Report on the annual accounts of the Office for Harmonisation in the Internal Market for the financial year 2005 together with the Office's replies
Date: 2006-09-28
Institutions: European Court of Auditors
Subjects: European Court of Auditors, European Union Intellectual Property Office, administration of the Institutions, financial control, interinstitutional relations (EU), report

C 312/106

EN

Official Journal of the European Union

19.12.2006

REPORT

on the annual accounts of the Office for Harmonisation in the Internal
Market for the financial year 2005 together with the Office’s replies

(2006/C 312/18)

CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

STATEMENT OF ASSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Paragraph

1-2

3-6

7-11

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

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

Page

107

107

107

109

111

19.12.2006

EN

Official Journal of the European Union

C 312/107

INTRODUCTION

OBSERVATIONS

1.
The Office for Harmonisation in the Internal Market (here-
inafter the Office) was set up by Council Regulation (EC)
No 40/94 (1) of 20 December 1993. Its mandate is to implement
the Community legislation on trade marks and designs, which
gives undertakings uniform protection throughout the entire area
of the European Union.

2.
Table 1 summarises the Office’s competences and activi-
ties. Key information from the financial statements drawn up by
the Office for the financial year 2005 is presented in Tables 2, 3
and 4.

7.
As regards budgetary implementation, the overall imple-
mentation rates for commitment and payment appropriations for
the financial year were 95 % and 80 % respectively. However, the
consumption of appropriations was lower for administrative
expenditure (Title II): around 10 % of the appropriations for this
and the previous financial year were cancelled and one third of
the commitments for this financial year were carried over. This
situation should prompt the Office to improve the forecasting
and planning of its administrative expenditure so as to avoid
mobilising funds unnecessarily.

STATEMENT OF ASSURANCE

3.
This Statement is addressed to the Office’s Budget Com-
mittee pursuant to Article 137 of Council Regulation (EC)
No 40/94.

The Office’s accounts for

4.
the financial year ended
31 December 2005 (2) were drawn up by its President, pursuant
to Article 119 of Council Regulation (EC) No 40/94, and sent to
the Court, which is required to give a statement of assurance on
their reliability and on the legality and regularity of the underly-
ing transactions.

5.
The Court conducted its audit in accordance with its poli-
cies and standards, which are based on international auditing
standards that have been adapted to the Community context. The
audit was planned and performed to obtain reasonable assurance
that the accounts are reliable and the underlying transactions are
legal and regular.

The Court has thus obtained a reasonable basis for the

6.
statement expressed below.

Reliability of the accounts

The Office’s accounts for the financial year ended 31 Decem-
ber 2005 are, in all material respects, reliable.

Legality and regularity of the underlying transactions

The transactions underlying the Office’s annual accounts,
taken as a whole, are legal and regular.

The observations which follow do not call the Court’s state-
ment into question.

8.
The segregation of the duties of initiation and verification
of budgetary operations was not completely guaranteed. Indeed,
the audit showed that dozens of commitments and several hun-
dred payments had both been initiated and validated by one and
the same employee.

In 2005, the Administrative Board had still not adopted
9.
any minimum internal control standards. Furthermore, the autho-
rising officers had not yet formalised the management and inter-
nal control procedures and systems that they were applying. This
being so, the accounting officer was not in a position to validate
the systems intended to provide him with information.

An examination of a procedure for recruiting temporary
10.
staff showed some shortcomings:
lack of a formal decision
appointing selection boards, failure to specify the deadline for the
submission of applications, lack of systematic use of evaluation
scales, no minutes of selection board meetings, recruitment of
two candidates where the vacancy notice specified only one
recruitment.

The audit work on procurement and contract manage-
11.
ment revealed some anomalies: a lack of precision in the contract
notices as to the nature of the contracts being published (works
or supplies) (3), failure to adequately justify the use of the negoti-
ated procedure for a contract extension (4), incomplete documen-
tation of the procedure or inadequate application of the selection
and evaluation criteria provided for in the contract notices (5),
award of four specific contracts for a duration that overran the
expiry date of
the corresponding framework contracts by
11 months.

(1) OJ L 11, 14.1.1994
(2) These accounts were drawn up on 28 February 2006 and received by

the Court on 5 July 2006.

(3) One case detected.
(4) Extension involving a sum of 2 million euro.
(5) In the case of four contracts.

C 312/108

EN

Official Journal of the European Union

19.12.2006

This report was adopted by the Court of Auditors in Luxembourg at
28 September 2006.

its meeting of

For the Court of Auditors
Hubert WEBER
President

Table 1

Office for Harmonisation in the Internal Market (Alicante)

Area of Community
competence deriving from
the Treaty

Competences of the Office as specified in Council Regulation (EC)
No 40/94 of 20 December 1993

Governance

Resources available to the Office
(2004)

Products and services supplied in
2005

Free movement
goods:

prohibitions or
restric-
tions justified on grounds
of the protection of indus-
trial and commercial prop-
erty must not constitute a
means of arbitrary dis-
crimination or a disguised
restriction
trade
between Member States.

on

(From Article 30 of
Treaty)

the

Restrictions on freedom to
provide services within the
Community are prohib-
ited in respect of nationals
of Member States who are
established in a State of the
Community other
than
that of
the person for
whom the services are
intended.

(From Article 49 of
Treaty)

the

of

Objectives:

Tasks:

1. Administrative Board

2005 final budget

Trade marks:

to implement the Com-
munity legislation on
trade marks and designs,
which gives undertakings
the right to uniform pro-
tection throughout
the
entire area of the Euro-
pean Union

— to receive and enter appli-
cations for registration,

— to examine the conditions
for entry in the Register
and
compatibility with
Community legislation,

— to search at the industrial
property offices of
the
Member States for any pre-
existing
trade
marks,

national

— to publish applications,

— to examine any opposition

by third parties,

Composition:

— one representative of each Member State,

— one representative of the Commission.

