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MINISTERS’ DEPUTIES |
CM Documents |
CM(2021)135 |
28 September 2021[1] |
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1414th meeting, 13 October 2021 11 Programme, Budget and Administration
11.4 Meeting report of the Budget Committee – September 2021 session Item to be considered by the GR-PBA at its meeting on 6 October 2021 |
1. The Budget Committee held a virtual meeting on 20-23 September 2021. The list of participants appears in Appendix I.
2. The Committee adopted the Agenda as set out in Appendix II.
3. The Committee took note of the report (CM(2021)78) and agreed the minutes of its June 2021 meeting (P-Bud(2021)CR1). It appreciated the action plan and will continue using this as a monitoring tool for its work.
4. The Committee took note of the decisions and documents of the Committee of Ministers issued since its session in June 2021, as set out in document P-Bud(2021)13. It noted in particular the changes recommended by the Co-ordinating Committee on Remuneration (CCR) to the salary adjustment method. It also noted that the merging of two Directorates (the Directorate of External Relations with the Directorate of Political Affairs) led to the freezing of one A6 post.
a. Consolidated Financial Statements and Budgetary Management Accounts for 2020
- Secretary General's reply to the External auditor's 2021 recommendations and follow-up of previous recommendations
5. The Committee examined the Secretary General’s reply to the External Auditor’s 2021 recommendations and the follow-up of previous recommendations, including prioritisation and expected date of implementation. The Committee held an exchange of views with the Treasurer about the time schedule foreseen for the implementation of recommendations and on outstanding recommendations from previous audits.
6. The Committee discussed the relationship between previous and new recommendations and how best to represent that relationship. It suggested adding a graph showing timelines to better understand which recommendations were overdue.
b. Interim Progress Review Report 2021
7. The Committee took note of the Interim Progress Review Report 2021 (CM/Inf(2021)19). It welcomed its evolving presentation and considered that it continued to get better in terms of showing relevant information in a reader friendly format and to support clear questioning on material issues. Several questions were raised on capturing the impact of the Covid-19 pandemic on achievement of objectives and expenditure. The Committee held a discussion about how objectives would be achieved in future years, particularly with the move to a new planning and budgeting cycle. It noted that, due to the Covid-19 pandemic, monitoring mechanisms would not be able to carry out all their planned on-site visits for 2021 and that the situation as at 30 June 2021 is presented in Appendix III of the document. It noted that this situation would be updated in October and that special measures – like those agreed last year (cf. CM(2020)182) – would be necessary (estimated at €1.6 M as at 30 June 2021). Considering that measures were needed to avoid an important backlog of monitoring visits, the Committee recommended that the Secretariat take the necessary measures in order to catch up with the original planning as soon as possible and therefore recommended that the Committee of Ministers agree to the special measures.
8. On the expenditure side, due to the pandemic situation and related impediments to the implementation of the planned activities, the underspending as of 30 June 2021 amounted to €6.3 M, out of which €3.9 M related to operational expenses (in particular travel and subsistence expenses), €1.1 M to the allocation of the joint programme/action plan provision (postponed or delayed) and €1.4 M to staff costs (delayed recruitment and vacancies).
9. The Committee noted that a transfer of €1.1M would be needed from the operational pillars to the support pillar in the Ordinary Budget under the programme General Administration (cf. CM/Inf(2021)14) to cover additional Covid-19 related costs (i.e. to ensure the continued smooth running of the Organisation, such as additional cleaning, ventilation, support to videoconferencing, the provision of masks and gels and ensuring the provision of catering services). It recommended to the Committee of Ministers to approve this transfer.
10. The Committee noted that the next progress report to be presented in March 2022 would present consolidated data on the impact of the Covid-19 pandemic in 2020 and 2021.
c. Unpaid contributions as at 30 June 2021
11. The Committee took note of the situation of unpaid contributions as at 30 June 2021 (cf. CM(2021)108). It recommended that the Council of Europe continue to encourage all States to fulfil their financial obligations, including late payment interest, in line with the Financial Regulations.
12. The Committee held an exchange of views with Leticia Andres-Sanchez, Head of the Fund Administration Unit, and her colleague Vincent Tournier, Fund Administrator (International Service for Remunerations and Pensions, OECD) who presented the investment policy (cf. P-Bud(2021)12) and financial performance of the Fund (cf. CM(2021)95). The Committee considered that the presentation gave a clear sense of history and strategy of the Pension Reserve Fund (PRF).
13. The Committee raised questions on the possibility of adjusting the target rate of return due to the recent unusual performance of the PRF driven by the effect of the Covid-19 pandemic on the markets performance. The Fund Secretariat cautioned that more time was needed to monitor the trends on the investment market before making any conclusions on the adjustments of the target rate of return. The evolution of the investment strategy showed the diversification of risk and asset classes by investing across more and more different investment streams. The Committee noted that the PRF has outperformed its target over recent years, and that this performance is unlikely to continue in future years. The Fund Secretariat considered that further diversification would be needed to meet the expected real rate of return on assets (EROA) of 3.4% in future years and that if a higher EROA was set, the investment policy would necessarily entail higher risks. The Committee recognised that it was important to understand the impact of the upcoming decisions regarding member States’ contributions to the PRF.
