CM(2010)143 28 October 20101
1099 Meeting, 23-25 November 2010
11 Administration and logistics
11.5 Administrative expenses levies on
Secretariat memorandum prepared by the Directorate General
of Administration and Logistics
Item to be prepared by the GR-PBA on 18 November 2010
1. In February 2005 (915th meeting, point 11.4) the
Committee of Ministers approved the implementation of a system of administrative
expenses levies on extrabudgetary resources. The applicable rates have already
been reviewed once in 2008 (1032nd meeting, point 11.1).
The Committee of Ministers is invited, within the approved
1. to approve the proposal to raise the rate of levy
on extrabudgetary contributions from 1.5% to 2.3% (cf. paragraph 22 below);
2. to fix the amounts for annual levies per position
financed by these contributions to:
- €18 000 per position occupied by a staff member based in
the Strasbourg, Paris or Brussels premises (€16 100 since February 2005) (cf.
paragraph 24 below);
- €3 300 per position occupied by a staff member based in
the Graz or Lisbon premises (paragraph 25 below).
Opinion of the Budget Committee
2. In its October 2010 meeting report, the Committee
recommended the proposed changes to rates of levy while emphasising that these
changes did not prejudge the introduction of another calculation method in the
future (cf. CM(2010)137, paragraphs 44-48).
3. The annual amount of extrabudgetary resources
(voluntary contributions and EU contributions to joint programmes) has grown
considerably with time, increasing from €10.8 million in 1999 to €28.8 million
in 2009. Over the same period member states' contributions to the Ordinary
Budget increased from €153 million in 1999 to €205 million in 2009, including
the financing of the two reinforcement programmes for the Court of Human Rights.
4. The structure of the Organisation's programme/budget
has been modified and now makes it possible to have an overview of all of the
Organisation's resources, including its budgets (general budget and partial
agreement budgets) and the European Union's contributions to joint Council of
Europe/EC programmes. This helps to clarify the link between the Ordinary Budget
programmes, those financed by the partial agreements and the European Youth
Foundation (some €40 million in 2010) and the joint programmes (€28.8 million in
2009). Only voluntary contributions, the amount of which is by nature to a large
extent unforeseeable, are not indicated in full.
5. These supplementary programmes can however be
implemented only by utilising the Organisation's administrative and logistical
structures. This situation has moreover long been acknowledged in the case of
the partial agreements since, in accordance with Article 21 of the Financial
Regulations, a system whereby the partial agreements contribute to the
Organisation's general operating costs has existed since 1974 ("fixed sum
contributions"). The Budget Committee last examined this system in 1989 and, at
the time, did not wish to change the rules in force.
Review of the current situation
6. The fixed sum contributions system is based on three
separate "baskets" of expenses: the first includes general services expenditure
covering services used by all entities of the Organisation, the second covers
services used by all partial agreements based in Strasbourg apart from the EDQM,
which finances its own premises and partly has its own IT systems, and the third
solely includes general services expenditure covering services used by the
partial agreements not based in Strasbourg and having their own premises: the
Lisbon North-South Centre and the Graz Centre.
7. The total expenditure in each basket is divided by the
total number of staff concerned (plus the judges of the Court and the
Commissioner for Human Rights), and the result is re-allocated on the basis of
the number of staff of each partial agreement.
8. By way of illustration, in the 2010 budget, the total
of the basket to be allocated to all entities based in Strasbourg calculated
according to the approved method (basket 1) amounted to €16 843 000 for a total
of 2 366 staff, corresponding to a fixed cost of €7 100 per member of staff. The
total of the supplementary basket (basket II) to be allocated to all entities
based in Strasbourg apart from the Pharmacopoeia amounted to €40 997 000 for a
total of 2 146 staff, corresponding to a fixed cost of €19 100 per member of
staff. The amount calculated for basket III, applicable to the partial
agreements not based in Strasbourg, was €6 200.
The calculation of the contribution payable by the Pompidou
Group partial agreement, based in Strasbourg and having twelve staff members,
was accordingly: €7 100 x 12 + €19 100 x 12, giving a total of €314 400.
