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WIPO is in the path of institutionalizing an Enterprise Risk Management Programme as a part of their SRP. Our review revealed inadequacies in the existing risk management and internal control framework of the Financial Services. Though the external Consultants are at work towards this end, considering the expected time for completion of this task, we recommend that Financial Services should 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 units where such framework does not exist or exists partially. (Ref 10.1) para
2. 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. (Ref para 10.1.2 and 10.1.3)
3. WIPO does not have a formal Treasury and Cash Management policy. We noted instances of payment of avoidable bank and commission charges coupled with weak (non-forward looking) cash flow forecasting system. This needs a review of the system in place to consider adopting an appropriate Treasury and Cash Management policy to address the issues pointed in this 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. (Ref para 10.2 and 10.3.1)
May 2013- Management Letter- Audit of Financial Statements of WIPO for the Year 2012 Page 1
4. Only nine out of 68 accounts are subject to independent verification of bank reconciliation statements. Institutionalize a system of independent verification of bank reconciliation statements. (Ref para 10.2)
5. Accounts maintained with regard to Funds in Trust were fraught with the risk of avoidable exchange losses and more reimbursements than due. We recommend a periodical review of the dormant accounts and close them where necessary. Review the ambiguities in the contractual obligations leading to more reimbursements than due. (Ref para 10.3) 6. 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. (Ref para 10.4.1)
7. We noted differences in the PCT revenue recognized and deferred in the data maintained in AIMS and the concerned interface (BibAdmin). Though the quantum of differences varied between the results of audit analysis and the results of analysis carried out at Management 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 approach recommended by audit should be tested during 2013. (Ref para 10.4.2.3 (a)) 8. 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. (Ref para 10.4.2.3 (b))
9. Revenue from assessed contributions was not being recognized as soon as WIPO gains control of resources (date of invoices sent in the beginning of the year to all the Member
May 2013- Management Letter- Audit of Financial Statements of WIPO for the Year 2012 Page 2
States) in line with IPSAS 23 and rather the revenue was being spread proportionately over throughout the year. We recommend that assessed contributions are recognized in accordance with the Accounting policy espoused in the financial statements or IPSAS 23 (para 29) or the policy adopted by WIPO to recognize revenue on the due date of invoices sent to Member States for each year of the financial period. (Ref para 10.4.2.3 (c)) 10. 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 year end procedures. (Ref para 10.4.2.5)
11. 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 two years. These being low in volume, but high in value, for a better control, classify the inventory to switch over to annual stock taking of high value assets. (Ref para 10.5.1) 12. 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 was misclassified in the financial statements. Set a system of verification of these calculations independently by setting appropriate threshold limits. (Ref para 10.5.4)
May 2013- Management Letter- Audit of Financial Statements of WIPO for the Year 2012 Page 3
1. Introduction 1.1 The audit of the Financial Statements of the World Intellectual Property Organization (WIPO) for the period ended 31 December 2012 was conducted by an Audit Team consisting of Dr. Sadu Israel (Team Leader), Ms. Sudha Rajan, and Mr. Ramanathan Krishnamurthy between 7th April 2013 and 3rd May 2013 at WIPO Headquarters, Geneva. 2. Background 2.1 WIPO was established in 1970, as a specialized agency of United Nations (UN). It is expected to promote the protection of IP throughout the world, through cooperation among the Member States and in collaboration with other international organizations. Major activities of WIPO include: • Administering multilateral treaties and working with Member States to support the evolution of the international legal framework for IP; • Providing global IP services that make it easier and more cost-effective to obtain protection internationally for new inventions, brands and designs; and • Providing arbitration, mediation and other alternative dispute resolution services.
May 2013- Management Letter- Audit of Financial Statements of WIPO for the Year 2012 Page 4
Accumulated surplus funds in excess of the target may be made available by the Assemblies to finance capital improvements or other priorities in accordance with the policy on the Utilization of reserves established by WIPO’s Assemblies. WIPO adopted IPSAS 31 on Intangible Assets.Audit of Financial Statements of WIPO for the Year 2012 Page 5 .2 million Swiss francs in 2011.3. 3.2 WIPO’s capital consists of its accumulated surplus and working capital funds which form part of its net assets. WIPO adopted IPSAS in 2010. Financial Performance 3.0 million Swiss francs and total expenses of 321. 4 Progress of IPSAS implementation 4. In addition.1 Application of these standards gives a more accurate picture of WIPO’s real financial position. Funds equal to the target level for accumulated surplus and the working capital funds are set aside to maintain sufficient levels of liquidity and to cover operational deficits should they occur.6 million Swiss francs.4 million Swiss francs.1 The Organization’s results for 2012 showed a surplus for the year of 15.7 million Swiss francs.3 million Swiss francs. This can be compared to a deficit of 32. as its assets and liabilities are covered more exhaustively and priority is given to the economic reality of transactions rather than their legal appearance. The policy establishes a target level for accumulated surplus equal to a percentage of estimated biennial expenditures for each of the Unions forming the Organization. 5 Authority for Audit May 2013. The capital is managed in accordance with the Policy on Reserve Funds and principles applied in respect of the use of reserves adopted by the Assemblies of the Member States of WIPO at its 48 th series of meetings in 2010. the net result of all adjustments is a deficit of 26. each of the treaty agreements of the respective Unions establishes a level for the working capital funds. As a result of adoption of IPSAS.Management Letter. During the year 2012. with total revenue of 293. with total revenue of 337.2 million Swiss francs and total expenses of 325.
The audit is conducted in accordance with the International Standards on Auditing.Management Letter.11 and Annex II of the Financial Regulations and Rules (FRR). related disclosures. Geneva. As a part of this exercise. 5. September 26 to October 5. conducting interview with concerned officials etc. 6 Audit Objectives.5. Scope and Coverage Our audit is designed primarily for the purpose of providing an opinion on the Financial Statements for the period ending 31 December 2012. 2011. we conducted an audit of the Statement of Financial Position as at 31st December 2012 and Statement of Financial Performance for the period ended 31 st December 2012 and the related notes to Accounts and Appendices annexed thereto. issue of audit enquiries.2 The scope of the audit is in accordance with Regulation 8.1 7 Audit Methodology 7. 6.Audit of Financial Statements of WIPO for the Year 2012 Page 6 . generating reports from Peoplesoft/AIMS and selected interfaces. Audit involved examination of Financial Statements and related documents.1 An entry conference was held by the Audit team with the Chief Finance Officer (Controller) along with the Head. Financial Services on 8th April 2013. The purpose of these checks was to May 2013.1 The audit of the World Intellectual Property Organization (WIPO) was assigned to the Comptroller and Auditor-General of India for the financial years 2012 to 2017 in terms of approval of WIPO General Assembly Fortieth (20th Ordinary) Session. Further we also reviewed the action taken and assurances provided relating to the issues raised during the interim audit of the financial statements to the end of September 2012. working papers. examination of compliance with other earlier adopted IPSAS. This also included a review of the restated figures of the closing balances as on 31 December 2011 as a result of adoption of new IPSAS (IPSAS 31). internal controls that informs our assessment of the risk of material misstatement in the Financial Statements arising out of fraud or error etc.
