Report on the financial statements of the Community Plant Variety Office (CPVO - Angers) for the financial year ended 31 December 1999 together with the Office's replies
Date: 2000-09-27
Institutions: European Court of Auditors
Subjects: Community body, crop production, financial control, financial year, management audit, report

27.12.2000

EN

Official Journal of the European Communities

C 373/59

on the financial statements of the Community Plant Variety Office (CPVO — Angers) for the
financial year ended 31 December 1999 together with the Office’s replies

REPORT

(2000/C 373/10)

CONTENTS

Paragraph

THE COURT’S OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-4

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE COM-
MUNITY PLANT VARIETY OFFICE (CPVO, ANGERS) FOR THE FINANCIAL YEAR ENDED
31 DECEMBER 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Analysis of the implementation of the budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rules on fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Charging VAT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5-15

5-7

8

9-12

9

10

Financial commitments covering several financial years . . . . . . . . . . . . . . . . . . . . . . . . . .

11-12

Work on the Office’s new headquarters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Payment of French family allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Delay in setting examination fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

14

15

Tables 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Office’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

60

60

60

60

60

60

61

61

61

61

61

62

64

C 373/60

EN

Official Journal of the European Communities

27.12.2000

THE COURT’S OPINION

1. This report is addressed to the Administrative Council of the
Community Plant Variety Office (CPVO — Angers) in accordance
with Article 111(2) of Council Regulation (EC) No 2100/94 (1).

2. The Court has examined the financial statements of the Com-
munity Plant Variety Office for the financial year ended 31 Decem-
ber 1999. In accordance with Article 110 of Council Regulation
(EC) No 2100/94 the budget was implemented on the responsibil-
ity of the President of the Office. This responsibility includes
drawing up and presenting the financial statements (2) in accor-
dance with the internal financial provisions provided for in
Article 112 of Council Regulation (EC) No 2100/94 (3). The Court
of Auditors is required under Article 248 of the Treaty establish-
ing the European Community to audit those accounts.

3. The Court performed its audit in accordance with its audit
policies and standards. These have been adapted from generally
accepted international auditing standards to reflect the particular
nature of the Community context. The Court carried out such
tests of the accounting records and applied such other audit pro-
cedures 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 1999 are reliable and that the underlying transac-
tions, taken as a whole, are legal and regular.

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE
BUDGET OF THE COMMUNITY PLANT VARIETY OFFICE (CPVO
— ANGERS) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER
1999

Analysis of the implementation of the budget

5. The final appropriations for the Office for 1999 amounted to
8,2 million euro, of which 3,7 million euro (or 45 %) was used

(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 1999 were drawn up on 14 April 2000 and were
sent to the Office’s Administrative Council, the Commission and the
Court of Auditors. The Court received them on 25 April 2000. A
summary version of the balance sheet at 31 December 1998 and
31 December 1999 and of the revenue and expenditure account for
financial years 1998 and 1999 is given in Tables 1 and 2 at the end of
this report.

(3) OJ L 227, 1.9.1994, p. 28.

during the year, 3,1 million euro (or 38 %) was automatically car-
ried over to the financial year 2000 and 1,4 million euro (or 17 %)
lapsed on 31 December 1999.

6. Most of the year’s expenditure consists of staff expenditure
(2,5 million euro) and administrative expenditure (0,5 million
euro), while the carry-overs are mainly for work on the Office’s
future headquarters (1,4 million euro) and the costs of technical
examinations for varieties for which rights are still under consid-
eration (1,3 million euro).

7. The appropriations carried over automatically from 1998 to
1999, amounting to 1,6 million euro, were almost all fully utilised
in the case of those in Titles I and II of the budget (staff expendi-
ture and administrative expenditure), whereas, because of inap-
propriate financial rules (see paragraphs 11 and 12), a significant
volume of operating appropriations which had been carried over
(0,6 million
lapsed
on 31 December 1999.

1,3 million

euro)

euro

out

of

Accounting systems

8. As the Sincom 2 (SI2) application, which is used by several of
the satellite organisations, did not come into use until 1 January
2000, the Office continued to use a spreadsheet and a commer-
cial accounting package to keep its budget accounts and general
accounts, respectively, up to 31 December 1999. In view of the
risk of errors and inconsistencies associated with the use of these
different systems, the Court reiterates the observations which it
has made on this subject before (4), especially as, contrary to the
provisions of Article 123(4) of the regulation implementing its
Financial Regulation, the Office still does not carry out a monthly
reconciliation of the entries.

