Source: EURLEX
Language: en
Format: md

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| 6.12.2017 | EN | Official Journal of the European Union | C 417/187 |

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REPORT

on the annual accounts of the European Union Intellectual Property Office for the financial year 2016, together with the Office’s reply

(2017/C 417/30)

INTRODUCTION

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|  | 1. | The European Union Intellectual Property Office (hereinafter ‘the Office’, aka ‘EUIPO’), known as Office for Harmonization in the Internal Market (‘OHIM’) until 23 March 2016, was established by Regulation (EC) No 207/2009[(1)](#ntr1-C_2017417EN.01018701-E0001), last amended by Regulation (EU) 2015/2424[(2)](#ntr2-C_2017417EN.01018701-E0002). The core business of the Office, which is located in Alicante, is the registration of EU trademarks and registered Community designs, which are valid throughout the EU. |

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|  | 2. | The table presents key figures for the Office[(3)](#ntr3-C_2017417EN.01018701-E0003).  Table  Key figures for the office   |  |  |  | | --- | --- | --- | |  | 2015 | 2016 | | Budget (million euro)[(4)](#ntr4-C_2017417EN.01018701-E0004) | 384,2 | 421,3 | | Total staff as at 31 December | 848 | 910 | |  | | | |

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

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|  | 3. | The audit approach taken by the Court comprises analytical audit procedures, direct testing of transactions and an assessment of key controls of the Office’s supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations. |

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| OPINION   |  |  |  |  |  |  |  | | --- | --- | --- | --- | --- | --- | --- | |  | 4. | We have audited:   |  |  | | --- | --- | | (a) | the accounts of the Office which comprise the financial statements[(5)](#ntr5-C_2017417EN.01018701-E0005) and the reports on the implementation of the budget[(6)](#ntr6-C_2017417EN.01018701-E0006) for the financial year ended 31 December 2016; and |  |  |  | | --- | --- | | (b) | the legality and regularity of the transactions underlying those accounts; |   as required by Article 287 of the Treaty on the Functioning of the European Union (TFEU). |   Reliability of the accounts  Opinion on the reliability of the accounts   |  |  |  | | --- | --- | --- | |  | 5. | In our opinion, the accounts of the Office for the year ended 31 December 2016 present fairly, in all material respects, the financial position of Office at 31 December 2016, the results of its operations, its cash flows, and the changes in net assets for the year then ended, in accordance with its Financial Regulation and with accounting rules adopted by the Commission’s accounting officer. These are based on internationally accepted accounting standards for the public sector. |   Legality and regularity of the transactions underlying the accounts  Revenue  Opinion on the legality and regularity of revenue underlying the accounts   |  |  |  | | --- | --- | --- | |  | 6. | In our opinion, revenue underlying the accounts for the year ended 31 December 2016 is legal and regular in all material respects. |   Payments  Opinion on the legality and regularity of payments underlying the accounts   |  |  |  | | --- | --- | --- | |  | 7. | In our opinion, payments underlying the accounts for the year ended 31 December 2016 are legal and regular in all material respects. |   Responsibilities of management and those charged with governance   |  |  |  | | --- | --- | --- | |  | 8. | In accordance with Articles 310 to 325 of the TFEU and the Office’s Financial Regulation, management is responsible for the preparation and presentation of the accounts on the basis of internationally accepted accounting standards for the public sector and for the legality and regularity of the transactions underlying them. This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of financial statements that are free from material misstatement, whether due to fraud or error. Management is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities which govern them. The Office’s management bears the ultimate responsibility for the legality and regularity of the transactions underlying the accounts. |  |  |  |  | | --- | --- | --- | |  | 9. | In preparing the accounts, management is responsible for assessing the Office’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting. |  |  |  |  | | --- | --- | --- | |  | 10. | Those charged with governance are responsible for overseeing the entity’s financial reporting process. |   Auditor’s responsibilities for the audit of the accounts and underlying transactions   |  |  |  | | --- | --- | --- | |  | 11. | Our objectives are to obtain reasonable assurance about whether the accounts of the Office are free from material misstatement and the transactions underlying them are legal and regular and to provide, on the basis of our audit, the European Parliament and the Council or other respective discharge authorities with a statement of assurance as to the reliability of the accounts and the legality and regularity of the transactions underlying them. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit will always detect a material misstatement or non-compliance when it exists. These can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these accounts. |  |  |  |  | | --- | --- | --- | |  | 12. | An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and the regularity of the transactions underlying them. The procedures selected depend on the auditor’s judgment, including an assessment of the risks of material misstatement of the accounts and of material non-compliance of the underlying transactions with the requirements of the legal framework of the European Union, whether due to fraud or error. In making those risk assessments, internal controls relevant to the preparation and fair presentation of the accounts and legality and regularity of underlying transactions, are considered in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the accounts. |  |  |  |  | | --- | --- | --- | |  | 13. | For revenue, we assess the Office’s procedures for collecting fees and other income, if any. |  |  |  |  | | --- | --- | --- | |  | 14. | For expenditure, we examine payment transactions when expenditure has been incurred, recorded and accepted. Advance payments are examined when the recipient of funds provides justification for their proper use and the Office accepts the justification by clearing the advance payment, whether in the same year or later. |   Other matter   |  |  |  | | --- | --- | --- | |  | 15. | Without calling into question its opinion, the Court draws attention to the fact that the United Kingdom (UK) notified the European Council on 29 March 2017 of its decision to withdraw from the European Union. An agreement setting out the arrangements for its withdrawal will be negotiated. The Office’s budget is fully financed by fees from economic actors operating in the EU. The amount of fees fluctuates every year depending on the volume of registrations and renewals of trademarks and designs. A future decrease of the Office’s revenue resulting from the UK’s decision to leave the EU is possible. | |