It is intended to draw the attention of the Management to our findings and recommendations on issues which we believe merit attention of the Management.2 We discussed the issues and the recommendations with the Chief Finance Officer We were provided with Director (Controller) and the Head. 9. conducted at WIPO Headquarters Office. Geneva.Management Letter.1. that revenue and expenses had been recognized in accordance with the Financial Regulations and.1 Risk Management and Control Framework Management responses to the issues which have been considered appropriately in the 10. Letter. These issues may also be considered for inclusion in the Reports for submission to the Program and Budget Committee (PBC). 10 Significant Audit Issues and Recommendations 10. Financial Services. 9 Purpose of the Management Letter 9. Audit findings were discussed in an Exit Conference held on 3rd May 2013 with the Chief Finance Officer (Controller) whose remarks have been taken into account where appropriate. that the financial statements presented fairly the financial position as at 31 December 2012.1 We express our appreciation for the assistance and co-operation extended to the audit team during audit.1 This Letter summarizes the results of the audit of the financial statements for the period ended 31st December 2012. lastly.ascertain that the expenses recorded in the financial statements were consistent with the approved budgets.1 Financial Services May 2013.Audit of Financial Statements of WIPO for the Year 2012 Page 7 . 8 Acknowledgment 8.
Audit of Financial Statements of WIPO for the Year 2012 Page 8 . In this backdrop. Expenditure and Investment) sections of the Financial Services that there exists well documented risk registers and internal controls in respect of 6% of the operational units. In some cases internal controls were indicated in the process flow itself. Investment-Manage Treasury.Management Letter. the documented risks and/ or controls were either May 2013.Manage payroll. and Manage petty cash) the framework exists but the same was incomplete as either the relevant risks or the internal controls were not defined in certain cases. a flagship programme of WIPO. considering that the strength of the risk management framework in place will have a bearing on the quality of financial information. efforts were made to prepare appropriate risk registers and internal controls by various functional wings. Consequently. setting and strengthening on internal control systems and appropriate risk management framework has been a focus area of the Strategic Realignment Programme (SRP).Manage office wings. Member States.Setting appropriate internal controls and risk management framework for better governance has been an area of concern to both oversight bodies and WIPO Management as evident from the focus of the recommendations made by the auditors and IAOC and compliance thereof. The results are discussed below: a) Need for risk management and internal control framework We noted from a review of the process flow charts and risks and internal controls developed for the three (Income. In 66% of the operational units (Expenditure. In 28% of the operational units (Income-Customer vendor. including Financial Services. we reviewed the risk management and internal control documentation in place in case of Financial Services. manage FIDES. b) Inadequacies in the framework in place We noted that even in respect of those units where risks and internal controls were documented either fully or partially. Expectedly. There were documented process flows and risks involved for various operational units of the Financial Services Division. Short term gains and losses) there was a need for documented risks and internal controls. Expenditure.
Management Letter. PCT IB/RO There exists a system of periodical reconciliation of income data with the data maintained in BIBADMIN. Risks and controls associated with this important activity had not been documented. Payroll There exists a system of reconciling payroll data between SIGAGIP and AIMS systems. consequent on reconciliation. 2. We were also informed that discussions were on with a Consultant to develop a Risk Management framework for the Financial Services wing on a pilot basis. information in respect of 9 accounts is only sent to an independent section (Income) for verification and in other cases no independent verification is carried out. While May 2013.Audit of Financial Statements of WIPO for the Year 2012 Page 9 . 4. The Management replied that the Risk Management framework was being developed by an external consultant and Finance would adopt this framework once it is finalized. Risks and controls associated with this important activity had not been documented. We are aware that WIPO Management is committed for institutionalizing an appropriate risk framework and a risk management process that had been incorporated into the annual work planning cycle and inputs for the 2013 cycle. No 1. an interface with AIMS for PCT revenue.not up to date or not in line with the operational procedures in place. Sr. Linking accounts for re-evaluation to prevent differences in valuation of foreign currency account. The following table gives a list of such cases which is only illustrative but not exhaustive. Manage petty cash Long pending differences exist in the cash balances of overseas office which need to be monitored and resolved from time to time 3. Operational unit wise risks and controls not documented Bank Reconciliation Out of 68 bank accounts WIPO maintains.
there would have been an impact on the results also. Concerning the review of Internal Controls in place.indicating that the work done so far to document internal controls and risks falls within the framework envisaged.Management Letter. the Management added that at the current rate of progress.Audit of Financial Statements of WIPO for the Year 2012 Page 10 .2 Peoplesoft/AIMS Peoplesoft/Administrative Integrated Management Systems (AIMS) is an ERP System which had an interface with several other systems used for various purposes such as revenue from PCT and fees from other Unions. there should be an automatic reconciliation of the transactions among various modules of the same ERP system in which case there shouldn’t be a room for any differences. We noted from a review of the data received on disposals made during the year 2012 that there existed a discrepancy of CHF 30000 between the GL and AM and the GL entry which was made with accounting date of December 2012 instead of January 2013 (when the asset was actually retired). Had the same error happened for an asset which was not fully depreciated. there was no impact on the statement of Financial performance.22) 10. we noted the following issues which point out the following inadequacies. May 2013. the work will take at least two years to complete. during the testing of accounting records maintained in the AIMS. This error had resulted in the overstatement of the Disposal and connected depreciation by CHF 30000 and the understatement of Gross block and Depreciation by the same amount in Note 6. etc. it was stated that a system for reviewing the documentation which covers risks and internal controls will be introduced once all of the initial documentation has been completed. (Refer AQ no. payroll. a) Reconciliation between General Ledger and Asset Management In an ideal scenario.1. Since the Net Book Value of the asset as per asset register is nil.
if any.Management Letter. differences in the revaluation amounts of Investment property. Regarding the suggestion concerning the review of items beyond certain threshold limits.3 Assets Depreciation A review of the balances available in the Fixed Assets Detailed Report maintained in AIMS in comparison with the accounting policy and values disclosed in the financial statements indicated various discrepancies such as differences in asset values. In their reply the Management attributed the discrepancies to various reasons such as additions in 2011 and 2012 and are contained within the cost figure on the Fixed Assets Detailed Report. a series of cost adjustments made and technical problems in AIMS. While stating that they take a note of the discrepancy between the GL and AM concerning the date of retirement of the asset. We note from the item no. non-reversal of the adjustment for the increase in fair value in the GL which was to be added to the asset in the asset management (AM) module. Failure on this account. and maintained that they would not have any impact on the financial statements. We recommend that. the Management stated that they would review the existing GL and AM reconciliation procedures to ensure asset retirement dates are the same in both the GL and AM.Audit of Financial Statements of WIPO for the Year 2012 Page 11 . 59 of the year end procedure that this item was shown as acted upon. May 2013. but the case in question point towards the effectiveness of the year end procedures. The above discrepancies noted in the AIMS system point towards a need for review of the integration that exists among various modules. it was stated that the Management would expect to address this in their proposed work to develop a Materiality Framework. could have an impact on the reliability of the accounting information generated from such systems.1. (Refer AQ no.Reconciliation of the GL and AM balances is one of the year end procedures. discrepancies in the useful life of assets etc.28) 10. appearance of low value assets in the assets register..
