Ministers' Deputies / Rapporteur Groups

GR-PBA
Rapporteur Group on Programme, Budget and Administration

GR-PBA(2014)CB8      19 November 2014[1]

 

Synopsis

Meeting of 6 and 13 November 2014

 

The Rapporteur Group on Programme, Budget and Administration (GR-PBA) met on 6 and 13 November 2014 with Ambassador Matthew JOHNSON, Permanent Representative of the United Kingdom, in the chair. The group examined the following items set out in the annotated agenda (documents GR‑PBA(2014)15 and GR‑PBA(2014)15 rev).

1.         Co-ordinating Committee on Remuneration (CCR)

a. Exchange of views with Ambassador Franz Cede, Chair of the CCR

(DD(2014)1213, DD(2014)1341)

1.1.       Ambassador Franz Cede, Chair of the CCR, informed the group of recent activities within the Co-ordination system, the recommendations made by the CCR within that framework and the work programme for 2015. The text of Ambassador Cede's statement is available in document DD(2014)1341.

1.2.       Delegations thanked the Chair of the CCR for his clear and comprehensive statement. Stressing the utility of the CCR's activities for the Organisation and the need for harmonised standards for the co-ordinated organisations, several delegations expressed their commitment to the Co-ordination system, while considering that it could be faster and more flexible. The ensuing discussion focused chiefly on the co-ordinated method of salary adjustment. Where the timetable for salary adjustment was concerned, numerous delegations expressed the wish to bring forward the date of the CCR recommendation, to align it with the Organisation's budgetary calendar. Regarding its frequency, numerous delegations enquired as to the possibility of a biennial (rather than annual) salary adjustment, to fit the pattern of the Organisation's biennial Programme and Budget. The difficulty of financing an annual salary adjustment in the context of zero nominal growth was also emphasised. Some delegations asked for details regarding the real possibilities of invoking the affordability clause and/or not implementing the CCR's recommendations. The question of the advantages and disadvantages of a co-ordinated system for salary adjustment was also raised[2]. The Chair of the CCR and Mr Jean-François Poels (head of the ISRP) provided the details requested. In particular, they pointed out that the CCR was to begin work in 2015 on the revised method of salary adjustment, with a view to its entry into force as of 2017, and encouraged all the delegations to actively participate in the work of the Co-ordination system and send representatives to the CCR so that their concerns could be heard. For his part, the Chair of the CCR indicated that he had duly noted the group's comments and observations and would report back to the CCR.

1.3.       Concluding the discussion on this item, the Chair thanked the Chair of the CCR for his statement, which was extremely useful for the group, and also his valuable contribution to the activities of the CCR throughout his chairmanship, notably his unstinting efforts to reach consensus within that body.

b. Annual adjustment of remuneration of the staff of the co-ordinated organisations at 1 January 2015 – 231st report

(CM(2014)126 and CM(2014)126-add)

1.4.       The Chair recalled that the purpose of this item was the formal approval of the salary adjustment for 2015, the budgetary implications having been taken into account in the adjusted budget for 2015. In the absence of any further comments, the Chair concluded that the group was able to recommend the draft decisions, as set out in the annotated agenda, to the Deputies for adoption without further debate at their 1213th meeting (26 November 2014).

c. Review of the system of the installation allowance – 229th Report

(CM(2014)99 and CM(2014)133)

1.5.       In reply to a question, the Secretariat informed the group that, based on the amounts paid in respect of the installation allowance in the last twelve months, the revised system would have made it possible to generate an annual saving of around 100 K €, across all budgets (including some 65 K € on the Ordinary budget). Concerning the wish of some delegations to harmonise the frequency of ceiling adjustments with the biennial Programme and Budget, it was pointed out that the States' representatives within the CCR had rejected the idea of an adjustment every two years, instead preferring an adjustment every three years. Finally, the Chair recalled that the periodical adjustment would be made on the basis of the average trends in similar allowances within the civil services of the eight reference countries: any risk linked to deflation would therefore be covered in this way. In the absence of any further comments, the Chair concluded that the group was able to recommend the draft decisions, as set out in the annotated agenda, to the Deputies for adoption without further debate at their 1213th meeting (26 November 2014).

d. Review of the system of the daily subsistence allowance – 228th Report

(CM(2014)105, CM(2014)135)

