Ministers’ Deputies
CM Documents

CM(2008)88 28 May 20081
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1031 Meeting, 2 July 2008
11 Administration and Logistics


11.5 Meeting report of the Budget Committee – May 2008 session

Item to be considered by the GR-PBA at its meeting on 17 June 2008

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1. The Budget Committee met in Strasbourg on 19-21 May 2008.

2. The Committee considered the following items:

    I. Opening of the meeting
    II. Election of Chairperson and Vice-Chairperson of the Committee
    III. Examination of the following documents:

      - Report of the October 2007 meeting
      - Minutes of the October 2007 meeting

    IV. Presentation of changes made by the Deputies to the draft budget for 2008 before its approval
    V. Execution of the 2007 budget - RBB and PMM results
    VI. Examination of the priorities for 2009 and exchange of views with the Secretary General
    Mr. Terry Davis

    VII. The situation of the Pension Reserve Fund

      - Report of the Management Board to the Committee of Ministers for the second half of 2007
      - Results of the actuarial study of February 2008

    VIII. Administrative charges
    IX. The situation of the Organisation’s buildings
    X. European Directorate for the Quality of Medicines: new budget presentation
    XI. 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

The Director General of Administration and Logistics opened the meeting of the Committee, which was the first meeting in the three year mandate (2008-2010) of the Committee.

II. ELECTION OF CHAIRPERSON AND VICE-CHAIRPERSON OF THE COMMITTEE

Ms Musset was elected Chair, and Mr Hjalmarsson Vice-Chair for 2008.

III. EXAMINATION OF THE FOLLOWING DOCUMENTS

Report of the October 2007 meeting

The Committee took note of the report of the October 2007 meeting

Minutes of the October 2007 meeting

The Committee examined and approved the minutes of its meeting held in October 2007.

IV. PRESENTATION OF CHANGES MADE BY THE DEPUTIES TO THE DRAFT BUDGET FOR 2008 BEFORE ITS APPROVAL

The Committee took note of the various changes made to the draft budget by the Committee of Ministers during the budgetary debate in November 2007.

V. EXECUTION OF THE 2007 BUDGET – RBB AND PMM RESULTS

The Committee considered the documents:

- CM/Inf(2008)11. Budgets of the Council of Europe for the financial year 2007 – Progress Review Report
- CM/Inf(2008)12. Programme of Activities 2007 – Progress Review Report

and held an exchange of views with the Director of Strategic Planning.

The Committee noted an improvement in the presentation of logframe results for certain sectors and reiterated its remarks made in previous years that effective reporting on actual results depended on the prior setting of clear and specific expected results and performance indicators in logframes, which should include fewer, but better defined objectives. The Committee welcomed the process of review and streamlining of logframes which had begun in relation to the 2008 budget and was of the opinion that it should be extended to all sectors, in particular the Programme of Activities.

The Committee noted with satisfaction that the balance of unspent appropriations had been significantly reduced in 2007 and encouraged the Secretariat to continue its efforts in this direction.

VI. EXAMINATION OF THE PRIORITIES FOR 2009 AND EXCHANGE OF VIEWS WITH THE SECRETARY GENERAL, MR. TERRY DAVIS

The Committee took note of the document CM(2008)61 - Priorities for 2009 - Budgetary Implications and held an exchange of views with the Secretary General.

The Secretary General outlined the main elements of the Priorities document, namely:

- The proposals represented zero real growth for the Ordinary Budget of the Council of Europe.

- Obligatory adjustments concerning the full year effect of previous decisions such as those in respect of extra staff for the Court had been covered by efficiency savings from most major administrative entities within the Organisation. Some administrative entities (specifically the Court, the Parliamentary Assembly and the Congress) had not proposed net savings.

- Notwithstanding the context of zero real growth, it had been possible to reinforce other priority sectors such as the Commissioner for Human Rights and the Department for the Execution of Judgments.

- The European Court of Human Rights had not asked for major additional resources in 2009, but it had stated that it may review its proposals for 2009 if Protocol 14 did not enter into force prior to 2009.

- The Court had announced that it intended to ask for a new enhancement programme from 2010. It would include a request for 75 extra posts per year for the years 2010-2012. Should such a programme be approved by the Committee of Ministers, the Court would also require additional office space. One solution could be to refurbish B building which was currently empty. Even though this would have no direct budgetary consequences for 2009, the decisions would need to be taken in the near future in order to allow for renovation work to start in 2009.

