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MINISTERS’ DEPUTIES |
CM Documents |
28 May 2018[1] |
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1321st meeting, 4 July 2018 11 Programme, Budget and Administration
11.2 Meeting report of the Budget Committee – May 2018 session Item to be considered by the GR-PBA at its meeting on 3 July 2018 |
1. The Budget Committee met in Strasbourg on 14-16 May 2018. The list of participants appears in Appendix I.
Item 1 Adoption of the agenda
2. The Committee adopted the Agenda as set out in Appendix II.
Item 2 Reports of the September 2017 and March 2018 meetings
3. The Committee took note of the reports of its last meetings (September 2017 - CM(2017)119 and March 2018 - CM(2018)57).
Item 3 Budget Committee terms of reference
4. The Committee took note of the terms of reference presented in Article 25 of the Financial Regulations which set out its role and responsibilities (cf. Appendix III).
5. The Committee noted that as a consequence of the change in Turkey’s contributor status, it would be proposed shortly to the Deputies that the Budget Committee return to its former (pre-2016) composition i.e. 11 members comprising experts nominated by the five major contributors and six experts nominated by other member States. It recommended that Article 25 be amended as presented in Appendix III. This would not affect the current Committee.
Item 4 Implementation of the Programme and Budget 2016-2017
Consolidated Financial Statements and Budgetary Management Accounts for 2017
6. The Committee took note of the information provided in the various documents under this item.
7. Concerning post-employment health benefits expenses for 2016, the Committee noted that the 2016 figures had been restated due to a change in the calculation method used by the actuary to take into account the distribution of the obligation between employees and employer. This resulted in a decrease in expenses of €5M for 2016 in that regard.
8. The Committee noted that the Russian Federation’s 2017 financial obligations were fully recognised as revenue, with only the part paid included in the cash flow statement, and the outstanding contribution of €22M of the Russian Federation was included in short-term debtors as at 31 December 2017.
9. It noted that the amount of deferred income (mainly extrabudgetary resources received in advance of incurring related expenditure) had almost doubled since 2015 (€97M in 2017 compared to €84 M in 2016 and €57 M in 2015). This is beneficial in cash flow terms. However, the Committee highlighted that this also meant an obligation of expenditure of almost €100M in future periods.
10. As concerns the consolidated cash flow statement, the Committee expressed its concerns about the dependency inter alia on extrabudgetary resources. It highlighted that, in terms of cash flow, the unpaid Russian Federation’s contributions were, in effect, covered by extrabudgetary resources. This dependency could be a risk for the Organisation if extrabudgetary resources were reduced. 5% lower extrabudgetary resources would have led to a net decrease in cash flow for the year. It noted however that cash and equivalents at the end of 2017 amounted to €191M (cf. paras. 34-35).
11. It considered that further adjustments in presentation could be made to improve readability and transparency. To this end, it suggested including in the:
i. Consolidated Financial Statements
- in the management report, an overview of the Organisation’s financial position, including details by pillar; significant challenges and achievements in the financial year and comments on value for money; evolution of the operating expense ratio;
- in the statement of internal control, any significant risks and relevant response activities;
- disclosure of the extrabudgetary resources by donors and by category (earmarked / unearmarked contributions), potentially with graphical illustration;
- movements of inventories under expenses and not as revenues;
- reconciliation of provisions for post-employment benefits with the movements of the balance sheet.
ii. Budgetary management accounts
- more explicit notes to reconcile figures between the various tables.
Exchange of views with the External Auditor (NIK, Poland)
12. The Committee held an exchange of views with Mr Paweł Banaś, representative of the Najwyższa Izba Kontroli (NIK), Poland, External Auditor. Mr Banaś presented the External Auditor opinions on the 2017 Consolidated Financial Statements and on the Budgetary Management Accounts and highlighted the main recommendations.
13. The Committee was informed that an unqualified opinion, accompanied by an emphasis of matter, would be given to the Financial Statements. The emphasis of matter concerned employee benefits and the Pension Reserve Fund (PRF) (potential long term impact of the decision to gradually increase contributions over a four-year period), and the Russian Federation’s suspension of payment of the outstanding balance of its 2017 contributions.
14. The Committee drew attention to some of the recommendations which were reiterated by the External Auditor, such as:
- payment authorisation;
- regular inventory of assets; and
- the proper project documentation;
as well as to recommendations concerning:
- the safety of data;
- the accounting policy in respect of unpaid contributions in the future; and
- providing a simulation of the long-term consequences of smoothing the increase in member States’ contributions to the PRF over a four year period.