1.6.       The Chair recalled that the new rates of daily subsistence allowance for 2015 resulting from the revised method had recently been approved by the CCR: they were set out in its 232nd report (cf document CM(2014)134) and the annotated agenda had been revised accordingly (see new draft decision no. 5 in document GR-PBA(2014)15-rev). The Secretariat informed the group that, based on the amounts paid in respect of the daily subsistence allowance in the last twelve months, the revised system would have made it possible to generate an annual saving of around 375 K € (equivalent to a reduction of 11%). Where the adjustment of the subsistence allowance was concerned, it was pointed out that the States' representatives within the CCR had agreed to review it every three years; if the Council of Europe were to decide on a different periodicity, this would entail additional costs for the Organisation. In reply to a question, the Secretariat indicated that replacing the current system of lump-sum reimbursement with a system of reimbursement on the basis of actual accommodation costs would entail IT developments and an additional administrative workload, owing to the extra checking required. It was for that reason that the Secretary General had proposed that the current system be maintained, pending the findings of the cost-benefit analysis of a possible change of system. The group agreed that this analysis should be available by 1 September 2015. Finally, the Secretariat recalled that the reduction in daily subsistence allowances paid to Council of Europe staff on mission in Strasbourg (-9%) would have a similar impact on the relocation allowance paid to certain seconded officials in accordance with Resolution CM/Res(2012)2.

1.7.       Concluding the discussion on this item, the Chair noted that the group was able to recommend the draft decisions, as set out in the revised annotated agenda and with decision no. 4 as amended during the meeting (see below), to the Deputies for adoption without further debate at their 1213th meeting (26 November 2014) :

The Deputies (…)

4.             noted that the Secretary General would complete a cost-benefit analysis of a possible change of the system by 1 September 2015; (…)

e. Review of the system of the kilometric allowance – 227th Report

(CM(2014)104)

1.8.       The Secretariat provided the information requested concerning the reasons why the CCR had preferred to freeze this allowance rather than reduce it. In view of the low overall cost represented by the allowance (8K €) and the fact that it was granted solely in the Organisation's interests (where it came to a lower amount), the Chair noted that the group could recommend the draft decisions, as set out in the annotated agenda, to the Deputies for adoption without further debate at their 1213th meeting (26 November 2014).

2.         Staff Regulations – Pensions schemes

a. Co-ordinating Committee on Remuneration (CCR) – Review of the staff contribution rate to the co-ordinated pension scheme – 230th Report

b. Review of the staff contribution rate to the New Pension Scheme (NPS) –

Technical opinion of the Administrative Committee on pensions of the co-ordinated organisations (CAPOC)

c. Review of the staff contribution rate to the Third Pension Scheme (TPS) –

Technical opinion of the Administrative Committee on pensions of the co-ordinated organisations (CAPOC)

(CM(2014)106, CM(2014)106-add, CM(2014)106-add2)

2.1.       The Chair recalled that the regulations of the three pension schemes in force at the Council of Europe (Co-ordinated Pension Scheme, New Pension Scheme and Third Pension Scheme) stipulated that the staff contribution rates within each pension scheme were to be reviewed every five years, on the basis of an actuarial study. The details regarding the next adjustment, due on 1 January 2015, were set out in documents CM(2014)106, CM(2014)106-add and CM(2014)106-add2.

2.2.       The Chair concluded that the group agreed to recommend that the Deputies adopt the draft decisions, as set out in the annotated agenda and as amended during the discussion with regard to the Third Pension Scheme (see below), at their 1213th meeting (26 November 2014), without further debate:

The Deputies (…)

9.            amended Article 41, paragraph 3 of the Third Pension Scheme Rules “TPS” (Appendix V ter to the Staff Regulations) to take account of the above decisions, accordingly replaced the figure 9.1% by the figure 9.4% and replaced the sentence “This rate shall be reviewed on 1st January 2015 and thereafter every five years or whenever necessary, on the basis of an actuarial study, the procedures for which are appended hereto” by the following sentence: “This rate shall be reviewed at least every five years or whenever necessary, on the basis of an actuarial study, the procedures for which are appended hereto”.

3.         Pension Reserve Fund – Investment strategy and exchange of views with Mr Thomas Weinberg, Chair of the Management Board

(CM(2014)135)

3.1.       Outlining the events leading up to this exchange of views, the Chair pointed out that the Deputies had invited the Management Board to make proposals for improving the Fund's performance. In reply, the Management Board had recommended in particular allowing the Socially Responsible Investment (SRI) strategy to be more flexible (cf document CM(2014)4).

