II.1.1.1.

Budget formulation
The NATO Financial Regulations and the implementing rules and procedures govern
NATO financial management. Last updated in 191! the Regulations focus on "udgetar#
management and control and also address contracting! accounting! treasur# operations!
and auditing.
$ach %upreme &ommander has a "oard structure to determine resource re'uirements and
to allocate resources. A financial controller at NATO (ead'uarters! su"ordinate financial
controllers! and associated staffs manage da#)to)da# financial operations. The contracting
function also is part of the financial controller organi*ation +ithin NATO.
Budget Formulation
The NATO ,ilitar# Authorities -%upreme &ommanders. receive funds via t+o
appropriation channels/
Operation and maintenance -O0,. funds emanate from the ,ilitar# Budget
&ommittee1s -,B&. recommendation of a funding ceiling for over 23 "udgets
that the North Atlantic &ouncil approves annuall# in 4ecem"er prior to the
"eginning of the NATO fiscal #ear -+hich is the calendar #ear.. The O0, "udget
is approaching 5% 61 "illion per #ear.
&apital investment funds are provided via the NATO %ecurit# Investment
7rogram -N%I7.. The North Atlantic &ouncil approves &apa"ilit# 7ac8ages and
specific capital pro9ects. The N%I7 has over 613 "illion of 5ndelivered Orders.
For :33;! the estimated cash outla# for approved N%I7 pro9ects is a"out 633
million.
NATO considers the over 13!333 militar# personnel to "e <donated la"or= > in the sense
the# are paid "# their respective countries. As such! the# are not reflected in the
preceding values. The ?!333@ NATO civilians are funded "# the O0, "udget. The
largest O0, "udget is for Air"orne $arl# Aarning and &ontrol Force fleet operations at
6?33 million.
7lanning and 7rogramming
The resource planning in NATO is developed along a frame+or8 used in man# of the
mem"er countries! under different names > in some parts similar to the 5% 7lanning
7rogramming Budgeting $Becution %#stem and the Romanian 7lanning 7rogramming
Budgeting $valuation %#stem! in the sense that it follo+s the phases of planning C
programming C "udgeting.
As the 5% 4o4 uses the Future Dears 4efense 7lan and Romania uses financial
documents estimating the financial needs for the ,a9or 4efense 7rograms! NATO uses a
similar document called the ,edium Term Financial 7lan. The purposes are similar in
attempting to displa# resource re'uirements over the medium term. NATO places special
emphasis on programming +hen its capital investment resource re'uirements +ill come
on line. In practice! the Resource 7olic# and 7lanning Board recommends and the North
Atlantic &ouncil approves onl# a cash outla# forecast for the neBt #ear for on)going N%I7
pro9ects and an O0, "udget for the "udget #ear.
Budgeting
The NATO ,ilitar# Authorities "udget process closel# follo+s the "udgeting model used
in man# NATO countries! including Romania and 5.%.! +ith top)line figures approved "#
the North Atlantic &ouncil! then apportioned to the %upreme &ommanders! and finall#
allocated to Regional &ommands. Aith over 23 "udgets! there is an eBceptional amount
of detail for trifling amounts. Budgets are screened "# higher)level "udget staffs and
ultimatel# "# the ,B&. The ,B& ma# cut funds for such common reasons as concern
a"out eBecuta"ilt# and ma# free*e funds pending clarification of an issue.
After a "udget is approved! the financial controller has +ide authorit# to ma8e intra)and
inter"udgetar# transfers! although a"ove)threshold transfers re'uire ,B& approval.
NATO has the mid)#ear revie+ process that is virtuall# identical to the one used "# most
4o4 components.
Treasur# Operations
The NATO ,ilitar# Authorities call cash from mem"er nations three times per #ear/
April! Eune! and Octo"er. The Octo"er cash call reconciles financial impacts such as
foreign eBchange gains and losses! interest earned! and "an8 fees. The latter are re'uired
since NATO is not a sovereign nation and! as such! must a+ard competitivel# solicited
contracts to o"tain "an8ing services. To minimi*e foreign eBchange fluctuations! cash
calls are made in the currenc# of the mem"er nation to the maBimum eBtent possi"le.
