Management Controls 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
- Federal Information Security Management Act
- 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
The USPTO continues to stay vigilant in ensuring that there are no material weaknesses in administrative controls over information systems and is always seeking methods of improving our secure configuration. With all mission and business systems fully certified and accredited, the USPTO systems have maintained full authority to operate since 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, 2005, while actions were being taken to address the findings, management had two recommendations outstanding on reports issued in FY 2004. Also, action was taken to close three recommendations contained in the audit reports issued in FY 2004 and prior. No new reports had been issued during FY 2005. A summary of audit findings and recommendations follows.
| Report for Fiscal Year | Status | Recommendation | Action Plan | Completion Date  1 |
|---|---|---|---|---|
| FY 2001 | Closed | Coordinate training in international intellectual property law enforcement and provide clarification of the Council's role to the other agencies involved. |
Additional staff was hired in May 2005 for enforcement activities. | May 2005 |
| FY 2004 | Open | Ensure that the USPTO works with Commerce and the Office of Personnel Management (OPM) to officially obtain delegated examining authority. | The USPTO has coordinated with OPM to grant us formal delegated examining authority status. The final decision is pending our corrections for staffing violations identified in the OPM audit of our existing delegated examining unit. | Estimated March 2006 |
| 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 February 2006 |
| FY 2004 | Closed | Ensure that the OHR staff using the automated staffing system comply with federal personnel regulations and the Veterans’ Employment Opportunities Act of 1998. | The OHR put 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. | September 2005 |
| FY 2004 | Closed | Ensure that the OHR staff possess the expertise and receive the training necessary to accomplish their assigned duties. | The OHR enacted 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. | May 2005 |
|
1. For the Delegated Examining Authority: The date of completion was revised to allow time to make corrections in response to a recent OPM audit. For the Organizational Policies: The Office of Human Resources is currently revamping, getting approval and implementing all 55 of its agency administrative orders, policies, and standard operating procedures. To complete this, the anticipated completion time was adjusted from last year. (back to text) |
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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. Government Standard General Ledger. The USPTO complied substantially with the FFMIA for FY 2005.
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 FY 2005 against performance targets established internally, by OMB, and the government-wide Metric Tracking System (MTS):
| Financial Performance Measure | FY 2005 Target | FY 2005 Performance |
|---|---|---|
| Percentage of Timely Vendor Payments (MTS) | 98% | 99% |
| 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 2005 Financial Statements (OMB) | Unqualified | Unqualified |
| Material Weaknesses Reported by OIG (OMB) | None | None |
| Timely Posting of Inter-Agency Charges (USPTO) | 30 days | 21 days |
| Average Processing Time for Travel Payments (USPTO) | 8 days | 7 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. In FY 2005, the USPTO did not pay interest penalties on 98.7 percent of the 8,045 vendor invoices processed, representing payments of approximately $459.6 million. Of the 186 invoices that were not processed in a timely manner, the USPTO was required to pay interest penalties on 109 invoices, and was not required to pay interest penalties on 77 invoices, where the interest was calculated at less than $1. The USPTO paid only $15 in interest penalties for every million dollars disbursed in FY 2005. Virtually all recurring payments were processed by 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 FY 2005.
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 the USPTO 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.
Improper Payments Information Act OF 2002
During FY 2005, the USPTO did not have any erroneous payments that exceeded the ten million dollar threshold. The USPTO identifies, analyzes, and compiles information regarding improper payments to determine when and if systemic and/or managerial issues exist that may require corrective actions on the part of the USPTO management. The USPTO identifies actual improper payments, 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.
While our erroneous payments were only 0.18 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 (CCR) database. The CCR database is maintained by the Department of Defense and requires all government contractors to maintain current contact and banking information. Implementation of an automated interface with the CCR database is planned for FY 2006.
Significant challenges encountered during FY 2005 included not only the lack of an automated interface with the CCR database, which requires the continued application of manual procedures for banking data verification, but also vendors failure to maintain current and accurate banking data within the CCR database.
| Program | FY 2004 Outlays | FY 2004 Im- proper Pay- ment Percent | FY 2004 Im- proper Pay- ment Dollars | FY 2005 Outlays | FY 2005 Im- proper Pay- ment Percent | FY 2005 Im- proper Pay- ment Dollars | FY 2006 Im- proper Pay- ment Percent | FY 2007 Im- proper Pay- ment Percent | FY 2008 Im- proper Pay- ment Percent |
|---|---|---|---|---|---|---|---|---|---|
| Patent | $1,109 | 0.03% | $0.42 | $1,247 | 0.18% | $2.21 | 0.00% | 0.00% | 0.00% |
| Trademark | 137 | 0.01% | 0.05 | 155 | 0.19% | 0.30 | 0.00% | 0.00% | 0.00% |
| Total | $1,246 | 0.04% | $0.47 | $1,402 | 0.18% | $2.51 | 0.00% | 0.00% | 0.00% |
|
Amount subject to review
|
$159.4 |
|---|---|
|
Number of invoices subject to review
|
4,433 |
|
Actual amount received
|
$107.3 |
|
Number of invoices actually reviewed
|
985 |
|
Remaining amount to review
|
$ 24.7 |
|
Number of invoices remaining to review
|
86 |
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, leaving simplified acquisitions available to audit.
The audit, to date, has resulted in two invoices that have been identified as potentially recoverable improper payments, which are insignificant. Confirmation with the vendors is in progress. No amounts were recovered as of the end of FY 2005.