9. Since the receipt is stable in nature (the contribution
is levied whether or not the posts are filled), the total amount corresponding
to these fixed sum contributions is included within receipts in the Ordinary
10. In 2005 (915th meeting, point 11.4), the Deputies
approved the implementation, with effect from 1 January 2005 of a system of
levies for administrative expenses on extra-budgetary resources (joint
programmes or voluntary contributions) to cover the administrative and
logistical expenses incurred as a result of the implementation of externally
1. authorised the opening of a Special Account entitled
“Administrative Costs – Activities financed by external contributions” on the
same basis as that governing the opening and management of Special Accounts
adopted at their 431st meeting (27 November – 1 December 1989, item 42.a);
2. decided that this Account would serve to cover
administrative and logistical support expenses incurred in relation to
activities financed by external contributions;
3. decided that this Account would receive allocations
from joint programmes and voluntary contributions to unfunded activities in
accordance with the modalities set out in document
11. The logic underlying this system was based on the
marginal cost concept, that is the principle that the Organisation's fixed
structures were already financed. It led to the introduction of a 1% levy on all
contributions to cover all the related financial transactions resulting from the
contributions and a fixed sum contribution of €16 100 per staff member based in
Strasbourg and financed via a voluntary contribution or joint programme. This
amount was calculated on the basis of the baskets principle, as described above
for the partial agreements, but was adjusted so that it solely reflected the
marginal cost of the staff (CM(2005)1).
12. As a result of changes in the management procedures
following recommendations made by the external auditor in 2006, the accounting
transactions relating to joint programmes represented a significantly greater
burden. The rate of the levy was accordingly increased by the Deputies to 1.5%
in 2008 for programmes signed on or after 1 August 2008 (1032nd meeting, point
Possible evolution of the levy system
13. The growing importance of activities financed with
non-Ordinary Budget resources today raises two questions:
- Is the fixed sum contributions system for the partial
agreements still satisfactory?
- Should the system of marginal levies on externally funded
projects be modified?
Fixed sum contributions system
14. The new budget presentation now pinpoints, in the 4th
pillar, all of the Organisation's common expenses. Some of these expenses are
already included in the baskets, but others are not.
15. Historically, certain costs have not been included in
the calculation of the fixed sum contributions, a decision which can be called
into question. Specifically the costs of the Private Office of the Secretary
General, of Protocol, of the Legal Advice Department, of External Relations, of
Political Advice, Policy Planning and External Presence and of the
Administrative Tribunal are not currently included in the calculation.
16. It may therefore now be desirable to revise this
system. However, a major political event for the Organisation will assume
primary importance in the coming months and will have an impact on any cost
allocation system. This event is the European Union's (EU) accession to the
European Convention on Human Rights. The EU event will very probably be called
upon to contribute to costs relating to the Convention and hence generally those
of the Court, of the Department for the Execution of Judgments and of the part
of the Committee of Ministers dealing with execution of judgments. It is clear
that the costs of these sectors cannot be confined solely to the current budget
lines but will also have to include the cost of buildings, computer and
telecommunications networks, central administration (human resources and
finance) and above all the employer's share of pension costs (as recommended by
the Cour des Comptes). The discussions on the accession conditions have not yet
been concluded, and consequently no decision on the determination of the Union's
contribution has yet been taken. Since it is possible that the way this
contribution is calculated will lead to a complete overhaul of the cost
allocation systems, it is premature to implement a partial revision of the
system at present, as it will perhaps be necessary to come back to this matter
in the very near future, in all probability in the course of 2011.
Levies on voluntary contributions and joint programmes
17. The level of voluntary contributions and joint programmes
has been high for some years now, and it was initially considered whether they
could not be incorporated into the partial agreements system. This possibility
had to be discarded as the present system is based solely on the number of
staff, which in the case of the programmes varies considerably since the
expenditure linked to certain voluntary contributions may sometimes include no
staff expenses, whereas in other cases it is almost entirely made up of staff
expenses. This question could be reconsidered if the entire system has to be
overhauled in the framework of the Union's accession to the European Convention
on Human Rights.
