Ministers' Deputies / Rapporteur Groups
GR-AB
Rapporteur Group on Administrative and Budgetary Questions

GR-AB(2005)4 14 February 2005
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Draft annotated agenda
Meeting of 21 February 2005

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The Chairman proposes the following items be dealt with possibly without debate:

6. Co-ordinating Committee on Remuneration (CCR)
Turkey: Special Adjustment of Remuneration at 1 November 2004 - 162nd Report

1. Exchange of views with the External Auditor

1.1. In April 2003, the Committee of Ministers adopted a reform of the Organisation's external audit process and subsequently appointed the Head of the National Audit Office (United Kingdom) as External Auditor for a five year term beginning with the audit of the 2004 financial year. The duties of the External Auditor are set out in the Financial Regulations (see Appendix 1 for relevant extract). The main task is to certify the financial statements of the Council of Europe and to perform such audits of the Organisation as deemed necessary in order to satisfy himself or herself that the financial statements are in accordance with the accounting records and that the financial transactions reflected in the statements are in compliance with the financial regulations and other applicable directives. The External Auditor shall also report to the Committee of Ministers any observation arising during the course of the audit which he or she considers should be brought to its attention. Such observations may include matters with respect to the economy, efficiency and effectiveness of the financial procedures, the accounting system and the administration and management of the Organisation.

1.2. Mr Graham Miller, Director at the National Audit Office, will take this opportunity of an exchange of views with the GR-AB to present the approach of the External Auditor for the audit of the financial statements for 2004 and to answer any queries delegations may have.

2. Early retirement scheme
(GR-AB(2005)3)

2.1. At its meeting of 20 January 2005, the Group held a preliminary discussion on the Secretary General's intention to implement an early retirement scheme. At that meeting the Chair noted that whilst delegations expressed themselves in favour of the general idea, a couple of delegations had requested additional information on certain aspects before making a final decision. He also noted that some delegations favoured including possible suppression of posts in the objectives of any such scheme and that there were mixed reactions on the cost involved bearing in mind the objectives. In this light the Secretariat has prepared a document setting out the (revised) objectives, budget considerations and information on the previous early retirement scheme and on staff turnover over the past couple of years.
2.2. It is recalled that the new scheme would be financed by an internal loan over a five year period along the same lines of the previous scheme implemented in 2000 and which ends in 2005. The 2005 budgetary appropriations (Vote VII (other expenditure), sub-head IX (early termination of service of permanent staff) – € 484 800) for the last instalment of the internal loan for the 2000 scheme could be maintained at the same level during the period 2006 – 2010 in order to provide the finance for a new scheme.

2.3. The Group is invited to resume consideration of this item with a view to recommending the following draft decisions to the Deputies:

      The Deputies

      1. took note of the Secretary General's intention to take measures to implement an early retirement scheme under the provisions of the statutory texts and rules in force to terminate the service of permanent staff of the Council of Europe, in the light of the objectives listed in paragraph 4 of document GR-AB(2005)3;

      2. authorised the Secretary General to finance these measures by way of an internal loan funded from cash surpluses, to be reimbursed over a five year period from 2006 to 2010 in instalments not exceeding € 484 800;

      3. invited the Secretary General to report to the Committee of Ministers on progress on the implementation of these measures before the end of 2005.

3. Annual adjustment of remuneration of staff – review of the Deputies' November 2002 decision (818th meeting, item 11.2) on the annual adjustment method.
(CM/Del/Dec(2004)883/11.1, GR-AB(2005)5 and 6)

3.1. At their 913th meeting (2 February 2005, item 11.2) the Deputies instructed the GR-AB to review the decision taken at their 818th meeting (27 November 2002, item 11.2) setting the framework for the annual adjustment method and which is reproduced below:

      “The Deputies

      1. took note of the letter of the Chairman of the Co-ordinating Committee on Remunerations (CCR) to the Councils of the Co-ordinated Organisations dated 12 July 2002, as well as the 139th Report of the CCR concerning the remuneration of the Staff of the Co-ordinated Organisations: General Review, Report by the CCR Chairman as they appear in CM(2002)138;

      2. decided that as from 1 January 2003 the salary adjustment procedure as determined by the 80th Report of the CCR will be replaced by the new salary adjustment method provided for in the Annex to the 139th Report, under the following conditions:

      a. Articles 1 to 7 and 9 to 13 are adopted as set out in the Annex to this report, with the result that:

      - the principle of private sector studies (Article 10, paragraph 4) is maintained, and
      - provision is made for the possible introduction of flexible management of salary scales, to be examined by the CCR after having been submitted to the Committee of Ministers (Article 12);

      b. As regards Article 8, in case of exceptional budgetary difficulties, the Committee of Ministers has the right to decide that the annual adjustment recommended by the CCR can be reduced or not awarded at all, or phased in or postponed till later in the calendar year. The Committee of Ministers also maintains the right to implement an adjustment superior to that recommended by the CCR. Any such decision shall be based on a proposal by the Secretary General or the Committee of Ministers and must:

      - be based on the justifiable budgetary circumstances,
      - respect general legal principles in this domain, especially the principle of proportionality,
      - be established openly in consultation with the Staff Committee;

      3. invited the Secretary General to examine with the representatives of Secretaries General of the other Co-ordinated Organisations ways to reinforce the system so that it continues to fulfil its role.”