- The report of the actuary on the Pension Reserve Fund indicated that member states should increase their contribution to the Fund in 2009 by €6.4M compared with 2008 (i.e. some €5.9M more than indicated in the previous actuarial study for the same period).

General Remarks

The Committee welcomed the fact that once again the Secretary General had identified efficiency gains within the Ordinary Budget which could be reallocated to reinforce priority areas and to meet the financial consequences of decisions taken by the Committee of Ministers in previous years. However the Committee drew the attention of the Committee of Ministers to the type of savings which had been made, as they did not affect expenditure in relation to staff costs in sufficient proportions.

The Committee regretted that three administrative entities with significant budgets (the Parliamentary Assembly, the Court and the Congress) had not proposed meaningful efficiency gains for 2009. The Committee therefore recommended that further savings which would have to be made to balance the 2009 budgets should include efficiency gains within the budgets of the Parliamentary Assembly, the Court and the Congress.

The Committee noted that the proposals were based upon the principle of zero real growth in contributions to the Ordinary Budget. The Committee noted however, that the expenditure of the budget increased by 1.02%.

It was of the opinion, on the other hand, that the principle of zero real growth could be applied on a wider basis to include all of the General Budget, or even incorporate the partial agreements.

The Committee committed itself to examine this proposal at one of its forthcoming meetings.

If this approach were applied to the General Budget for 2009, this would require further overall savings of €6.4 M to be found in order to finance the increase in contributions to the Pension Reserve Fund.

The Committee felt that it was important to adopt this approach for future years as the perspectives for
2010-2011 as detailed in Appendix V of the Secretary General’s priorities document indicated increases in both the Ordinary Budget and the Extraordinary budget in the years to come due essentially to the three year programme presented by the Court.

The Committee could not endorse the proposal of the Secretary General to finance part of the 2009 budget by using all of the credit balance from the 2007 financial year and the €900K which had been already set aside from the credit balance of the 2006 financial year. The Committee wished to highlight to the Committee of Ministers that a similar level of resources could not be guaranteed to be available for future years’ budgets.

The Committee noted that the methodology approved by the Committee of Ministers for the calculation of the inflation adjustment for the 2009 budgets, i.e. by use of the 12 month average French inflation rate for the twelve months to February 2008, gave rise to an adjustment of 1.9%. The Committee stated that this inflation adjustment should be applied to the Budget of Expenditure. Moreover, the methodology for the calculation of the salary adjustment for 2009 would be based on the rate of inflation for the twelve months to June 2008. The current rising trend in the rate of inflation, together with real salary increases in some of the reference countries, could mean that the salary adjustment recommended by the CCR for 2009 will be higher than 1.9%. The Committee wished to bring this matter to the attention of the Committee of Ministers.

The Committee welcomed the fact that the Secretary General proposed to reduce the negative reserve significantly in 2009. The Committee reiterated it’s position, expressed in recent reports, that the negative reserve was budgetarily unorthodox and should not feature in the Organisation’s budget. The Committee recommended that the negative reserve should be eliminated gradually over the course of the next few years.

VII. THE SITUATION OF THE PENSION RESERVE FUND

The Committee took note of the request made by the GR AB at its meeting on 15 May 2008 to provide it with specific comments on the 2008 actuarial study on the Pension Reserve Fund, and on long term perspectives for the pensions of staff of the Organisation.

It held an exchange of views with the actuary of the Joint Pensions Administrative Section, who supplied the necessary technical information. The actuary said that the model used for the calculations had been validated by the British Government Actuary’s Department in 2005. He reminded the Committee that the increase in member states’ contributions arising from the study was due to three main factors:

- the increase in the number of serving staff members affiliated to the pension scheme
- the fact that the Fund’s real rate of return had been lower than expected between 2005 and 2008
- the reduction of the target real rate of return from 6 to 5%.

The actuary said that the level of the target rate of return was due to a recommendation by the Fund’s Management Board, which wished to avoid having to invest massively in high risk assets; this had been approved by the Committee of Ministers.

On the basis of all the information supplied, the Committee accepted the findings of the study. It also pointed out that as early as October 2005 it had expressed doubts as to the validity of the 6% target rate of return taken as an assumption in the previous study.

The Committee consequently recommended taking the necessary steps to finance the Pension Reserve Fund as required by the study.

