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CM(2010)137      25 October 20101
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1099 Meeting, 23-25 November 2010
11 Administration and Logistics

11.1 Meeting report of the Budget Committee –
October 2010 session

Item to be examined by the GR-PBA at its meeting on 4 November 2010
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1. The Budget Committee met in Strasbourg on 12 - 15 October 2010.

2. 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 September 2010 meeting

1. The Committee wished to make the following amendments to its report of the September 2010 meeting :

“34. The Committee noted that the EYF's budget, as proposed in document CM(2010)130, remained stable and that, following the transfer of four posts from the Ordinary Budget to the EYF for an amount of € 391 900 (as mentioned above), the operational programme had been reduced by an equivalent amount. “

“66. […] The Committee of Minister’s attention was drawn to the fact that this presentation would lead to a significant technical increase in the amount of member States’ contributions to the Ordinary Budget for the 2012 financial year and would reduce by an equivalent amount the contributions in respect of the Pension Reserve Fund. “

2. Apart from the two above-mentioned amendments the Committee took note of its report of the September 2010 meeting.

II. Introduction of a biennial budget of the Council of Europe

3. The Committee recalled the statements of the Secretary General and the decisions taken to date by the Committee of Ministers in respect of the introduction of a biennial budget.

4. In its document on priorities for 2011 and their budgetary implications (CM( 2010) 42rev para. 45), the Secretary General indicated:
“The Organisation’s new programme is a crucial element of the reform, which is to be seen as a package and an ongoing process. The prioritisation exercise carried out in the preparation of the 2011 priorities and the structuring of the new programme have laid the foundations for the Organisation to work more strategically, building on its comparative advantages while establishing the conditions for a more sustainable resource structure. The possible move towards a biennial budget process as from 2012 will be a further step in this direction.”

5. The Deputies considered the proposals made by the Secretary General at the 1084th meeting of the Committee of Ministers and …

“welcomed the strategic approach of the Secretary General to the prioritisation of the Programme of Activities and Budget and supported his proposals for Priorities for 2011”
6. The Committee noted that in the introduction of the draft Programme and Budget for 2011 the Secretary General had stated:

“the new programme and budget is [….[ a platform for looking ahead, in particular for external funding and a move towards a multiannual budget”.

7. The Special Representative of the Secretary General for Organisational Development and Reform - Gérard Stoudmann, presented to the Committee the advantages for the Organisation of a move towards a biennial budget.

8. Mr Stoudmann stressed that a biennial budget would put more emphasis on strategy, long-term planning and political focus, which was important for the Committee of Ministers and the Secretary General. At the same time a biennial budget could provide some flexibility in the use of financial resources, for instance by agreeing to carry forward some funds.

9. He indicated that it would be essential to establish all necessary mechanisms for regular review and control by the Committee of Ministers. Accountability should be built into any chosen system from the outset and many of the issues raised must result in a review of the Financial Regulations.

10. Mr Stoudmann considered that everybody would benefit. A responsive Organisation needed some flexibility, which was lacking at present. At the same time, the Committee of Ministers would be better able to concentrate on key and strategic issues and enhance its role also in terms of better accountability. A biennial budget would clearly be the next logical step in an improvement of procedures. Now that the whole of the Council of Europe had been consolidated into one single Budget and Programme for 2011, it was appropriate to make the process more strategic, and to spend less time on a constant cycle of budget preparation.

11. Mr Stoudmann stressed, in particular, the importance of the timing of the measure: a biennial budget was needed for 2012. This was absolutely essential in order to maintain the momentum for reform and would provide a unique opportunity to review the Council of Europe programme and its procedures.

12. The Committee was informed during its exchange of views with the secretariat that in fact two of the main strategic advantages of a move towards biennial budgeting were not mentioned in CM(2010)125, firstly that the move towards biennial budgeting would support a significant restructuring of the programme of activities (1/5 of the budget) as all current mandates of intergovernmental committees would finish at the end of 2011 and that this would allow for two-year programmes to begin in 2012 and be completed in 2013.

