Report

on the financial statements of the Community Plant Variety Office concerning the financial year 2002, together with the Office's replies

(2003/C 319/12)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Management Board of the Community Plant Variety Office (hereinafter referred to as "the Office"), pursuant to Article 111(2) of Council Regulation (EC) No 2100/94(1).

2. The Court has examined the Office's financial statements for the financial year ended 31 December 2002. In accordance with Article 110 of Council Regulation (EC) No 2100/94, the Office's budget was implemented on the responsibility of its President. This responsibility includes the drawing-up and presentation of the financial statements(2) in accordance with the internal financial provisions adopted on the basis of Article 112 of Council Regulation (EC) No 2100/94. The Court is required pursuant to Article 248 of the Treaty establishing the European Community to examine these accounts.

3. The Court carried out the audit in accordance with its auditing policies and standards. These have been adapted from generally accepted international auditing standards to reflect the specific nature of the Community context. The Court carried out such tests of the accounting records and applied such other audit procedures as it deemed necessary in the circumstances. Through this audit the Court obtained a reasonable basis for the opinion expressed below.

4. This examination has enabled the Court to obtain reasonable assurance that the annual accounts for the financial year ended 31 December 2002 are reliable and that the underlying transactions, taken as a whole, are legal and regular.

OBSERVATIONS

Introduction

5. The Office was created by Regulation (EC) No 2100/94 of 27 July 1994 to grant industrial property rights for plant varieties that would be valid throughout the European Union. In order to grant such rights, the Office first examines the admissibility of the applications which are submitted to it. Applications which are deemed valid are forwarded for analysis to national examination centres which, for a fee, assess the originality of the varieties for which a protection application has been submitted.

Implementation of the budget

6. The implementation of the appropriations for the financial year 2002 and of the appropriations carried over from the previous financial year is shown in Table 1.

7. Commitments against the appropriations for the financial year 2002 totalled 8,9 million euro. Payments made against the commitments amounted to 4,3 million euro and a total of 3,9 million euro was carried over. The volume of carryovers remained high, especially in the case of appropriations for operating activities.

8. The monitoring and recovery of non-recurring revenue could be improved. Debit notes are not sent to debtors or, when they are issued, are inadequately monitored from an accounting point of view. By way of example, the Office failed to seek payment from the Office for Official Publications of the European Communities of revenue totalling 0,1 million euro owed since 1999.

Financial statements

9. The revenue and expenditure account and the balance sheet published by the Office in its activity report for the financial year 2002 are shown in summary form in Tables 2 and 3.

10. The balance sheet as at 31 December 2002 mentions a reserve of 11029000 euro. The reserve fund in question is the one provided for in Article 6(2)(d) of the Office's Financial Regulation. As the Office has its own resources, it may establish a reserve fund so as to preserve its self-financing capacity. However, in keeping with the spirit of the basic Regulation, the Court asks the Office to ensure that this reserve does not needlessly exceed its envisaged financial requirements.

11. The Office makes no checks to ensure that the charges and interest (615000 euro in 2002) of which it is notified by its banks are accurate.

12. When the Office closed the accounts for the financial year 2002, it had to adjust the VAT amounts entered in the accounts in order to correct errors that had arisen following changes in the accounting methods used. The Office should continue its efforts to ensure that VAT is correctly entered in the accounts. Furthermore, it should take greater care when submitting its requests for VAT refunds.

Legality and regularity of the underlying transactions

13. In order to receive Community protection, a new plant variety must display certain technical characteristics. These characteristics are verified by examination centres, according to a standard protocol, at the request and on behalf of the Office. The centres charge the Office a flat rate stipulated by contract.

14. In some cases one of the characteristics of a plant variety cannot be verified on the basis of the standard protocol and the examination centre has to carry out additional work. The cost of the additional work is billed either directly to the applicant or to the Office, which then passes on the charge to the applicant.

15. At the very least, the contracts between the Office and the examination centres should include the provisions covering these additional tests and the guarantees for ensuring that they are actually paid for.

16. As regards the billing of employment-agency staff, the Office issued commitments only after it had received each invoice. This practice is contrary to Article 29(1) of the Office's Financial Regulation.

17. Advances are paid by the Office in the absence of an invoice. According to the applicable legislation, this type of payment should be made only on the basis of formal invoices(3) which explicitly mention the amount of VAT.

18. As regards the procedures for signing contracts, shortcomings were noted in estimates of the volume of services to be provided and in the procedures for evaluating bids. As a result, companies obtained additional contracts worth more than 50 % of the initial contract.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 15 and 16 October 2003.

For the Court of Auditors

Juan Manuel Fabra Vallés

President

(1) OJ L 227, 1.9.1994, p. 27.

(2) In accordance with Article 111(2) of Council Regulation (EC) No 2100/94, the accounts for all the Office's revenue and expenditure for the financial year 2002 were drawn up on 16 September 2003 and forwarded to the Court of Auditors. The Court received these accounts on 25 September 2003. A summarised version of these financial statements is presented in the tables attached to this report.

(3) Obligation stipulated by Article 289. I of the Code général des impôts français: "Tout assujetti doit délivrer une facture ou un document en tenant lieu pour les biens livrés ou les services rendus à un autre assujetti ou à une personne morale non assujettie, ainsi que pour les acomptes perçus au titre de ces opérations lorsqu'ils donnent lieu à exigibilité de la taxe" [Every taxable person shall issue an invoice or acceptable substitute document in respect of goods supplied or services rendered to another taxable person or to a legal person not subject to taxation and, similarly, in respect of advanced payments received as part of such transaction when tax is due on them].

Table 1

Community Plant Variety Office - Implementation of the budget for the financial year 2002NB:

Any discrepancies in the totals are due to the effect of rounding.

Source:

Office data. These tables summarise the data provided by the Office in its own financial statements.

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Table 2

Community Plant Variety Office - Revenue and expenditure account for the financial years 2002 and 2001

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NB:

Any discrepancies in totals are due to the effects of rounding.

Source:

The Office's data.

Table 3

Community Plant Variety Office - Balance sheet as at 31 December 2002 and 31 December 2001NB:

Any discrepancies in totals are due to the effects of rounding.

Source:

The Office's data.

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The Office's Replies

8. For the follow-up of non-routine operations, the Office will take action to try to improve the follow-up of non-routine receipts.

10. The fees regulation has been revised with the aim of reducing the reserve to a level that is in line with the financial needs of the Office.

11. The Office is considering the possibilities of checking the amounts of bank charges and interest reported by the banks.

12. The Office takes note of the observation of the Court. It will study the ways to improve the management and the follow-up of its VAT accounts.

15. A more explicit reference to the contractual handling of additional tests and their remuneration will be made when amending the contracts with the examination offices.

16. The practice described by the Court has been discontinued. Since the beginning of 2003 provisional commitments are registered as such, rather than as "pre-commitments".

17. The Office will insist on receiving invoices in full compliance with the applicable law.

18. In the future, the Office will take measures to evaluate as precisely as possible the expected values of the contract.