Report of Independent Auditors' – Cover Letter

I am pleased to provide you with the attached audit report required by the Chief Financial Officers Act of 1990, as amended, which presents an unqualified opinion on the Department of Commerce’s FY 2007 consolidated financial statements. The audit results indicate that the Department has established an internal control structure that facilitates the preparation of reliable financial and performance information. We commend the Department for the noteworthy accomplishment of once again attaining an unqualified opinion—the ninth consecutive year.

The independent public accounting firm of KPMG LLP performed the audit of the Department’s financial statements for the year ended September 30, 2007. The contract required that the audit be done in accordance with U.S. generally accepted government auditing standards and Office of Management and Budget Bulletin 07-04, Audit Requirements for Federal Financial Statements.

In its audit of the Department, KPMG found that:

• the financial statements were fairly presented, in all material respects and in conformity with U.S. generally accepted accounting principles;
• there was one significant deficiency related to weaknesses in controls over the Department’s financial management systems (but not considered a material weakness in internal control as defined in the independent auditors’ report);
• there were no instances in which the Department’s financial management systems did not substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996;
• there was one instance in which the Department did not comply with other laws and regulations (Anti-Deficiency Act violation at the National Oceanic and Atmospheric Administration); and
• there was one additional concern in which the Department’s Office of General Counsel is reviewing whether the United States Patent and Trademark Office violated the Anti-Deficiency Act and the Patent and Trademark Fee Fairness Act of 1999 during fiscal year 2005. However, a conclusion has not yet been reached.

The Department implemented corrective actions during FY 2007 to resolve many of the previously identified information technology control weaknesses and agreements in violation of the Anti-Deficiency Act. These actions and management’s expression of its intent to resolve the remaining and newly identified weaknesses are evidence of the Department’s continued commitment to sound financial management, effective internal controls, and reliable financial/performance information.

My office oversaw the audit performance and delivery. We reviewed KPMG’s report and related documentation and made inquiries of its representatives. Our review disclosed no instances where KPMG did not comply, in all material respects, with U.S. generally accepted government auditing standards. However, our review cannot be construed as an audit in accordance with U.S. generally accepted government auditing standards. It was not intended to enable us to express, and we do not express, any opinion on the Department’s consolidated financial statements, conclusions about the effectiveness of internal controls, or conclusions on compliance with laws, regulations, contracts, and grant agreements. KPMG is solely responsible for the attached audit report dated November 9, 2007, and the conclusions expressed in the report.

An audit action plan is not required to address the significant deficiency reported by KPMG. However, we ask that you provide a plan addressing the related specific recommendations included in the separate, limited-distribution information technology general controls report (FSD-18530-8-0001) in accordance with Department Administrative Order 213-5.

If you wish to discuss the contents of this report, please call me on (202) 482-4661, or John Seeba, Assistant Inspector General for Auditing, on (202) 482-5910. We appreciate the cooperation and courtesies the Department extended to both KPMG and my staff during the audit.

Attachment

cc:	Otto J. Wolff Chief Financial Officer and Assistant Secretary for Administration Barry C. West Chief Information Officer Jon W. Dudas Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office