Accounting
In the past five #ears! NATO has made significant progress! "ringing its accounting into
the t+ent#)first centur#. The NATO ,ilitar# Authorities fielded a commercial off)the)
shelf soft+are pac8age -Oracle Financials. to :? sites. NATO1s adaptation of Oracle is
called the NATO Automated Financial %#stem. In addition! NATO adopted International
7u"lic %ector Accounting %tandards that the NATO ,ilitar# Authorities have
implemented. The chart of accounts and transaction sets mirror the 5.%. Fovernment
%tandard Feneral Ledger! although the NATO version is much simpler. Feneral)purpose
financial statements and "udgetar# eBecution data are availa"le in Greal)time!G and the
NATO ,ilitar# Authorities are developing a managerial accounting s#stem that +ill "e
responsive to the needs of eBecutive management. At present! the NATO ,ilitar#
Authorities are hampered "# an infleBi"le personnel s#stem that does not allo+ for staff
training and staff movement +ithout the emplo#ee1s consent.
Audit
The NATO International Board of Auditors -IBAN. conducts eBternal and financial
audits. The %upreme &ommanders1 audit staffs! +hich +or8 for the respective financial
controllers! perform internal audits. The IBAN reports to the North Atlantic &ouncil. An
ad hoc group of financial counselors resolves disagreements "et+een auditors and clients.
The advent of the use of international accounting standards is forcing a much higher level
of professional competence +ithin the IBAN in terms of information technolog# and
accounting 8no+ledge.
The NATO "udget c#cle is composed of four stages/ planning! formulation! revie+ and
approval! and eBecution.
The aim of the 7lanning stage! according to NATO 4efense 7lanning &ommittee
4irective -9?.H is! to provide a frame+or8 +ithin +hich national and NATO defense
planning can "e harmoni*ed so as to meet the Alliance1s agreed militar# re'uirements in
the most effective +a#. The "edroc8 of this stage is the ,edium Term Financial 7lan
-,TF7.! a five)#ear planning document that alerts the nations and NATO ,ilitar#
Budget &ommittee of the principal militar# re'uirements! "oth changes to ongoing
activities and of ne+ re'uirements. The plan isn1t a "inding agreement! and the
&ommittee isn1t o"ligated to provide funds! even if a pro9ect is accepted in the ,TF7.
(o+ever! it is the primar# vehicle availa"le to o"tain funding for ne+ or changes to
eBisting pro9ects! allo+ing the &omponent to identif# funding for all re'uirements
validated through the Re'uirements Board process.
In a top)do+n approach! the Alliance1s %trategic Fuidance is used to scri"e the
Functional 7lanning Fuidance. Based on this the ,TF7 is developed! serving as the
principal document for the national authorities to plan their international militar#
contri"utions necessar# for the accomplishment of agreed and proposed militar#
missions. It provides a mechanism to match financial resources +ith the minimum
manpo+er! ph#sical and service re'uirements! and to help plan! prioriti*e! phase! and
allocate ne+ or eBpanding activities. The call is issued in April),a#! and the ,TF7 is
t#picall# su"mitted in Eune.
In the Formulation -development. stage! the "asic "udget inputs for the eBpected resource
eBpenditures are put toghether! from various sources! depending on the specific of the
organi*ation -for eBample! the "udget inputs for NATO Air Base Feilen8irchen!
Ferman#! home to the NATO Air"orne $arl# Aarning and &ontrol -NA$A0&. Force
$)?A &omponent are gathered "# its resource managers from four information sources/
1. $)?A organi*ations! forecasting costs for their annual da#)to)da# operationsI
:. NA$A0& Force &ommand! determining certain specific annual logistics
re'uirementsI
?. The NATO ,aintenance and %uppl# Activit#! +hich assists in forecasting costs for
4epot Level ,aintenance! Foreign ,ilitar# %ales! and other commercial contractsI and
J. (ost Nations! providing estimates according to current ,emoranda of Agreement..
The Budget 0 4is"ursing Branch under the Financial &ontroller compiles the annual
"udget inputs and coordinates them +ithin the &omponent. Then! the appropriate "udget
office at NA$A0& Force &ommand prescreens the draft "udget estimates. After going
final and upon approval "# the &omponent &ommander! the final operating and support
"udget is su"mitted to Allied &ommand Operations for on+ard su"mission to the
,ilitar# Budget &ommittee and the participating nations. This effort t#picall# concludes
in Eul#)August for the follo+ing #ears1 "udget.