no matter how well designed. the effectiveness may vary over time. investment appraisal. cash and liquidity management. Therefore. We noted through a separate test that WIPO had opened 6 accounts during the year 2012. besides better governance. iii) The Management should take up a review of 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. has inherent limitations-including the possibility of circumvention-and therefore can provide only reasonable assurance. In this backdrop. because of changes in the work procedures. According to FR104.2 Treasury and Cash Management System Appropriate treasury and cash management system assists an entity in better cash flow forecasting.Audit of Financial Statements of WIPO for the Year 2012 Page 12 . As such there is no separate Treasury and Cash Management policy. Furthermore. the Financial Services should review immediately the existing risk management framework in place to make it up-to-date and develop suitable risk registers and internal controls in case of those operational units where they do not exist or exist partially.2 concurrence of Controller is required for opening a bank account. considering the nature of the control weaknesses noted and commented in this Letter. (Refer AQ no.i) Notwithstanding the ongoing endeavors to set in place an Enterprise Risk Management Framework as a part of the SRP. WIPO’s treasury and cash management functions are primarily governed by the Financial Regulations and Rules in place and the Investment Policy. institutionalize a system of reviewing the framework set at periodical intervals. we reviewed the system in place for treasury and cash management and the results are discussed below: i) Opening of bank accounts: WIPO maintains 68 bank accounts with various banks.11) 10. ii) Effective Internal Control. In response to a separate query that sought whether there exists approval of the Controller for the 6 May 2013.Management Letter.
must be reconciled with the information submitted by banks in accordance with Rule 104. the Management replied that the Controller approves the contract with the donor.2 which stipulates that the approval of the Controller is required for opening a bank account. iii) Cash flow forecasting: May 2013. Concerning opening of accounts for FITs. The practice followed doesn’t flow from the provision in question. 2012). This reconciliation must be performed or validated by an officer playing no actual part in the receipt or payment of funds. we believe that the practice may need a review as in this case too explicit approval of Controller is required. Management replied the Controller was informed of the need to open this account and approved its being opened but no record has been kept of this approval.2. Concerning the accounts opened with Credit Suisse (in SGD on January 18.new accounts opened.9 provides that every month all financial transactions.Audit of Financial Statements of WIPO for the Year 2012 Page 13 . bank reconciliation statements of 9 accounts are sent for independent verification (to Income Section) and in other cases they are reviewed internally by the bank reconciliation unit. The same holds good for Credit Suisse (in SGD on January 18. However. The reply given needs a review in line with FR104. which stipulates the opening of a separate bank account for the new fund. the Management while stating that the accounts pointed out by audit were sub-accounts.Management Letter. approval of the Controller was obtained. including bank charges and commissions. With regard to the accounts opened in respect of new Trust Funds. 2012) account too. ii) Reconciliation of bank accounts: Financial Rule 104. We noted that there exists a system of independent verification of bank reconciliations. out of 68 bank accounts of WIPO. added that if a bank account was opened at a bank with which the Organisation did not have any current banking relationship.
ii) Institutionalize a system of independent verification of bank reconciliation statements.One of the key advantages of managing treasury and cash management function is to ensure seamless flow of liquidity and planning investments. Review the present practice of sending the statements to Income section as there could be issues on account of conflict of interest.Audit of Financial Statements of WIPO for the Year 2012 Page 14 . (but investment section obtains information from the concerned sections at periodical intervals) which is supposed to be a forward looking exercise.3 of this Letter. As pointed out at para 10. we suggested the following: i) Follow the provisions given in the FRR for opening the bank accounts. If there are any anticipated operational problems. We noted that there was no system of cash flow forecasting in real sense. Presently. iii) Introduce a system of generating periodical/exception reports on treasury and cash management for submission to appropriate level of senior management. iv) Review the present system of cash flow forecasting to make it a forward looking exercise. especially relating to policy breaches. be it for general accounts or FITs. There was no system of generating exception reports to be provided to senior management. cash flow reports were being prepared for the previous period which doesn’t serve the intended purpose. Considering the procedures and practices in place with regard to treasury and cash management. appropriate delegation levels may be considered and approvals are always documented. and May 2013. we raised concerns on account of avoidable commitment charges and interest paid on borrowings. iv) Reporting on key activities: There was no system of monthly report on treasury activities on key financial risks of WIPO which could be a part of the key risk indicators.Management Letter.
Regarding the independent verification of bank reconciliations. possibly involving a delegation of power from the Controller. (Refer AQ no.25) The Management replied that they had taken a note of the recommendation that all bank account openings are to be explicitly approved by the Controller and will work toward a procedure that takes this into consideration.v) Consider adopting a treasury and cash management policy that would provide for addressing the issues on account of liquidity management. Concerning the recommendation on cash flow forecasting. and the existing segregation of duties among the staff of Finance Services. the Management stated that they were planning to establish it on quarterly basis. nor by the Head of the Investment Section who initializes cash management bank transfers.Management Letter. In this case. besides better governance.Audit of Financial Statements of WIPO for the Year 2012 Page 15 . Management sought to know whether there would be any conflict if the colleagues who do not make accounting entries in Aims are bank signatories. Management may consider getting these verifications done through the staff not working in Finance Services. May 2013. We recommend that considering the likely conflict that could arise with bank signatories. investments. the Management stated that they propose to have these reconciliations approved by a colleague who does not make accounting entries in AIMS.
3. v. ii. iv. Management sought the nature of exception reports that could help them in monitoring the system. the Management stated that a planned treasury study that will be carried out during the course of this year would address this issue. i. Identify bank accounts with balances in excess of the operational needs. We suggest that the following reports may be considered.Audit of Financial Statements of WIPO for the Year 2012 Page 16 . Non. May 2013. Loss making transactions (Foreign Exchange) above threshold limits.8 Mn CHF). return on the same is 1.3 Financial Management 10.Compliance with stipulated limits and authorizations. Payments and transactions that are not in line with the trend based on past history.1 Mn CHF (in which unrestricted balances are 244.1 Borrowings As per the financial statements Cash and equivalents of WIPO are 408.24 per cent in 2011]. Individual transactions above threshold limits.375 per cent in 2012 [1. 10. vi. About the suggestion for exception reporting. The average rate of interest earned on interest bearing accounts and investments held with the Swiss National Bank was 0.335 Mn CHF for 2012.Management Letter. Pending bank reconciliations.About the need for a treasury and cash management policy. iii.
Regarding the loan facility on the conference hall. the loan was drawn down in 3 slices: 5 years. In view of the above. we recommend that such issues be brought under a suitable Treasury and Cash Management policy for review from time to time.375 per cent which was the return on the investment of the Organization.Borrowings represent the Foundation for Buildings for International Organizations (FIPOI) loan (23. As mentioned at 10.833 in 2011 and CHF 60. For this reason. Therefore. it was stated that they were planning to ask the bank to postpone the drawdown of the loan for one year or more. among others that for the time being they were of the view that they should avoid financing a large long term investment with short term cash.05 Million during 2011) is payable on unutilized loan.The interest paid on the BCG loan was 3.15 percent annually (0.6 million Swiss francs) and the BCG/BCV New Building loan (126.2 of this Letter. In addition a commitment charge of 0.2 Provision for Commitment charges May 2013. it was sought to clarify whether WIPO had considered the option of repaying the loan along with the reasons for repeated non.utilization of loan which is leading to payment of commitment charges. as this could be risky if the financial situation deteriorates.62 percent).6) 10. It was replied that the possibility of repaying the loan had not been formally discussed but the intention had always been to have this possibility available on a periodic basis.Management Letter.000 in 2012. It is pertinent to mention here that WIPO had paid commitment charges to the tune of CHF 45. (Refer AQ no.Audit of Financial Statements of WIPO for the Year 2012 Page 17 . 10 years and 15 years. in absence of a formal Treasury and Cash Management policy the risk of payment of avoidable higher interest and commitment charges would continue to persist. It was further stated.3. as the interest paid on borrowings and the commitment charges were significantly higher than 0.1 million Swiss francs).31 million CHF for the year 2012 (average 2.