It nevertheless considered that it would be difficult to place an additional burden of 6 million euros on the member states in 2009 and therefore proposed to the Committee of Ministers various possible ways of alleviating the burden on the financial year 2009:

- Part of the unexpended balances, in the order of 50%, of the Ordinary Budget for 2006/2007 (ie 4.9 million euros), which it was proposed in the Priorities document to use as receipts in the Ordinary Budget for 2009, could be earmarked for financing the Pension Reserve Fund. Additional savings equivalent to the same amount would then have to be identified in the Ordinary Budget in order to balance it, notably amongst proposals for new expenditure in the Programme of Activities.

- Part of the Pharmacopoeia balances could be refunded to the Pharmacopoeia member states which could be used to cover the increase in their contributions to the Pension Reserve Fund. However, the Committee pointed out that this proposal would concern only 36 of the Organisation’s 47 member states.

- The Committee noted that the contribution readjustment for the three coming years by comparison with the 2005 study would be about 18 million euros (6 million per year). Consideration might be given to arriving at this amount in a more incremental manner (3, 6 then 9 million euros over 3 years).

Amongst the three possibilities above, the Committee, with the exception of one member, expressed its preference for the first and second proposals.

The Committee also recommended that studies be conducted with a view to making alternative proposals on pensions for the future in order to reduce the member states’ contractual obligations. Moreover, the Committee suggested that other financing options for the Pension Reserve Fund be studied, one member suggested for example creating an internal tax on salaries and pensions.

VIII. ADMINISTRATIVE CHARGES ON VOLUNTARY CONTRIBUTIONS

The Committee took note of document: P-Bud(2008)2: Logistical support for Externally Financed Projects. The Committee recommended approval of the proposal to increase the percentage levy in relation to the additional costs incurred within the Finance Directorate for the processing of payments in respect of joint programmes and voluntary contributions from the current 1.0% to 1.5%. This would take into account, amongst other factors, implementation of the recommendations of the External Auditor in respect of the regularisation of the situation concerning bank accounts held in the name of the Organisation in member states other than the host country and the internal controls covering payment procedures. This had led to significant increases in the volume and complexity of payments being made by the Finance Directorate and the number of bank accounts under management.

Furthermore, given the fact that income from voluntary contributions and joint programmes now represented 24% of the Programme of Activities financed by the Ordinary Budget, the Committee also recommended that the Committee of Ministers should instruct the Secretariat to carry out a detailed study of the way in which voluntary contributions and joint programmes are managed by the Organisation, including use of special accounts. The Committee underlined that the study should indentify all of the additional costs – both direct and indirect - incurred by the Organisation as a result of the acceptance of such income in order that the financial impact on the Organisation of voluntary contributions and joint programmes could be assessed more accurately. The levies which were currently in place to meet this financial impact (1.0%, to be increased to 1.5%, of the value of the voluntary contributions plus € 16 100 in respect of each staff member financed by voluntary contributions) should then be adjusted accordingly. It is desirable that the results be known before the 2009 budget vote for implementation from 2009.

IX. THE SITUATION OF THE ORGANISATION’S BUILDINGS

The Committee took note of the documents:

- Note CAHB 03 2008 B Building Pdr-08 04 08: Ad Hoc Committee of Experts on Buildings (meeting of 16 and 17 April 2008 - Point 5) Renovation of B Building and
- Note CAHB 03 2008 Occup Lcx Pdr-08 04 08: Ad Hoc Committee of Experts On Buildings (meeting of 16 and 17 April 2008 - Point 4) Council of Europe Buildings in Strasbourg - Vacant Offices

which detail respectively the estimated cost (€7 875 000 at April 2008 prices) of a possible renovation of B Building and the situation in respect of vacant office space within the existing office infrastructure of the Organisation in Strasbourg.

The Committee also noted that within document CM(2008)61: Priorities for 2009 – Budgetary implications it was stated that the European Court of Human Rights would be requesting a new three year programme of increased resources commencing in 2010. The Committee wished to bring to the attention of the Committee of Ministers that any additional resources in terms of staffing that may be granted to the Court for any future enhancement programmes would also, given the current situation in respect of vacant offices, give rise to additional costs relating to the provision of office space for any such additional staff, as well as for new current operating expenditure.

Whilst the Committee noted that there was a proposal to meet any such needs by means of the refurbishment of the currently vacant B building, it insisted that no decision on the eventual refurbishment should be taken until there had been a decision of the Committee of Ministers on a significant programme of increased resources of the Court.

The Secretariat also informed the Committee that the old EDQM building had currently yet to be sold.

