Report on the financial statements of the Office for Harmonization in the Internal Market for the financial year 2002, together with the Office's replies
Date: 2003-10-16
Institutions: European Court of Auditors
Subjects: European Union Intellectual Property Office, financial control, financial year, report

30.12.2003

EN

Official Journal of the European Union

C 319/83

on the financial statements of the Office for Harmonization in the Internal Market for the
financial year 2002, together with the Office’s replies

REPORT

(2003/C 319/13)

CONTENTS

Paragraph

Page

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

OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementation of the budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Staff recruitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-4

5-15

5

6-10

11-13

14-15

Tables 1 to 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

84

84

84

84

84

85

86

90

C 319/84

EN

Official Journal of the European Union

30.12.2003

THE COURT’S OPINION

This report is addressed to the Budgetary Committee of the
1.
Office for Harmonization in the Internal Market (hereinafter ‘the
Office’) pursuant to Article 137(2) of Council Regulation (EC)
No 40/94 (1).

2.
The Court has examined the financial statements of the
Office for the financial year ended 31 December 2002. In accor-
dance 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 presen-
tation of the financial statements (2), in accordance with the inter-
nal financial provisions provided for in Article 138 of Council
Regulation (EC) No 40/94. The Court of Auditors is required pur-
suant to Article 248 of the Treaty establishing the European Com-
munity to examine 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 Office’s brief was extended by Article 2 of Council Regula-
tion (EC) No 6/2002 of 12 December 2001 on Community
designs (3) so that they enjoy the same protection at Community
level. The Office operates in close collaboration with the national
offices, which it pays for registering trade marks. Moreover, the
Office has the judicial power to arbitrate in any disputes that may
arise concerning trade marks.

Implementation of the budget

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

7.
The most striking fact is the decrease in the fees received
by the Office, which have fallen from 105,1 million euro in 2001
to 96,2 million euro in 2002, i.e. a drop of 8,9 million euro.

8.
Revenue totalling 1,8 million euro that was charged to the
financial year 2001 involved income which was recorded by the
accounting officer in 2002 and should have been charged to the
financial year 2002, as laid down in the Office’s Financial Regula-
tion (4).

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

Revenue totalling 0,8 million euro was received from the
9.
sales of publications in the fourth quarter of 2000 and the last
three quarters of 2001. The Office did not take timely action to
recover this sum from the Publications Office.

OBSERVATIONS

Introduction

10.
In 2002, the Office received 0,6 million euro from the
Commission to carry out projects for which contracts totalling
1,7 million euro had been made with the Commission. The imple-
mentation of these projects was entered in the accounts outside
the budget, which is not in accordance with the principle of bud-
getary unity.

5.
The Office was set up by Council Regulation (EC) No 40/94
of 20 December 1993 in order to allow undertakings to have
trade marks enabling them to protect their products or services
in an identical manner throughout the entire area of the Union.

Financial statements

(1) OJ L 11, 14.1.1994.
(2) As required pursuant to Article 137(1) of Council Regulation (EC)
No 40/94, the accounts of all the Office’s revenue and expenditure for
the financial year 2002 were drawn up on 28 February 2003 and
sent to the Court of Auditors. These accounts were received by the
Court on 2 April 2003. A summarised version of these accounts is
presented in the tables annexed to this report.

11.
The revenue and expenditure account and the balance
sheet published by the Office in its activity report for the financial
year 2002 are presented in summary form in Tables 2 and 3.

(3) OJ L 3, 5.1.2001, p. 1.
(4) Articles 5(3) and 23 of the Office’s Financial Regulation.

30.12.2003

EN

Official Journal of the European Union

C 319/85

The allocation for the provision for procedural expendi-
12.
ture increased by 17 % in 2002 compared with 2001, while the
total number of case-files submitted to the Office fell from 135 822
to 121 212, i.e. an 11 % reduction. Such a divergence in trends
points to an increase in the time taken to process the files (1).

