32000Y1227(10)

Report

on the financial statements of the Community Plant Variety Office (CPVO - Angers) for the financial year ended 31 December 1999 together with the Office's replies

(2000/C 373/10)

CONTENTS

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THE COURT'S OPINION

1. This report is addressed to the Administrative Council of the Community Plant Variety Office (CPVO - Angers) in accordance with Article 111(2) of Council Regulation (EC) No 2100/94(1).

2. The Court has examined the financial statements of the Community Plant Variety Office for the financial year ended 31 December 1999. In accordance with Article 110 of Council Regulation (EC) No 2100/94 the budget was implemented on the responsibility of the President of the Office. This responsibility includes drawing up and presenting the financial statements(2) in accordance with the internal financial provisions provided for in Article 112 of Council Regulation (EC) No 2100/94(3). The Court of Auditors is required under Article 248 of the Treaty establishing the European Community to audit those accounts.

3. The Court performed its audit in accordance with its audit policies and standards. These have been adapted from generally accepted international auditing standards to reflect the particular nature of the Community context. The Court carried out such tests of the accounting records and applied such other audit procedures as it deemed necessary in the circumstances. By means of this audit the Court obtained a reasonable basis for the opinion expressed below.

4. This examination has enabled the Court to obtain reasonable assurance that the annual accounts for the financial year ended 31 December 1999 are reliable and that the underlying transactions, taken as a whole, are legal and regular.

MAIN OBSERVATIONS ON THE IMPLEMENTATION OF THE BUDGET OF THE COMMUNITY PLANT VARIETY OFFICE (CPVO - ANGERS) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 1999

Analysis of the implementation of the budget

5. The final appropriations for the Office for 1999 amounted to 8,2 million euro, of which 3,7 million euro (or 45 %) was used during the year, 3,1 million euro (or 38 %) was automatically carried over to the financial year 2000 and 1,4 million euro (or 17 %) lapsed on 31 December 1999.

6. Most of the year's expenditure consists of staff expenditure (2,5 million euro) and administrative expenditure (0,5 million euro), while the carry-overs are mainly for work on the Office's future headquarters (1,4 million euro) and the costs of technical examinations for varieties for which rights are still under consideration (1,3 million euro).

7. The appropriations carried over automatically from 1998 to 1999, amounting to 1,6 million euro, were almost all fully utilised in the case of those in Titles I and II of the budget (staff expenditure and administrative expenditure), whereas, because of inappropriate financial rules (see paragraphs 11 and 12), a significant volume of operating appropriations which had been carried over (0,6 million euro out of 1,3 million euro) lapsed on 31 December 1999.

Accounting systems

8. As the Sincom 2 (SI2) application, which is used by several of the satellite organisations, did not come into use until 1 January 2000, the Office continued to use a spreadsheet and a commercial accounting package to keep its budget accounts and general accounts, respectively, up to 31 December 1999. In view of the risk of errors and inconsistencies associated with the use of these different systems, the Court reiterates the observations which it has made on this subject before(4), especially as, contrary to the provisions of Article 123(4) of the regulation implementing its Financial Regulation, the Office still does not carry out a monthly reconciliation of the entries.

Financial Regulations

Rules on fees

9. According to the rules on fees(5), the examination fees for the first growing period are not due until one month after the beginning of the examination. The Office therefore has no guarantee that the fee for work contracted out to examining centres will actually be paid. The application procedure should be rationalised by amending the Office's rules to allow the examination fee to be collected in advance.

Charging VAT

10. Until December 1998 the general Financial Regulation required expenditure to be charged inclusive of VAT, since VAT, once it had been refunded, could be used again. Since that date(6), the general Financial Regulation has required expenditure to be charged net of VAT. The Court calls upon the Office to incorporate this new procedure into its own internal rules.

Financial commitments covering several financial years

11. In view of the time needed for some technical examinations (which may cover a period of four years), examinations and reports that have been requested by the Office in a given year and are the subject of a commitment of expenditure in the same year are neither finished nor invoiced at 31 December of year n+ 1, which is the date on which the commitments carried over for that purpose automatically lapse. A new financial commitment, charged to the budget allocation for year n+ 2, then has to be effected in order to cover the legal commitments previously entered into by the Office.

12. This situation, which is also described in the annual report produced by the Office, gets worse from year to year. One of its consequences is that in the financial statements the Office's accounting commitments at 31 December 1999 are understated by 0,5 million euro (compared with 0,2 million euro at 31 December 1998). The Office should amend its financial regulation to take account of the constraints to which its activities are subject and to improve the transparency of its accounts.

Work on the Office's new headquarters

13. Although, according to the initial forecasts, the Office was expected to be in a position to take possession of its new headquarters at the end of the first half of 1999, it did not actually move in until October 2000. This postponement of the removal date resulted in the payment of additional rent amounting to over 100000 euro.

Payment of French family allowances

14. In France the law provides for family allowances to be paid to anyone who is resident on the national territory and has at least two dependent children. The national authorities confirmed to the Office that family allowances would be payable to European officials in full under the French social security scheme, which has precedence over other schemes. The Office should continue its efforts to have this provision put into effect and thereby reduce the expenditure of a similar nature that is charged to the CPVO's budget.