3.2.       Mr Weinberg, Chair of the Management Board, presented orally the Management Board's replies to the five options put forward by the Budget Committee (cf document CM(2014)135). He indicated that the Management Board considered that the first option (i.e. the initial proposal made by the Management Board) was the only option that would make it possible to keep the long-term rate of return of 5.0% with a reasonable investment risk, allowing the Fund to be sustainable without increasing member States’ contributions. If the Council of Europe maintained the SRI strategy in its present form, the target of return would have to be reduced to 4%, which would imply an increase in member States’ contributions (€5 million per year). Mr Weinberg further pointed out that the engagement overlay proposed in part of the portfolio (cf. appendix to document CM(2014)135) aimed at improving the social responsibility of companies in certain asset classes (global and emerging markets). A number of pension reserve funds already used such an engagement overlay policy. Finally, Mr Weinberg drew the group's attention to paragraph 20 of document CM(2014)135, which demonstrated that the first option would generate a saving of around €300 K per year in management costs.

3.3.       In the ensuing discussion, several delegations expressed concerns over the potential risk to the Organisation's reputation, if the investment strategy departed from stringent compliance with SRI criteria. Mr Weinberg pointed out that the first option would not mean abandoning the SRI strategy, but that an engagement overlay policy would be pursued for part of the investments (global and emerging markets equity): the engagement overlay would be handled by a specialised company, which would engage, where necessary, with certain companies in this portfolio, with the aim of encouraging them to improve their practices and policies in the spirit of the Council of Europe's SRI criteria. A number of delegations thought that this option would make it possible to attenuate the risk to the Council's reputation, while reducing market risk and management costs, without entailing increased contributions from member States, which was excluded for some of them. The need for close monitoring of the implementation of the engagement overlay was emphasised in this context. However, one delegation indicated that it could not endorse this option and would prefer to maintain the current SRI policy as a matter of principle, even though this implied a lower rate of return.

3.4.       Concluding the discussion on this item, the Chair proposed that the draft decisions be amended in the light of the discussion within the group, by inviting the Management Board of the Pension Reserve Fund to closely monitor the implementation of the proposed engagement overlay. The Chair proposed that the draft decisions set out below be transmitted to the Deputies for examination at their 1213th meeting (26 November 2014), noting that one delegation was still unable to join the emerging consensus on the revised draft decisions and that he would continue discussions with that and other interested delegations in the meantime:

The Deputies

1.         took note of the response of the Management Board of the Pension Reserve Fund to the comments of the Budget Committee, as it appears in document CM(2014)135, and consequently

2.         approved the conclusions of the Management Board of the Pension Reserve Fund as regards the Strategic Asset Allocation and the alternative Socially Responsible Investments (SRI) strategy, as they appear in the second three-year review (document CM(2014)4), and invited the Management Board of the Pension Reserve Fund to closely monitor the implementation of the engagement overlay, as set out in the Appendix to document CM(2014)135.

4.         Extension of the jurisdiction of the Administrative Tribunal of the Council of Europe to other governmental  international organisations – Draft agreement with the Central Commission for the Navigation of the Rhine

(CM(2014)132)

4.1.       The Chair recalled that, in accordance with Resolution CM/Res(2014)4 adopted by the Deputies on 11 June 2014, the Secretary General had submitted a draft agreement on extension of the jurisdiction of the Administrative Tribunal of the Council of Europe to the examination of disputes between the Central Commission for the Navigation of the Rhine (CCNR) and its staff (cf document CM(2014)132). Summing up the discussion on this item, the Chair noted that such an agreement would not prejudice any future decisions of the Committee of Ministers concerning the Administrative Tribunal and that the group could recommend the draft decisions, as set out in the annotated agenda, to the Deputies for adoption without further debate at their 1213th meeting (26 November 2014).

5.         Long-term budgetary sustainability and efficiency of the Organisation (continued)

(SG/Inf(2014)25, GR-PBA(2014)10, GR-PBA(2014)16, GR-PBA(2014)17)

5.1.       The Chair invited the group to continue its examination of this item, in accordance with the roadmap (cf document GR-PBA(2014)10), pointing out, among other things, that the discussion provided an opportunity for delegations to present their views and provide guidance to the Secretariat on the way forward.