13. The Committee also noted that the Secretary General did not consider the introduction of a biennial budget to be one in a series of reform measures but rather an essential part of the reform process which if it were not introduced in 2012 would lead to a loss in momentum in the overall process.

14. The Committee examined the document CM(2010)125 – Introduction of a biennial budget of the Council of Europe.

15. The Committee noted that the proposal as presented was for two consecutive budgets of one year and that this would cover all budgets including the Partial Agreements. In this respect, given the specific characteristics of the EDQM, specific attention would have to be given to the implementation of a biennial budget for this partial agreement.

16. The Committee discussed the advantages and disadvantages of a move towards biennial budgeting from both a strategic and a practical standpoint and identified a number of potential disadvantages:

    Ø Potential decrease in control by the Committee of Ministers on budgetary aspects, particularly in the second year. In this respect, if the Committee of Ministers decided to introduce a budget over two years, it was important to ensure that it retained an appropriate level of control over programme and budgetary appropriations and their use. It would be particularly important that the revised financial regulations contained specific provisions concerning the programme and budgetary powers of the Secretary General and the Committee of Ministers in respect of the transfer of appropriations from Vote to Vote, pillar to pillar and possibly programme to programme during the course of the biennial period.

    Ø Potential difficulties in planning for two years, in particular for staff costs and inflation and to be able to react to new circumstances

    Ø The potential that during a period of reform of the Organisation a change of this magnitude may constitute a risk of destabilising the reform process itself.

17. The Committee noted that the document described certain strategic advantages such as:

    Ø Better planning,
    Ø Further focus on the implementation of activities
    Ø Better administrative and financial management
    Ø Facilitating relations with outside partners, particularly the EU.
    Ø Making member states aware every second year of the contributions for the coming two years.

18. In addition, the Special Representative of the Secretary General for organisational development and reform had indicated that the change to a biennial budget would bring greater flexibility to the implementation of the programme.

19. The Committee questioned whether these were really strategic advantages or whether they could be more appropriately described as positive side effects.

20. In terms of planning, a detailed implementation report would have to be prepared in September of the first year and the draft budget for the second year would have to be revised if necessary which could lead to additional workload and costs.

21. In terms of improving administrative and financial management, budgeting for two years would involve more work than budgeting for one year and reporting mechanisms would have to be enhanced.

22. The Committee recognised that whilst the overall time spent on examining the budget and programme would probably remain the same, it would be possible during the first year of the cycle to carry out an in-depth analysis of implementation of programmes and political priorities.

23. The Committee felt that the reference in the document to the EU was irrelevant as the EU had an annual budget prepared in a multiannual (7 years) framework.

24. In respect of member states contributions the Committee noted that whilst the total of all member states contributions would be known for the coming two years, individual member states contributions would have to be calculated on an annual basis in accordance with Resolution (94) 31. The current fluctuations in percentage contributions resulting from changes in Gross Domestic Product or population would persist as well those resulting from the effects of inflation and the salary adjustment.

25. The Committee noted that it was ultimately for the Committee of Ministers to decide on the introduction of a two year budget and the accompanying procedures but wished to bring to the attention of the Committee of Ministers certain points which would need to be borne in mind, if the Organisation were to benefit from such a move.

26. The Committee felt it was essential to ensure procedures were in place for both the Committee of Ministers and the Secretary General to re-open the debate on the budget for the second year. The revised financial regulations would have to address this issue. The Committee recommended that in any event, the Committee of Ministers should take a specific decision to confirm the second year’s budget, in particular to decide on the inflation and salary adjustments to be used.

27. Consequently, the Committee recommended that the deadline for the possible re-opening of the debate for the second year should be the 31 October at the earliest.