X. EUROPEAN DIRECTORATE FOR THE QUALITY OF MEDICINES: NEW BUDGET PRESENTATION

The Committee took note of the proposed new budget structure. This new simplified format, consolidating the three existing budgets into a single budget, had several advantages; in particular, it gave an overview of all the EDQM’s activities, thereby facilitating analysis and improving transparency.

The Committee welcomed this presentation proposal and considered it a significant improvement, allowing the establishment of a clear and consolidated presentation of the EDQM accounts. It regretted that it had not received the medium-term investment programme and intended to resume consideration of the budget sub head “Project expenditure earmarked for future activities” in the autumn, during the discussion of the draft Budget for 2009 and in the light of the outcome of the EDQM’s discussion of its medium and long term strategy; these elements would give it a clearer picture of the credit balances.

Also, as the planned investments concerned all sectors of activity, the Committee was in favour of placing the investment appropriation in a separate budget head and be accompanied by the programme of investment, as in the Ordinary Budget.

The Committee recommended that this new presentation be used in the coming years.

XI. ANY OTHER BUSINESS

Investment programme

The Committee was informed of major developments that had prompted the Directorate of Logistics to propose amending the investment programme for 2008 as adopted by Committee of Ministers at their 1012th meeting. In the light of the explanations provided, it recommended the proposals for amending the investment programme as set out in document P-Bud(2008)4.

Study on the efficiency and effectiveness of committees and study on staff/activities ratio and working methods

The Committee took note of the decision of the Ministers Deputies at their 1024th Meeting (23 April 2008) to transmit to the Committee “for information and possible comments” the studies on the efficiency and effectiveness of committees and on staff/activities ratio and working methods produced by external consultants. The Committee noted that the Internal Auditor would be conducting further analysis of the staff/activity ratios. The Committee stated that it would resume consideration of the two studies and make any necessary comments, once the results of the Internal Auditor’s analysis were available for consideration. The Committee took note of the initial responses of the Secretariat to the studies as contained in documents GT-REF.INST(2008)2 and GT-REF.INST(2008)3.

Budgetary process

The Budget Committee stated that it would like to know more about the internal budgetary process in order to better evaluate how and in what sense results could be improved and how reallocation of current appropriations during the financial year might be treated. It intended to examine this question during the next meeting.

Next meetings

The Committee recalled that its autumn 2008 meetings would be held on the following dates:

- 8th to 11th September
- 6th to 10th October
Appendix I

BUDGET COMMITTEE

May session 2008

Monday 19 May at 9.30 a.m. – Wednesday 21 May 2008

Room 7, Palais de l’Europe

DRAFT AGENDA

Item 1 Opening of the meeting

Item 2 Election of Chairperson and Vice-Chairperson of the Committee

Item 3 Examination of the following documents:

      - Report of the October 2007 meeting

      - Minutes of the October 2007 meeting

Item 4 Presentation of changes made by the Deputies to the draft budget for 2008
before its approval

Item 5 Execution of the 2007 budget - RBB and PMM results

Item 6 Examination of the priorities for 2009 and exchange of views with the Secretary General
Mr. Terry Davis

Item 7 The situation of the Pension Reserve Fund

      - Report of the Management Board to the Committee of Ministers for the second half of 2007

      - Results of the actuarial study of February 2008

Item 8 Administrative charges

Item 9 The situation of the Organisation’s buildings

Item 10 European Directorate for the Quality of Medicines: new budget presentation

Item 11 Any other business

      - Investment programme of the Directorate of Logistics

      - Study on the efficiency and effectiveness of committees and study on staff/activities ratio and working methods

Appendix II

BUDGET COMMITTEE

May session 2008

(19-21 May 2008)

LIST OF PARTICIPANTS

STATES

MEMBERS

Austria

Mr Christoph JACKWERTH

Belgium

Ms Anne VAN NIEUWENBURG

France

Ms Marie-Chantal MUSSET

Germany

Mr Michael LAUMANNS (Substitute)

Italy

Mr Claudio DE ROSE (apologies)

Poland

Ms Magdalena KAKOL (Substitute)

Romania

Mr Stefan PETRESCU

Russian Federation

Mr Vladimir A. IOSIFOV

Sweden

Mr Åke HJALMARSSON

Turkey

Mr Fikret DEMIR (apologies) (Substitute)

United Kingdom

Ms Joycelyn BUCHAN

Note 1 This document has been classified restricted until examination and adoption by the Ministers’ Deputies.


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