13.
The Office’s inventory includes goods which are no longer
in use and nothing has been delisted since November 2000. The
Office should attend to this problem when it makes its physical
inventory, which it has introduced following the Court’s previous
recommendations (2).

ment on a local basis resulting in the integration as permanent
officials of persons recruited by procedures which favour internal
applicants. During the financial year 2002, out of 77 requests to
fill a post, only four had been advertised widely outside the Office.
An analysis of the movements of all the categories of staff during
the financial year 2002 (see Table 4) confirms the internal nature
of staff recruitment.

Staff recruitment

14.
In its report concerning the financial year 2000 (3), the
Court noted that the Office’s recruitment policy led to recruit

15.
In order for equality of access to the Community public
service to be better safeguarded, the Office should endeavour to
advertise its employment offers very widely and, where possible,
join forces with the institutions and other bodies for recruitment
purposes.

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) This indication is borne out by the fact that the number of applica-
tions to register trade marks dropped by 5 000 units betwen 2001
and 2002, while the number of corresponding research requests sub-
mitted to the national offices fell by 8 000 units.
(2) Paragraphs 10 and 11, OJ C 326, 27.12.2002, p. 87.
(3) Paragraph 13 onwards, OJ C 372, 28.12.2001, p. 88.

Office for Harmonisation in the Internal Market — Implementation of the budget for the financial year 2002

Table 1

Revenue
received

Allocation of
expenditure

Appropriations in the final budget

Appropriations carried over from the
previous financial year

Available appropriations
(2002 budget and financial year 2001)

entered

commit-
ted

paid

carried
over

cancelled

outstanding
commitments

paid

cancelled

appro-
priations

commit-
ted

paid

carried
over

cancelled

Expenditure

(EUR million)

Title I
Staff

Title II
Administration

Title III
Operating
activities

Title X
Reserve

96,2

4,3

51,3

151,8

49,9

48,0

46,1

0,9

2,9

26,3

24,8

15,1

9,7

1,5

0,5

6,9

0,4

0,1

50,4

48,6

46,6

0,9

6,3

0,6

33,2

31,7

21,4

9,7

2,9

2,1

26,8

25,1

16,4

8,7

1,7

10,4

9,3

1,1

37,2

35,4

25,7

8,7

2,8

51,7

0,0

0,0

0,0

Total

154,7

97,9

77,6

19,3

51,7

57,8

0,0

17,8

0,0

16,0

0,0

1,8

51,7

0,0

0,0

0,0

172,5

115,7

93,6

19,3

51,7

59,6

Revenue

Revenue
entered
in the final
budget for the
financial year

99,0

4,4

51,3

Source of
revenue

Fees

Other
revenue

Outturn of the
previous finan-
cial year

Total

154,7

NB: Any discrepancies in totals are due to the effects of rounding.
Source: Office’s data. These tables summarise the data supplied by the Office in its own financial statements.

C
3
1
9
/
8
6

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
U
n
o
n

i

.

3
0
1
2
2
0
0
3

.

30.12.2003

EN

Official Journal of the European Union

C 319/87

Office for Harmonisation in the Internal Market — Revenue and expenditure account for the financial years 2002 and 2001

Table 2

2002

2001

(EUR 1 000)

Revenue
Own revenue
Financial 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

Outturn for the financial year (a-b) (1) (1
)

Other expenditure/provisions for the year
Provision for procedural expenditure

Balance carried over from the previous financial year
Appropriations carried over which lapse
Unused appropriations for reuse from the previous financial year
Provision for procedural expenditure of the previous financial years
Exchange-rate differences and extraordinary revenue

97 329
3 141

Total revenue (a)

100 470

46 106
934

15 095
9 718

16 431
8 651

96 934

3 536

- 1 363

- 1 363

51 349
1 817
11
0
17

55 368

Total expenditure (b)

Subtotal

Balance for the financial year

105 921
4 729

110 650

43 910
536

14 102
6 901

23 619
10 369

99 437

11 213

- 1 167

- 1 167

52 271
1 057
164
- 12 208
19

51 349

(1) Calculation according to the principles of Article 15 of Council Regulation (EC, Euratom) No 1150/2000 (OJ L 130, 31.5.2000, p. 8).
NB: Any discrepancies in totals are due to the effects of rounding.
Source: Office’s data. These tables summarise the data supplied by the Office in its own financial statements.

