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Management Controls and Compliance With Laws and Regulations

T his section provides information on the USPTO’s compliance with the following legislative mandates:

  • Federal Managers' Financial Integrity Act (FMFIA)
  • Federal Information Security Management Act (FISMA)
  • Inspector General (IG) Act Amendments
  • Federal Financial Management Improvement Act (FFMIA)
  • OMB Financial Management Indicators
  • Prompt Payment Act
  • Civil Monetary Penalty Act
  • Debt Collection Improvement Act
  • Biennial Review of Fees
  • Improper Payments Information Act of 2002

Federal Managers’ Financial Integrity Act

The FMFIA requires federal agencies to provide an annual statement of assurance regarding management controls and financial systems. The statement of assurance is provided in the Director's opening letter at the front of this Performance and Accountability Report. 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 Department of Commerce 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 Government Accountability Office's (GAO) High Risk List related to controls governing various areas.

Federal Information Security Management Act

In fiscal year 2002, none of our critical information systems had received certification and accreditation (C&A). At that time, OIG recommended declaration of a material weakness until the C&A had been completed for all mission critical and classified systems. During fiscal year 2003, the OIG reviewed the USPTO IT Security Program and reported substantial improvement over the previous year, with the Network Perimeter receiving full authority to operate (ATO) and the remaining mission critical and classified systems receiving an interim ATO.

While the OIG reflected this progress in its annual Federal Information Security Management Act review for the Department of Commerce Read Footnote 1 1 , the report recommended that USPTO repeat its material weakness declaration in fiscal year 2003 until all mission critical and classified systems received full ATO.

In fiscal year 2004, we accomplished rigorous C&A in accordance with government standards for all mission-critical and classified systems and reduced the risks to a level sufficient for the Designated Approving Authorities to justify granting full ATO. With the last of these ATOs having been granted in March 2004, thereby removing the condition that previously compelled the USPTO to declare a material weakness, the USPTO no longer has a material weakness in its IT Security Program. In addition, all business-essential systems have completed C&A activities and achieved full accreditation with ATO in September 2004.

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, 2004, while actions were being taken to address the findings, management had one recommendation outstanding on reports issued in fiscal year 2002 and prior. Also, action was taken to close one recommendation contained in the one audit report issued in fiscal year 2004. This audit report still has four recommendations remaining open. A summary of audit findings and recommendations follows.

Status of IG Act Amendments Audit Recommendations
as of September 30, 2004
Report for Fiscal Year Status Recommendation Action Plan Completion Date
FY 2001 Closed To improve overall personnel operations regarding the clearing of backlogged personnel actions forms and strengthening internal controls over the Official Personnel Files (OPF). A quarterly review began 10/1/02. All missing SF-50s have been printed for all on-site OPFs. OPFs that are currently signed out by others in the USPTO organization will be audited as they are returned over the next fiscal year. April 2004
FY 2001 Open Coordinate training in international intellectual property law enforcement and provide clarification of the Council's role to the other agencies involved.
One additional full-time equivalent was hired in August 2003. When the action plan was developed several years ago, it was envisioned that the enforcement staff levels would increase significantly. Estimated January 2005
FY 2002 Closed Reexamine the recruiting process to determine whether recruiting techniques can be developed to better identify those applicants most suited, and those not suited, for the patent examination process. The partnership with the US Office of Personnel Management (OPM) to conduct a study to determine if we can develop patent examiner candidate characteristic and a series of questions for use as a recruiting tool has been delayed due to uncertainty in our budget and patent examiner hiring levels. However, as an interim measure, before candidates for examiner positions are appointed, designated certifying officials in each Technology Center assess the communication skills of applicants through oral interviews and review of the writing sample submitted via the on-line application. June 2004
FY 2002 Closed Reexamine the recruiting process to better inform patent examiner applicants about the nature of USPTO's production-oriented work environment. A website dedicated to patent examiner recruitment was completed in August 2004. The website features information on the USPTO, the skill sets necessary for the positions of patent examiner, job opportunities, and linkage to an on-line application, which includes submission of a sample written communication. A revised recruitment CD, with upgraded information and new soundbytes, was also completed in August 2004." August 2004
FY 2004 Open Ensure that the USPTO works with the Department of Commerce and OPM to officially obtain delegated examining authority.
The USPTO has coordinated with the Department of Commerce to request that OPM grant us formal delegated examining authority status. Estimated November 2004
FY 2004 Open Ensure that the USPTO develops Office of Human Resources (OHR) organizational descriptions, policies, and procedures, in accordance with the intent of DOO 10-14. The USPTO is now in the process of updating all our OHR policies, operating procedures, and processes. We have also developed the OHR Policy Document Control system to track and maintain our policies and procedures. Estimated June 2005
FY 2004 Open Ensure that the OHR staff using the automated staffing system comply with federal personnel regulations and the VEOA.
The OHR is putting measures in place to ensure that our staff is trained on the automated staffing system and that appropriate safeguards are in place to ensure that we are in compliance with all legal and regulatory requirements. Estimated December 2004
FY 2004 Closed Ensure that the OHR Director position, as described, be properly classified. The Director of OHR position is classified as a GS-201-15, and we have advertised the position accordingly. September 2004
FY 2004 Open Ensure that the OHR staff possess the expertise and receive the training necessary to accomplish their assigned duties. The OHR is putting into place a framework that will ensure that all staff members receive the necessary training to accomplish their assigned duties, to include counseling employees on strengths and weaknesses, developing an Individual Development Plan for each employee that will set forth how skill gaps will be filled, and providing both in-house and third-party training opportunities to address skill gaps. Estimated March 2005

