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Performance and Accountability Report Fiscal Year 2009
Independent Auditors' Report

Table of Contents | Management | Financial | Auditor | IG | Other

Report of Independent Auditors

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KPMG LLP
2001 M Street NW
Washington, DC 20036

 

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 U.S. Patent and Trademark Office (USPTO), an agency within the U.S. Department of Commerce, as of September 30, 2009 and 2008, and the related consolidated statements of net cost, changes in net position, cash flows, and combined statements of budgetary resources (hereinafter referred to as “financial statements”) for the years then ended. The objective of our audits was to express an opinion on the fair presentation of these financial statements. In connection with our fiscal year 2009 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 financial statements.

Summary

As stated in our opinion on the financial statements, we concluded that the USPTO’s financial statements as of and for the years ended September 30, 2009 and 2008, are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles.

Our consideration of internal control over financial reporting resulted in one matter related to weaknesses in the USPTO’s general information technology controls being identified as a significant deficiency. However, this significant deficiency is not considered to be a material weakness.

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 under Government Auditing Standards, issued by the Comptroller General of the United States, and Office of Management and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as amended.

The following sections discuss our opinion on the USPTO’s 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 U.S. Patent and Trademark Office as of September 30, 2009 and 2008, and the related consolidated statements of net cost, changes in net position, cash flows, and the combined statements of budgetary resources for the years then ended.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the U.S. Patent and Trademark Office as of September 30, 2009 and 2008, and its net costs, changes in net position, budgetary resources, and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

The information in the Management’s Discussion and Analysis section is not a required part of the 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 financial statements taken as a whole. The information in the Other Accompanying Information section on pages 110 through 141 are presented for purposes of additional analysis and are not required as part of the financial statements. This information has not been subjected to auditing procedures and, accordingly, we express no opinion on it.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Our consideration of the internal control over financial reporting was for the limited purpose described in the Responsibilities section of this report and would not necessarily identify all deficiencies in the internal control over financial reporting that might be significant deficiencies or material weaknesses.

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 significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the USPTO’s financial statements will not be prevented, or detected and corrected on a timely basis.

In our fiscal year 2009 audit, we identified the following matter related to the USPTO’s financial management systems, summarized below, and in more detail in Exhibit I, that we consider to be a significant deficiency. However, we do not believe this significant deficiency is a material weakness.

General information technology controls. We found that although the USPTO has taken corrective actions to address certain information technology (IT) control weaknesses, general IT weaknesses still exist. Despite the positive efforts made by the USPTO, the USPTO needs to make continued improvement in its IT general control environment to fully ensure that financial data being processed on the USPTO’s systems has integrity, is confidentially maintained, and is available when needed.

Exhibit II presents the status of the prior year significant deficiencies.

We noted certain additional matters that we reported to management of the USPTO in two separate documents addressing the information technology and other internal control matters, respectively.

COMPLIANCE AND OTHER MATTERS

The results of our tests of compliance as described in the Responsibilities section of this report, exclusive of those referred to in the Federal Financial Management Improvement Act of 1996 (FFMIA), 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.

The results of our tests of FFMIA disclosed no instances in which the USPTO’s financial management systems did not substantially comply with the (1) Federal financial management systems requirements, (2) applicable Federal accounting standards, and (3) the United States Government Standard General Ledger at the transaction level.

* * * * * * *

RESPONSIBILITIES

Management’s Responsibilities. Management is responsible for the 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 2009 and 2008 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 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 2009 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 financial statements. We did not test all controls relevant to operating objectives as broadly defined by the Federal Managers’ Financial Integrity Act of 1982. The objective of our audit was not to express 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.

As part of obtaining reasonable assurance about whether the USPTO’s fiscal year 2009 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 financial statement amounts, and certain provisions of other laws and regulations specified in OMB Bulletin No. 07-04, including the provisions referred to in Section 803(a) of FFMIA. 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.


The USPTO’s response to the significant deficiency identified in our audit is presented in Exhibit I. We did not audit the USPTO’s response and, accordingly, we express no opinion on it.

This report is intended solely for the information and use of the USPTO’s and the U.S. Department of Commerce’s management, the U.S. Department of Commerce’s Office of Inspector General, OMB, the U.S. Government Accountability Office, and the U.S. Congress 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 5, 2009

 

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