|Performance and Accountability Report Fiscal Year 2007
Management's Discussion and Analysis
Management Assurances and Compliance with Laws and Regulations
This section provides information on the USPTO’s compliance with the following legislative mandates:
Federal Managers’ Financial Integrity Act
The FMFIA requires federal agencies to provide an annual statement of assurance regarding management controls and financial systems. The USPTO management is responsible for establishing and maintaining effective internal control and financial management systems that meet the objectives of the FMFIA. The objectives of internal control, as defined by the Government Accountability Office (GAO), are to ensure:
The statement of assurance is provided at right, which includes one Section 2 material weakness for IT security discussed in further detail in the Federal Information Security Management Act section below. This statement was based on the review and consideration of a wide variety of evaluations, control assessments, internal analyses, reconciliations, reports, and other information, including the DOC OIG audits, and the independent public accountants’ opinion on the USPTO’s financial statements and their reports on internal control and compliance with laws and regulations. In addition, USPTO is not identified on the GAO’s High Risk List related to controls governing various areas.
Federal Financial Management Improvement Act
The FFMIA requires Federal agencies to report on agency substantial compliance with Federal financial management system requirements, Federal accounting standards, and the U.S. Standard General Ledger at the transaction level. The USPTO complied substantially with the FFMIA for FY 2007.
Other Compliance with Laws and Regulations
Federal Information Security Management Act
The USPTO continues to stay vigilant in reviewing administrative controls over information systems and is always seeking methods of improving our secure configuration. All mission and business systems are fully certified and accredited, with full authority to operate. In addition, during FY 2007, all ten contractor systems were certified and accredited, receiving full authority to operate.
During FY 2007, the USPTO made significant progress, including improved processes and documentation. However, since some weaknesses remain, we are continuing to report the material weakness in IT Security, in recognition of the need for compliance with Government guidance on IT Security and to reconfirm its commitment to the protection of our Nation’s intellectual capital information systems.
While the USPTO IT Security Program has made significant strides within the past year, there remain several security areas that require improvement. Specific areas that have been improved upon during FY 2007 include the C&A process of contractor systems, continuous monitoring of IT systems, and improvement of C&A packages for Federal systems. In addition, upon issuance of the authority to operate for the Patent Automation Program, the OMB removed the USPTO from their Management Watch List.
During FY 2008, the USPTO will continue to improve upon the remaining weaknesses.
Inspector General Act Amendments
The Inspector General Act, as amended, requires semi-annual reporting on IG audits and related activities, as well as any requisite agency follow-up. The report is required to provide information on the overall progress on audit follow-up and internal management controls, statistics on audit reports with disallowed costs, and statistics on audit reports with funds put to better use. The USPTO did not have audit reports with disallowed costs or funds put to better use.
The USPTO’s follow-up actions on audit findings and recommendations are essential to improving the effectiveness and efficiency of our programs and operations. As of September 30, 2007, management had two recommendations outstanding from a report issued in FY 2004 (USPTO-BTD-16432-4-0001: “USPTO Needs Strong Office of Human Resources Management Capable of Addressing Current and Future Challenges”). No new reports had been issued during FY 2007. A summary of audit findings and recommendations follows.
OMB Financial Management Indicators
The Office of Management and Budget (OMB) prescribes the use of quantitative indicators to monitor improvements in financial management. The USPTO tracks other financial performance measures as well. The table above shows the USPTO’s performance during FY 2007 against performance targets established internally and by OMB and the government-wide Metric Tracking System (MTS).
Prompt Payment Act
The Prompt Payment Act requires Federal agencies to report on their efforts to make timely payments to vendors, including interest penalties for late payments. In FY 2007, the USPTO did not pay interest penalties on 98.0 percent of the 8,740 vendor invoices processed, representing payments of approximately $629.9 million. Of the 270 invoices that were not processed in a timely manner, the USPTO was required to pay interest penalties on 176 invoices, and was not required to pay interest penalties on 94 invoices, where the interest was calculated at less than $1. The USPTO paid only $30 in interest penalties for every million dollars disbursed in FY 2007. Virtually all recurring payments were processed by electronic funds transfer in accordance with the electronic funds transfer provisions of the Debt Collection Improvement Act of 1996.
Civil Monetary Penalty Act
There were no Civil Monetary Penalties assessed by the USPTO during FY 2007.
Debt Collection Improvement Act
The Debt Collection Improvement Act prescribes standards for the administrative collection, compromise, suspension, and termination of Federal agency collection actions, and referral to the proper agency for litigation. Although the Act has no material effect on the USPTO since it operates with minimal delinquent debt, all debt more than 180 days old has been transferred to the U.S. Department of the Treasury for cross-servicing.
Biennial Review of Fees
The Chief Financial Officers Act of 1990 requires a biennial review of agency fees, rents, and other charges imposed for services and things of value it provides to specific beneficiaries as opposed to the American public in general. The objective of the review is to identify such activities and to begin charging fees, where permitted by law, and to periodically adjust existing fees to reflect current costs or market value so as to minimize general taxpayer subsidy of specialized services or things of value (such as rights or privileges) provided directly to identifiable non-Federal beneficiaries. The USPTO is a fully fee-funded agency without subsidy of general taxpayer revenue. For non-legislative fees, it uses ABC accounting to evaluate the costs of activities and determine if fees are set appropriately. When necessary, fees are adjusted to be consistent with the program and with the legislative requirement to recover full cost of the goods or services provided to the public.
In September 2007, the USPTO implemented a patent fee increase commensurate with the last 12 months’ increase in the Consumer Price Index. A large scale fee restructuring is underway, comparing fees to costs at the fee code level. This study is on-going and is expected to continue through FY 2008.
Improper Payments Information Act of 2002
During FY 2007, the USPTO did not have any erroneous payments that exceeded the ten million dollar threshold. While our erroneous payments were only 0.04 percent of total disbursements and primarily related to inaccurate banking information, we plan to further reduce this percentage through our use of the government-wide Central Contractor Registration database maintained by the Department of Defense, which requires all government contractors to maintain current contact and banking information. The USPTO identifies overpayments and erroneous payments by reviewing (1) credit memos and refund checks issued by vendors or customers and (2) undelivered electronic payments returned by financial institutions.
During FY 2005, the USPTO entered into an agreement with the DOC to use an existing contract for recovery audit services. The audit was limited to closed obligations greater than $0.1 million. Further excluded were grants, travel payments, purchase card transactions, inter-agency agreements, government bills of lading, and gift and bequest transactions.
The audit was completed in FY 2006 and resulted in three invoices that were identified as recoverable improper payments, which are insignificant. The improper payments identified of $0.1 million were recovered during FY 2006. No additional actions were taken in FY 2007.
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