audit findings

7/27/2019 Audit Findings

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Financial Audit of WIPO

Financial Position, Financial

Performance and Audit Findings

8/11/2013 1



Our focus was on

• Whether there were acceptable financial andinformation systems in place, along witharrangements to provide annual assurance on the

reliability of such systems – 16 interfaces

– AIMS, Bibadmin, SIGAGIP

– Year-end procedures

• Whether WIPO had arrangements in place toproduce reliable Financial Statements, along withadequate supporting working papers

8/11/2013 2



Six components of Accounts

1. A Statement of Financial Position

– Depicts net assets -the difference between totalassets and total liabilities

• provides information about the financial strength of WIPO,and the resources which are available to support its futureobjectives.

2. A Statement of Financial Performance

– net surplus or deficit - the difference between total

revenue and total expenses• provides information on WIPO’s sources of revenue, and the

cost of its activities

8/11/2013 3




3. A Statement of Changes in Net Assets – identifies the change in the net asset position during

the year• highlights the sources of changes in the Organization’s

overall financial position, including changes due to thesurplus or deficit for the period.

4. A Statement of Cash flow – movements of cash during the year resulting from

operating, investing and financing activities• provides information on how cash has been raised and used

during the year, including borrowing and repayment of borrowing, and the acquisition and disposal of fixed assets

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5. A Statement of Comparison of Budget and – presents a comparison of the budget amounts under

the Program and Budget, and the actual amounts forthe year

• provides information on the extent to which resources wereobtained and used in accordance with the approved budget.

6. Notes to the Financial Statements – assist in understanding the principal financial

statements• comprise a summary of significant accounting policies and

other explanatory information. They also discloseinformation required by IPSAS which is not presented on theface of the principal financial statements

8/11/2013 5



Financial Position

830.7m

i n m i l l i o n s o f S w i s s

f r a n c s

Other 58.4m

Borrowings

149.7m

Other 49.6m

Employee benefits

141.4m

Payables and

advance receipts

303.0m

Fixed assets

373.0m

Net assets

178.2m

Cash and cash

equivalents

408.1m

Assets Liabilities

8/11/2013 6



Composition of employee benefits

liabilities

December 31, 2012

(in millions of Swiss

francs)

After Service Health Insurance (ASHI) 110.9 78.4

Accumulated leave 13.5 9.6

Repatriation and separation benefits 12.5 8.8

Closed pension fund 3.3 2.3

Accrued overtime 0.7 0.5

Home leave not taken 0.5 0.4

Total Employment Benefit liabilities 141.4 100.0

Percentage of

Liability

8/11/2013 7



Summary of Revenue

Investment

1.8m

Hague system fees

3.0m (0.9%)

Madrid system fees

51.6m

(15.3%)

Other 8.9m (2.6%)

Assessed conts.

17.6m (5.2%)

Voluntary conts.

7.7m (2.3%)

PCT system fees

248.2m

(73.7%) Arb. & Med.

1.7m

Other

4.8m

Pubs. 0.6m

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Expenditure

Supplies andmaterials 2.6m

Other 11.3m (3.5%)

Depreciation, amortization

and impairment 8.1m

Contractual serv ices

55.0m

(17.1%)

Operating ex.24.6m (7.6%)

Personnel expenditure

212.8m

(66.2%)

Travel/fellow s.

17.6m (5.5%)

Equip. 0.6m

8/11/2013 9



Financial Performance

• The Organization’s results for 2012 showed asurplus for the year of 15.7 million Swissfrancs, with total revenue of 337.0 million

Swiss francs and total expenses of 321.3million Swiss francs.

• This can be compared to a deficit of 32.2million Swiss francs in 2011, with totalrevenue of 293.2 million Swiss francs and totalexpenses of 325.4 million Swiss francs.

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Summary of Financial Performance

2012 2012 2012 2012 2012 2011

Total revenue 341.1 10.2 3.8 -18.0 337.0 293.1

Total expenses 290.1 7.8 14.8 8.6 321.3 325.3

Net surplus/(deficit) 51.0 2.4 -11.0 -26.6 15.7 -32.2

(in millions of Swiss francs)

Program

and Budget

Special

AccountsTotal

IPSAS

Adjustments

Projects

Financed

from

Reserves

8/11/2013 11



Audit approach and Methodology

8/11/2013 12



Audit Findings

8/11/2013 13



Enterprise Risk Management

• WIPO is in the path of institutionalizing an EnterpriseRisk Management Programme as a part of their SRP.Our review revealed inadequacies in the existing riskmanagement and internal control framework of the

Financial Services.• Though the external Consultants are at work towards

this end, considering the expected time for completionof this task, we recommend that Financial Servicesshould review the existing framework in place to make

it up-to-date and develop suitable risk registers and internal controls, particularly in case of those unitswhere such framework does not exist or exists partially.