- Measures to increase financial and budgetary flexibility to respond to urgent and important new developments:

5.2.       The group examined the measures envisaged by the Secretary General, as set out in document GR‑PBA(2014)17. In general, delegations stressed the importance of budgetary discipline and sound management in the best interests of the Organisation, as well as the need for flexibility in the use of funds. However, differences of opinion emerged over the degree of flexibility required to achieve the desired balance: on the one hand, some delegations considered that the tools currently available allowed sufficient flexibility while contributing to budgetary discipline; on the other hand, some delegations would be open to greater flexibility, as long as transparency and efficiency were maintained. Furthermore, delegations reiterated the principle whereby unspent appropriations should be reimbursed to member States, unless the Committee of Ministers decided otherwise on a case-by-case basis.

5.3.       The main specific comments with regard to the five areas identified in document GR-PBA(2014)17 can be summarised as follows:

- Responsiveness to emerging crises or any unforeseen event necessitating rapid action: delegations were almost equally divided between those which were open to explore further the setting up of a "contingency fund" (on condition that the framework, financing, aim and draw-down conditions were clearly defined) and those which did not favour or were more reluctant to set up such a fund and which stressed the need for the Organisation to make savings before asking for more funding. All delegations did consider it useful, however, to more closely examine possible improvements to the existing tools (such as increasing the “field reserve” and enlarging its scope), as appropriate. The Chair concluded that optimum use and improvement of the existing mechanisms should form the starting point for future action in this area, before developing any new mechanisms.

- Smooth and seamless programme implementation throughout the biennium period: while several delegations were open to more flexible carry-forward of unspent appropriations to the second year of the biennium, which seemed logical in the context of the biennial Programme and Budget, the majority were not in favour of an automatic carry-forward. The Chair proposed that the Secretariat examine the current provisions of the financial regulations, to see whether the "exceptional circumstances" for carrying forward unspent appropriations to the second year should be reviewed, on condition however that carry-forwards would be used within the same programme line, in a fully transparent manner and maintaining the role of the Committee of Ministers.

- Use of the Organisation’s cash flow as an “Internal Loan Facility” to fund capital expenditure projects: the Chair noted that the delegations were not opposed to this measure and they requested further information on how it would operate. Nevertheless, two delegations called for caution, stressing the need for transparent use of this measure and clear limits.

- Pre-authorisation of capital expenditure for selected investment projects: the Chair noted that this measure could be discussed in further detail when the group examined investment needs (point 4 of the road-map).

- The establishment of a “Headquarters Utilisation Fund”: delegations were open to this measure, which they regarded as an innovation, while emphasising that activities generating revenue should not jeopardise the Organisation's core activities. Clear procedures should be devised and the legal and fiscal implications should be examined in-depth.

5.4.       The Chair concluded that the discussion had provided the Secretariat with some useful pointers regarding the measures envisaged to increase financial and budgetary flexibility. He asked the Secretariat to continue its reflection, in the light of the group's comments and possibly subsequent bilateral exchanges with member States, with a view to presenting concrete proposals in due course for the measures worth pursuing.

- Budget scenarios and implications for future funding models:

5.5.       The Chair indicated that the budget scenarios presented in document GR-PBA(2014)16-prov food for thought regarding the long-term outlook for the Organisation. He also stressed that this was a forecasting exercise, based on the best information available to date and setting out fairly conservative scenarios. All the delegations taking the floor thanked the Secretariat for the quality of the document, which they considered extremely useful. Several delegations stated that these scenarios demonstrated the need to make sustainable cuts in staff expenditure and take measures to enhance efficiency. Other delegations noted that, in this context of restrictions, choices would have to be made between the Organisation's different activities. Finally, one delegation emphasised that, whichever scenario was selected, the salary adjustment should not be to the detriment of the number of posts. The Chair concluded by inviting delegations to send this document to their national authorities, in order to prepare inter alia the examination of the budget priorities and framework for the next biennium.

- Measures to enhance efficiency and effectiveness:

5.6.       The Secretariat gave an oral report on the strengthening of the performance culture within the Organisation, and in particular on the ongoing improvement in results-based budgeting/management (RBB/RBM) and the global review of the project management methodology (PMM)[3]. The presentation given on this point by the Director of DPFL and the Director of ODGPROG is available in document DD(2014)1367. The Chair concluded by thanking the Secretariat for the presentation and recalling that a document on wider measures to enhance efficiency and effectiveness would be distributed by the Secretariat in time for the next meeting.

6.         Any other business

-

7.         Date of the next meeting

To be determined.