Financial Regulations

Rules on fees

9. According to the rules on fees (5), the examination fees for the
first growing period are not due until one month after the begin-
ning of the examination. The Office therefore has no guarantee
that the fee for work contracted out to examining centres will
actually be paid. The application procedure should be rationalised
by amending the Office’s rules to allow the examination fee to be
collected in advance.

(4) Reports on the financial statements of the CPVO for the financial
years 1995, 1996 and 1997, OJ C 393, 29.12.1997, para-
graphs 1.5 – 1.6, p. 52 and OJ C 406, 28.12.1998, paragraph 1.6,
p. 49.

(5) See Article 8(2) of Council Regulation (EC) No 1238/95 of 31 May

1995, OJ L 121, 1.6.1995, p. 31.

27.12.2000

EN

Official Journal of the European Communities

C 373/61

Charging VAT

Work on the Office’s new headquarters

10. Until December 1998 the general Financial Regulation
required expenditure to be charged inclusive of VAT, since VAT,
once it had been refunded, could be used again. Since that date (1),
the general Financial Regulation has required expenditure to be
charged net of VAT. The Court calls upon the Office to incorpo-
rate this new procedure into its own internal rules.

13. Although, according to the initial forecasts, the Office was
expected to be in a position to take possession of its new head-
quarters at the end of the first half of 1999, it did not actually
move in until October 2000. This postponement of the removal
date resulted in the payment of additional rent amounting to over
100 000 euro.

Financial commitments covering several financial years

11.
In view of the time needed for some technical examinations
(which may cover a period of four years), examinations and
reports that have been requested by the Office in a given year and
are the subject of a commitment of expenditure in the same year
are neither finished nor invoiced at 31 December of year n+1,
which is the date on which the commitments carried over for that
purpose automatically lapse. A new financial commitment,
charged to the budget allocation for year n+2, then has to be
effected in order to cover the legal commitments previously entered
into by the Office.

12. This situation, which is also described in the annual report
produced by the Office, gets worse from year to year. One of its
consequences is that in the financial statements the Office’s
accounting commitments at 31 December 1999 are understated
by 0,5 million euro (compared with 0,2 million euro at 31 Decem-
ber 1998). The Office should amend its financial regulation to
take account of the constraints to which its activities are subject
and to improve the transparency of its accounts.

Payment of French family allowances

14.
In France the law provides for family allowances to be paid
to anyone who is resident on the national territory and has at
least two dependent children. The national authorities confirmed
to the Office that family allowances would be payable to Euro-
pean officials in full under the French social security scheme,
which has precedence over other schemes. The Office should con-
tinue its efforts to have this provision put into effect and thereby
reduce the expenditure of a similar nature that is charged to the
CPVO’s budget.

Delay in setting examination fees

15. Article 93(1) of the rules regarding procedures before the
Office (2) provides, ‘By 27 April 1997 the Administrative Council
shall have determined uniform methods for calculating the costs
and the uniform constituents of the costs, which shall apply to all
designated Examination Offices’. The Office did not begin this
work until the last quarter of 1999 and, according to the decision
of the Administrative Council of 28 and 29 September 1999, it
was to be completed by 31 December 2000, more than three
years after the deadline set by the Regulation (3).

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 27 September 2000.

For the Court of Auditors

Jan O. KARLSSON

President

(1) See Article 27(2a) of the Financial Regulation applicable to the gen-
eral budget of the European Communities, as amended by Council
Regulation (EC, ECSC, Euratom) No 2548/98 of 23 November 1998,
OJ L 320, 28.11.1998, p. 1.

(2) Commission Regulation (EC) No 1239/95, OJ L 121, 1.6.1995, p. 37.
(3) See paragraph 11 of the Court’s report on the financial year 1998,

OJ C 372, 22.12.1999, p. 57.

C 373/62

EN

Official Journal of the European Communities

27.12.2000

Balance sheet at 31 December 1999 and 31 December 1998

Table 1

Assets

1999

1998

Liabilities

1999

1998

(1 000 EUR)

Fixed assets
Land and builidings
Equipment and furniture
Computer equipment
Intangible assets

Current assets
Recoverable VAT
Sundry accounts receivable

Cash accounts
Bank — demand accounts
Imprest account

1 295
70
123
31

1 518

133
363

496

9 731
150

9 881

1 202
58
93
29

1 383

185
138

323

6 902
150

7 052

Subtotal

Subtotal

Subtotal

Fixed capital
Own capital
Balance for the financial year
Provision for charges

Subtotal

Current liabilities
Automatic carry-overs of appropriations
Social liabilities
VAT
Sundry accounts payable

1 518
6 096
453

8 067

3 061
18
133
616

Subtotal

3 828

1 383
4 994
165

6 542

1 552
36
185
443

2 216

Total assets

11 896

8 758

Total liabilities

11 896

8 758

NB: differences in totals are due to the effects of rounding.
Source: prepared by the Court of Auditors on the basis of data from the Office.

