Report

on the financial statements of the Office for Harmonization in the Internal Market for the financial year 2001, together with the Office's replies

(2002/C 326/12)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Budget Committee of the Office for Harmonisation in the Internal Market in accordance with Article 137(2) of Council Regulation (EC) No 40/94(1).

2. The Court has examined the financial statements of the Office for Harmonisation in the Internal Market for the financial year ended 31 December 2001. In accordance with Article 119(2)(c) of Council Regulation (EC) No 40/94, 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 provided for in Article 138 of Council Regulation (EC) No 40/94. The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to audit these accounts.

3. The Court performed its audit in accordance with its auditing policies and standards. These have been adapted from generally accepted international auditing standards to reflect the specific characteristics of the community context. The Court carried out such tests of the accounting records and other auditing procedures as it deemed necessary in the circumstances. By means of 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 2001 are reliable and that the underlying transactions, taken as a whole, are legal and regular.

MAIN OBSERVATIONS

Budgetary implementation

5. The implementation of the appropriations for the financial year 2001 and of the appropriations carried over from the previous financial year is set out in Table 1.

6. The appropriations available for the financial year amounted to 181,1 million euro, of which 163,8 million euro had been granted for 2001 and 17,3 million euro had been carried over from the previous financial year. The appropriations for the financial year 2001, which initially amounted to 184,2 million euro, were reduced by 3,1 million euro by means of a supplementary and amending budget to take account of the slowing down of the economy which occurred during the second quarter of the year and worsened in the aftermath of 11 September 2001.

7. The appropriations of the financial year as such, which include a reserve of 54 million euro, were committed to the extent of 99,5 million euro and disbursed in payments amounting to 82,0 million euro, i.e. 82 % of the commitments entered into. The balance of the appropriations was either carried over (17,7 million euro) or cancelled (64,1 million euro including the reserve of 54 million euro which remained unused). The operational appropriations (Title III), i.e. 35,2 million euro, were committed to the extent of 34,0 million euro, of which 24,0 million euro, i.e. 71 %, were disbursed and 10,3 million euro, i.e. 29 %, had to be carried over to the following financial year, the balance being cancelled.

8. The appropriations carried over from the previous financial year totalled 17,3 million euro, of which 8,7 million euro had been granted for Title III. These appropriations were disbursed in payments amounting to 16,3 million euro, of which 8,6 million euro were for Title III, and the balance was cancelled.

Financial statements

9. The revenue and expenditure account and balance sheet published by the Office in its activity report for the financial year 2001 are presented in summary form in Tables 2 and 3. The Office has taken account of the depreciation of its fixed assets. It has also made provision for expenditure related to the implementation of procedures in respect of trade marks.

10. The Office has never made a full physical inventory of its goods. A physical check revealed that some goods were unidentified or were located incorrectly, or could not even be located.

11. The Office should bring its accounting practice as regards the booking of assets classified as fixed assets into line with that of the Commission. Such entries are in fact made on the date of issue of the payment order and not on the date on which the risks of ownership of the assets are transferred to the Office(3).

12. Article 9 of the Office's inventory rules should be amended to bring them into line with Article 18 of the Commission Regulation, which lays down that the architects' fees and experts' expenses are to be included in the acquisition expenses.

Application of the financial provisions

13. In August 2001, a member of staff signed a series of payment orders(4) although he had not been delegated to do so. The orders signed in this way totalled approximately 100000 euro. This situation was caused by the absence of the responsible Authorising Officers. The Office should take measures to prevent such a situation form recurring.

14. The last update of the list of deputy Authorising Officers available at the end of November 2001 dates back to 18 June of the same year. Since then, several members of staff have been appointed Authorising Officers but the list has not been updated. It would also be desirable to make a periodic check on the specimen signatures.

Purchases of goods and services

Use of framework contracts

15. In the region of Alicante there is only a limited number of tenderers who are able to satisfy the Office's requirements. It is difficult to use the Interinstitutional framework contracts, either on account of the clauses which limit their application to Brussels and/or Luxembourg, or on account of the Office's location. Nevertheless it uses them as a point of reference for its own purchases.

Forecasting of requirements

16. Until 2001, the planning of the Office's requirements assumed a stable and sustained growth of booking requests, bearing in mind the Office's endeavours to increase productivity. This approach, particularly as regards the basic assumption, should be refined in order to take better account of the various factors underlying booking requests and thereby achieve a better estimate of future requirements.

