Report on the financial statements of the Office for Harmonisation in the Internal Market (OHIM - Alicante) 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, domestic market, financial control, financial year, management audit, report

27.12.2000

EN

Official Journal of the European Communities

C 373/65

on the financial statements of the Office for Harmonisation in the Internal Market (OHIM —
Alicante) for the financial year ended 31 December 1999 together with the Office’s replies

REPORT

(2000/C 373/11)

CONTENTS

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

1-4

Paragraph

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE OFFICE FOR
HARMONISATION IN THE INTERNAL MARKET FOR THE FINANCIAL YEAR ENDED
31 DECEMBER 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Analytical accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Advisory Committee on Procurements and Contracts (ACPC) . . . . . . . . . . . . . . . . . . . . . . . .

Written procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purchase of printers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5-18

5

6

7-10

7-9

10

11-13

14-15

16-18

17

18

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

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

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C 373/66

EN

Official Journal of the European Communities

27.12.2000

THE COURT’S OPINION

of VAT. The Court calls upon the Office to incorporate this new
procedure into its own internal rules.

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 1999. In accordance with Article 119(2c), of
Council Regulation (EC) No 40/94 (2), the budget was imple-
mented on the responsibility of the President of the Office. This
responsibility includes the drawing-up and presentation of the
financial statements (3) 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 proce-
dures 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 OFFICE FOR HARMONISATION IN THE INTER-
NAL MARKET FOR THE FINANCIAL YEAR ENDED 31 DECEM-
BER 1999

Analytical accounting

6.
In last year’s report the Court drew attention to the absence
of a system of analytical accounting. The Office is currently pre-
paring a system which has still to be computerised before it can
become operational.

Balance sheet

Inventory

7. At the end of the year inventory changes in the accounts were
reconciled with the inventory register. However, during the year,
responsibility for the general inventory and the computerised
inventory were separated. Because of this separation, and after the
comparison had been made, some assets were moved from the
general to the computerised inventory. During the year a new sys-
tem was used for the general inventory.

8. These changes in the management of the inventories created
differences in the inventory totals between the accounts and the
inventory register. During the audit visit, these differences could
not be calculated precisely, but the magnitudes concerned are not
such as to affect the reliability of the accounts.

9. The accounts and the inventory register should be reconciled
regularly in order to ensure that the entries are compatible.

Financial Regulation

Intangible assets

5. 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 (4), the general
Financial Regulation has required expenditure to be charged net

(1) OJ L 11, 14.1.1994, p. 33.
(2) OJ L 11, 14.1.1994, p. 30.
(3) Pursuant to Article 137 (1), of Council Regulation (EC) No 40/94, the
accounts of all revenue and expenditure of the Office for the financial
year 1999 were drawn up on 28 March 2000 and then forwarded to
the Office’s Board of Management, the European Parliament, the
Commission and the Court of Auditors. The latter received them on
31 March 2000. The abridged version of the financial statements is
given in the tables annexed to this report.

(4) 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.

Intangible assets are not included in the inventory register.
10.
According to the Office, these assets are various software pack-
ages covered by licences. The Office should draw up a new inven-
tory book for intangible assets and establish whether these assets
are still of value and whether they satisfy the inventory rules.

Human resources

11. As the table shows, staff numbers are increasing steadily and
rapidly (see also paragraph 15), although the rate of increase is
less than that of representative indicators of the Office’s activi-
ties (5). The Office should nevertheless not ignore this factor and

(5) See, in this connection, the Court’s Annual Report on the financial

year 1998, OJ C 372, 22.12.1999, paragraph 12.

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Official Journal of the European Communities

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should be sure to continue its efforts to increase productivity.

located in three or four other buildings which will cost more than
90 000 euro a month in rent.

1997

1998

1999

Average number of personnel (includ-
ing temporary workers and locally
recruited staff) (1)

251

385

494

Trade mark applications

27 243

31 238

42 701

Trade marks registered

576

24 280

33 948

(1) Average between the end of year n-1 and the end of year n.

12. During the year the Office recruited 196 members of staff.
Of these recruitments, 60 involved people changing their status
from that of a temporary worker to a contract of employment as
an auxiliary member of the staff and 53 involved members of
staff moving from an auxiliary contract to a temporary one. Only
17 people were recruited following the publication of a vacancy.

13. The position of Head of the Human Resources Department
has never been filled. It would be desirable for someone to be
recruited to this post, given the total of 523 members of staff (at
the end of 1999).