3.2. The rules provided for in the Annex to the CCR's 139th report has been reproduced in document
GR-AB(2005)6.

3.3. The Chair of the GR-AB has sent a letter to delegations and to the Secretariat requesting written contributions before 16 February 2005, with a view to examining this issue at this meeting. All contributions will be distributed to delegations as and when received. For the time being the Chair has received a non-paper from Italy (GR-AB(2005)7) and a legal opinion from the Secretariat (GR-AB(2005)5).

4. Co-ordinated Committee on Remuneration (CCR)

a. System of daily subsistence allowance (160th report of the CCR)
(CM(2004)185)

4.1 In the 160th report (CM(2004)185), the CCR proposes to change the method of adjusting the daily subsistence allowances of staff travelling of the Co-ordinated Organisations on duty.

4.2. The procedures are currently set out in the 50th Report of the CCR (CM(95)66), which was adopted at the 540th meeting of the Ministers' Deputies on 7 June 19951. As provided for in Article 1 of Annex 1 to the 50th Report, the subsistence allowance is a lump sum payment for the cost of accommodation, meals and personal expenses while on mission.

4.3. The daily subsistence allowances for staff travelling on duty in member countries are currently calculated by the Inter-Organisations Section (IOS) based on data received from eleven reference countries (Belgium, Denmark, France, Germany, Italy, Netherlands, Norway, Sweden, Switzerland, United Kingdom and United States). For travel in non-member countries, United Nations daily rates of subsistence allowance are applied.

4.4. When the detailed rules for calculating the adjustment of the allowance were originally set out, all the reference countries had a system of lump sum payment covering accommodation, meals and personal expenses. Over the years the practices in the reference countries have changed and now very few of the reference countries still have a pure system of lump sum payment. Most reference countries have moved to reimbursement of hotel costs, with or without ceilings, and this does not lend itself to the calculation of an overall average of national subsistence allowance data to arrive at those of the Co-ordinated Organisations, as indicated in the current rules. It is therefore no longer possible to produce viable results using the current method.

4.5. After having examined the systems in other international organisations, the CCR recommends the following procedure for the adjustment of the current levels of daily rates of subsistence allowance and the currencies in which the allowance is expressed:

Missions to European Union countries

- the current levels of daily rates of subsistence allowance will be adjusted annually on the basis of the evolution of the indices for hotels and restaurants/cafeterias as calculated by the respective National Statistics Offices. Rates will be expressed in Euros.

Missions to other countries

- United Nations daily rates of subsistence allowances will be used expressed either in US dollars or local currency.

4.6. The rates of daily allowances will be adjusted once a year on 1 January, barring exceptional circumstances.

4.7. The GR-AB is invited to examine this item with a view to recommending to the Deputies the approval of the revised rules as set out in Appendix 1 to the 160th report, with effect from 1 January 2005:

The Deputies

      1. took note of the 160th report of the Co-ordinating Committee on Remuneration (CCR) on the system of daily subsistence allowance as set out in document CM(2004)185;

      2. approved the rules for the adjustment of the daily subsistence allowance for staff travelling on duty as they appear in Annex 1 to the 160th report (CM(2004)185) and consequently decided that these rules would replace the provisions set out in Annex I of the 50th report of the CCR (CM(95)66), as amended by the 145th Report of the CCR (CM(2003)34), with effect from 1 January 2005.

4.8 It should be noted that one delegate (Italy) to the CCR abstained; his position is explained in Appendix II of the 160th Report and is reproduced in Appendix 2 to this draft annotated agenda for convenience. One other delegation (Belgium) has since contested the validity of the new regulations. Comments received from the Belgian delegation explaining its reasoning are also appended. If this situation remains unchanged at the date of the meeting, the Chair will propose to postpone this item (both 4a and b, since both are closely linked).

b. Review at 1 January 2005 of daily allowances for staff subsistence (163rd report of the CCR)
(CM(2005)4)

4.9 This report, which has been issued as a Chairman's report in view of the contestation of one delegation (Belgium) (see paragraph 5.8 above), sets out revised daily rates of subsistence allowance as from 1 January 2005 on the basis of the new adjustment method set out in 5.a above. The budgetary impact of the adjustment will be covered by the appropriations already approved in the 2005 budgets. Until a decision is taken on this matter, 2004 rates are provisionally applied.