18. A second possibility considered was to continue with
the existing system, but identifying those expenses not included in the
calculation of the 1.5% levy applied since 2008 and the cases for which no levy
had been proposed.
19. The joint programmes' growing importance makes their
evaluation absolutely essential. This was moreover underlined by the
Organisation's external auditor, whose summary report on the 2009 accounts
includes the following observation: "Since the Council of Europe is involved in
numerous projects, particularly field activities in partnership with the
European Union and other donors, evaluating these projects and programmes, in
terms of their relevance and added value, the efficiency with which they are
carried out, their effectiveness, and their impact and sustainability, is of key
importance for the Organisation. We recommend that the Directorate of Internal
Oversight should establish a methodology for evaluating programmes and projects
as rapidly as possible."
20. Staff will clearly be needed to perform these
evaluations and audit certain programmes; the Directorate of Internal Oversight
has estimated this need at two full-time positions.
21. In addition, the various contracts concluded in
respect of joint programmes or the payment of voluntary contributions generate a
significant workload for the Legal Advice Department. Contracts are concluded
not only when activities begin but also during their implementation. Moreover,
it has been noted that about 30% of the files now submitted to the Tenders Board
concern activities carried on outside the Ordinary Budget or the partial
agreements. The additional staffing needs in these two sectors have been
estimated at one person full-time equivalent.
22. Overall, the additional needs correspond to a
supplementary levy of 0.8% (a global cost of €238 000 for total contributions of
€28.8 million). It is therefore proposed to increase the rate from 1.5 to 2.3%.
23. Following a recommendation by the external auditors,
it must be ensured that this levy is applied without exception to all
extrabudgetary contributions paid to the Organisation.
24. With regard to the sum levied per staff member, the
current rate (which only applies to staff based in Strasbourg) has remained
unchanged since February 2005. The calculation method used at the time
(CM(2005)1) can continue to be used while updating the data, but it would now
appear appropriate to include certain human resources services which were not
included in 2005 (training and career management) since, under the new staff
policy, persons employed on positions have the status of permanent rather than
temporary staff. On the basis of the 2010 data, the rate as recalculated would
be €18 000 instead of €16 100.
25. For staff not based in Strasbourg, no fixed sum
contribution has been applied so far, although resources are clearly required to
manage them. It is therefore proposed to use the same basket as for calculating
the fixed sum contributions of the Graz and Lisbon centres, but adjusted on the
same basis as above, giving €3 300 for 2010. For staff assigned to
offices of the Organisation such as the Paris or Brussels offices (or any other
office of the same kind that may be set up), the same rate of contribution as
for staff based in Strasbourg shoud be applied, since the services supplied in
their case would be strictly equivalent. Furthermore, it should be noted that a
direct cost-recovering charge of €4800 is included in the budgets of Joint
Programmes for staff of joint programmes using the premises of Council of Europe
field offices, the cost of which is borne by the Directorate General of
Democracy and Political Affairs. This system may be reviewed in the future in
the light of changes in the Council of Europe external presence policy.
26. In the specific case of joint programmes, the total
amounts levied are offset against the fixed percentage for administrative
overheads specified in the general conditions of the grant contracts concluded
for external actions of the European Union: "A fixed percentage not exceeding 7%
of the total amount of direct eligible costs of the Action may be claimed as
indirect costs to cover the administrative overheads incurred by the Beneficiary
for the Action, ..." Discussions with the persons dealing with these matters at
the EU have shown that this 7% rate is at present an indispensable condition for
the contract's signature and cannot be called into question.
27. All receipts generated by the levies on contributions
paid and the contributions per post will continue to be included in receipts
under the special account "logistical and administrative support for externally
financed projects" (LS).
28. It should also be noted that the Council of Europe's
contribution to joint programmes consists also of the working time of a number
of staff charged to the Ordinary Budget, whose costs are included in the lines
for the corresponding programmes.
29. A table illustrating the effect of proposed
adjustments to the levies is appended hereto.
This document has been classified restricted until examination by the
Committee of Ministers.
The rate of 1.5% will accordingly apply to all programmes once the
programmes signed prior to 1 August 2008 have been completed.