14. The Committee would like to see the impact that changing the target rate would have on the global contributions rate (Graph 1, CM(2021)95) and what impact this would have on the current investment strategy. The Committee would continue its examination of this question at its next meeting in the light of the upcoming four-year review of the Fund’s investment policy and strategic asset allocation.
a. Main parameters
15. The Committee took note of the main parameters used for the preparation of the draft Programme and Budget 2022-2025:
- for the first time, the programme spanned four years, whilst maintaining the biennial budget cycle. A mid-term review would be carried out in 2023;
- it had been presented on the basis of zero-real growth (ZRG) (inflation rate of 0.4% applied to member States’ contributions in 2022 and (a provisional) 1.5% in 2023). This resulted in an increase in member States’ contributions to the Ordinary Budget of €1.0 M in 2022 and a further €3.8 M in 2023. The Committee of Ministers had yet to reach a decision on the budgetary framework for 2022-2023;
- reinforcements were proposed (cf. CM(2021)130, page 14 and Appendix XIII) for key strategic priorities, internal governance, communication and information technologies. They would be financed in a large part through redeployment of existing resources (savings on official journeys (excluding monitoring visits) through the implementation of the online meeting strategy and the roll out of the departure scheme). In practice this meant that a negative amount had been included in Common provisions for €1.2 M in anticipation of the future savings in staff expenditure;
- the recommendation for the 2022 salary adjustment had not been received from the Co-ordinating Committee on Remuneration (CCR) at the time of preparation of the draft Programme and Budget and has to be absorbed within the proposed budgetary envelope;
- the Pension Reserve Fund reflected the higher global contribution rate (GCR) of member States needed to ensure the long-term sustainability of the Fund as determined by the actuarial study which the Committee had examined in June 2021. The required increase of €4.3 M (before inflation) was smoothed over a four-year period. Consequently, member States’ direct contributions to the Fund would increase over the biennium by €2.5 M (cf. CM(2021)130, page 172 (for the biennium) and DD(2021)282 (presenting the situation for the four-year period)). It was recalled that the Committee had, at its June 2021 meeting, recommended “that the required GCR be implemented as from 2022. However, acknowledging the economic context due to the Covid-19 pandemic, it considered that smoothing the increase over a four-year period as proposed by the Secretary General could also be envisaged” (CM(2021)78, paragraph 30). The Committee of Ministers had yet to decide on this matter.
16. The Secretariat had been informed that the CCR recommendation for the 2022 salary adjustment in application of the salary adjustment method could amount to 3.7% for France (corresponding to €6.2 M for the Ordinary Budget in 2022). The 3.7% was composed of: 1.9% inflation (end June 2022); 0.1% carry forward from this year as a result of the moderation clause; and 1.7% purchasing power parity. Application of the CCR recommendation would require additional savings of €3.9 M (suppression of 40 posts).
17. The Committee expressed its concern about the application of the salary adjustment and its possible impact on the Programme and Budget. It noted that,despite forecast increases in GDP, member States were faced with tough economic choices resulting from the Covid-19 pandemic. It recommended that the Committee of Ministers and the Secretary General explore all possible avenues for a salary adjustment commensurate with the budgetary situation of the Organisation.
b. Reform measures
c. Selected programme lines - Court, Anti-discrimination, diversity and inclusion, Parliamentary Assembly, Rule of Law based institutions, General Administration
18. The Committee held an exchange of views on five programmes/institutions:
- European Court of Human Rights: with the participation of Maria Tsirli, Registrar of the Court;
- Anti-discrimination, diversity and inclusion: with the participation of Jeroen Schokkenbroek, Director of Anti-discrimination;
- Rule of Law based institutions: with the participation of Simona Granata-Menghini, Director, Secretary of the European Commission for Democracy through Law (Venice Commission), and Christophe Poirel, Director of Human Rights;
- Parliamentary Assembly: with the participation of Despina Chatzivassiliou-Tsovilis, Secretary General of the Assembly;
- General Administration: with the participation of Francis Dangel, Director General of Administration.
19. As a general observation on the draft Programme and Budget 2022-2025, the Committee noted with satisfaction the quality of the Result Based Management (RBM) approach. It welcomed the continued improvements such as the presentation of theory of change for each sub-programme and programme and the improvement of indicators at immediate and intermediate level, and the linking to the UN sustainable development goals.
20. The Committee noted the Appendix III on Reform measures of the draft Programme and Budget. It welcomed the ongoing efforts made by the Secretariat to better identify, formulate and use annual baselines, to set quantifiable targets whenever possible and to quantify potential savings or efficiency gains. The Committee welcomed the quantification of the online meetings strategy. It underlined that holding online meetings has an impact on the quality of the exchanges and on their efficiency and effectiveness. It therefore recommended that the Secretariat organise physical meetings, including for intergovernmental bodies, as far as possible.