28. The Committee recommended that any logframes presented within the draft programme and budget should detail the budgetary resources allocated for each programme and for each financial year as well as the specific performance indicators for each year.

29. The Committee expected the draft two-year programme and budget document to clearly distinguish foreseeable developments in the activities indicated each year in terms of both resources and performance indicators.

30. The Committee stressed that the implementation of consecutive annual budgets would have to be accompanied by a reinforced system of reporting on the implementation of the programme and that a report would have to be drawn up in order to take account of the level of implementation of the programme and budget by 30th September of year 1 at the latest in order to enable any decision to be taken in respect of the re-opening of the debate on the second year’s budget. The decision of the Committee of Ministers would have to take into account the final inflation rate it intended to retain as well as the salary adjustment.

31. The Committee noted that the Draft Programme and Budget for 2011, as in previous years, included a contingency reserve of €100 000. It recalled that the Council of Europe had been able to meet unforeseen circumstances in the past without an enhanced reserve. Therefore the creation of an enhanced reserve was not strictly speaking linked to the introduction of a biennial budget. In any event there would have to be a strict set of rules, which would notably include a specific decision of the Committee of Ministers, on the use of such a reserve.

32. In respect of the carry forward of appropriations, the Committee noted that the purpose of biennial budgeting according to Mr. Stoudmann was to provide some flexibility in the use of funds for instance in the form of a carry forward of some unspent appropriations. The Council of Europe seemed to be lacking flexibility at present. The Committee felt it appropriate to stress that at present, the Secretary General, within the Financial Regulations, had extensive authority to reallocate funds between programmes within the same Vote during the implementation of the approved budget which provided flexibility.

33. As regards unspent appropriations, the Committee recalled the decision of the Committee of Ministers in June 2010 according to which unspent appropriations should be returned to member States. It therefore recommended that all unspent appropriations be returned to member states and that the carry forward of appropriations should be requested only in fully justified exceptional circumstances and be the subject of a specific Committee of Ministers decision, after an opinion of the Budget Committee, as was currently the case. This principle would apply to every financial year.

34. The Committee recognised that it was important that activities in year 2 commenced as soon as possible in order to ensure a smooth implementation of programmes over the two budget years. However, it stressed that no firm financial commitments should be entered into in respect of year 2 until there was a decision in respect of the budget for that year and that the relevant service be carried out after the opening of the new financial year.

35. The Committee considered that the proposed methodology for the inflation adjustment for the second year was unnecessarily complicated and that another system not based on ex post adjustments should be sought.

36. The Committee stressed that, in accordance with the decision of the Committee of Ministers in respect of 2011, the inflation adjustment should be applied to member states contributions.

37. The Committee recalled that whatever the methodology chosen for the calculation of the inflation adjustment it was up to the Committee of Ministers to decide on the total amount of the budget.

38. In this respect, the Committee recalled that the inflation adjustment was not automatic. The budget could not be prepared only through an adjustment, rather the activities of the programmes had to be estimated with regard to expenditure, firstly in regard to staff expenditure (remuneration and full-time equivalent worked (FTE) and secondly, with regard to forecast costs for other types of expenditure.

39. The Committee noted the methodology proposed for dealing with the salary adjustment and recalled that whatever technical procedures were put in place in respect of the salary adjustment, a provision would be needed, where necessary, to cover salary increases in year 2, which should be calculated on the basis of the provisional inflation rate. The final decision in respect of whether the recommendations of the CCR be implemented each year should remain with the Committee of Ministers.

40. The Committee stressed that new technical provisions, in the form of revised Financial Regulations would need to be drafted and that these would have to be submitted to the Budget Committee for examination before adoption by the Committee of Ministers. The Committee requested that the Secretariat ensure that the Budget Committee was provided with a new draft set of Financial Regulations during March 2011 in order to allow for consultation with Committee members in respect of possible amendments and allow for an in-depth discussion and recommendations on the revised regulations during its meeting in May 2011.