C 319/88

EN

Official Journal of the European Union

30.12.2003

Office for Harmonisation in the Internal Market — Balance sheet as at 31 December 2002 and 31 December 2001

Table 3

(EUR 1 000)

Assets

2002

2001

Liabilities

2002

2001

Fixed assets
Buildings
Equipment and furniture
Transport equipment
Computer equipment
Intangible fixed assets
Amounts written off

26 286
3 783
111
9 636
24
- 11 775

25 804
3 475
111
8 493
24
- 8 902

Fixed capital
Own capital
Balance for the financial year

Long-term liabilities
Long-term creditors (1)

Subtotal

28 065

29 005

Subtotal

Current assets
Suppliers and missions
Other sundry accounts receivable

167
89

159
262

Current liabilities
Automatic carryovers of appropriations
Customers’ advances
Amount outstanding
Sundry accounts payable
Provision for procedural expenditure

28 065
55 368

29 005
51 349

Subtotal

83 433

80 354

23

23

19 303
22 289
14
664
14 738

—

—

17 807
23 042
12
781
13 375

Cash accounts
Bank accounts
Cash

Subtotal

256

421

Subtotal

57 008

55 016

Suspense accounts
Revenue to be reused

112 256
2

106 111
1

Subtotal

112 258

106 112

Total

140 579

135 539

115

168

Subtotal

115

168

Total

140 579

135 539

(1) In 2001 the long-term liabilities were incorporated under the heading ‘Sundry accounts payable’.
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.

30.12.2003

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Official Journal of the European Union

C 319/89

Office for Harmonisation in the Internal Market — Changes in staff numbers during 2002

Table 4

Status of staff

Staff
numbers
as at
31.12.2001

Internal
mobility

Increase

External
recruit-
ment

Decrease

Total

Internal
mobility

Departures

Total

Staff numbers
as at
31.12.2002

Establish-
ment plan

Occupation
rate
(%)

Permanent officials

Temporary staff

Seconded
experts

national

Auxiliary staff

(a)

463

164

3

55

(b)

12

53

0

0

Total

685

65

Source: Office data.

(c)

(d) = (b + c)

2

5

0

2

9

14

58

0

2

74

(e)

0

12

0

53

65

(f)

42

13

0

3

58

(g) = (e + f)

(h) = (a + d – g)

(i)

(j) = (h/i)

42

25

0

56

123

529

186

82

106

435

197

3

1

636

715

89

C 319/90

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Official Journal of the European Union

30.12.2003

THE OFFICE’S REPLIES

Budgetary execution

Financial statements

Revenue

Inventory

The authorising officer signed the recovery order in 2001, whereas
the financial controller and the accounting officer signed it only
in 2002, thus giving rise to a minor incoherence with the formali-
ties prescribed. The Office will make the necessary effort to avoid
such problems in the future.

The reason for not having decided on the write-off of assets is due
to the fact that the physical inventory was still ongoing. The Office
is aware of this and will try to keep this information updated.

Sales of publications

Recruitment of personnel

The Office takes good note of this observation of the Court of
Auditors. The collection of revenue of publications depends on
the information provided by the Office for Official Publications of
the European Communities, which has significant delays in its
communication on publication sales to the Office. In the future
the Office will claim the corresponding settlement list.

External recruitment has essentially been stopped on account of
the economic situation. The Office has discontinued its policy of
internal competitions for established posts and, at the same time,
in order to fill certain vacancies and encourage mobility among
its staff, published internal vacancy notices for a large number of
posts at the Office.

Assigned revenue

The Office takes good note of the observation and points out that
it will study the possibility of including these activities under
assigned revenue in its budget 2004.

The Office has already contacted the European Personnel Selec-
tion Office (EPSO) with a view to using its services as far as pos-
sible. However, the Office did launch a recruitment procedure at
the beginning of 2003 to meet specific staffing needs associated
with enlargement.