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CM(2005)147 7 October 20051
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947 Meeting, 22-24 November 2005
11 Administration and Logistics


11.3 Meeting report of the Budget Committee – September 2005 session

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1. The Budget Committee met in Strasbourg on 19-22 September 2005.

2. The Committee considered the following items:

    I. Opening of the meeting
    - Report of the May 2005 meeting
    II. Exchange of views with the Secretary General of the Council of Europe, Mr. Terry Davis

      - Third Summit of Heads of State and Government of the Council of Europe
      (Warsaw, 16-17 May 2005) - Priorities for 2006 – Budgetary implications
      - European Court of Human Rights

    III. Draft Budgets of the Partial Agreements 2006
    IV. Pensions Reserve Fund

      - Actuarial study – JPAS document
      - Pension Reserve Fund – Management Structure
      - Draft Pensions Budget for 2006

    V. Examination of the document on internal loans
    VI. Meeting with the Internal Auditor on his 2004 Report
    VII. Any other business

3. The agenda of the meeting appears at Appendix I and the list of participants at Appendix II.

I. OPENING OF THE MEETING

REPORT OF THE MAY 2005 MEETING

4. The Committee examined and approved the report of the May 2005 meeting.

II. EXCHANGE OF VIEWS WITH THE SECRETARY GENERAL OF THE COUNCIL OF EUROPE, MR TERRY DAVIS

5. The Committee held an exchange of views with the Secretary General, during which he outlined the approach he had taken in preparing the budgetary proposals for 2006. In particular, he explained the measures taken in relation to efficiency savings, sunsetting of activities, and the reallocation of resources released by activities coming to an end in 2005. This approach would also be followed in future draft budgets.

6. The Secretary General also indicated that there were some changes within the presentation of the 2006 draft budget, in comparison with previous draft budgets, which had been made in the interests of transparency.

7. Furthermore, the Secretary General informed the Budget Committee of the latest situation with regard to the budgetary proposals of the European Court of Human Rights.

8. The Secretary General drew the attention of the Committee to the main comments of the External Auditor concerning the Financial Statements of the Organisation for 2004.

9. The Committee welcomed the fact that the Secretary General had taken a radical approach in relation to the preparation of the budget proposals for 2006, and noted that some of the measures proposed, such as efficiency savings and sunsetting of activities, had been recommended by the Budget Committee in previous years (CM(2003)121 para. 7, CM(2004)192 paras. 16-20). The Committee noted that the implementation of the Action Plan would not generate significant increases in expenditure in future years and would lead to the redeployment of posts.

10. The Committee stated that it would bear the Secretary General’s comments in mind when considering the Draft Ordinary Budget and other budget proposals at its October meeting.

III. DRAFT BUDGETS OF THE PARTIAL AGREEMENTS 2006

General remarks

11. The Committee noted that the same exercise in respect of efficiency savings had been carried out during the preparation of the draft budgets of the Partial Agreements.

12. The Committee noted that in terms of contributions of member states to the budgets of the Partial Agreements, the aggregate amount of contributions to all Partial Agreements, within the draft budgets for 2006, was approximately € 200 000 less in nominal terms than the total member states’ contributions to the Partial Agreements for 2005.

13. The Committee noted that in line with its recommendation on the budgets for 2005, many logframes contained more quantitative information in respect of indicators. However, there were still some cases where indicators were vague and without precise and verifiable information relating to the indicator. The Committee hoped to see further improvements in description of expected results and definition of performance indicators in the 2007 draft budget.

Partial Agreement in the Social and Public Health Field

14. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

15. The Committee noted that, in the interests of transparency, 50% of the costs relating to two posts have been transferred to the Ordinary Budget to reflect the actual duties attached to these two posts.

16. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

European Pharmacopoeia and Subsidiary budgets – Biological Standardisation Programme – Publications, Development, Certification and Conferences

17. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

General Remarks

18. The Committee stated that, given the size of the subsidiary budgets, it would be useful to include a summary consolidating the three budgets of the Pharmacopoeia within the draft budget document in order to give an overall view of the activity. The Secretariat undertook to include such a table in the 2007 draft budget.

