Report of Independent Auditors on Internal Control

To the Office of Inspector General,
Department of Commerce, and
Under Secretary of Commerce for Intellectual Property and Director of the United States
Patent and Trademark Office

We have audited the financial statements of the U.S. Patent and Trademark Office (USPTO) as of and for the years ended September 30, 2001 and 2000, and have issued our report thereon dated December 28, 2001. We conducted our audits in accordance with auditing standards generally accepted in the United States; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and, Office of Management and Budget (OMB) Bulletin 01-02, Audit Requirements for Federal Financial Statements.

In planning and performing our audits, we considered the USPTO's internal control over financial reporting by obtaining an understanding of the USPTO’s internal control, determined whether internal control had been placed in operation, assessed control risk, and performed tests of controls in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements. We limited our internal control testing to those controls necessary to achieve the objectives described in OMB Bulletin 01-02. We did not test all internal control relevant to operating objectives as broadly defined by the Federal Managers’ Financial Integrity Act, such as those controls relevant to ensuring efficient operations. The objective of our audits was not to provide assurance on internal control. Consequently, we do not provide an opinion on internal control.

Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be reportable conditions. Under standards issued by the American Institute of Certified Public Accountants, reportable conditions are matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the USPTO’s ability to record, process, summarize, and report financial data consistent with the assertions by management in the financial statements. Material weaknesses are reportable conditions in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Because of inherent limitations in internal control, misstatements, losses or noncompliance may nevertheless occur and not be detected. However, we noted no matters involving the internal control and its operation that we considered to be material weaknesses as defined above.

In addition, with respect to internal control related to performance measures reported in the Management’s Discussion and Analysis (MD&A), we obtained an understanding of the design of internal control relating to the existence and completeness assertions and determined whether they have been placed in operation, as required by OMB Bulletin 01-02. Our procedures were not designed to provide assurance on internal control over reported performance measures, and, accordingly, we do not provide an opinion on such controls.

Separate letters, dated October 12, 2001 and December 28, 2001, were provided to management that further discuss certain matters related to electronic data processing and other matters that came to our attention, respectively, as a result of our audits.

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

December 28, 2001