Financial Audit of WIPO

Financial Position, Financial Performance and Audit Findings

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Our focus was on

Whether there were acceptable financial and information systems in place, along with arrangements to provide annual assurance on the reliability of such systems
16 interfaces AIMS, Bibadmin, SIGAGIP Year-end procedures

Whether WIPO had arrangements in place to produce reliable Financial Statements, along with adequate supporting working papers
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Six components of Accounts

1. A Statement of Financial Position
Depicts net assets -the difference between total assets and total liabilities
provides information about the financial strength of WIPO, and the resources which are available to support its future objectives.

2. A Statement of Financial Performance

net surplus or deficit - the difference between total revenue and total expenses
provides information on WIPOs sources of revenue, and the cost of its activities
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Six components of Accounts

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 Organizations overall financial position, including changes due to the surplus 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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Six components of Accounts

5. A Statement of Comparison of Budget and
presents a comparison of the budget amounts under the Program and Budget, and the actual amounts for the year
provides information on the extent to which resources were obtained 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 disclose information required by IPSAS which is not presented on the face of the principal financial statements
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Financial Position
830.7m Net assets 178.2m

Cash and cash equivalents 408.1m

in millions of Swiss francs

Payables and advance receipts 303.0m

Fixed assets 373.0m

Employee benefits 141.4m

Borrowings 149.7m Other 49.6m Other 58.4m

Assets

Liabilities

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Composition of employee benefits liabilities

December 31, 2012 (in millions of Swiss francs) After Service Health Insurance (ASHI) Accumulated leave Repatriation and separation benefits Closed pension fund Accrued overtime Home leave not taken Total Employment Benefit liabilities 110.9 13.5 12.5 3.3 0.7 0.5 141.4 Percentage of Liability 78.4 9.6 8.8 2.3 0.5 0.4 100.0

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Summary of Revenue

Voluntary conts. 7.7m (2.3%) Assessed conts. 17.6m (5.2%) Other 8.9m (2.6%) Madrid system fees 51.6m (15.3%)
A rb. & M ed. 1 .7m P ubs. 0.6m Investment 1 .8m Other 4.8m

PCT system fees 248.2m (73.7%)

Hague system fees 3.0m (0.9%)

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Expenditure
Contractual services 55.0m (17.1%) Operating ex. 24.6m (7.6%) Other 11.3m (3.5%) Personnel expenditure 212.8m (66.2%) Travel/fellow s. 17.6m (5.5%)
Supplies and materials 2.6m Equip. 0.6m Depreciatio n, amo rtizatio n and impairment 8.1m

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Financial Performance
The Organizations results for 2012 showed a surplus for the year of 15.7 million Swiss francs, with total revenue of 337.0 million Swiss francs and total expenses of 321.3 million Swiss francs. This can be compared to a deficit of 32.2 million Swiss francs in 2011, with total revenue of 293.2 million Swiss francs and total expenses of 325.4 million Swiss francs.
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Summary of Financial Performance

Program and Budget Special Accounts Projects Financed from Reserves 2012 3.8 14.8 -11.0 IPSAS Adjustments Total

(in millions of Swiss francs) 2012 Total revenue Total expenses Net surplus/(deficit) 341.1 290.1 51.0 2012 10.2 7.8 2.4 2012 -18.0 8.6 -26.6 2012 337.0 321.3 15.7 2011 293.1 325.3 -32.2

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Audit approach and Methodology

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Audit Findings

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Enterprise Risk Management

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.
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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

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Treasury and Cash Management

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.
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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 reconciliation statements.

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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.

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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.

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Revenue Management
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.
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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.

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Revenue Management contd.,

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 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.
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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 year end procedures.

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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 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.
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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 was misclassified in the financial statements. Set a system of verification of these calculations independently by setting appropriate threshold limits.
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Financial Management
Borrowings Provision for Commitment Charges Funds in Trust
Dormant accounts Management of Funds

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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 Foreign Currency Accounts

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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

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Other issues
Physical verification of assets Accounts receivable Revaluation of land on which New Building is situated Employee benefits

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Thank you

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