8/11/2013 14



AIMS- Integration among various

modules

• Full integration does not exist between Asset

Management and General Ledger of AIMS.

• Review the AIMS system with reference to the

integration that exists among various modules

and also carry out necessary reclassification of

assets in line with the declared accounting

policies

8/11/2013 15



Treasury and Cash Management

• WIPO does not have a formal Treasury and CashManagement policy. We noted instances of payment of avoidable bank and commission charges coupled withweak (non-forward looking) cash flow forecasting

system.• This needs a review of the system in place to consider

adopting an appropriate Treasury and CashManagement policy to address the issues pointed inthis regard. Management accepted various suggestions

in this regard. We recommend that Management may set a time frame for implementing these and closely monitor the progress.

8/11/2013 16



Bank Reconciliation

• Only nine out of 68 accounts are subject to

independent verification of bank reconciliation

statements. Institutionalize a system of

independent verification of bank reconciliationstatements.

8/11/2013 17



Funds In Trust

• Accounts maintained with regard to Funds in

Trust were fraught with the risk of avoidable

exchange losses and more reimbursements

than due.

8/11/2013 18



Cash Flow Statement

• In the event of WIPO going in for any

borrowings for creation of an asset, the cash

flows on interest which would be capitalized

need to be classified as investing activity.Necessary modification to this effect may be

carried out in the WIPO IPSAS guidance

manual.

8/11/2013 19



Revenue Management

• We noted differences in the PCT revenue recognizedand deferred in the data maintained in AIMS and theconcerned interface (BibAdmin). Though the quantumof differences varied between the results of audit

analysis and the results of analysis carried out atManagement level consequent on audit query,unexplained differences persists.

• To ensure conformity with the declared accounting policy and IPSAS requirements, the Management

should identify the sources of the differences in deferral and recognition. As agreed to, the approachrecommended by audit should be tested during 2013.

8/11/2013 20



Revenue Management contd.,

• WIPO does not book any accruals into AIMS

on a monthly basis and they are booked into

AIMS at the year-end which defeats the very

spirit of accrual concept. Set a system of entering accruals into AIMS as they accrue.

8/11/2013 21



Revenue Management contd.,

• Revenue from assessed contributions was not beingrecognized as soon as WIPO gains control of resources(date of invoices sent in the beginning of the year to allthe Member States) in line with IPSAS 23 and rather

the revenue was being spread proportionately overthroughout the year.

• We recommend that assessed contributions arerecognized in accordance with the Accounting policy espoused in the financial statements or IPSAS 23 (para

29) or the policy adopted by WIPO to recognize revenueon the due date of invoices sent to Member States for each year of the financial period.

8/11/2013 22



Re-evaluation of accounts

• Re-evaluation of accounts and attendant

controls need a re-look to set a mechanism for

reviewing these re-evaluations independently

from time to time, particularly during the yearend procedures.

8/11/2013 23



Assets Management

• Assets each with value over CHF 5000,

constitute only 14.46% of the total number of

items valuing 59% of the total assets.

Nevertheless, they are verified once in twoyears. These being low in volume, but high in

value, for a better control, classify the

inventory to switch over to annual stock takingof high value assets.

8/11/2013 24



Repatriation and Travel Grant

• IPSAS stipulate separate presentation for

current-and non-current assets, and current

and non-current liabilities. The current portion

of the Repatriation Grant and Travel wasmisclassified in the financial statements. Set a

system of verification of these calculations

independently by setting appropriatethreshold limits.

8/11/2013 25



Financial Management

• Borrowings

• Provision for Commitment Charges

•

Funds in Trust – Dormant accounts

– Management of Funds

8/11/2013 26



Accounting Issues

• Statement IV- Cash flow Statement

• Significant Accounting Policies – Capitalization of software as Intangible Asset

– Fixed Assets-policy for assets held for a part of the year

– Revenue• Recognition and deferral of Patent Co-operation Treaty Revenue

• Interest Revenue (Investment-EURO revenue)

• Assessed Contributions – Deferment of revenue despite meeting revenue recognition criteria

–

Recognition of revenue despite repeated default – Prior Period Errors

– Reconciliation/re-evaluation of Bank Balances in ForeignCurrency Accounts

8/11/2013 27



Disclosure Issues

• Disclosure of Complementary and

Supplementary Fee

• Surface rights acquired at no cost

• Investment Property

• Amortization of Non-Current Asset

•

Leases-disclosure in Contingent Assets and Liabilities

8/11/2013 28



Other issues

• Physical verification of assets

• Accounts receivable

•

Revaluation of land on which New Building issituated

• Employee benefits

8/11/2013 29



Thank you

8/11/2013 30

audit findings

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