Report on the annual accounts of the Office for Harmonization in the Internal Market for the financial year 2007 together with the Office's replies
Date: 2008-09-18
Institutions: European Court of Auditors
Subjects: European Court of Auditors, European Union Intellectual Property Office, administration of the Institutions, financial control, implementation of the budget, powers of the institutions (EU), report

C 311/178

EN

Official Journal of the European Union

5.12.2008

REPORT

on the annual accounts of the Office for Harmonization in the Internal
Market for the financial year 2007 together with the Office’s replies

(2008/C 311/26)

CONTENTS

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

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

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

Paragraph

1-2

3-6

7-10

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

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

Page

179

179

179

181

184

5.12.2008

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Official Journal of the European Union

C 311/179

INTRODUCTION

1.
The Office for Harmonization 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.

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

2.
Table 1 summarises the Office’s competences and activi-
ties. Key data summarised from the financial statements drawn up
by the Office for the financial year 2007 are presented in Tables 2,
3 and 4 for information purposes.

OBSERVATIONS

STATEMENT OF ASSURANCE

3.
This Statement is addressed to the Office Budget Commit-
tee in accordance with Article 137 of Council Regulation (EC)
No 40/94.

The Office’s accounts for

4.
the financial year ended
31 December 2007 (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 provide a statement on their reli-
ability and on the legality and regularity of the underlying
transactions.

7.
The Office’s 2007 budget amounted to 276 million euro,
as compared with 212 million euro the previous year. The 2007
budget includes a reserve of 118 million euro, as compared with
77 million euro the previous year. The Office’s budget is financed
by fees paid by the users of its services.

8.
In recent years, the Office has significantly reduced the
number of its permanent staff while increasing the volume of its
activities via a systematic automatisation of processes and an out-
sourcing of supporting activities. Expenditure on IT consultancy,
development and maintenance increased from 7,5 million euro in
2000 to 17 million euro in 2006 and to 22 million euro in 2007.
The benefits of this approach should be evaluated by the Office
through a global cost-benefit analysis.

5.
The Court conducted its audit in accordance with the IFAC
and ISSAI (3) International Auditing Standards and Codes of Eth-
ics, in so far as these are applicable in the European Community
context. The audit was planned and performed to obtain reason-
able assurance that the accounts are reliable and that the under-
lying transactions are legal and regular.

9.
For the 2007 projects managed by the Office’s Quality
management department, cost/benefit analysis, financial esti-
mates and due justifications were not always prepared. A direct
link between the projects and the budgetary commitments was
not established, which did not permit efficient cost controlling
and management.

The Court has thus obtained a reasonable basis for the

6.
Statement set out below:

Reliability of the accounts

The Office’s accounts for the financial year ended 31 Decem-
ber 2007 are, in all material respects, reliable.

In its report (4) on the Office’s annual accounts for 2006,
10.
the Court observed the need for the Office to propose a level of
fees to the Commission which reflects more accurately its real
costs (5). The accumulated budgetary surplus (6) in 2006 was
201 million euro and in 2007 it reached 273 million euro. The
Office, together with the Commission, also needs to reflect on
how it can make better and more productive use of the funds cur-
rently held in reserves.

(1) OJ L 11, 14.1.1994, p. 1.
(2) These accounts were drawn up on 20 June 2008 and received by the

(4) OJ C 309, 19.12.2007, p. 141.
(5) Article 134(2) of Council Regulation (EC) No 40/94 of 20 Decem-

Court on 1 July 2008.

ber 1993.

(3) International Federation of Accountants (IFAC) and International Stan-

(6) Carried over budgetary results plus reserve fund according to

dards of Supreme Audit Institutions (ISSAI).

Article 16 of the Office’s Financial Regulation.

C 311/180

EN

Official Journal of the European Union

5.12.2008

This report was adopted by the Court of Auditors in Luxembourg at
18 September 2008.

its meeting of

For the Court of Auditors
Vítor Manuel da SILVA CALDEIRA
President

Table 1

Office for Harmonization 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

Governance

Free movement of goods

Objectives

Tasks

1. Administrative Board

Resources made available to the Office in
2007
(Data for 2006)

Products and services supplied in the 2007
financial year

Final budget

276 million euro

Trade marks

Numbers of applications: 88 200

Prohibitions or restrictions justified
on grounds of the protection of
industrial and commercial property
must not constitute a means of arbi-
trary discrimination or a disguised
restriction on trade between Mem-
ber States.

— To implement the Commu-
nity legislation on trade
marks and designs, which
gives undertakings the right
to
uniform protection
throughout the entire area of
the European Union.

(From Article 30 of the Treaty)

Restrictions on freedom to provide
services within the Community are
prohibited 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 the Treaty)

— To receive and enter applica-
tions for registration.

— To examine the conditions
for entry in the Register and
compatibility with Commu-
nity legislation.

— To search at the industrial
property offices of the Mem-
for any pre-
ber States
existing
trade
marks.

national

— To publish applications.

— To examine any opposition

by third parties.

— To register or reject applica-

tions.

Composition

— One representative of each MemberState.

(212 million euro)

Number of registrations: 68 000

— One representative of the Commission and their

Including a Community

Cases of opposition: 16 400

alternates.

Task

— To advise the President on matters for which the

Office is responsible.

— To prepare lists of candidates (Article 120) for
President, 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
Administrative Board.