” A review of the bank statements provided for the loan account and the ledger in AIMS for the account (74341 – BK Charges New Construction) indicated that an amount of CHF 3314218.0 million Swiss francs. “In October 2010.0 million Swiss francs to be used to finance part of the cost of the construction of the New Conference Hall and available for use during the period March 31. The contract again provides for an annual repayment of principal equal to 3 per cent of the total amount borrowed.01. In this regard it was sought to clarify as to whether the provision and accounting entry for the amount of CHF 60. 2014. plus a margin of between 0.95 had been accounted for the Fiscal year 2012.15 percent on 40 Million CHF undrawn loan) towards commission. We noted that an amount of CHF 60000 was debited in the bank statement by BCGE on 09.70 per cent dependent on the length of the term as determined by the Organization. 2012 the Organization had not drawn down the additional amount of 40. an amendment to the loan agreement was approved by the Banque Cantonale de Genève.Audit of Financial Statements of WIPO for the Year 2012 Page 18 .15 per cent on undrawn loan amounts during the period of availability. 2011 to March 31. Apart from the interest. The interest rate has also been fixed at the Swiss franc Swap LIBOR for up to 15 years.000 (0. the transactions and events are recorded in the accounting records and recognized in the financial statements of the periods to which they relate. the Banque Cantonale Vaudoise and WIPO providing an additional amount of 40. to begin on March 31.0 million Swiss francs. The elements May 2013. WIPO was liable to pay as per the agreement an amount of CHF 60.30 per cent to 0.2013. 2015 for the loan of 40. As at December 31. It is noted that the Organization pays an annual commission of 0.000 had been made in relation to the Fiscal year 2012 in compliance with the accrual concept of accounting as detailed in IPSAS 1 which states “Accrual basis means a basis of accounting under which transactions and other events are recognized when they occur (and not only when cash or its equivalent is received or paid).Management Letter. Therefore. This amount corresponds to the amount of interest amount debited as per the bank statements.Note no: 15 of WIPO’s financial statements for the year ended 2012 on Borrowings provides the following in relation to the borrowing arrangement from BCGE.
Therefore. A review of management of these accounts revealed the following. WIPO is responsible for receiving contributions from donors. and expenses”.3. 10.recognized under accrual accounting are assets.3 Funds in Trust In addition to the income and expenditure recorded in its financial statements. This is represented as funds in trust in the financial statements of WIPO. (Refer AQ no. It was further stated that 2012 was the first year for which a full year of commission charge was paid. WIPO is responsible for providing fund administration services to multi-donor Funds in Trust (FITs).3. and this was directly debited from the WIPO BCGE bank account in January 2013. It was replied by the Management that they had noted that no accrual was recorded in the 2012 financial statements relating to commission of CHF 60. liabilities. These funds have been opened between periods ranging from 1995 to 2012.Management Letter. May 2013. revenue.1. independently.18) 10. Dormant Accounts WIPO maintains about thirty three (33) Funds in Trust Accounts pertaining to funds received from different donor nations. and providing consolidated reporting to donors.000 for undrawn loan amounts. disbursing funds to participating United Nations organizations. 22 funds are maintained in CHF and the remaining are maintained in other currencies (USD and Euro). we recommend institutionalizing a system of reviewing such contractual obligations leading to accruals. We believe that transactions such as these should be provided for in accordance with the accrual concept as a matter of routine. a commission charge was applied for nine months of the year and this was paid by the Organization during 2011.Audit of Financial Statements of WIPO for the Year 2012 Page 19 . the reply added that they had updated their year-end closing procedures to ensure that in future this charge is correctly accrued for as necessary.3. Each of these Trusts carries a specified amount to be donated over a predefined time schedule. In that role. net assets/equity. While stating that in 2011.
it could be considered if the funds could be closed and the balance returned. Finland (WFICR). In October 2012. We learnt that in respect of the WFINL and WFICR accounts pertaining to Finland. Costa Rica (WCORI) and El Salvador (WELSA). The funds pertaining to El Salvador and Costa Rica remained open. In 2008. These four accounts pertain to Finland (WFINL). The last activity recorded in this fund was in 2005. It was. seen that there had been no movement in the fund during the last five years. In terms of the agreement an amount of USD380. these funds would be merged in 2013. In this case too there hadn’t been any activity recorded during the last seven years.From the data on open accounts it is seen that there were four (04) FITS accounts which have been lying dormant. It was observed that this fund had also not seen any activity since 2005-06. some activity was expected shortly in one of the funds and that subsequent to this activity being completed.Audit of Financial Statements of WIPO for the Year 2012 Page 20 . WIPO had informed the concerned official regarding the existence of an unused balance of USD 31993 and sought advice on whether the fund could be closed and the unused balance returned. b) WELSA account: This fund came into existence in June 1998 and the Government of El Salvador was to pay WIPO USD 200. WIPO Management had informed the concerned Programme Manager that since there was no activity in these funds. Scrutiny of these accounts indicated the following: a) WCORI account: This account was created in June 1995. The concerned official had responded stating that the balance would be used shortly.Management Letter.000 which was to be made effective within a specified time schedule. without any contribution or any activity for a long period of time. however. May 2013.000 was to be made available through this fund. The Programme Manager has responded that the fund need not be closed.
We note that maintenance of these accounts is fraught with the risks of continued exchange losses. including those which are dormant.96 Expenditure 82. Details of this account are as under: Opening balance 9318. and added that they contact the Program Managers concerned with the detailed financial situation of the FITs for a review and closure where necessary. Analysis of the reimbursements/transfers made out of these funds indicates that there are two funds (WESPA (Spain) and WUGAY (Uruguay)) with negative balances.64 Reimbursement 91753.Audit of Financial Statements of WIPO for the Year 2012 Page 21 . in case of WESPA account (Donor-Spain) CHF 91753 was reimbursed to the donor leading to a negative closing balance of CHF 64474. Concerning the case of El Salvador (WELSA) and Costa Rica (WCORI) it was stated that they were in contact with the concerned Programme Managers and would follow up. with minimal or no expenditure and request respective donor to review and close the funds where possible.3. 2012 depicts the Special Accounts by Donor Contributions.Management replied that Finance carries out an annual regular review of all FITs.3.55 Closing balance -64474.Management Letter. we recommend that Management should review these plus other such accounts. While the amount reimbursed was not significant in case of WUGAY account.26 Income -1956. Given the fact that these funds have not had any activity for long period of time. if any.2 Management of Funds Annex III of Financial Statements for the year ended December 31.29) 10. besides payment of bank charges for maintaining these accounts at higher rates than what interest accrues on the balances. (Refer AQ no.49 In these cases we sought to know whether the loss on account of this transfer was recognized in the books of accounts since the fund had been closed and there was no May 2013.