41. In terms of the calendar cited in CM(2010)125, the Committee recalled that the examination of the draft programme and budget could only begin once the Committee had examined the Financial statements of the previous years and the reports of the Internal and External Auditors. It would clearly therefore be necessary for the Committee to hold two meetings during the Autumn of 2011, as in the past.

42. The Committee questioned whether or not the introduction of biennial budgeting was really so crucial to the reform process, and whether alternative approaches could be considered.

43. The Committee felt that some of the problems, in term of programming, which had been raised by the Secretariat could be addressed by other approaches to planning and budgeting in a medium term perspective, taking as an example the system used in some member states. In such a system an annual budget is prepared in the context if a rolling three year programme framework. This facilitates forward planning for programmes in excess of one year but retains an annual review.

III. Administrative expenses levies on extra-budgetary resources

44. The Committee held an exchange of views on the points made in the document drafted by a member of the Committee, “Elements of a strategy with regard to Joint Programmes (JPs) and other Voluntary Contributions (VCs)” and on the Secretariat’s proposals regarding the levies on extra-budgetary resources.

45. In respect of the joint programmes carried out with the Union, the Committee noted that the current rate of levy on administrative expenses was contractually set at a maximum of 7% of the total amount of direct eligible costs of the programme. The Committee considered that this percentage was lower than the marginal costs generated by the use of Union resources and encouraged the Administration to make this clear in their future negotiations with the EU in order that the rate could be set at a suitable level.

46. The Committee stressed that marginal costs had a limit (in particular office space) and that beyond a given level of financial resources, other fundamental problems would arise in terms of the costs which they could generate for the Organisation.

47. In respect of voluntary contributions, the Committee noted that the Secretary General would be making proposals to the Committee of Ministers to examine the conditions for accepting such resources and ensure that the activities they would finance corresponded to the strategic goals of the Organisation.

48. Lastly, the Committee took note of the Secretariat’s proposals regarding levies on extra-budgetary contributions to offset administrative overheads. The Committee felt able to recommend these proposals, without prejudging the introduction of another calculation method in the future.

IV. Exchange of views with the external auditor

49. In the light of the exchange of views with the external auditor, the Committee wished to draw a number of points to the attention of the Committee of Ministers.
The Committee reiterated the recommendations it had made in the report of its meeting in September 2010 regarding the introduction of a cost accounting system in the EDQM.

“49. The Committee recommended, in the light of the comments made by the external auditor, that the EDQM establish at the start of 2011 a medium-term strategy and also stressed the need to develop as soon as possible a cost accounting system. It also recommended that the EDQM take action on all the other recommendations made by the external auditor.”

50. With regard to the Organisation’s Financial statements, the Committee recalled the recommendations made previously and which had been repeated by the new external auditor concerning the desired speeding up of the timetable for the production, certification and approval by the Committee of Ministers of the Financial statements, the objective being to produce the necessary documents by the end of March.

51. In addition, the Committee suggested that in future, the presentation and use of special accounts be examined by the external auditor.

52. Regarding the observations made concerning relations with the Organisation’s bank, the Committee recommended that the external auditor’s recommendations be implemented as soon as possible.
Lastly, the Committee expressed its appreciation for the performance audits carried out by the external auditor, in particular the examination carried out for the EDQM, and recommended that the Secretary General take account of the conclusions thereof in the interests of the smooth running of the Organisation.

V. Exchange of views with the internal auditor

53. The Internal Auditor presented his annual report, as set out in CM(2010)51rev, and held an exchange of views with the Committee.

54. The Committee took note of the fact that the Directorate’s remit had changed during 2010 following the creation of the Directorate of Internal Oversight which now covered both internal audit and evaluation functions. This should facilitate the performance approach in the Organisation’s activities.