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|  | 16. | The comments which follow do not call the Court’s opinion into question. |

COMMENTS ON BUDGETARY MANAGEMENT

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|  | 17. | The Office’s budget implementation rate was low at 89 % which indicates an imprecise estimation of its expenditure in the 2016 budget. The preciseness of the Office’s budget, where necessary through an amendment, has become more important following the recent changes in its founding and financial Regulations specifying mechanisms such as the allocation of surpluses to a reserve fund[(7)](#ntr7-C_2017417EN.01018701-E0007) and the related offsetting mechanism[(8)](#ntr8-C_2017417EN.01018701-E0008) which are connected with the budgeted amounts. |

COMMENTS ON SOUND FINANCIAL MANAGEMENT AND PERFORMANCE

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|  | 18. | In 2014, the Office launched a call for tender to conclude a four-year framework contract (FWC) with an estimated market volume of 30 million euro to procure consultancy services covering a broad range of activities comprising audit services, project management, general consultancy and studies. However the procurement procedure and the subsequent use of the FWC were not properly managed in parts. The objectives and activities to be carried out had not been sufficiently specified to precisely estimate the volume of the FWC. As a consequence, it was fully used within only two years and six months already. Moreover, despite the broad diversity of services to be procured and the largely varying levels of expenditure per activity, no lots had been used. Their use could have encouraged participation of smaller companies for low-value activities. Finally, competition on price was neutralised and dependence upon the contractor was increased as a consequence of requesting fixed-price offers from a single contractor using the FWC. The Office should consider concluding agreements with multiple suppliers with reopening of competition whenever appropriate. |

OTHER COMMENTS

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|  | 19. | The Office’s mandate of registering trademark and designs for the European single market produces a large volume of translation work. The Office’s founding Regulation establishes that the translation services required for the functioning of the Office shall be provided by the Translation Centre for the Bodies of the European Union (‘CdT’), resulting in the Office being CdT’s main client. The Office makes increasing use of in-house solutions such as linguistic and translation memories and related software. These tools aim to improve the Office’s own cost-effectiveness and efficiency. However, from a European Union perspective the current situation may result in a duplication of effort and related costs. |

FOLLOW-UP OF PREVIOUS YEARS’ COMMENTS

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|  | 20. | An overview of the corrective action taken in response to the Court’s comments from previous years is provided in the Annex. |

This Report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 12 September 2017.

For the Court of Auditors

Klaus-Heiner LEHNE

President

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