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
Date: 2002-10-17
Institutions: European Court of Auditors
Subjects: European Union Intellectual Property Office, financial control, financial year, report

C 326/86

EN

Official Journal of the European Communities

27.12.2002

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

REPORT

(2002/C 326/12)

CONTENTS

Paragraph

Page

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

MAIN OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Application of the financial provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purchasesofgoodsandservices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Useofframeworkcontracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forecastingrequirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-4

5-18

5-8

9-12

13-14

15-18

15

16-18

Tables 1 to 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

87

87

87

87

88

88

88

88

89

92

27.12.2002

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Official Journal of the European Communities

C 326/87

THE COURT’S OPINION

This report is addressed to the Budget Committee of the
1.
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 respon-
sibility 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 audit-
ing policies and standards. These have been adapted from gener-
ally accepted international auditing standards to reflect the spe-
cific characteristics of the community context. The Court carried
out such tests of the accounting records and other auditing 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.

The appropriations available for

the financial year
6.
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 supplemen-
tary 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 mil-
lion euro) or cancelled (64,1 million euro including the reserve of
54 million euro which remained unused). The operational appro-
priations (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 finan-
cial 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.

4.
This examination has enabled the Court to obtain reason-
able 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.

Financial statements

MAIN OBSERVATIONS

Budgetary implementation

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

(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 finan-
cial 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.

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 unidenti-
fied 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).

(3) Article 17 of Commission Regulation 2909/2000 (OJ L 336,

30.12.2000, p. 75).

C 326/88

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Official Journal of the European Communities

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

difficult to use the Interinstitutional framework contracts, either
on account of the clauses which limit their application to Brus-
sels and/or Luxembourg, or on account of the Office’s location.
Nevertheless it uses them as a point of reference for its own pur-
chases.

Application of the financial provisions

Forecasting of requirements

13.
In August 2001, a member of staff signed a series of pay-
ment orders (1) although he had not been delegated to do so. The
orders signed in this way totalled approximately 100 000 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.

Until 2001, the planning of the Office’s requirements
16.
assumed a stable and sustained growth of booking requests, bear-
ing 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.

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 speci-
men 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

17.
In 2001 the Office concluded a contract for a three-year
period (2)
to rent an extra building for an amount of
2 869 344 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 becom-
ing apparent then that the economy was entering a downturn. In
fact, at the beginning of 2002, the building was particularly unoc-
cupied 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) Over ten cases have been identified.
(2) As from 1 June 2001.

Implementation of the budget for the financial year 2001

Table 1

Revenue

Revenue entered
in the final
budget for the
financial year

Source of revenue

Revenue
received

Allocation of
expenditure

Expenditure

(mio. EUR)

Final budget appropriations

Appropriations carried over from the
previous financial year

Appropriations available
(2001 budget and financial year 2000)

entered

commit-
ted

paid

carried
over

cancelled

commitments
outstanding

paid

cancelled

appro-
priations

commit-
ted

paid

carried
over

cancelled

Fees

105,8

105,1

Other revenue

5,6

5,6

Out-turn of the
previous
financial year

52,3

Total

163,6

52,3

162,9

Title I
Staff

Title II
Administration

Title III
Operating
activities

45,9

44,5

43,9

0,6

1,4

28,7

21,0

14,1

6,9

7,7

89,0

34,0

Total

163,6

99,5

23,6

81,6

10,4

17,9

55,0

64,1

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.

0,4

8,3

8,8

17,5

0,4

0,0

46,3

44,9

44,3

0,6

7,3

1,0

37,0

29,3

21,4

6,9

1,4

8,7

8,6

16,3

0,1

1,1

97,8

42,8

32,2

181,1

117,0

97,9

10,4

17,9

55,1

65,2

.

.

2
7
1
2
2
0
0
2

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

C
3
2
6
/
8
9

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Official Journal of the European Communities

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Revenue and expenditure account for the financial years 2001 and 2000

Table 2

2001

2000

(1 000 EUR)

Revenue received during the financial year
Own revenue
Miscellaneous revenue

Budgetary expenditure for the financial year
Staff — Title I of the budget
Payments
Appropriations carried over

Administration — Title II of the budget
Payments
Appropriations carried over

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

Out-turn of the financial year (a-b) (1)

Other expenditure/provisions for the year
Provision for procedural expenditure

Balance carried over from the previous financial year
Unused appropriations carried over from the previous financial year
Unused appropriations for reuse
Provision for procedural expenditure of the previous financial year
Exchange-rate differences

Total revenue (a)

Total expenditure (b)

Subtotal

105 921
4 729

110 650

43 910
536

14 102
6 901

23 619
10 369

99 437

11 213

1 167

10 046

52 271
1 057
164
– 12 208
19

(1) Calculated according to the provisions of Article 15 of Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 (OJ L 130, 31.5.2000, p. 8).
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.

Balance for the financial year

51 349

110 243
3 404

113 647

35 123
466

13 020
8 202

21 019
8 767

86 597

27 050

18 325
6 952

– 56

52 271

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Official Journal of the European Communities

C 326/91

Balance sheet as at 31 December 2001 and 31 December 2000

Table 3

Assets

2001

2000

Liabilities

2001

2000

(1 000 EUR)

Fixed assets
Buildings
Equipment and furniture
Information technology
Intangible fixed assets
Movable equipment
Amounts written off

Current assets
Suppliers
Other sundry accounts receivable (1)

Cash accounts
Bank accounts
Cash

25 804
3 475
8 493
24
111
– 8 902

24 578
2 382
5 966
17
80
– 6 060

Subtotal

29 005

26 963

Subtotal

159
262

421

106 111
1

Subtotal

106 112

172
94

266

91 362
1

91 363

Total

135 539

118 592

Fixed capital
Own capital
Balance for the financial year

29 005
51 349

Subtotal

80 354

Administration

Automatic carry-overs of appropriations
Customers’ advances (1)

Amount outstanding

Sundry accounts payable

Provision for procedural expenditure

17 807

23 042

12

781

13 375

26 963
52 271

79 234

17 436

21 673

34

35

Suspense accounts

Revenue to be reused

Subtotal

55 016

39 178

Subtotal

168

168

180

180

Total

135 539

118 592

(1) Including an amount of 174 965 euro corresponding to cheques received by the Office during the time when its offices were closed at the end of 2001 which could not be

cashed until January 2002.

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.

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THE OFFICE’S REPLIES

Financial statements

Forecasting of requirements

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 purchas-
ing 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 cre-
ated 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

16.
The considerable growth in the number of applications
during previous years forced the Office to make frequent amend-
ments 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 sat-
isfaction and the factors which affect trade mark applications. Fur-
thermore, 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 build-
ings, 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.

The situation described by the Court was an exceptional
13.
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.

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.

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

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.