17. In 2001 the Office concluded a contract for a three-year period(5) to rent an extra building for an amount of 2869344 euro. An examination of the file shows that the deal was done very quickly. The speed with which negotiations were conducted is barely explicable, given that it was already becoming apparent then that the economy was entering a downturn. In fact, at the beginning of 2002, the building was particularly unoccupied and the Office was having to pay the rent and meet the maintenance costs.

18. The slow-down in the economy which started in 2000 and was confirmed in 2001 made the Office's growth prospects more uncertain and increased the need for a real forecasting and planning effort in order to rationalise the Office's purchasing policy.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 17 October 2002.

For the Court of Auditors

Juan Manuel Fabra Vallés

President

(1) OJ L 11, 14.1.1994.

(2) As required under Article 137(1) of Council Regulation (EC) No 40/94, the accounts of all the Office's revenue and expenditure for the financial year 2001 were drawn up on 11 March 2002 and forwarded to the Office's Board of Management, the European Parliament, the Commission and the Court of Auditors. These accounts were received by the Court on 28 March 2002. A summarised version of these accounts is presented in the tables annexed to this Report.

(3) Article 17 of Commission Regulation 2909/2000 (OJ L 336, 30.12.2000, p. 75).

(4) Over ten cases have been identified.

(5) As from 1 June 2001.

Table 1

Implementation of the budget for the financial year 2001NB:

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

Source:

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

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Table 2

Revenue and expenditure account for the financial years 2001 and 2000

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NB:

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

Source:

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

Table 3

Balance sheet as at 31 December 2001 and 31 December 2000NB:

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

Source:

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

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The Office's replies

Financial statements

10. The physical inventory of the Office comprises both data-processing equipment and other equipment. The former is checked regularly. The situation as regards the inventory of non-data-processing equipment is due to the fact that the Office has offices on several sites, to the inadequacies of the data-processing system and to problems relating to staff turnover. A review of the non-data-processing equipment inventory was started in 2002. It will be completed at the beginning of 2003, and it is intended that the review should be validated by a company specialising in this field. Furthermore, the Office is examining the possibility of purchasing a data-processing system for the management of its assets so that, by 2003, it will have a tool for managing the life cycle of equipment, from acquisition to write-off. Within the framework of the reorganisation of the Office, a single sector has been created with responsibility for the management of a centralised inventory of logistical and data-processing equipment.

11. The computer tool referred to in the previous paragraph will enable the Office to bring its practices into line with those of the Commission.

12. The inventory rules will be reviewed in 2003 after the amendment of the Office's Financial Regulation to bring it into line with the framework Financial Regulation for the decentralised bodies.

Application of the financial provisions

13. The situation described by the Court was an exceptional one, resulting from the fact that all the authorising officers were absent on annual leave. In these circumstances, the most senior official present signed a series of payment orders with the verbal authorisation of the President of the Office. To prevent such a situation recurring, the Office has revised its delegation system.

14. The Office has started to make authorising officer delegations (including specimen signatures) more formal. This process will be completed during of the last quarter of 2002.

Forecasting of requirements

16. The considerable growth in the number of applications during previous years forced the Office to make frequent amendments to its annual budgets, with the necessary caution, and encouraged it to improve its productivity.

The Office is in the process of analysing the results of a study on the trade mark registration procedure which examines client satisfaction and the factors which affect trade mark applications. Furthermore, at the end of 2001, the Office began a study into the potential number of applications for Community designs in 2003. Cooperation has also been initiated with the national offices so that application trends can be monitored better and thus more accurate forecasts made of their potential number.

17. Medium-term forecasts for office requirements at the beginning of 2001, plus the scarcity in Alicante of office buildings, led the Office to seize the opportunity of renting an extra building in spring 2001, to replace, inter alia, unsuitable offices occupied at the time by approximately 70 members of staff. The contract was concluded in June 2001 (somewhat speedily because of the deadline for the adaptation of the building). At the same time, the rate of applications started to fall off during the first quarter of 2001, a trend which later became more pronounced. It was planned that the lease would be relinquished in accordance with an early termination clause included in the contract.

Two floors of the extra building (out of a total of four) have been occupied since the end of 2001, when staff were moved from the unsuitable buildings referred to above. At present, all the floors are occupied by staff from the Administration of trade marks and designs department, which was created in December 2001.

18. In view of the uncertainty and difficulties associated with forecasting its activities, the Office has started examining ways in which it might be able to adapt more easily to fluctuations.