2017 Progress Review Report
15. The Committee held an exchange of views on the implementation of the Programme and Budget in 2017 on the basis of the Progress Review Report 2017 (PRR), as set out in document CM/Inf(2018)7. The detailed assessment of the expected results by programme line was presented in document DD(2018)311.
16. The Committee considered the document useful. It suggested that the report be further improved by including the following elements:
- a brief overview of the overall achievements for each pillar;
- a comparison with previous reports in terms of general performance;
- an assessment of the performance rate per pillar;
- risk assessment of the impact of non-achievement of some expected results.
17. It also noted that it would be more clearly stated in future reports that the PRR focused on exceptions (i.e. on overachievements or on expected results not fully achieved) and did not give information on programme lines which had performed according to plan.
18. As regards the detailed extract from the RBB database, the Committee encouraged the Secretariat to streamline the indicators in the Support Pillar.
Item 5 Recent developments concerning the Council of Europe and presentation of Committee of Ministers’ decisions and documents since the prior Budget Committee meeting
19. The Committee took note of the decisions and documents of the Committee of Ministers since its session in October 2017, as set out in document P-Bud(2018)4. It asked that the main items be highlighted in future.
20. The Committee wished to recall the need to maintain the savings measures presented by the Secretary General and approved by the Committee of Ministers to deal with the consequences of the reduction in Turkey's contributions following the cessation of its status as a major contributor. It requested that a specific report on these measures be sent before its October meeting.
21. It would also revert to the question of unpaid contributions at that meeting. It took note of the Secretary General’s speaking notes[2] on this issue. It asked the Secretariat to keep it informed of developments regarding this issue.
Item 6 Internal Oversight
22. The Committee held an exchange of views with Mr Colin Wall, Director of Internal Oversight, in light of the 2017 annual report (CM(2018)39) and the 2018-2019 Work Plan (GR-PBA(2018)5).
23. The Committee welcomed the fact that the Internal Audit function had received the highest ranking of the External Quality Assessment and that there were measures in place to further improve the internal audit service. It noted that risk management was still not embedded effectively, although measures were in place to raise the profile of risk awareness and mitigation.
24. It welcomed improvements to fraud identification and investigation, with a clear framework for staff to report instances of potential non-compliance, including whistle blowing. The Committee supported efforts to ensure that senior staff continue to back this initiative.
25. The Committee recommended that the Director of Internal Oversight provide more details on high level risk analysis for the Council, including the methodology used.
26. The Committee asked for follow up information on the independent external investigation report on allegations of corruption involving PACE.
Item 7 Staff statistics
27. The Committee welcomed the statistics in document P-Bud(2018)6. It would revert to this topic in greater detail at its October meeting. It also requested that data on gender distribution, on professional (grade A)/support staff and early departures be provided in future statistics.
Item 8 Reform measures
28. The Committee held an exchange of views with Mr Francis Dangel, Director General of Administration, Ms Louise Barton, Director of Human Resources, and Mr John Hunter, Director of Information Technology.
29. It noted that the reform measures were aimed at further strengthening the culture of the Organisation and reviewing structures for improving delivery of objectives. The Committee noted the progress from the last meeting in March, and looked forward to seeing the reform progress report, including milestones and indicators for delivery. It considered that it was important to ensure that value for money considerations were embedded into decision making processes across the Organisation.
30. The Committee looked forward to receiving the new IT strategy, once finalised.
Item 9 Pension Reserve Fund (PRF)
31. The Committee examined the second report for 2017 of the Management Board (CM(2018)31) and the three-year review (CM(2018)30).
32. The Committee took note that the second report for 2017 was presented under the former assumption of a 5% target real rate of return on investment. To date, the 5% target had been realised.
33. It noted that the Committee of Ministers had just adapted the investment strategy to a target real rate of return of 3.4% following the recommendation of the PRF Management Board and the Budget Committee.
Item 10 Medium and long term cash flow
34. The Committee took note of the information provided by the Secretariat (P-Bud(2018)7 and P-Bud(2018)7-add). The document revealed that the Council had sufficient funds to cover expenditure until the end of 2019. Calculations were based on conservative estimates of extrabudgetary resources. However, the Committee noted that, in reality, this meant that extrabudgetary resources were covering the shortfall of funding resulting from the Russian Federation’s non-payment. The Secretariat would consider asking the Committee of Ministers to bring forward statutory payments, in practice due in June 2019, if they felt that there was a risk of cash running out in 2019. The Committee would support this recommendation, if it were implemented on a voluntary basis.
35. The Secretariat also confirmed that, if necessary, they could manage the critical points (January and May 2019) through cash pooling with the EDQM. The EDQM cash flow had not been included in the projections.