We also sought the circumstances that led to the transfer and the control system in place in this regard The Management replied that the loss on this account appears alongside the corresponding Fund in Trust (FIT) and reflects a series of exchange losses that have occurred during the lifetime of the FIT but which have not been accounted for correctly. the issues brought out would assist the Management in reviewing and strengthening the systems and procedures in place. It was also stated they had identified the reason for these accounting errors and would review the procedures in place in order to ensure that such a situation does not arise in the future with regard to this kind of FIT. With regard to FIT ESPA. Also.000 CHF was shown to have been received as interest on account of investments made by WIPO. Documents furnished to External auditors on May 2013.12) 10.Audit of Financial Statements of WIPO for the Year 2012 Page 22 . (Refer AQ no. We recommend that these accounts be reviewed at periodical intervals for their completeness and correctness. or financing activities (para 40 of IPSAS 2) Scrutiny of Statement II Statement of Financial Performance and related Note 23 indicated that a sum of 1. accounting records and the procedures followed in maintaining the accounting information.Cash flow Statement Cash flows from interest and dividends or similar distributions received and paid shall each be disclosed separately. Though there were no material individual misstatements.4 Main Accounting Points Arising In this section.1 Statement IV. a FIT based in a currency other than the Swiss franc.335. namely. carry out a review of any issues emerging on account of ambiguities in contractual obligations and address the same.possibility of payment by the donor. Each shall be classified in a consistent manner from period to period as operating. we present the results of review of Financial statements. 10. investing.Management Letter.4. it was stated that it would be impossible to reclaim the monies which had been transferred to a new fund at the request of the donor.
4. In view of this. being the first year of implementation. externally acquired software and internally developed software costs have been capitalized as assets of the Organization from January 1. the review of the capitalizations was conducted only during the last quarter (as per information furnished during Interim Financial Audit in November 2012). A suitable modification to the model Cash Flow statement given in the WIPO’s IPSAS Manual was also carried out. We recommend that necessary modification to this effect may also be carried out in the WIPO IPSAS guidance manual. the cash flows on interest which would be capitalized need to be classified as investing activity. May 2013. it was suggested to review the words “from January 2012” suitably to reflect the true date of capitalization.Borrowings from BCGE also indicated payment of Interest. we believe that in the event of WIPO going in for any borrowings for creation of an asset. WIPO has fully applied this standard for the first time in its 2012 financial statements.2. 2012.” However.4. While noting the modifications carried out in cash flow statement. the Management modified the Cash flow statement and also provided for necessary cross-reference to the note in which the details are available and details of interest expended in the Note 15 relating to borrowings in the amended statement at the instance of audit. The details of the same were not depicted/shown separately in the Statement of Cash Flows. While accepting the observation.Audit of Financial Statements of WIPO for the Year 2012 Page 23 . As such.1 Period of Capitalization: Note 2 of the financial statements states “in accordance with the effective date of IPSAS 31 Intangible Assets.2 Significant Accounting Policies Capitalization of software as Intangible Asset 10. (Refer AQ no.1) 10.Management Letter. The Management had agreed to this and the words “during 2012” were substituted with “from January 2012”.
Management proposed to include the wording. the Accounting Policy was silent regarding the period of charge of depreciation on Fixed Assets owned by the organization for part of the year i. As a result of this requirement. (Refer AQ no.e. the Management added that in the previous WIPO financial statements prepared in accordance with IPSAS. Considering that WIPO had already recognized the Surface Rights on the WMO land as an Intangible asset in 2011 financial statement (note 8). depreciation is charged only for the months during which the asset was in use” to the Note 2 of the Financial Statements.Audit of Financial Statements of WIPO for the Year 2012 Page 24 .5) 10.7) May 2013. assets purchased/disposed/retired from use during the year.2 Fixed Assets Note 2 Significant accounting policies-Fixed assets states that Fixed Assets are depreciated on a straight line basis over the estimated useful lives.. While accepting the recommendation. “where fixed assets are only in use for part of the year (due to acquisition. However. IPSAS 31 was applied on an exceptional basis to land surface rights held by the Organization and they do not retrospectively apply IPSAS 31 to other intangible assets as this was considered impracticable. “an entity that has previously recognized intangible assets shall apply this Standard retrospectively in accordance with IPSAS 3”. (Refer AQ no. to recognize intangible assets which were not recognized under the entities previous basis of accounting based on the recognition criteria of IPSAS 31.Retrospective application: Para 128 of IPSAS 31 provides.Management Letter.4. among others. disposal or retirement during the year). While stating that a suitable modification was carried out to the Note 8. there was a need for disclosing the departure from IPSAS 31 and the need for such a departure. Therefore.2. a need for Accounting Policy in this regard was pointed out. on initial adoption of IPSAS 31 an entity would be required.
the differences continue to persist. Revenue from PCT increased by 20. Libson and The Hague. May 2013.0 million francs. revenue from applications is only recognised on publication of the application. Similar such interfaces exist for revenue from other systems like Madrid.2 million Swiss francs.Audit of Financial Statements of WIPO for the Year 2012 Page 25 . The issue was discussed at length with the Head. Data regarding PCT revenue is maintained in an IT system.10. accounting for 73. we note that though the magnitude of differences had undergone a change.9 per cent compared to 2011 total revenue of 293. known as BIBADMIN which acts as an interface with AIMS system which is the source for generating financial statements. IPSAS specialist.3 Revenue a) Recognition and deferral of Patent Co-operation Treaty Revenue Total revenue of WIPO for 2012 was 337. corresponding to adjustments and corrections (for example refunds) recorded in AIMS but not reflected in BibAdmin. following his analysis replied that there exist non-significant differences of 36. Economics and Statistics Division which was analyzed independently and compared with the data used for deferral of revenue in PCT System maintained by the Income section which is reflected in the Financial Statements as required by IPSAS. In this backdrop. During exit conference while stating that the procedure being followed WIPO had been tested and audited earlier too. we obtained data maintained in BIBADMIN from Data Development Section.627 Swiss francs.2. The differences were attributed to the differences in the dates of data captured by Economic and Support Unit from where audit captured the data.8 millon). The largest source of revenue during 2012 was PCT system fees. Income section as well as IPSAS specialist.1 per cent from 2011.4. However. In the IPSAS financial statements.7 per cent of the total revenue. This arrangement presupposes a robust mapping between the parameters of the interface and the main system to prevent loss of financial data integrity. the Management added that though the reasons for the differences could not be readily identified and reconciled.Management Letter. Results of analysis indicate certain differences in the PCT revenue deferred (CHF 500000) and recognized (CHF 3. representing an increase of 14.
royalties. We noted that WIPO had undertaken an investment with Société Générale in EURO combined with a currency swap during 2012 by converting CHF into EURO and make a EURO deposit with a guaranteed coupon of 2. at the end of the deposit period. the Management should identify the sources of the differences in deferral and recognition. (Refer AQ no.8) b) Interest Revenue IPSAS 9 Revenue from Exchange Transactions provides that revenue arising from the use by others of entity assets yielding interest. The investment would be made for one month at a time. It further states that interest shall be recognized on a time proportion basis that takes into account the effective yield on the asset. and the amount of the revenue can be measured reliably. The interest is credited and the loss on the currency swap is debited to WIPO’s EURO account at the end of 2012.Audit of Financial Statements of WIPO for the Year 2012 Page 26 . As agreed to during the exit meeting. To ensure conformity with the declared accounting policy and IPSAS requirements.25 %. convert the EURO capital back into CHF by means of a forward contract taken out at the time the deposit is made (trade date). According to this. the approach recommended by audit should be tested during 2013.The EURO interest is paid to WIPO’s EURO account with a value date of 31/12/12. and dividends or similar distributions shall be recognized using the accounting treatments set out in paragraph 34 when it is probable that the economic benefits or service potential associated with the transaction will flow to the entity.the approach recommended by audit would be tested during 2013 for adoption based on the results. A/C & DEPOSITS had postings for the interest and expenditure (loss on currency swap) for the entire period of investment (from 1/8/2012 to 17/12/2012) during the month of December 2012.Management Letter. Since the details of the premium on currency swap (expenditure) and gain due to interest was May 2013. Audit noted that the account code 65010 INTEREST CURR.