3. Budget Committee

subsidy: 0 % (0 %)

of which cases settled: 12 200

Staff numbers as at 31 decem-
ber 2007

Appeals to the Boards of Appeal:
1 970

647 (675) posts in the establish-
ment plan, posts occupied: 619
(603) + 89 (72) other staff (auxiliary
contracts,
national
seconded
experts,
and employment
agency staff, special advisers)

local

Total staff: 708 (675)

Average time of registration

(excluding opposition or appeal):

— before publication: 7,5 months

— between publication and regis-

tration: 6,5 months

Designs

Designs received: 78 000

Designs registered: 77 000

— To examine applications for
revocation or invalidity.

Composition

— To handle appeals against

decisions.

— One representative of each MemberState and
one representative of the Commission and their
alternates.

Task

— To adopt the budget and the financial regulation,
grant discharge to the President and determine
the cost of search reports.

4. Decisions related to the applications

Decisions are taken by:

(a)

(b)

(c)

(d)

(e)

the Examiners;

the Opposition Divisions;

the Administration of Trade Marks and Legal
Division;

the Cancellation Divisions;

the Boards of Appeal.

5. External audit

Court of Auditors.

6. Discharge authority

The Office’s Budget Committee.

Source:

Information supplied by the Office.

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Office for Harmonization in the Internal Market (Alicante) — Implementation of the budget for the financial year 2007

Table 2

Source of revenue

Revenue

Revenue entered in the
final budget for the
financial year

Revenue received

Allocation of expenditure

Own revenue

Other revenue

Interest

Balance of the previous financial
year

Total

172 887

179 777

465

11 100

91 123

275 575

6 801

12 284

124 682

323 544

Title I
Staff

Title II
Administration

Title III
Operating activities

Title X
Reserve

Expenditure

Final budget appropriations

(1 000 euro)

Appropriations carried over from the
previous financial year

entered

committed

paid

carried
over

cancelled

available

paid

cancelled

63 716

60 066

58 968

1 097

3 650

1 390

1 056

333

37 363

35 272

25 402

9 870

2 091

10 691

9 616

1 075

56 294

48 091

30 390

17 702

8 203

14 407

13 193

1 214

118 202

0

0

0

118 202

0

0

0

Total

275 575

143 429

114 760

28 669

132 146

26 488

23 865

2 622

Source: Data supplied by the Office. This table summarises the data provided by the Office in its annual accounts. Revenue collected and payments are estimated on a cash basis.

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5.12.2008

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Official Journal of the European Union

C 311/183

Office for Harmonization in the Internal Market (Alicante) — Economic outturn account for the financial years
2007 and 2006

Table 3

Operating revenue

Revenue from fees

Revenue from the sale of publications

Other revenue

Operating expenses

Staff expenses

Fixed asset related expenses

Other administrative expenses

Operational expenses

(1 000 euro)

2007

2006

179 040

186

6 583

184 066

285

172

Total (a)

185 809

184 523

59 640

3 650

34 100

40 745

Total (b)

138 136

58 055

3 586

26 833

34 720

123 194

61 329

8 149

63

8 086

69 415

Surplus /(deficit) from operating activities (c = a – b)

Financial operations revenues (e)

Financial operations expenses (f)

Surplus /(deficit) from non-operating activities (g = e – f)

Economic result for the year (h = c + g)

47 673

14 011

74

13 938

61 611

Source: Data supplied by the Office. This table summarises the data supplied by the Office in its annual accounts: these accounts are drawn

up on an accrual basis.

Office for Harmonization in the Internal Market (Alicante) — Balance sheet at 31 December 2007 and 2006

Table 4

Non-current assets

Intangible fixed assets

Tangible fixed assets

Current assets

Short-term pre-financing

Short-term receivables

Cash and cash equivalents

Non-current liabilities

Provisions for risks and charges

Other long-term liabilities

Current liabilities

Provisions for risks and charges

Accounts payable

Reserve

Reserves

Accumulated surplus/deficit

Economic result of the year

(1 000 euro)

2007

2006

1 307

25 728

186

4 105

343 350

374 676

834

23

8 849

59 928

69 634

Total assets

Total liabilities

Net assets

305 042

90 171

153 261

61 611

305 042

Net capital

1 023

25 948

124

2 520

281 510

311 125

727

20

12 266

54 681

67 694

243 431

72 353

101 663

69 415

243 431

Source: Data supplied by the Office. This table summarises the data supplied by the Office in its annual accounts: these accounts are drawn

up on an accrual basis.

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Official Journal of the European Union

5.12.2008

THE OFFICE’S REPLIES

Future automation projects and eventual outsourcing of tasks are systematically taken into account
8.
when planning future establishment plan’s sizes and recruitment processes. The increase in the IT budget is
the result of a significant increase of information systems, either because new tasks (Madrid protocol, Com-
munity designs, renewals) or because of the e-business strategy and the re-engineering of our internal trade-
mark management systems as well as important investments in IT Security (business continuity). Internal
methodology already foresees cost/benefit analysis for each IT project. A similar methodology will be imple-
mented for outsourced activities.

9.
New tools for project management (including financial estimates management) are going to be intro-
duced. The application of the existing quality management methodology will be enhanced to cover system-
atically all these aspects in all projects.

In December 2006, the Commission made proposals for a new fee mechanism. The Council, in May

10.
2007, asked the Commission to make an immediate proposal for a reduction.