Our responsibility is to express an opinion on the fiscal year 2011 and 2010 consolidated financial statements of the USPTO based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Bulletin No. 07-04. Those standards and OMB Bulletin No. 07-04 require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the USPTO’s internal control over financial reporting. Accordingly, we express no such opinion.

An audit also includes:

  • Examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements;
  • Assessing the accounting principles used and significant estimates made by management; and
  • Evaluating the overall financial statement presentation.

We believe that our audits provide a reasonable basis for our opinion.

In planning and performing our fiscal year 2011 audit, we considered the USPTO’s internal control over financial reporting by obtaining an understanding of the USPTO’s internal control, determining whether internal controls had been placed in operation, assessing control risk, and performing tests of controls as a basis for designing our auditing procedures for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the USPTO’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the USPTO’s internal control over financial reporting. We did not test all controls relevant to operating objectives as broadly defined by the Federal Managers’ Financial Integrity Act of 1982.

As part of obtaining reasonable assurance about whether the USPTO’s fiscal year 2011 consolidated financial statements are free of material misstatement, we performed tests of the USPTO’s compliance with certain provisions of laws, regulations, and contracts, noncompliance with which could have a direct and material effect on the determination of the consolidated financial statement amounts, and certain provisions of other laws and regulations specified in OMB Bulletin No. 07-04. We limited our tests of compliance to the provisions described in the preceding sentence, and we did not test compliance with all laws, regulations, and contracts applicable to the USPTO. However, providing an opinion on compliance with laws, regulations, and contracts was not an objective of our audit and, accordingly, we do not express such an opinion.


This report is intended solely for the information and use of the USPTO management, the U.S. Department of Commerce management, the U.S. Department of Commerce Office of Inspector General and is not intended to be and should not be used by anyone other than these specified parties.

Signature of K P M G  L L P.

November 4, 2011

United States Patent and Trademark Office
Last Modified: 01/03/2012 14:04:41