55. The Committee regretted the fact that it was only examining the report of the internal auditor for 2009 in October 2010 and recommended that in future years the Committee should examine the reports of both the internal and external auditor at an earlier stage in the year and in any event before they discussed the budget proposals for the following year.

VI. Information in respect of the “B building”

56. The Committee took note of the information provided by the Director General of Administration and Logistics in respect of the B Building, namely that the European Parliament had again expressed an interest in either buying or renting the B Building.

57. The Committee noted that the discussions were at an early stage and that it wished to be informed of any further questions for which an early decision was advisable.

VII. Modification to the draft Programme and Budget following the publication of CCR recommendations on the annual remuneration adjustment 2011

58. The Committee took note of the information contained in the document CM(2010)135 concerning adjustments to the 2011 Draft Budgets following the recommendations of the Coordinating Committee on Remuneration on salary adjustments for 2011.

59. The Committee recommended that the CCR recommendations for 2011 be adopted and welcomed the proposal of the Secretary General to use the savings that this recommendation would generate to further reduce the negative reserve to € 571 000.

VIII. Exchange of views with the Rapporteurs Group on Program, Budget and Administration
(GR-PBA)

60. The Committee held an exchange of views with the Group of Rapporteurs on Administrative and Budgetary Questions, during which the Chairperson of the Budget Committee outlined the main findings and recommendations of the Committee in respect of the Draft Programme and Budget for 2011.

IX. Internal taxation – Continuation of discussion on the documents provided by Ms Van Nieuwenburg

61. The Committee was informed by the Secretariat of current practices in this area in other international organisations. The Committee took note of the oral presentation of legal and financial aspects and of the impact on the remuneration of staff of the possible introduction of an internal tax, and requested that this information be made available in a document. As the author of the reference document was not present, the Committee decided not to take a position on the matter for the time being and said that it would be for the incoming Committee to re-examine this item if it so wished on the basis of a document including the information provided by the Secretariat.

X. Other business

Modifications to the draft budgets of the partial agreements

62. The Committee was informed about the changes to the revised draft budgets of two partial agreements (the North-South Centre and the Pompidou Group) following changes which had occurred since its previous meeting. First, the draft budget of the Pompidou Group had been revised following the withdrawal of Denmark, whose contribution for 2011 would have been €26 900. The total contributions from member states had therefore been reduced by an equivalent amount to avoid an increase in contributions from the remaining member states. On this point, the Committee welcomed the approach which had been followed.

63. Second, with regard to the North-South Centre, two withdrawals (Switzerland and the Netherlands) and one accession (Malta) had been notified in September. The Committee noted that, in contrast to the principle applied for the Pompidou Group, only half of the impact of these changes had been taken into account and that the budget had been reduced by €48 200 instead of €96 400. The secretariat informed it that this practice had been the one applied since 2008 for the budget of the North-South Centre and that for 2010 when one of the major contributors had returned, the budget had been increased by only half of the contribution from this country, making it possible to reduce the contributions of all the other members.. Although the Committee understood the need for a degree of budgetary stability, it felt that the same principle should be applied to all the partial agreements, namely the full application of the effect of any changes in the number and the composition of member states in order to avoid an impact on the contributions of remaining member states. Nonetheless, the Committee stressed that it was for the Committee of representatives of member states of the enlarged partial agreement to decide on the budgetary package allocated to the Centre.

Execution of the 2011 budget

64. The new structure of the ordinary budget for 2011 included a reduction in the number of expenditure Votes from 8 to 2. The present financial regulations allowed the Secretary General to transfer funds within each Vote. The reduction in the number of Votes from 8 to 2 would have the effect of considerably increasing the possibilities of the Secretary General to change the approved budget during the course of the its implementation. The Committee believed that this was not intentional and it therefore wished to draw the attention of the Committee of Ministers to these theoretical consequences.
The Committee considered that it was necessary to change the Financial Regulations as a consequence of the new budgetary structure in order to preserve the Committee of Ministers’ budgetary powers. The Committee recommended that for the purposes of implementation of the 2011 budget, the reference to “Votes” be interpreted as “Pillars”.