In compliance with IPSAS and credible internal reporting for quarterly Financial statements (for internal consumption). It was replied that as a general principle WIPO does not book any accruals into AIMS on a monthly basis and added that accruals are only booked into AIMS at the year end. invoices are sent to member states during the month of November every year.4 of their IPSAS manual decided the point of recognition for assessed contributions for each year of the biennium as revenue on the due date of invoices sent to Member States for each year of the financial period.16) c) Assessed Contributions WIPO’s Financial Statements for 2012 (Note 2: Significant accounting policiesReceivables) states. the same should have been recognized on a monthly basis in compliance with IPSAS 9 and the accrual concept of accounting.Management Letter. we recommend that monthly accruals are calculated and adjusted amounts entered into AIMS.Audit of Financial Statements of WIPO for the Year 2012 Page 27 . “assessed contributions are recognized as revenue at the beginning of the financial year. An allowance for non-recoverable receivables is recorded equal to the assessed contributions frozen by action of the General Assembly plus contributions receivable from Member States that have lost the right to vote in accordance with Article 11 of the Convention establishing the World Intellectual Property Organization”. In line with the spirit of the cited provisions. Considering that the practice in place defeats the very spirit of the accrual concept. (Refer AQ no.Revenue from Non Exchange transactions indicates. the interest as well as the expenditure (premium on currency swap) should be recognized on a monthly basis. May 2013.known on a monthly basis (when the agreements were renewed).2. Further. Clause 29 of IPSAS 23. “an entity will recognize an asset arising from a non-exchange transaction when it gains control of resources that meet the definition of an asset and satisfy the recognition criteria”. WIPO as per para 17. Accordingly.
Management Letter.Review of the system of revenue recognition from assessed contributions revealed the following: i) Deferment of revenue despite meeting revenue recognition criteria: Audit noted from the Peoplesoft/AIMS that for the year 2012. revenue (CHF 17. However. May 2013.257 was due from various defaulting member countries out of the total assessed contribution of CHF 17. for the year 2012.46. ii) Recognition of revenue despite repeated default: At the time of preparation of Financial Statements for the year 2012.Audit of Financial Statements of WIPO for the Year 2012 Page 28 . WIPO had a membership of 185 member countries. To illustrate. WIPO continues to recognize this amount too which doesn’t meet the revenue recognition requirement stipulated in Clause 29 of IPSAS 23.383) was recognized on 1. which was being depicted in the provisions. gets netted off to Accounts Receivables at the year end.5 million. but on the same day the entry was reversed and the income was recognized in a deferred manner on the ground that full recognition of the total revenue from assessed contributions at the start of the year would lead to an unusually high surplus appearing in the statement of financial performance of the interim financial statements.435. A review of the invoices issued and contributions received indicate that about 23 member countries have been defaulting for the last three years. This methodology does not stem either from the Accounting policy espoused in the financial statements or IPSAS 23 (para 29) or the policy adopted by WIPO to recognize revenue on the due date of invoices sent to Member States for each year of the financial period. Audit is aware of the fact that this amount. The above issues indicate a need for reviewing the methodology being followed for initial recognition of assessed contributions in line with the spirit of IPSAS 23 and WIPO’s IPSAS manual.1. CHF 4.2012. for the sake of initial recognition.
Concerning recognition of revenue despite repeated default. and the deferral of revenue in this way allows management to understand the performance of the Organization during the year and maintained that this would not impact the financial statements which are prepared for the full year. as there is no deferral of revenue from assessed contributions at year-end in accordance with both IPSAS 23 and WIPO’s IPSAS Policy Guidance Manual. second and third quarters for internal management purposes only. The practice of spreading over the revenue which is to be recognized as soon as the invoices were issued (gains control of resources) and then correcting this treatment at the year-end is not in line with IPSAS 23 (para 29). the Management stated that the deferral of revenue from assessed contributions was an accounting entry which only impacts the accounts prepared during the year for the first. the Management maintained that WIPO policy in this area is in accordance with IPSAS 23. We do not agree with the above cited practices in place as they were not in line with IPSAS.Audit of Financial Statements of WIPO for the Year 2012 Page 29 .In response. We recommend that assessed contributions are recognized in accordance with the Accounting policy espoused in the financial statements or IPSAS 23 (para 29) or the policy adopted by WIPO to recognize revenue on the due date of invoices sent to Member States for each year of the financial period.Management Letter. Quoting that about 86 percent of contribution relates to Member States who have not lost voting rights.9) May 2013. though the contribution amount is not significant. Similarly. (Refer AQ no. it was stated that WIPO policy was to recognize an allowance against the carrying value of its receivable from member states equal to the amount due from Member States that have lost the right to vote at the Assemblies under WIPO’s Treaties and from least developed countries which have been frozen by action of the Assemblies. the practice of recognizing revenue despite default (has not gained control over resources) does not flow from IPSAS 23 (para 29).
5.Audit of Financial Statements of WIPO for the Year 2012 Page 30 .12) However.326 in respect of the balance in Credit Suisse account number 487080-82-11 Singapore Dollar to CHF (base currency) leading to an overstatement of amount recognized in the Financial Statements by CHF 1057. The Management replied that WIPO had not currently set a threshold value for prior period items or other materiality decisions with regard to the preparation of the financial statements.341.13) 10.2. Investment wing of Financial Services had adopted an exchange rate of 1.4 Prior Period Errors The Policy Guidance Manual for International Public Sector Accounting Standards 2012 edition states that Errors discovered in the current year are corrected before the financial statements are authorized for issue (para 3.Management Letter. (Refer AQ no. the Financial Statements and the notes thereon did not mention about WIPO’s policy related to treating prior period items and the threshold value set for an item to be considered material.4. and would meet the requirements of IPSAS 3 concerning relevant and reliable information.2. It was also stated that Management proposes to develop and apply a Materiality Framework which would apply the definition of materiality per IPSAS 18.104.22.168. These errors are corrected retrospectively and prior period financial statements are restated (para 3.4.1) and material errors in the preparation of the financial statements of one or more prior periods may be discovered in the current year. May 2013. Reconciliation/re-evaluation of Bank Balances in Foreign Currency Accounts WIPO Financial Regulations and Rule 106.5 (a) stipulate that the Controller shall establish the operational rates of exchange between the Swiss franc and other currencies which shall be derived from the operational rates of exchange and shall be used for recording all WIPO transactions.2. Verification of WIPO bank balances with the Bank Reconciliation Statements and the Bank Correspondences including the conversion to base currency indicated that as against the approved UN operational rate of 1.
May 2013.Management Letter.4.Reportedly.3. While stating that this fact should have been noticed during the closure review of the accounts being revalued. Considering the serious nature of the anomaly. the issue noted indicates a need for reviewing the system of the linking of accounts opened for re-evaluation and attendant internal controls in place.10) 10. (Refer AQ no. Though the amount in question is not significant. particularly during the year end procedures. we recommend that the system in place for re-evaluation of accounts and attendant controls be reviewed and also that a mechanism be set for reviewing these re-evaluations independently from time to time. the information provided to the stakeholders through the note needs to be suitably modified to reflect the actual position.3 Disclosure Issues 10. the Management added that the account had been set to be revalued and suitable action would be taken to prevent recurrence of such anomalies in future.1 Disclosure of Complementary and Supplementary Fee Note 13 Transfers Payable of WIPOs Financial Statements for the year 2012 states that Madrid Union Complementary and Supplementary fees: In accordance with the Madrid Agreement [Article 8(2) (b and c)] and the Madrid Protocol [Article 8(2) (ii and iii)] the Organization collects complementary and supplementary fees of 100 Swiss francs per application or renewal on behalf of the contracting parties. the account had not been integrated for re -evaluation since beginning of creation of the account which led to the difference. The funds are transferred annually at the beginning of the year following the reporting date. We noted that the transfers had been partially completed (in April 2013) and the remaining would be completed shortly. Considering the factual position of the transfer (not completed even till April 2013).4.Audit of Financial Statements of WIPO for the Year 2012 Page 31 .