Draft budget of the European Pharmacopoeia

19. The Budget Committee endorsed the draft budget of the Pharmacopoeia and the subsidiary budgets proposed for 2006 and took note of the substantial amounts included for the financing of the new building and the Pharmacopoeia's installation in its new premises, in accordance with the decisions taken by the Committee of Ministers (CM/Del/Dec(2003)842/11.1 and CM/Del/Dec(2005)932/11.1b).

20. Given the current surpluses, it was necessary that in future the Committee should have information on the estimated cost of running the New Pharmacopoeia Building in order to determine if the current level of receipts will be sufficient to finance the costs and if they can be maintained in future years. This would enable the correct level of member states’ contributions to be established.

Sub-head I – bis – Changes in permanent staff

21. Given that the cost of the proposed modifications, for which justification had been provided, would be financed by an increase in the Pharmacopoeia's own receipts, and would not entail an increase in member states' contributions, the Committee was able to approve the proposed modifications, i.e. the creation of four new permanent posts. The Budget Committee nevertheless drew the Committee of Ministers' attention to the need to monitor the number of posts and the level of expenditure relating to permanent staff, in order to avoid additional costs for member states in the future.

Sub-head II – Remuneration and Accessory Charges in respect of temporary staff

22. Given that the appropriations requested for temporary staff had been justified, were linked to an increase in sales, and would consequently be financed by an increase in receipts, the Committee was able to approve the proposals relating to the additional temporary staff posts.

23. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

Subsidiary budget – Biological standardisation

24. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

Subsidiary budget – Publications, Development, Certification and Conferences

Sub-head I – bis – Changes in permanent staff

25. Given that the cost of the proposed modifications, for which justification had been provided, would be financed by an increase in the receipts of the budget, the Committee was able to approve the proposed modifications, i.e. the creation of four new permanent posts.

26. As stated above, the Committee wished to draw the attention of the Committee of Ministers to the need to monitor the number of posts and the level of expenditure relating to permanent staff in future years.

Sub-head II – Remuneration and Accessory Charges in respect of temporary staff

27. Given that the appropriations requested for temporary staff had been justified, were linked to an increase in sales, and would consequently be financed by an increase in receipts, the Committee was able to approve the proposals relating to the additional temporary staff posts.

28. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

Partial Agreement on the Council of Europe Development Bank

29. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

30. The Committee noted that there had still been no decision on the future of the A6 post, included without appropriations, which still appeared within the establishment table. The Committee was informed that a final decision in this respect was dependant upon the conclusion of the job classification exercise which had been undertaken by the Directorate of Human Resources.

31. The Committee stressed that a speedy decision should be taken on this matter in order to avoid uncertainties in the level of human resource of the Secretariat of the Partial Agreement.

32. The Committee discussed to what extent, if any, the activities of the Secretariat of the Partial Agreement, as presented in the draft budget, should be financed from the surplus of the Council of Europe Development Bank, rather than by contributions from the member states of the Partial Agreement. In this respect the Committee recommended that the Committee of Ministers should mandate the Secretary General to carry out a study on the nature of the work of the Secretariat of the Partial Agreement, in order to establish how much of this work can be considered as being to meet the requirements of the member states of the Partial Agreement and how much could be considered as directly relating to the activities of the Bank, with a view to the Bank reimbursing the Partial Agreement for any costs relating to the Bank, if necessary.

33. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

Partial Agreement on the Co-operation Group to combat drug abuse and illicit trafficking in drugs (Pompidou Group)

34. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

35. The Committee noted that the proposals for 2006 include the suppression of one B4 permanent post.

36. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

Partial Agreement on the Co-operation Group for the prevention of, protection against, and organisation of relief in major natural and technological disasters

37. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

38. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

    Partial Agreement on the European Support Fund for the co-production and distribution of creative cinematographic and audio-visual works “Eurimages”

39. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

40. The Committee recognised that the main concern of Eurimages was to support films which promote a European identity. The Committee noted however that the level of reimbursment was too small in comparison with the advances given; the Committee recommended that the Secretariat of Eurimages increase their efforts to remedy this situation.

41. The Committee noted that the Budget, expected results and performance indicators presented related to the Secretariat of the Partial Agreement, but stated that it felt that it would be appropriate to include also within the logframes of the Partial Agreement the objectives, expected results and performance indicators for the activities of the Eurimages fund.

42. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

Enlarged Agreement on the European Commission for Democracy through Law

43. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

44. The Committee noted that the increase in member states’ contributions to the budget was entirely due to obligatory adjustments linked to the personal situation of the actual staff members in post forecast for 2006 in comparison with 2005.

45. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

Partial Agreement on the Youth Card

46. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

47. The Committee noted that, in the interests of transparency, 75% of the costs relating to one post have been transferred to the Ordinary Budget to reflect the actual duties attached to this post.

48. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

Enlarged Partial Agreement on the European Centre for Modern Languages

49. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

50. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document CM(2005)133 Vol. IV.

    Partial Agreement establishing the European Centre for Global Interdependence and Solidarity

51. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

52. The Committee noted that the decrease in the 2006 draft budget in comparison with 2005 was due to the fact that it was based only on obligatory contributions, as at this stage no voluntary contributions for 2006 had yet been confirmed.

53. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document NS/bud/2006.

      Enlarged Partial Agreement on the "Group of States against Corruption – GRECO"

54. The Committee took note of the information provided by the Secretariat of the Partial Agreement.

Sub-head I – bis – Changes in permanent staff

55. Given the structural nature of the work performed by a current temporary staff member, the Committee recommended the proposal to suppress one A2 long term temporary staff post and to create an A2/3 permanent post.

56. The Committee recommended the estimates of expenditure and receipts for 2006 as set out in document Greco(2005)16.

IV. PENSIONS RESERVE FUND

Actuarial study

57. The Committee examined document "P-Bud(2005)6: Pension Reserve Fund - Actuarial Study" prepared by the Joint Pensions Administrative Section, in the presence of Mr Michel Garrouste, Head of the Section, and Mr Eric Gires, Actuary for the Section and author of the actuarial study.

58. The Committee noted the member states’ obligation to pay their share of the cost of pension rights of pensioners and serving staff, and that the existence of the Pension Reserve Fund will make it possible, in the medium to long term, to stabilise the contributions that states will be called on to pay in this respect.

59. In the light of the clarification provided by Mr Gires in connection with the assumptions that had served as a basis for the various calculations, the Committee took note of the sum total of the Organisation's pension obligations as indicated by the actuary at 31 December 2004, namely € 733 921 673, and that the rate of contribution to the Pension Reserve Fund was 31.6% of total basic salaries as compared with 30.5% as per the previous actuarial study.

60. It also took note of the total contributions required from the member states in 2006, namely € 29 013 690 (€ 28 444 790 in 2005 euros). In this connection, however, the Committee stressed that one of the assumptions used as a basis for the estimate was that the Fund's average real rate of return over the long term would be 6%, whereas current yields were well below that rate. The actuary pointed out that this factor was one of the assumptions that the Committee of Ministers had adopted when it had set up the Pension Fund, and that he was obliged therefore to use that rate.

61. The Committee drew the attention of the Committee of Ministers to the assumptions used in respect of the rate of return of the Reserve Fund as the rate of 6% appeared to be unrealistic. This element of the calculation should be revised regularly as it impacts on the capacity of the Fund to meet its obligations. The Committee also recommended that an actuarial study be carried out every three years, as recommended by the External Auditor.

62. The Committee also drew attention to its request, set out in its October 2004 meeting report, to the effect that in future the draft budget for pensions include a summary statement of the situation of the Pension Reserve Fund.

Management structure of the Pension Reserve Fund

63. The Committee examined the information in document "P-Bud(2005)7: Pension Reserve Fund - Management Structure" concerning the introduction of a new management structure for the Reserve Fund.

64. The Committee stressed that the Management Board proposed under the structure should have the technical expertise needed to take its decisions on the Investment Adviser's proposals with a full understanding of the issues. It was therefore of the opinion that the Management Board should comprise technical experts and, accordingly, suggested that Article 5 of the revised draft Statute of the Council of Europe Pension Reserve Fund should read as follows:

"Composition and role of the Management Board:

- the Management Board shall be composed of six members appointed by the Committee of Ministers: four specialists with expertise in the management of investment funds, nominated on the proposal of member states, one representative of the Secretary General and one staff representative."

65. Furthermore, in the light of the information provided by the Secretariat about the way in which the Fund would operate, the Committee recommended that secretariat costs be shared with other international organisations.

66. It also suggested amending Article 8 of the draft Statute of the Reserve Fund to ensure that the Agreement on Privileges and Immunities (or equivalent) from which the Council of Europe benefited also applied to the Fund and to its Secretariat.