21. The Committee was also informed of the status on the implementation of the people strategy and the digital transformation and efforts on improving governance methods and tools, which will further strengthen an agile, creative and accountable Organisation. It discussed the importance of providing value for money and ensuring positive return on investments. Furthermore, the Committee was briefed on the green shift, contributing to reduced carbon footprint and efficiency gains. The Committee encouraged further efforts in this direction.
22. With regard to the budgetary framework, the Committee noted that the Committee of Ministers still had to decide on zero real growth or to apply zero nominal growth. The Committee noted that the Secretariat had provided a table showing individual member States’ total contributions for 2022-2023 with a view to informing decision making in this context in document DD(2021)281.
23. In the case of zero nominal growth, a €1.0 M reduction would have to be found in 2022 and €4.8 M in 2023. It recalled that this would be in addition to the savings to be found of €1.2 M for the reinforcements proposed and after already having to absorb increases in non-staff costs due to rising inflation. The savings needed would therefore amount to €1.6 M in 2022 and €6.0 M in 2023. Should the CCR recommendation for 2022 be applied (cf. §16 above), this would lead to a total of savings to be identified of €5.5 M in 2022 and €9.9 M in 2023.
24. Subject to how the Committee of Ministers will decide to factor in inflation, the Committee recommended the approval of the Programme and Budget as presented in the document CM(2021)130.
d. Real estate/capital master plan
25. The Committee examined the proposals contained in document P-Bud(2021)16 to restore the Capital Master Plan (CMP) to its initial duration of 15 years, to renovate the D building and to carry out IT cabling infrastructure works. The Committee noted that the Ad hoc Committee on Buildings (CAHB) had given a favourable opinion (cf. CM(2021)113). It noted that these proposals would be financed as from 2024 through the Extraordinary Budget (Appendix 1 of P-Bud(2021)16), which assured the financing of the construction of buildings and other major investments, without increasing member States’ contributions, and following the final reimbursement of the bank loan which was contracted to fund the Agora building and other major works. It also noted that the CMP included a buffer of +/- 15% which should ensure that its estimated overall cost be respected. In the light of the explanations given by the Secretariat, the Committee recommended approving the proposals.
26. The Committee held an exchange of views with Mr Colin Wall, Director of Internal Oversight, in the light of the 2020 annual report (CM(2021)81), the 2021-2022 workplan (GR-PBA(2021)1) of the Directorate of Internal Oversight and the impact of the Covid-19 pandemic. The Committee welcomed the presentation of the annual report, which is user friendly and informative. It stressed the importance of giving an adequate follow up to recommendations of high priority.
27. No other business was discussed.
28. The next meetings will take place in Strasbourg on 31 May-2 June 2022 and 26-29 September 2022.
29. The Committee approved the present report.
30. The Committee held an exchange of views with the GR-PBA and presented the main conclusions of its meeting.
APPENDIX I – LIST OF PARTICIPANTS
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Mr Christoph JACKWERTH |
Austria |
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Mr Niels Christen PULTZ |
Denmark |
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Mr Olivier GUÉROT |
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 (Vice Chair) |
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Mr Wojciech NOWAK |
Poland |
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Mr Vladimir V. KUZNETSOV |
Russian Federation |
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Mr Jörg PORTMANN |
Switzerland |
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Mr Cebrail YILMAZER (Excused) |
Turkey |
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Mr Alistair VOSPER |
United Kingdom (Chair) |
APPENDIX II – AGENDA
1. Adoption of the agenda
P-Bud(2021)OJ2, P-Bud(2021)OT2, tentative planning
2. Report and minutes of June meeting
CM(2021)78, P-Bud(2021)CR1, P-Bud(2021)3-rev (action plan)
3. Recent developments
4. Implementation of the Programme and Budget 2020-2021
a. Consolidated Financial Statements and Budgetary Management Accounts for 2020
- Secretary General's reply to the External auditor's 2021 recommendations and follow-up of previous recommendations
b. Interim Progress Review Report 2021
CM/Inf(2021)19, CM/Inf(2021)13, CM/Inf(2021)14
c. Unpaid contributions as at 30 June 2021
5. Pension Reserve Fund
a. Investment policy
b. Exchange of views with the Fund's secretariat
6. Draft Programme and Budget 2022-2025
CM(2021)130, CM(2021)129-rev, P-Bud(2021)15, DD(2021)281, DD(2021)282, DD(2021)283
a. Main parameters
b. Reform measures
[CM(2021)130, Appendix III]
c. Selected programme lines
- Court, Anti-discrimination, diversity and inclusion; Parliamentary Assembly; Rule of Law based institutions; General Administration
d. Real estate/capital master plan
7. Internal Oversight - exchange of views with Mr Colin Wall, Director of Internal Oversight
8. Other business
9. Dates of next meetings
10. Examination and approval of the draft meeting report
11. Exchange of views with the Rapporteur Group on Programme, Budget and Administration (GR-PBA) [Thursday 3:00 p.m.]
APPENDIX III – OTHER DOCUMENTS DISTRIBUTED
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Reference |
Title of document |
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Analysis of technical transfers as at end June 2021 |
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Estimated cost of online meetings |