Bogsch and G.” The United Nations System Task Force on Accounting Standards in its Submission on the Consultation Paper: Consultation on IPSASB Work Program 2013-2014 states that “the issue of accounting and reporting of donated rights to use May 2013. Bodenhausen buildings are located is the property of the Republic and Canton of Geneva which has granted the Organization surface rights including the right to construct buildings for a period of 60 years with an option exercisable solely by the Organization of an extension for an additional period of 30 years. These surface rights were acquired by the Organization at no cost and no value has been recognized.30) 10.Audit of Financial Statements of WIPO for the Year 2012 Page 32 . Funds are transferred annually in the first half of the year following the reporting date’. (Refer AQ no. are not valued in the financial statements. as the Organization does not have the right to dispose of the rights which revert to the Republic and Canton of Geneva unless renewed. ii) Note 8 Intangible assets: “The land on which the A.3. that revert back to the Canton at the end of the grant.Management Letter.2 Surface rights acquired at no cost WIPO discloses the rights acquired without cost as given below: i) Part of Note 2 relating to Intangible asset: The rights to use property granted by the Canton of Geneva acquired without cost.While accepting the suggestion the Management proposed to carry out an amendment to the text of Note 13 Transfers Payable as ‘Madrid Union Complementary and Supplementary fees: In accordance with the Madrid Agreement [Article 8(2) (b and c)] and the Madrid Protocol [Article 8(2) (ii and iii)] the Organization collects complementary and supplementary fees of 100 Swiss francs per application or renewal on behalf of the contracting parties. The amount due to each contracting party varies based upon the services provided by the party (examination undertaken).4.
Audit of Financial Statements of WIPO for the Year 2012 Page 33 . statement of changes in net assets/equity and cash flow statement. we believe that the present disclosure in the Financial Statements as cited is insufficient considering that the financial impact of the fair rental value of the service in kind with materiality has not been given.” WIPO follows the option as detailed in 59.” Based on the sense in which the word “information” is used in IPSAS 1. and in the options given in the guidance paper by the UN Task Force1. and to demonstrate the accountability of the entity for the resources entrusted to it. which is to provide information useful for decision making. Notes provide narrative descriptions or desegregations of items disclosed in those statements and information about items that do not qualify for recognition in those statements. statement of financial performance. Decision paper . as set out in IPSAS 1.assets where nominal or no rent is paid.joint premises -OP 3 Disclosure: Disclosure of information about the resource in the Notes May 2013.” The Management responded that they would look into the possibilities for valuing the benefit derived from the land surface rights acquired at no cost. As per IPSAS 1 Definitions “Notes contain information in addition to that presented in the statement of financial position. within the ‘Improvements to IPSAS 23 – Non-Exchange Revenues’).joint premises under OP 3 Disclosure: Disclosure of information about the resource in the Notes. The Task Force encourages the IPSASB to consider this issue either as a potential new project or to add it to the scope of existing potential project (for example.Management Letter. Therefore we suggested that WIPO may consider taking up the accounting treatment of expense/revenue based on fair value or at least convey the financial impact of the service in kind received in their notes in compliance with para 109 of IPSAS 23 which provides that “The disclosures required by paragraphs 106 and 107 assist the reporting entity to satisfy the objectives of financial reporting. It was also stated that they shall examine the most appropriate disclosures concerning these arrangements for inclusion in the Organization’s future financial statements prepared in accordance with 1 59. Decision paper . including cases where the asset is shared by multiple entities. is a common occurrence in the public sector which should not be overlooked.
0 million Swiss francs.4 Amortization of Non-Current Asset Note 10: Other Non-current Assets of WIPO’s Financial Statements for the year ended 2012 states “in 1991 the Organization entered into an agreement with the International Centre of Geneva Foundation (FCIG) related to the construction of a building on rue des Morillons in Geneva. it was added WIPO will monitor any changes in this position.Audit of Financial Statements of WIPO for the Year 2012 Page 34 .3. May 2013.4 million Swiss francs.21) 10.IPSAS.3. The lease agreement was renewed for a period of seven years from January 1. Stating that the UN Task Force continues to state that a range of accounting options are acceptable for donated/free-to-use land or premises. (Refer AQ no. The agreement provided for the Organization to advance the sum of 11. As the existing disclosure in Note 7 does not cater to the needs of this para. 2012. Switzerland at a total cost of 20. At that date the Organization also entered into an agreement to lease the building from FCIG.4.23) 10.3 Investment Property The existence and amounts of restrictions on the reliability of investment property or the remittance of revenue and proceeds of disposal is to be disclosed as per para 86 (g) IPSAS 16. details of restrictions or negative assurance about their existence may please be incorporated in the disclosure in compliance with IPSAS 16.4.Management Letter. The Management replied that the note was modified suitably to include that the Organization was not aware of any restrictions on the realizability or remittance of revenue from the investment property. with the balance of the construction cost covered by a mortgage between FCIG and the Cantonal Bank of Geneva. This indicates the need for details of restriction in case of existence of restrictions as also the need for a negative assurance if no such restrictions exist. (Refer AQ no.
the Organization leases space for its liaison offices in New York. The majority of these leases are cancellable by the Organization subject to notification periods specified in the agreements. From January 1.3. the Management. 2012.0 million Swiss francs loan to FCIG. WIPO is to be repaid the balance of the loan after amortization.20) 10. Upon vacating the premises. both parties have the right to terminate the agreement at any point through mutual consent formalized in writing.0 million Swiss francs of the 11. Singapore and Tokyo. The annual amount of rent payable by WIPO is equivalent to the annual repayments (interest plus repayments of the principal) on the mortgage between FCIG and the Cantonal Bank of Geneva.Audit of Financial Statements of WIPO for the Year 2012 Page 35 .4.679 Swiss francs against the 10. The current rate of interest.0 million Swiss francs of its 11. The Organization leases space for its New York liaison office under the terms of a non-cancellable lease agreement which has outstanding payments to the end of the lease period as follows: May 2013.0 million Swiss francs loan for restoration of the building to its original condition. loan repayment and interest payment on the Mortgage may also be included in the note for a clearer depiction of the arrangement.Management Letter. FCIG will also retain 1. 2018. In reply.Under the current lease agreement between the Organization and FCIG. In addition.WIPO as Lessee states “the Organization has a number of leases providing additional space.” We suggested that the amount of principal outstanding. is 1. storage and specialized facilities in Geneva.48 per cent. WIPO also recognizes an annual amortization charge of 188. (Refer AQ no. fixed through to December 31. while accepting the suggestion for additional disclosures stated that they would disclose the amount of rent paid in 2012 by WIPO which is equivalent to annual interest and principal payments on the mortgage between FCIG and the Cantonal Bank of Geneva. Rio de Janeiro.5 Leases-disclosure in Contingent Assets and Liabilities Note 19 of WIPO’s Financial statements on Leases.