27.12.2000

EN

Official Journal of the European Communities

C 373/63

Revenue and expenditure account for the financial years 1999 and 1998

Table 2

(1 000 EUR)

1999

1998

Revenue
Subsidy received from the Commission
Other subsidies
Fees
Bank interest
Recoverable VAT
Miscellaneous revenue

Expenditure

Staff expenditure — Title I of the budget
Payments
Appropriations carried over

Total revenue

Buildings, equipment and miscellaneous administrative expenditure — Title II of the budget
Payments
Appropriations carried over

Operating expenditure — Title III of the budget
Payments
Appropriations carried over

Total expenditure

Outturn for the financial year
Balance carried over from previous financial year
Appropriations carried over from previous financial year which lapse
Exchange-rate differences
Recovery of provisions

NB: differences in totals are due to the effects of rounding.
Source: prepared by the Court of Auditors on the basis of data from the Office.

Balance for the financial year

0
377
6 388
207
211
110

7 293

2 500
51

525
1 526

677
1 484

6 763

529
4 994
557
1
16

6 096

0
306
4 873
263

5 443

1 948
37

1 776
222

497
1 293

5 772

– 329
5 131
197
– 5

4 994

C 373/64

EN

Official Journal of the European Communities

27.12.2000

REPLIES THE OFFICE’S

8. Accounting systems

In December 1998, the Office installed the SI2 system, modelled
on the Sincom system used by the Commission. For the financial
year 1999, a spreadsheet (Excel) was used to keep both the budget
accounts in SI2 and the general accounts on Expert M.

— the slow pace of public contract procedures imposed by the

Community regulations,

— the slow pace of French procedures for obtaining planning

permission,

— the unsuccessful outcome of some calls for tender,

The Office has developed and introduced a procedure to carry out
a monthly reconciliation. This will be carried out regularly from
now on.

— on-site problems concerning the quality of outside contrac-

tors.

9. Rules on fees

14. Payment of French family allowances

The proposed amendment has already been made with the entry
into force of Commission Regulation (EC) No 329/2000 of 11 Feb-
ruary 2000.

10. Charging VAT

The Office has taken the necessary measures to incorporate the
new Community provisions on the charging of expenditure and
the reimbursing of VAT into its own Financial Regulation. Once
the Office’s Administrative Council has received the Court of
Auditor’s comments, it will be able to adopt this draft amend-
ment.

11 and 12. Financial Regulation and examination fees

The Office has taken the necessary measures to draw up a draft
amendment to its Financial Regulation with a view to improving
the management of technical examinations expenditure. This draft
aims at enabling the Office to carry forward, over several years,
appropriations legally committed to ensure that money is avail-
able to cover payments to the examination offices for technical
examinations.

13. Work on the office’s new headquarters

Work on the Office’s new headquarters was considerably delayed
for the following reasons:

The Office has noted the Court’s comments. In strict accordance
with the Protocol on the Privileges and Immunities of the Euro-
pean Communities and the Staff Regulations as well as the Court
of Justice’s jurisprudence in this matter (Judgment No 186/85),
the Office will continue its efforts in order to benefit from the
approach proposed by the French authorities.

15. Delay in setting examination fees

In 1996, on the basis of a specific mandate given by the Admin-
istrative Council, the President of the CPVO set up a group of
experts to prepare a draft uniform method for calculating costs.
The group first met on 26 November 1996. After holding several
meetings, the group concluded that an external expert would
have to be consulted in order to finalise the draft. The Administra-
tive Council also supported this conclusion.

Since the call for tenders for an external auditor was unsuccess-
ful, the President recruited an accountant as a temporary staff
member of the Office whose main task is to coordinate and sup-
port the working group’s activities. The Office is planning to
present a proposal on a uniform method for calculating costs to
the Administrative Council at its meeting in October 2000. At the
same meeting, a proposal based on the Office’s initiative and aim-
ing at amending the DUS examination fees will be submitted to
the Administrative Council.

According to recent calculations, the level of remuneration, based
on the ‘in-out’ principle which the Office has applied up to now,
in the majority of cases, falls below the level of real costs gener-
ated. For this reason, the delay in adopting methods for calculat-
ing the costs did not have a negative effect on the Office’s finances.