Task:

— to advise the President on matters for which the

Office is responsible,

— to prepare lists of candidates (Article 120) for Presi-
dent, Vice-Presidents and chairmen and members of
the Boards of Appeal.

2. President of the Office

Appointed by the Council from a list of at most three
candidates which has been prepared by the Administra-
tive Board.

— to register or reject applica-

3. Budget Committee

218 million euro (177 million
euro) including a Community
subsidy: 0 % (0 %)

Staff
31 December 2005

numbers

as

at

Number of posts in establish-
ment plan: 675 (675)

Posts occupied: 611 (648)

+ 78 (41) other staff (auxiliary
contracts, seconded national
experts,
staff,
employment-agency staff)

local

Total staff: 689 (689)

assigned to the
duties:

Number of applications: 64 112

Number of registrations: 60 570

Number of cases of opposition:
17 216

of which cases settled: 12 856

Appeals to the Boards of Appeal:
1 505

Average time for registration
(excluding
or
appeal):

opposition

— before publication:

10 months

following

— between publication and reg-

istration: 11 months

Designs

Designs received: 63 700

Designs registered: 67 887

tions,

— to examine applications for
revocation or invalidity,

— to handle appeals against

decisions.

Composition:

one representative of each Member State and one rep-
resentative of the Commission and their alternates,

— production: 548 (524)

— support: 141 (165)

Task:

to adopt the budget and the financial regulation, grant
discharge to the President and determine the cost of
search reports.
4. Decisions in connection with procedures
Decisions are taken by:
(a) the Examiners;
(b) the Opposition Divisions;
(c) the Administration of Trade Marks and Legal Divi-

sion;

(d) the Cancellation Divisions;
the Boards of Appeal.
(e)
5. External audit
The Court of Auditors.
6. Discharge authority
The Office’s Budget Committee.

Source:

Information sent by the Office.

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OFFICE FOR HARMONISATION IN THE INTERNAL MARKET

Table 2

Implementation of the budget for the financial year 2005

Revenue

Source of revenue

Revenue entered in
the final budget for
the financial year

Revenue
received

Allocation of expenditure

Final budget appropriations

Expenditure

Appropriations carried over
from the previous financial
year

Appropriations for the financial year and for the
previous financial year

entered

commit-
ted

paid

carried
over

cancelled available

paid

cancelled available

commit-
ted

paid

carried
over

cancelled

(1 000 euro)

Own revenue

133 533

157 600

Other revenue

404

905

Interest

3 100

4 387

Balance from the previ-
ous financial year

Total

81 353
218 390

90 171
253 063

Title I
Staff
Title II
Administration
Title III
Operating activities
Title X
Reserve

58 165

57 072 55 680

995

1 491

1 001

669

332

59 166

58 073

56 349

995

1 823

32 477

29 352 19 658

9 685

3 134

8 890

7 894

996

41 367

38 242

27 552

9 685

4 130

38 669

36 884 22 613

14 226

1 829

16 323

16 198

125

54 992

53 207

38 811 14 226

1 954

89 079

0
Total 218 390 123 308 97 951

0

0
24 906

89 079
95 533

0
26 214

0
24 761

0
1 453

89 079

0
0
244 604 149 522 122 712 24 906

0

89 079
96 986

Revenue and expenditure account for the financial year 2005 (1)

Balance sheet at 31 December 2005 and 2004 (1)

Table 3

Table 4

Operating revenue
Own revenue
Other subsidies/revenue

Operating expenditure
Staff
Administration
Operating activities

Other income (d)
Other charges (e)

(1 000 euro)

2005

156 944
823
157 767

56 278
28 610
35 850
120 738
37 029
4 451
38
41 442

Total (a)

Total (b)
Operating result (c = a – b)

Economic result (f = c + d – e)

(1) The data for the financial year 2004 are not presented as they are not comparable with those for 2005 because of

the change in the accounting methods applied.

Source: Office data — These tables summarise the data supplied by the Office in its annual accounts.

Assets
Fixed assets
Receivables
Cash and cash equivalents

Liabilities
Accumulated surplus/deficit
Economic result for the year
Non-current liabilities
Current liabilities

(1 000 euro)

2005

2004

27 456
2 196
208 020
237 672

132 575
41 442
613
63 042
237 672

Total

Total

28 125
3 233
156 638
187 996

132 575
0
784
54 637
187 996

(1) The data for the financial year 2004 have been restated in order to make them comparable with those for 2005.

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19.12.2006

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Official Journal of the European Union

C 312/111

THE OFFICE’S REPLIES

The Office will continue its efforts to improve the man-
7.
agement of its budgetary credits. For the whole of its budget the
Office managed to reduce the level of cancellations of carried over
appropriations (from 10 % in 2004 to 6 % in 2005).

8.
Following the Court’s remark, in 2006 the Office has put
into place procedures in order to minimize the cases in which a
budgetary operation is treated by the same person acting as line
manager and authorising officer.

The internal control standards were adopted by the Bud-
9.
get Committee with a decision of 5 May 2006. The Office will
take all the appropriate measures to implement these standards.

10.
Following the Court’s remark, the Office will take appro-
priate measures to reinforce its recruitment procedures by
improving their formalisation and documentation.

11.
Following the Court’s remark, the Office will take all the
appropriate measures to correct the insufficiencies detected by
better formalizing and documenting its procedures in this area.