4.10 The Group is invited to examine this item with a view to recommending the approval by the Committee of Ministers of the revised rates with effect from 1 January 2005:

The Deputies

      1. took note of the 163rd report of the Co-ordinating Committee on Remuneration (CCR) – Chairman's Report – on the review at 1 January 2005 of the daily rates of subsistence allowance for staff of the Co-ordinated Organisations, as it appears in document CM(2005)4;

      2. approved the daily rates of subsistence allowance as set out in the above mentioned report with effect from 1 January 2005.

5. Reform of Human Resources Policy at the Council of Europe - third Progress Report
(GR-AB(2005)2)

5.1. The Directorate General of Administration and Logistics has issued a third progress report on the reform of Human Resources Policy at the Council of Europe covering the period from April to December 2004. The report gives the progress to date in the core fields of reform (recruitment and contractual policy, management of posts and job classification, career development, appraisal, equal opportunities, and balance between work and private life) as a follow-up to the second progress report (document GR-AB(2004)8) which was discussed by the Group in May 2004.

6. Co-ordinating Committee on Remuneration (CCR)
Turkey: Special Adjustment of Remuneration at 1 November 2004 - 162nd Report
(CM(2005)7)

6.1. Application of the salary adjustment method (139th Report by the CCR - CM(2002)138) provides that the Chairman, on behalf of CCR, may submit to Councils a recommendation providing for a special adjustment of remuneration when the cost-of-living trend in a country shows an increase of at least 5% since the date of effect of the last adjustment.

6.2. Inflation having increased by 7.2% in Turkey between 1 January 2004 and 31 October 2004, the Chair of the CCR recommends to Councils on behalf of the CCR that remuneration for all categories of staff in Turkey be adjusted, with effect from 1 November 2004, to take full account of this change. Currently there are 4 project staff members paid on the Turkish scale, financed through a joint programme with the European Commission. The total budgetary cost of this special adjustment is estimated at € 1600 which will be covered by appropriations already provided for by the joint programme.

6.3. The GR-AB is invited to examine this item with a view to recommending to the Deputies the following draft decisions:

      The Deputies

      1. took note of the 162nd report of the Co-ordinating Committee on Remuneration (CCR) (CM(2005)7);

      2. decided that, as a special adjustment, salary scales for Turkey, as adjusted at 1 January 2004, be increased by 7.2% with effect from 1 November 2004;

      3. noted that by application of the 150th report by the Co-ordinating Committee of Government Budget Experts (CCG), dated 4 April 1978 (CCG(78)4), pensions will be increased in the same proportion and on the same date as the remuneration of the staff to whom the CCR's 162nd report applies;

      4. noted that, in accordance with the interpretation given to paragraph 3 of the 34th report by the CCG dated 25 October 1965 (CCG(65)5), the remuneration of auxiliary staff serving in the Co-ordinated Organisations will be adjusted in accordance with the provisions of the CCR's 162nd report.

7. Any other business

-

8. Date of the next meeting

To be communicated in due course.

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Appendix 1 – Extract of Financials Regulations concerning the External Auditor

PART VI - EXTERNAL AUDITOR

Article 80

The External Auditor shall be Head of the Supreme Audit Institution of a member State and shall be appointed by the Committee of Ministers for a period of five years, not renewable.

The External Auditor may not otherwise be removed during his or her tenure of office, except by the Committee of Ministers.

For the purpose of conducting a local or special examination the External Auditor may engage the services of the Supreme Audit Institution of another member State.

The External Auditor shall be completely independent and solely responsible for the conduct of the audit.

The Organisation shall afford to the External Auditor such facilities and technical assistance as he or she may consider necessary for the performance of his or her duties.

Article 81

The audit shall be conducted in conformity with generally accepted international auditing standards.

The audit shall be conducted at the headquarters of the Organisation or any other premises of the Organisation as deemed necessary.

The External Auditor and his or her staff shall have free access to all vouchers, books, documents and files which he or she considers necessary to examine for the purpose of the audit. He or she may ask the Organisation's officials for any information he or she thinks necessary. The External Auditor and his or her staff shall respect the confidential nature of any information, which has been made available and shall not make use of it except in direct connection with the performance of the audit. The External Auditor may draw the attention of the Committee of Ministers to any denial of information, which in his or her opinion was required for the purpose of the audit.

Article 82

The duties of the External Auditor shall be to satisfy him or herself that the financial statements give a true and fair view of the financial situation and operations of the Organisation and have been prepared in accordance with the Financial Regulations, that all financial transactions are in order, that management has been conducted with due regard for economy and that internal controls are operating satisfactorily. The External Auditor may make observations with respect to the economy, efficiency and effectiveness of the financial procedures, the accounting system and the administration and management of the Organisation.

