13 April 1994

Doc. 7071

COMMUNICATION FROM THE COMMITTEE OF MINISTERS

Reply to Recommendation 1230 (1994)

on the Social Development Fund of the Council of Europe:

activities and outlook

(adopted by the Committee of Ministers on 8 April 1994

at the 511th meeting of the Ministers' Deputies)

1.       The Committee of Ministers has requested the opinion of the Governing Body of the Social Development Fund on Parliamentary Assembly Recommendation 1230 (1994), on the basis of which it supplies the following reply to the Parliamentary Assembly.

2.       With regard to paragraph 9.i., the Ministers' Deputies took note of the suggestion by the Chairman of the Governing Body, Mr. Romeo dalla Chiesa, that a fixed periodical calendar be drawn up for regular hearings with both organs of the Council of Europe during which the most complete information available on the Fund would be provided. In as far as the Committee of Ministers is concerned, the Ministers' Deputies approved this suggestion and invited the Chairman of the Governing Body to their June meeting to which the Chairman may wish to be accompanied by the Governor, Mr. Alomar. Considering that this would be the first occasion for the Ministers' Deputies to meet the newly elected officials of the Fund, the invitation is also extended to the Chairman of the Administrative Council, Mr. K. Nars.

3.       With regard to paragraph 9.ii.a., the Governing Body has every intention of keeping the Committee of Ministers and the Parliamentary Assembly regularly informed of the Fund's activities, in accordance with the new dispositions of its revised Articles of Agreement (Article IX, Section 5 and Article XIII, sub-paragraph a).

4.       As far as paragraphs 9.ii.b-f. are concerned, the findings of the 1992 internal audit and those of the Inspector in 1993 where the relevant recommendations are concerned led to the adoption of a number of reform measures both on the institutional and structural levels and in respect of the management and monitoring of the Fund's activities. At this stage it should be mentioned that:

-       the Administrative Council has adopted Resolution 1313 in which the Fund's priority fields of action and the project eligibility criteria are redefined and rules for monitoring are laid down;

-       a "manual for project preparation and monitoring" has been prepared and will be submitted to the Administrative Council for approval as soon as comparisons have been made with the methods applied by other international organisations;

-       all projects already approved but not yet financed have been reviewed according to true "project financing" criteria;

-       the role of the Director of Administration of the Council of Europe as Financial Counsellor, for the purposes of giving a technical opinion on the Fund's administrative budget, has been confirmed;

-       more stringent administrative rules and internal supervision procedures, and the work which has started on a reorganisation plan should result in a new establishment table being produced requiring higher professional qualifications at all levels and a gradual increase in the workforce;

-       an actuarial study has been undertaken in order to verify the financial consequences for the assets of the Autonomous Pension Fund (APF) of the changes that its operating rules have undergone since 1989, and to discover the amount of any possible shortfall at the end of the last financial year;

-       the Administrative Council has adopted a scheme for "global loan" disbursement linked strictly to the approved projects and a more rigorous information procedure; also, a study currently in progress of the mechanisms used by other international financing organisations, should allow a better adaptation of the Fund's operations to the desired objectives. The Assembly will be informed as soon as possible of the results of an investigation into the use made of such loans in the past;

-       the administrative inquiry for the Fund's staff has so far comprised:

.       an agreement between the Council of Europe and the Fund to give the staff the benefit of the guarantees offered by the Appeals Board;

.       the appointment of a senior Council of Europe official with considerable experience in the application of the Staff Regulations to conduct the inquiry.

This enquiry ended on 25 March 1994. In terms of its results, three staff members have been suspended, to which has been added a further suspension decided upon following serious errors related to the following paragraph.

-       in addition to the administrative irregularities so far revealed, information has recently come to the attention of the heads of the Fund's organs concerning further serious cases of mismanagement. The very nature of this information was such that the Governing Board decided on the waiving of immunity of the former Governor, and the Secretary General decided on waiving the immunity of three of the Fund's staff members, two of whom have already retired. This information was immediately transmitted to the Public Prosecutor of the Departmental Court of Paris, who has subsequently decided to open a judicial enquiry.

5.       With regard to paragraph 9.iii.a., the admission of new members from Central and Eastern Europe continues to be closely watched by the Fund's directors in close consultation with the Secretariat of the Council of Europe. After Slovenia, whose accession became effective on 1 February 1994, Bulgaria has recently confirmed that its accession is on the agenda of a forthcoming session of the National Assembly. Regular contacts are being maintained with the representatives of Lithuania and Poland, for which the Governing Body has already adopted Resolutions setting out the conditions for admission. More recently, the Czech Republic and Slovakia made it known that they were interested in joining the Fund and asked to know what the financial terms of their participation would be. Once the balance sheet as at 31 December 1993 is known, it will be possible to respond to these requests in accordance with the decisions taken by the Fund's organs, particularly with regard to the new situation of the Fund's reserves.

      The Chairman of the Governing Body recently undertook an official visit to Slovakia and Slovenia. Both countries' authorities displayed keen interest in the Fund's readiness, under the terms of the new Articles of Agreement and of Resolution 1313, to contribute to the funding of capital projects having high economic and social priority. Where Slovenia is concerned, applications could well be forthcoming in the second half of this year.

6.       Regarding paragraphs 9.iii.b and c., following the admission of Slovenia to membership, the authorised capital of the Fund was ECUs 1,281 million. Of this, the sum of ECUs 1,225 million has been subscribed, three countries not as yet having contributed to the fourth increase decided in 1990. Paid-up capital stands at ECUs 141 million, including ECUs 21 million (1.7% of the subscribed capital) actually paid over by the member States, the greater proportion resulting from the incorporation of reserves. Where the balance sheet for the last financial year receives official approval, the Fund's reserves should total approximately 470 million ECUs.

      Loans from the "Social Account" - which carry 1% interest and are intended to finance projects of high social priority - already total 114 million ECUs and have practically absorbed all the endowments so far made by the Fund's organs. On the other hand, a sum of ECUs 22.5 million is available in the "Emergency Account" opened in 1993 for interest-free loans set aside for very precise assistance projects in countries afflicted by exceptional events, and for refugees. Moreover, the Administrative Council, at its next session, will be presented with a proposal to attribute a fairly important part of the net profits from the 1993 financial year to a "Reserve to be allocated" for highly social purposes.