These being a low volume but high value items. (Refer AQ no. it was seen that the net of inventory items considered as an asset and physically tracked amounted to CHF 19218382. While accepting the recommendation.Management Letter. for a better control. the practice in place may warrant a review. Further. We noted that the practice in vogue tracks 59% of the assets each with value over CHF 5000. once in two years. Appropriate classification of the existing assets would be the first May 2013.7 b) sub-clause 2 of WIPO IPSAS Manual.The details of outstanding payments on account of the non-cancellable lease are contractual commitments which also need to be included in the disclosure for contingent assets and liabilities (Note 18) in compliance with IPSAS 19. according to para 12.2.1 Physical verification of assets Rule 105. though they constitute only 14. WIPO follows a biennial policy for its inventory tracking and recording assets. the Management stated that they propose to add ‘WIPO had contractual commitments relating to non-cancellable lease arrangements and they were detailed in Note 19 Leases – WIPO as Lessee’ to Note 18 of the financial statements. Of these 792 (14.46%) items amounting to CHF 11250685 (59%) are of value greater than CHF 5000.46% of the total number of items.19(2)) 10.5 Other Issues 10.33 of WIPO’s Financial Rules and Regulations states that “Officers responsible for the management of the property of the Organization shall perform periodic physical inventories of non-expendable equipment for the purpose of ensuring that the accounting records of fixed assets are accurate”.Audit of Financial Statements of WIPO for the Year 2012 Page 36 . WIPO recognizes individual items of value of CHF 5000 or more as assets.5. From the Physical Inventory Audit report for the Biennium 2010-2011.
classify the existing assets based on their value and conduct annual stock taking of high value assets.19) 10.Audit of Financial Statements of WIPO for the Year 2012 Page 37 . It was replied during the exit conference that the Management had a plan to get their assets verified by an external agency in future. May 2013. maintaining the balance in USD over a period of three years (being the lease period) spanning more than one financial period.650 (two installments) be lodged with the Grantor by WIPO (Grantee) which will be refunded thirty days after the end of the agreement. A review of the accounting entry indicated that WIPO made payment in USD instead of in Brazilian Reals (BRL) as was provided in the agreement. Thereafter. If the proposed arrangement is expected to take time for its fructification. Rio. (Refer AQ no. The amount of the security which is an asset (account receivable) for WIPO is available in account code 13290 in the payment currency (USD) instead of the agreement currency (BRL).2 Accounts receivable WIPO’s External office in Rio de Janeiro is operating from a leased premise from March 01. We also noted that there was no practice of taking stock of the assets of the WIPO offices located at New York.Management Letter. the balance may be maintained in BRL and the necessary entries may be passed in the interest of true and fair depiction of this item in the books of accounts. The Rental agreement with Dijon Business Centre provides that a security of R$ 55.step towards regular and better control. annual stock taking of high value assets may be considered. Singapore and Tokyo. we recommend that in the intervening period.5. In the absence of any written agreement with a bank or the grantor for payment in USD instead of BRL. Since the agreement clearly provides for repayment in BRL. 2011. will lead to differences in recognition of Exchange gains or losses due to revaluation of balances at the year end.
Management Letter.5.” The basis on which the decision of not revaluing the land for 2012 had been reached was sought. (Refer AQ no. Prevailing market conditions do not indicate a need to perform a revaluation of the land as at December 31. which is situated in close proximity to WIPO. as this would not lead to a material change in the land value. 2009 at 28. Quoting that ILO.0 million Swiss francs is included in the revaluation surplus which forms part of WIPO’s net assets.3 Revaluation of land on which New Building is situated Note 9: Land and buildings states “the land upon which the New Building was constructed was acquired by the Organization at a cost of 13.26) 10. The yield has been selected by reference to the perceived quality and duration of the income and the potential for further rental growth and is cross-referenced by the evidence provided by comparable sales. the Management stated that they propose to amend the currency of the security deposit in their accounting records to BRL in 2013 and would record exchange gains/losses on the basis of CHF/BRL going forward. it was concluded that prevailing market conditions did not indicate a need to perform a revaluation of the land as at 31/12/2012.Audit of Financial Statements of WIPO for the Year 2012 Page 38 .6 million Swiss francs.6 million Swiss francs in 1998 and was revalued to fair value based on International Valuation Standards as determined by an independent appraiser at December 31. The potential income is based on comparable rentals in the market and takes into account the quality of the spaces as well as the location. The net result of the revaluation of 15. It was replied that based on discussions with the external expert CBRE. did proceed with a revaluation of its land held at fair value as at 31/12/2012 and this resulted in no change in May 2013. Market value was estimated by capitalizing at an appropriate investment yield the future potential income stream from the property.Stating that they were not aware of any separate written agreement that would require the lease grantor to reimburse the security deposit in USD rather than BRL. 2012.
Management Letter. as separate classifications on the face of its statement of financial position as per para 70 of IPSAS 1. (Refer AQ no. seen from the financial statements and notes forming part of the accounts (Note 12) that the current portion of the Repatriation Grant and Travel for the year ended 31.2.200x). the Management maintained that they would continue to monitor the situation on annual basis. It was also stated they had amended the other tables including the Statement of Financial Position as necessary and would process this change in AIMS. The Management replied that they had corrected the classification between current and non-current for the repatriation grant.12. and current and non-current liabilities.5. It was.Audit of Financial Statements of WIPO for the Year 2012 Page 39 .411 and CHF 187. this amount should form the basis for depiction of the current portion of the liability for the year ended 31.8 of WIPO IPSAS Manual 2102 version provides that WIPO would use current and non-current classifications when preparing financial statements where the term “current” applies to the 12 months following the reporting date (i.2012. instead of CHF 1158 thousand which has resulted in an error in classification of non-current liability as current to the extent of CHF 236 thousand which needs rectification in the interest of compliance with IPSAS.2012 has been depicted as CHF 1394 thousand.4 Employee benefits An entity shall present current and non-current assets. 12 months following 31.12.12. A review of the actuarial valuation for employee benefits conducted by Mercer on 6 th March 2013 indicates the current service cost and interest cost of the liability on account of repatriation grant at CHF 1158410 (CHF 970.the value of land owned by ILO. Further para 1.e. Expectedly. May 2013.3) 10. however.999 respectively) for the year 2013.
636. The action taken by WIPO was verified during the course of the Financial Audit and where the status is ongoing. losses of CHF 97883 had been written off during the year 2012.6 Information on cases of frauds and presumptive frauds Analysis of the information on fraud/presumptive fraud provided by the office of the Director.1 Disclosures by Management Write-off of losses of cash.4. we recommend that current and noncurrent classifications be checked independently by setting appropriate threshold limits.8. Internal Audit and Oversight Division indicate that 21 new cases of fraud/presumptive fraud were registered in 2012. (Refer AQ no.17) 10.Management Letter. 12. There were 16 investigation cases which had been carried forward from 2011. receivables and property The Management informed that in accordance with financial regulation 6. it has been commented upon in the Management Letter along with necessary recommendations. Review of Management Action on Past Recommendations 11. A total of 25 cases of investigation were closed during 2012 and as on 31 st December 2012.Considering the serious nature of the issue.Audit of Financial Statements of WIPO for the Year 2012 Page 40 . the IAOD had 12 cases from 2012 and the previous years which will still being investigated. May 2013. 12. 11. IAOD informed audit the recovery was being affected. The IAOD had also recommended in November 2012 the recovery of an amount of CHF4. 80 from a staff member in one particular instance.1 The status of implementation of the External Audit Recommendations by WIPO is enclosed as an Annexure to the Management Letter. Financial Rule 106.
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