In particular he or she shall, for this purpose, verify:

- that the financial statements are in accordance with the accounting records of the Organisation;

- that the accounting system and the financial statements cover all financial transactions effected by the Organisation in the course of the year;

- the regularity of all transactions, having regard to the Financial Regulations and any other rules laid down by the Committee of Ministers and any other applicable directives;

- that all budgetary expenditure has been in conformity with the purposes of, and within the limits of, the appropriations as shown in the Budget, amended as appropriate;

- that any special funds created and any receipts applied to special purposes, in pursuance of Article 4, second and third paragraphs, have been administered in accordance with the rules governing them;

- that all transactions are vouched for by appropriate supporting documents;

- that certificates of funds and securities placed on deposit are periodically obtained from the depositaries and that periodic certificates of verification of cash in hand are held;

- that inventories are kept in good order and are subject to proper supervision;

- that internal controls, including internal audit, are adequate and reliable;

- that the financial management is sound and economical.

Article 83

The External Auditor shall express and sign an opinion on the financial statements no later than 30 June following the financial year to which it relates, which shall:

- identify the financial statements examined;
- describe the nature and scope of the audit; and
- address, as appropriate, whether:

      a) the financial statements present fairly the financial position of the Council of Europe as at the end of the financial year and the results of its operations in that year;
      b) the financial statements were prepared in accordance with the Financial Regulations and the stated accounting principles;
      c) the accounting principles were applied on a consistent basis from year to year;
      d) transactions were in accordance with the Financial Regulations and budgetary authorisations.

The External Auditor shall draw up, by 30 June at the latest, a report to the Committee of Ministers, in which it shall set forth, after discussion with the departments concerned, its views and observations on the financial statements and any other matter referred to in Articles 81 and 82 above.

The report shall include:

      a) the nature and scope of his or her examination and of any changes in the nature and scope of such examination, including whether he or she has obtained all the information and explanations required;

      b) matters affecting the completeness or accuracy of the financial statements such as:

    - any income or receivables which have not been properly accounted for;
    - expenditure not properly substantiated;

      c) other matters to be brought to the notice of the Committee of Ministers, such as:

          - cases of fraud or presumptive fraud;
          - wasteful or improper expenditure of the Organisation's financial or other assets (notwithstanding that the accounting for the transactions may be correct),
          - expenditure likely to commit the Organisation to further outlay on a large scale;
          - any defect in the general system or detailed regulations governing the control of receipts and expenditure or of supplies, equipment and materials of the Organisation or of those for which the Organisation is responsible;
          - expenditure not in conformity with appropriations, as amended by duly authorised transfers between appropriations;
          - expenditure in excess of appropriations, as amended by duly authorised transfers;

      d) the accuracy or otherwise, as determined by stocktaking and examination, of quantitative records relating to supplies, equipment and material of the Organisation or for which the Organisation is responsible; and

      e) transactions accounted for in a previous financial year, concerning which further information has been obtained, or transactions in a later financial year concerning which it is considered desirable that the Committee of Ministers should be informed at an early stage.

The External Auditor shall not include any observations in the audit report without first affording the Secretary General an opportunity to comment on the matter under observation. Audit comments arising during the examination of the accounts shall be immediately communicated to the Secretary General and the Treasurer.

The report shall be transmitted to the Committee of Ministers together with the audited financial statements.

The External Auditor or his or her Deputy shall present the external audit report to the Committee of Ministers.

*
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Appendix 2

4. Co-ordinated Committee on Remuneration (CCR)
a. System of daily subsistence allowance (160th report) (CM(2004)185)

Italian position:

“The proposal on the daily subsistence allowance is not in line with the Councils' directives as it provides for an automatic adjustment of the allowance and leads to de-co-ordination of the system.”

Belgian position:

“Belgium has called into question the approval of the 160th report of the CCR. Basically, Belgium considers that the system of daily allowances applied in the Co-ordinated Organisations should continue to reflect changes in the reference countries and that, in the case of the Co-ordinated Organisations, accommodation expenses during official journeys should be reimbursed on the basis of documentary evidence. Standardising the amount of allowances and seeking concessions in the hotel sector, as the United Nations does, are also means of saving money. Indeed, these measures are being increasingly widely adopted by the individual countries themselves in an attempt to control expenditure in a climate of budget restrictions.”

Note 1 The Deputies approved an amendment recommended by the CCR in its 145th report (CM(2003)34) at their 835th meeting (8 April 2003, item 11.2) which did not effect the method of adjusting the daily subsistence allowance but allowed Organisations the possibility to decide individually to allocate specific proportions of the total allowance to cover the cost of accommodation, meals and personal expenses.


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