Federal Financial Management Improvement Act

The FFMIA requires federal agencies to report an agency's substantial compliance with federal financial management system requirements, Federal accounting standards, and the U.S. Government Standard General Ledger. The USPTO complied substantially with the FFMIA for fiscal year 2004.

OMB Financial Management Indicators

The OMB prescribes the use of quantitative indicators to monitor improvements in financial management. The USPTO tracks other financial performance measures as well. The table below shows the USPTO's performance during fiscal year 2004 against performance targets established internally and by OMB:

USPTO FY 2004 Financial Performance Measures
Financial Performance Measure FY 2004 Target FY 2004 Performance
Percentage of Timely Vendor Payments (OMB) 95% 98%
Percentage of Payroll by Electronic Transfer (OMB) 90% 99%
Percentage of Treasury Agency Locations Fully Reconciled (OMB) 95% 100%
Timely Reports to Central Agencies (OMB) 95% 100%
Audit Opinion on FY 2004 Financial Statements (OMB) Unqualified Unqualified
Material Weaknesses Reported by OIG (OMB) None None
Timely Posting of Inter-Agency Charges (USPTO) 30 days 26 days
Average Processing Time for Travel Payments (USPTO) 8 days 8 days

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. The USPTO's performance continues to exceed the government-wide goal of 95 percent of payments on time. In fiscal year 2004, the USPTO did not pay interest penalties on 98.2 percent of the 9,015 vendor invoices processed, representing payments of approximately $442.1 million. Of the 362 invoices that were not processed in a timely manner, the USPTO was required to pay interest penalties on 161 invoices, and was not required to pay interest penalties on 201 invoices, where the interest was calculated at less than $1. The USPTO paid only $49 in interest penalties for every million dollars disbursed in fiscal year 2004. Virtually all recurring payments were processed by electronic funds transfer (EFT) in accordance with the EFT provisions of the Debt Collection Improvement Act of 1996.

Civil Monetary Penalty Act

There were no Civil Monetary Penalties assessed by the USPTO during fiscal year 2004.

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. 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.

Improper Payments Information Act OF 2002

During fiscal year 2004, 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 a 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 erroneous payments by reviewing (1) credit memos and refund checks issued by vendors or customers, (2) undelivered electronic payments returned by financial institutions, (3) NFC payroll error reports, and (4) by ensuring the accuracy of all personnel actions transmitted to NFC.

Improper Payment Reduction Outlook (Dollars in millions)
Program FY 2004 Outlays FY 2004 Improper Payment Percent FY 2004 Improper Payment Dollars FY 2005 Improper Payment Percent FY 2006 Improper Payment Percent FY 2007 Improper Payment Percent
Patent $1,109 0.03% $0.42 0.00% 0.00% 0.00%
Trademark    137 0.01%  0.05 0.00% 0.00% 0.00%
Total $1,247 0.04% $0.47 0.00% 0.00% 0.00%



1. Independent Evaluation of the Department of Commerce's Information Security Program Under the Federal Information Security Management Act, Final Inspection Report No. OSE-16146, Sep 2003. (back to text)

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Last Modified: 7/4/2009 1:15:01 PM