Premises

14. According to the contract, work should have been completed
in June 1999. The official inauguration did indeed take place in
June 1999, but the move to the building did not take place until
June 2000.

15. The new building, which cost 23,6 million euro in total, has
space for 400 people and is already inadequate. In fact, due to the
highly satisfactory increase in trade mark applications, the Office
calculates that it will require office space for 800 people by the
end of 2001. Consequently, half the personnel will occupy offices

Advisory Committee on Procurements and Contracts (ACPC)

16. During the year, 73 proposals exceeded the ceiling of 46 000
euro above which the ACPC must be consulted: 26 contracts, for
a total of more than 12,3 million euro, were concluded by private
treaty, eight contracts, for a total of 1,6 million euro, followed
restricted tendering procedures, seven for a total of 1,4 million
euro followed negotiated procedures and 32 for a total of 32,2 mil-
lion euro followed open tendering procedures. The Office should
apply the rules on contracting more rigorously, so as to ensure
maximum competition.

Written procedures

17. During 1999, the ACPC delivered several opinions on big
projects using the written procedure. The Committee was there-
fore not able to do its job of discussing the projects. Thus, for the
contract for the maintenance of the technical installations in the
new building, the Office published a call for expressions of inter-
est in the Official Journal at the end of March 1999. The bids
received were opened on 6 May 1999. On 8 October 1999, the
President of the ACPC asked the members of the Committee to
give their opinion in writing before 14 October 1999 on a very
long report concerning a contract worth 1,6 million euro. How-
ever, this matter did not fulfil the criteria for emergency cases for
which the written procedure is provided.

Purchase of printers

18. At the end of the year, the ACPC gave a favourable opinion
for the purchase of printers worth a total of 190 000 euro from a
single company, because of a ‘supply contract which, technically,
cannot be separated from the main contract’. However, purchases
of standard printers could have been separated from the main
contract.

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

C 373/68

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Official Journal of the European Communities

27.12.2000

Table 1

Balance sheet for the financial years 1999 and 1998

Assets

1999

1998

Liabilities

1999

1998

(1 000 EUR)

Fixed assets
Equipment and furniture
Movable equipment
Computer equipment
Intangible assets
Fixed assets in course of construction (1)
Depreciation

Current assets
Sundry accounts receivable
Recoverable VAT and other taxes

Cash accounts
Bank accounts
Imprest account

1 422
58
4 720
463
20 010
– 3 942

1 177
58
3 911
458
5 140
0

Subtotal

22 731

10 744

79
170

249

82
773

855

Subtotal

65 177
1

48 228
2

Subtotal

65 178

48 230

Fixed capital
Own capital
Balance for the year

22 731
18 325

10 744
20 735

Subtotal

41 056

31 479

Current liabilities
Automatic carry-overs of appropriations
Appropriations to be reused
Sundry accounts payable
VAT and other taxes
Advances from customers

23 378
2 058
152
113
21 401

10 517
665
57
749
16 362

Subtotal

47 102

28 350

Total assets

88 158

59 829

Total liabilities

88 158

59 829

(1) Assets under construction include the building land (a donation) for the sum of ESP 1 (EUR 0,0060). The deed of the donation specifies that this land now belongs to the
Office. If this land is sold to a third party, the proceeds obtained by the Office must be paid to the donor. Exclusive sale of the land may also be made to the latter for the sum
of ESP 1. If the land is sold to the donor, the Spanish authorities have undertaken to purchase the buildings put up by the OHIM.

Source: prepared by the Court of Auditors on the basis of data from the Office.

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Official Journal of the European Communities

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Revenue and expenditure account for the financial years 1999 and 1998

Table 2

(1 000 EUR)

1999

1998

Revenue
Own revenue
Miscellaneous revenue

Expenditure

Staff — Title I of the budget
Payments (1)
Appropriations carried over

Buildings, equipment, etc. — Title II of the budget (2)
Payments
Appropriations carried over

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

86 589
1 648

Total revenue

88 237

32 482
540

20 851
10 129

15 529
12 709

Total expenditure

92 240

Out-turn for the financial year
Balance carried over from the previous financial year
Appropriations carried over from the previous financial year which lapse
Exchange-rate differences 1999 / Exceptional revenue 1998

– 4 003
20 735
1 597
– 4

Balance for the financial year

18 325

66 944
1 825

68 769

19 986
344

13 732
6 328

8 384
3 845

52 619

16 150
3 111
1 431
43

20 735

(1) For 1999, the amount included the employer’s contributions to the pension scheme for the Office’s staff from 1997, 1998 and 1999.
(2) For 1999, an amount of EUR 16 058 028 concerns the new building of the final headquarters (EUR 8 140 087 in 1998).
Source: prepared by the Court of Auditors on the basis of data from the Office.