67. One member could not give his agreement as he felt that the structure was too heavy, too expensive and not sufficiently safe for the investment of public funds.

      Pensions budget

68. The Committee drew attention to the fact that the document concerning the pensions budget was in two parts:

- Part 1: the Pensions Budget, which set out estimates for expenditure on pensions for the 2006 financial year and the allocation required from the Pension Reserve Fund;
- Part 2: the contributions to the Pension Reserve Fund required for the 2006 financial year.

69. Part 1: the Committee endorsed the draft budget, as set out for 2006, but stressed that the expenditure incurred was obligatory and that any such expenditure above the estimated amounts would be financed by an increase in the financing transfer from the Pension Reserve Fund.

70. Part 2: the Committee noted that, for the first time, the contributions to the Pension Reserve Fund had been established in accordance with the decision taken by the Deputies at their 818th meeting (item 11.4), which stipulated:

"The annual contributions called from member states to the Pension Reserve Fund ... will be determined in [the] light of the results of the actuarial study to be carried out in 2004" (in fact, the study was carried out in 2005).

71. The Committee was in a position to endorse the sum total of contributions to be called in 2006 for the Pension Reserve Fund, but once again expressed misgivings about one of the assumptions used in the actuarial study which determined this amount (see paragraph 60 above).

V. EXAMINATION OF THE DOCUMENT ON INTERNAL LOANS

72. The Budget Committee took note of the information provided by the Directorate General of Administration and Logistics concerning the use of internal loans as a means of financing some of the Organisation's projects. It welcomed the fact that the Secretariat had adopted a policy of no longer resorting to this type of funding other than for purposes already approved by the Committee of Ministers.

VI. MEETING WITH THE INTERNAL AUDITOR ON HIS 2004 REPORT

73. The Committee held an exchange of views with the Organisation's Internal Auditor and received information about the twelve audits completed in 2004 and the audits under way for 2005.

74. With regard to relations with the External Auditor, the Committee was informed by the Internal Auditor that there was good co-operation with Internal Audit and that in his opinion a number of the External Auditor's recommendations reinforced those of Internal Audit.

75. The Committee noted that significant progress had been made in internal control within the Organisation since 2001.

VII. ANY OTHER BUSINESS

    Financial statements of the Council of Europe for the year ended 31 December 2004 and Report of the External Auditor
    Comments by the Secretary General on the External Auditors’ report

76. During the course of the meeting, the Chair of the Rapporteur Group on Administrative and Budgetary Questions (GR-AB) addressed a letter to the Chair of the Budget Committee requesting that the Committee include in the report of the present meeting any comments it may wish to express on the financial statements of the Council of Europe for the year ended 31 December 2004, the report of the External Auditor and the comments of the Secretary General on the External Auditor’s Report.

77. The Committee remarked that its members had only received the above documents after they had arrived at the meeting and noted that their late publication was due to the fact that the External Auditor had submitted his report only on 8 September to the Administration, rather than by the due date of 30 June.

78. The Committee further remarked that its Chair had invited the representative of the External Auditor to attend the present meeting, during his presence in Strasbourg for the meeting of the GR-AB, in order to hold an exchange of views with the Committee, but that this invitation had been declined.

79. The Committee recalled that it had no formal role in the process of adoption of the annual financial statements. The mandate of the Committee stipulated only that the annual financial statements and the report of the External Auditor be forwarded to it for information (Article 29, paragraph 4 of the Financial Regulations).

80. The Committee noted that the External Auditor had given an unqualified report on the budgetary management accounts and that all figures appearing in the draft resolutions submitted for the Committee of Ministers’ approval were derived from these budgetary management accounts.

81. The External Auditor had, however, issued a disclaimer concerning the financial statements for 2004 citing an absence of an approved financial reporting framework. The Committee noted that the External Auditor had remarked nevertheless in paragraph 25 of his report that: “The approach used in drawing up the financial statements was consistent however with previous years’ practice.” This practice had, in the past, met with the approval of the Board of Auditors and led to the approval of the financial statements by the Committee of Ministers.

82. Furthermore, the Committee noted that the Secretary General had reacted positively to the report and, in his comments, had set out a timetable for the implementation of the recommendations of the External Auditor.