Delay in setting examination fees

15. Article 93(1) of the rules regarding procedures before the Office(7) provides, "By 27 April 1997 the Administrative Council shall have determined uniform methods for calculating the costs and the uniform constituents of the costs, which shall apply to all designated Examination Offices". The Office did not begin this work until the last quarter of 1999 and, according to the decision of the Administrative Council of 28 and 29 September 1999, it was to be completed by 31 December 2000, more than three years after the deadline set by the Regulation(8).

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 27 September 2000.

For the Court of Auditors

Jan O. Karlsson

President

(1) OJ L 227, 1.9.1994, p. 27.

(2) In accordance with Article 111(2) of Council Regulation (EC) No 2100/94 the accounts for all the Office's revenue and expenditure for the financial year 1999 were drawn up on 14 April 2000 and were sent to the Office's Administrative Council, the Commission and the Court of Auditors. The Court received them on 25 April 2000. A summary version of the balance sheet at 31 December 1998 and 31 December 1999 and of the revenue and expenditure account for financial years 1998 and 1999 is given in Tables 1 and 2 at the end of this report.

(3) OJ L 227, 1.9.1994, p. 28.

(4) Reports on the financial statements of the CPVO for the financial years 1995, 1996 and 1997, OJ C 393, 29.12.1997, paragraphs 1.5 ŽP 1.6, p. 52 and OJ C 406, 28.12.1998, paragraph 1.6, p. 49.

(5) See Article 8(2) of Council Regulation (EC) No 1238/95 of 31 May 1995, OJ L 121, 1.6.1995, p. 31.

(6) See Article 27(2a) of the Financial Regulation applicable to the general budget of the European Communities, as amended by Council Regulation (EC, ECSC, Euratom) No 2548/98 of 23 November 1998, OJ L 320, 28.11.1998, p. 1.

(7) Commission Regulation (EC) No 1239/95, OJ L 121, 1.6.1995, p. 37.

(8) See paragraph 11 of the Court's report on the financial year 1998, OJ C 372, 22.12.1999, p. 57.

Table 1

Balance sheet at 31 December 1999 and 31 December 1998

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Table 2

Revenue and expenditure account for the financial years 1999 and 1998

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Replies the Office's

8. Accounting systems

In December 1998, the Office installed the SI2 system, modelled on the Sincom system used by the Commission. For the financial year 1999, a spreadsheet (Excel) was used to keep both the budget accounts in SI2 and the general accounts on Expert M.

The Office has developed and introduced a procedure to carry out a monthly reconciliation. This will be carried out regularly from now on.

9. Rules on fees

The proposed amendment has already been made with the entry into force of Commission Regulation (EC) No 329/2000 of 11 February 2000.

10. Charging VAT

The Office has taken the necessary measures to incorporate the new Community provisions on the charging of expenditure and the reimbursing of VAT into its own Financial Regulation. Once the Office's Administrative Council has received the Court of Auditor's comments, it will be able to adopt this draft amendment.

11 and 12. Financial Regulation and examination fees

The Office has taken the necessary measures to draw up a draft amendment to its Financial Regulation with a view to improving the management of technical examinations expenditure. This draft aims at enabling the Office to carry forward, over several years, appropriations legally committed to ensure that money is available to cover payments to the examination offices for technical examinations.

13. Work on the office's new headquarters

Work on the Office's new headquarters was considerably delayed for the following reasons:

- the slow pace of public contract procedures imposed by the Community regulations,

- the slow pace of French procedures for obtaining planning permission,

- the unsuccessful outcome of some calls for tender,

- on-site problems concerning the quality of outside contractors.

14. Payment of French family allowances

The Office has noted the Court's comments. In strict accordance with the Protocol on the Privileges and Immunities of the European Communities and the Staff Regulations as well as the Court of Justice's jurisprudence in this matter (Judgment No 186/85), the Office will continue its efforts in order to benefit from the approach proposed by the French authorities.

15. Delay in setting examination fees

In 1996, on the basis of a specific mandate given by the Administrative Council, the President of the CPVO set up a group of experts to prepare a draft uniform method for calculating costs. The group first met on 26 November 1996. After holding several meetings, the group concluded that an external expert would have to be consulted in order to finalise the draft. The Administrative Council also supported this conclusion.

Since the call for tenders for an external auditor was unsuccessful, the President recruited an accountant as a temporary staff member of the Office whose main task is to coordinate and support the working group's activities. The Office is planning to present a proposal on a uniform method for calculating costs to the Administrative Council at its meeting in October 2000. At the same meeting, a proposal based on the Office's initiative and aiming at amending the DUS examination fees will be submitted to the Administrative Council.

According to recent calculations, the level of remuneration, based on the "in-out" principle which the Office has applied up to now, in the majority of cases, falls below the level of real costs generated. For this reason, the delay in adopting methods for calculating the costs did not have a negative effect on the Office's finances.