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Official Journal of the European Communities

27.12.2000

THE OFFICE’S REPLIES

5. An amendment to the Office’s Financial Regulation, setting
out the recent changes to the provisions of the Financial Regula-
tion applicable to the general budget of the European Communi-
ties, will be proposed to the OHIM’s Budget Committee at its
forthcoming meeting.

The Office has also introduced provisions to publish vacancies on
its Internet site in the future.

13. A Head of Service for the ‘Personnel and Social Administra-
tion’ Service has been recruited.

6. The Office confirms that the analytical accounting system has
been introduced. It is expected that the first results of this system
will be available for the second half of the year 2000.

8. The error discovered by the Court is an accounting one; no
assets were left out of the physical inventory. A number of mobile
telephones (GSM) and inverters, had not been included in the
inventory record. The Office has already changed the way it rec-
onciles the accounting and physical inventory records.

9. The Office has introduced provisions so that the regular rec-
onciliation of the physical inventory and accounting inventory
records covers all fixed assets rather than only new assets added
to the inventory.

10. The Office is currently considering ways to improve the
inventory method used for intangible fixed assets.

11.
In 1999, the number of trade mark applications rose by more
than 35 % in comparison with 1998. The Office is forced to adapt
its staff numbers to this increase. It endeavours to:

(a)

limit the increases in staff numbers to those directly involved
in productive activities (approximately 80 % of the total staff),
and

(b) increase productivity (approximately 13 %).

14. At the time of official inauguration of the permanent seat by
the Spanish Government in June 1999 (a date fixed in the con-
struction contract, concluded between the developer (Spanish
authorities) and the building contractor), a considerable amount
of work still had to be completed on the building. The Office did
not have access to the building until the year 2000, and did not
actually move into the building until 1 July 2000.

In September 2000, the Budget Committee examined the
15.
issue concerning Phase II, which will increase the seat’s capacity
to 800 people. Construction work could commence at the begin-
ning of 2002, once the corresponding call for tenders has been
concluded.

16. Since its inception, the Office has had to award contracts by
private treaty because the corresponding calls for tender have
proved to be unsuccessful.

On the one hand, the region where the OHIM is situated, has an
economic infrastructure which is often lacking in companies
capable of meeting the Office’s needs, and on the other hand,
companies which do not operate in the region show little interest
in investing in Alicante just to respond to the OHIM’s needs.

17. The 5 written procedures brought before the ACPC in 1999
represent 7,6 % of all matters dealt with by this body. Three were
due to the urgent need to complete the Office’s permanent seat.

12. As regards job vacancies published by the Office in 1999, it
must be noted that:

(a) 24 vacancies were published as part of selection procedures
for temporary members of staff (mainly through advertise-
ments in newspapers or various other publications);

18. The contract for the maintenance of technical installations
concerns the equipment of the new seat (Phase I). In order for the
building and its installations to be deemed complete, it was first
necessary to be able to use the power supply; in turn, for this the
Office was first required to conclude a maintenance contract. For
these reasons, the Office had to deal with the matter within the
shortest time, since each day’s delay attributable to the Office
affected rent expenditure for the buildings.

(b) 98 vacancies were published following the organisation of

competitions by the OHIM (four in 1999);

(c) 14 vacancies were published within the various Community
institutions in accordance with Article 29(1)(c) of the Staff
Regulations (transfers).

19. The purchase of standard printers constitutes a contract
which, technically, can be independent. Nevertheless, the Office
deemed it appropriate to consider this contract as ancillary to the
contract signed by the Commission, as the technical specifications
of the equipment needed by the Office were identical to those of
the Commission. As a result, the Office could take advantage of

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the favourable conditions obtained from the supplier. The Office
has followed the same practice for contracts concerning the pur-
chase of computer equipment since it was set up in Alicante. Fur-

thermore, with respect to the new call for tenders which the
Commission plans to conclude in 2000, the Office has already
asked that its needs be taken into account.