83. The Committee would seek clarification on the various points and recommendations appearing in the report of the External Auditor during an exchange of views with the latter, whom it had invited to attend its October meeting.

Appendix I

BUDGET COMMITTEE

Autumn session 2005

19 September at 9 a.m. – 22 September 2005

Room 7, Palais de l’Europe

DRAFT AGENDA

Item 1: Opening of the meeting

        - Report of the May 2005 meeting

      (CM(2005)88)

Item 2: Exchange of views with the Secretary General of the Council of Europe, Mr. Terry Davis,

      - Third Summit of Heads of State and Government of the Council of Europe
      (Warsaw, 16-17 May 2005) - Priorities for 2006 – Budgetary implications
      (CM(2005)97)
      - European Court of Human Rights:
      . Internal Audit Report (08/10/04)*
      . Internal Auditors Revised Figures (13/12/04)*
      . External Auditors Report (April 2005)*
      . Internal Auditors update (18/04/05)*
      . CM(2005)139 - Enhancement of the resources of the European Court of Human Rights
      . CM(2005)140 - Setting up of a fifth section at the European Court of Human Rights

Item 3: Draft Budgets of the Partial Agreements 2006

        (CM(2005)133, Vol. IV, Greco (2005) 16, NS/Bud/2006)

Item 4: Pensions Reserve Fund

      - Actuarial study - SCAP document
      (P-Bud(2005)6)
      - Pension Reserve Fund – Management Structure
      (CM(2005)135)
      - Draft Pensions Budget for 2006
      (P-Bud(2005)4)

Item 5: Examination of the document on internal loans

      (P-Bud(2005)5)

Item 6: Meeting with the Internal Auditor on his 2004 Report

      (GR-AB(2005)26)

Item 7: Any other business

* Note: these documents exist only in English

Additional Information Documents:

Title of Document

P-Bud(2005)8
Corrigendum to CM(2005)133 Volume IV

CM(2005)103 (restricted)
Financial statements of the Council of Europe for the year ended 31 December 2004 and Report of the External Auditor

CM(2005)104 (restricted)
Financial statements of the Partial Agreement establishing the European Centre for Global Interdependence and Solidarity for the year ended 31 December 2004

CM(2005)105 (restricted)
Financial statements of the Partial Agreement of the European Support Fund for the co-production and distribution of creative cinematographic and audio-visual works “EURIMAGES” for the year ended 31 December 2004

CM(2005)106 (restricted)
External Auditor’s Report 2004 – Comments by the Secretary General

GR-AB(2002)19 (restricted)
Establishment of a Pension Reserve Fund and introduction of a New Pension Scheme for permanent staff members hired on or after 1 January 2003

Budgetary Situations 2005 (as at the end of at August) of the Partial Agreements

€uro-Indicators News Release
Euro-zone and EU25 inflation rates

Financial Regulations and Supplementary Provisions

Partial Agreement Budgets 2006 - Summary Table by Accounting Code

2006 Draft Budget of Pensions: Justification of Variances

New General Building – Pharmacopoeia – Financing from the budgets of the Pharmacopoeia

Evolution of the Value of the Pensions Reserve Fund (French only)

Summary of Internal Loans Repayments

CM(2005)133 Volume I
Draft Budget for 2006 – Volume I – General Budget

CM(2005)133 Volume I Corrigendum (English only)

Appendix II

BUDGET COMMITTEE

Autumn session 2005

(19-22 September 2005)

LIST OF PARTICIPANTS

STATES

MEMBERS

Austria

Mr. Bruno WALDERT

Belgium

Ms. Anne VAN NIEUWENBURG

France

Ms. Marie-Chantal MUSSET

Germany

Mr. Michael LAUMANNS (Substitute)

Italy

Mr. Claudio DE ROSE

Poland

Mrs. Beata NEHREBECKA

Romania

Mr. Stefan PETRESCU

Russian Federation

Mr. Igor CHTCHERBAK

Sweden

Mr. Åke HJALMARSSON

Turkey

Mr. Fikret DEMIR

United Kingdom

Ms. Joycelyn BUCHAN

Note 1 This document has been classified restricted at the date of issue. Unless the Committee of Ministers decides otherwise, it will be declassified according to the rules set up in Resolution Res(2001)6 on access to Council of Europe documents.


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