DATE OF THE NEXT MEETING

4 - 6 May 2011.

Appendix I

BUDGET COMMITTEE

October session 2010

Tuesday 12 October at 9 a.m. – Friday 15 October 2010

Room 3, Palais de l’Europe

DRAFT AGENDA

Item 1 Opening of the meeting

    Report of the September 2010 meeting

CM(2010)123: Meeting report of the Budget Committee – September 2010 session

Item 2 Introduction of a biennial budget

      CM(2010)125 : Introduction of a biennial budget of the Council of Europe

Item 3 Administrative expenses levies on extrabudgetary resources

      P-Bud(2010)14 : Administrative expenses levies on extrabudgetary resources
      Mr Laumanns’ document : Elements of a strategy concerning the joint programmes (JP) and the voluntary contributions (VC)

Item 4 Exchange of views with the external auditor

      CM(2010)100 : Consolidated Financial Statements and Budgetary Management Accounts of the Council of Europe for the year ended 31 December 2009
      CM(2010)101 : Financial Statements and Budgetary Management Accounts of the Partial Agreement establishing the European Centre for Global Interdependence and Solidarity for the year ended 31 December 2009
      CM(2010)102 : Financial Statements and Budgetary Management Accounts 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 2009
      CM(2010)103 and CM(2010)103add: Consolidated Financial Statements and Budgetary Management Accounts of the Council of Europe for the year ended 31 December 2009 – Follow up to the Report of the External Auditor - Memorandum of the Secretary General

Item 5 Exchange of views with the internal auditor

CM(2010)51rev: Annual Report 2009 of the Directorate of Internal Audit

Item 6 Information in respect of the “B building”

Item 7 Modification to the draft Programme and Budget following the publication of CCR recommendations on the annual remuneration adjustment 2011

      CM(2010)135: Adjustments to the 2011 Draft Budgets

Item 8 Exchange of views with the Rapporteurs Group on Program, Budget and Administration (GR-PBA)

Item 9 Internal taxation – Continuation of discussion on the documents provided by Ms Van Nieuwenburg

Appendix II

BUDGET COMMITTEE

October session 2010

(12-15 October 2010)

LIST OF PARTICIPANTS

STATES

      MEMBERS

Austria

Mr Christoph JACKWERTH (apologies received)

Belgium

Mr Arie GEENS (Substitute ; apologies received)

France

Ms Marie-Chantal MUSSET  (Chair)

Germany

Mr Michael LAUMANNS (Substitute)

Italy

Mr Claudio DE ROSE

Poland

Mr Bartosz BURACZYŃSKI (Substitute)

Romania

Mr Stefan PETRESCU

Russian Federation

Mr Andrei Vitalievitch KOVALENKO

Sweden

Mr Åke HJALMARSSON (Vice Chair)

Turkey

Mr Fikret DEMIR

United Kingdom

Ms Joycelyn BUCHAN

Appendix III : Additional Information Documents:

Title of Document

DD(2010)460 : Information document

Lisbonne : Draft Budget of the European Centre for Global Interdependence and Solidarity (North-South Centre) For 2011

P-Bud(2010)15 : Draft Council of Europe Programme and Budget 2011
Revised budget of the Enlarged Partial Agreement Co-operation Group to Combat Drug Abuse and Illicit Trafficking in Drugs (Pompidou Group)

Projet de budget « bisannuel » du Conseil de l’Europe - Text Mme Musset

Some comments to an introduction of a biennial budget for the CoE - Text M.Hjalmarsson

Internal tax – Document transmitted by Ms VAN NIEUWENBURG

Note 1 This document has been classified restricted at the date of issue; it will be declassified in accordance with Resolution Res(2001)6 on access to Council of Europe documents.


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