Item 12 Other business
i. Revision of the 2018 budget of the Partial Agreement on the Co-operation Group for the prevention of, protection against, and organisation of relief in major natural and technological disasters (EUR-OPA)
36. The Committee recommended the proposals as set out in document CM(2018)72.
ii. Oral presentations
37. The Committee asked the Secretariat to provide concise visual aids when making oral presentations to facilitate understanding.
Item 13 Date of next meeting
38. 1-4 October 2018.
Item 11 Examination of the meeting report
39. The Committee approved the report of the session.
APPENDIX I – LIST OF PARTICIPANTS
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Mr Christoph JACKWERTH |
Austria |
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Mr Jean PARMENTIER |
France |
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Mr Detlev HAMMANN |
Germany |
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Ms Maria Teresa POLITO |
Italy |
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Ms Heidi Malene NIPE |
Norway |
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Mr Wojciech NOWAK |
Poland |
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Mr Vladimir V. KUZNETSOV |
Russian Federation |
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Mr Jesus Manuel GOMEZ GARCIA |
Spain |
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Mr Jörg PORTMANN |
Switzerland (Chair) |
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Mr Cebrail YILMAZER |
Turkey |
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Mr Alistair VOSPER |
United Kingdom (Vice Chair) |
APPENDIX II – AGENDA
1. Adoption of the agenda
P-Bud(2018)OJ2, P-Bud(2018)OT2
2. Reports of the September 2017 and March 2018 meetings
CM(2017)119, P-Bud(2017)CR2, CM(2018)57
3. Budget Committee terms of reference
4. Implementation of the Programme and Budget 2016-2017
Consolidated Financial Statements and Budgetary Management Accounts for 2017
a) Consolidated Financial Statements of the Council of Europe for the year ended 31 December 2017
b) Budgetary Management Accounts of the Council of Europe for the year ended 31 December 2017
CM(2018)100-add, CM(2018)100-add2
c) 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 2017
d) Financial Statements and Budgetary Management Accounts of the Enlarged 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 2017
e) Special accounts: situation as at 31 December 2017
f) Exchange of views with the External Auditor (NIK, Poland)
g) 2017 Progress Review Report
- Progress review report 2017 and detailed extracts from the RBB (Result Based Budgeting) database
5. Recent developments concerning the Council of Europe and presentation of Committee of Ministers’ decisions and documents since the prior Budget Committee meeting
6. Internal Oversight
a) Annual report 2017
b) Work Programme 2018-2019
c) Exchange of views with Mr Colin Wall, Director of Internal Oversight
7. Staff statistics
8. Reform measures
Exchange of views with Mr Francis Dangel, Director General of Administration, and Ms Louise Barton, Director of Human Resources
9. Pension Reserve Fund (PRF)
a) Second report for 2017
b) Third three-year review
10. Medium and long term cash flow
11. Examination and approval of the draft meeting report – May 2018 session
12. Other business
13. Date of next meeting
Strasbourg, 1-4 October 2018
APPENDIX III – Article 25 of the Financial Regulations with proposed amendments to paragraphs 1-4
1. There shall be a Budget Committee comprising thirteen eleven experts with recognised competence in the administrative and financial fields, appointed by the Committee of Ministers for a renewable term of three years.
2. Six Five experts shall be appointed upon nomination by the six five member States paying the highest contributions to the General Budget of the Organisation.
3. Seven Six other experts shall be appointed upon nomination by the governments of the other member States.
4. Thirteen Eleven alternate members shall be appointed by the Committee of Ministers, under the same conditions, in respect of each State whose candidate is appointed titular member.
5. The members of the Budget Committee shall act in the capacity of independent experts and advisers to the Committee of Ministers.
6. The function of the Budget Committee shall be to give the Committee of Ministers its opinion on financial and administrative matters in the Council of Europe, including:
a) the draft Programme and Budget, proposals for supplementary appropriations and, in general, any projects involving new expenditure;
b) the progress review reports provided for in Article 65;
c) the annual accounts provided for in Article 61 and the report of the external auditor for the previous financial year;
d) human resources and pension systems issues;
e) problems relative to the Working Capital Fund;
f) the transfers from/to operational pillars and from/to the support pillar referred to in Article 28 of these regulations;
g) any other matter of an administrative or financial nature referred to it by the Committee of Ministers or the Secretary General.
7. The recommendations of the Budget Committee shall be given in a report. If the Committee is not unanimous on any question, the report shall set forth the differing opinions expressed.
8. The Secretary General shall supply the Budget Committee with any assistance and documentation it may require, in good time to facilitate the accomplishment of its duties.
9. The rules of procedure of the Budget Committee shall be laid down in internal regulations approved by the Committee of Ministers.
[1] This document has been classified restricted until examination by the Committee of Ministers.
[2] Cf. SG/Inf(2018)10.