The Revie+ and Approval stage for the previous eBample involves the 1? nations
participating in the NA$A0& Force program. The NATO ,ilitar# Budget &ommittee!
consisting of one mem"er from each of the participating nations! revie+s the
&omponent1s "udget and ma8es recommendations to the NATO 4efense 7lanning
&ommittee. The 4efense 7lanning &ommittee has final approval authorit#. The approved
"udget total flo+s from the Budget Authori*ation 4ocument distri"uted "# the NATO
,ilitar# Budget &ommittee %ecretariat each #ear.
Finall# the &omponent receives its "udget and enters the $Becution stage -actuall#
spending the mone#.. Freat care is eBercised in spending international funds! and all
transactions are su"9ect to audits "# the NATO Board of International Auditors! the
Allied &ommand Operations Audit Branch! and the Internal Revie+ Officers.
$Bpenditure of funds involves appropriate separation of duties and follo+s a t#pical path!
+here fund managers re'uest commitment of funds! certif# "ills! control travel funds! and
suggest and 9ustif# funds transfers. The 7urchase and &ontracting Officer revie+s
purchase re'uests and places orders +ith suppliers. The Budget officer administers the
approved "udget! including credit allocations! transfers! fund free*esC unfree*es! and
availa"ilit# of credits. The Fiscal officer supervises and approves commitments and
pa#ment of funds. A mid)#ear "udget revie+ is conducted to assess the validit# and
accurac# of the "udget for the end of #ear. The &omponent1s mid)#ear revie+ is approved
"# the ,ilitar# Budget &ommittee! usuall# in August! and is follo+ed "# a ne+
allocation plan. At the end of the fiscal #ear in 4ecem"er! the &omponent goes through
the process of closeout and simultaneousl# "egins a ne+ calendar #ear and a ne+ fiscal
#ear. And the c#cle repeats itself.
To revie+! the annual -for instance for the #ear :311. "udget activities related to the
,ilitar# "udget could "e defined considering the follo+ing categories/
K the starting point is the L,edium -Llong=. term 7lanning= > ,TF7 -,edium Term
Financial 7lan C &R7 -&onsolidated Resource 7lan. dra+n for ; #ears :31? > :31H
K "ased on the date in the medium term plans! updated! the L%hort term planning= is the
second step! consisting of the "udget preparation for the neBt #ear :31: "ased on ,TF7
:311):31;
K in the same #ear :311 the L$Becution= step has to "e performed! meaning the eBecution
of the "udget for the current #ear :311 and the eBecution of commitments carried from
the previous "udgets for the #ears :33 and :339
II.1.1.:. The role of ,TF7C&R7 and ,ilitar# Budget
The role of ,TF7C&R7 and ,ilitar# Budget
As stated "efore! the ,edium)Term Financial 7lan or &onsolidated Resource 7lan is the
starting point for the developement of the "udget. The document covers ; #ears of the
follo+ing "udget #ear and its purpose is to identif#! validate and prioriti*e the Total
Re'uirements regarding resources needed for the neBt #ears.
The ,TF7C&R7 also contains estimates of costs related to civilian personnel! Operating
and ,aintenance -O0,. and N%I7 O0, tail. -The variet# of items financed "# the
O0, appropriation gives rise to the concept of GtoothG and GtailG +ithin the
appropriation. The GtoothG represents the areas of the account +hich pa# for com"at
operations! operational training! and maintenance +hile the GtailG is made up of the parts
of the appropriation +hich provide support to the fighting forces. The current issue for
the O0, appropriation is separating the GtoothG from the GtailG! that is! cutting "ac8 the
GtailG +ithout dulling the GtoothG..
One of the purposes of the ,FT7 is to develop and decide management strategies!
identif#ing directions of action and their appropriate resources. It is su"mitted to the
,ilitar# Budget &ommittee C,ilitar# &ommittee annuall#! accompanied "# a
&ommanderMs Impact %tatement.
The product of this medium term financial planning process is the ,edium Term
Financial 7lan! +hich is used as input to ,edium Term Resource 7lan ,TR7! +hich is
the primar# common)funded resource planning instrument > a five)#ear plan on +hich
NATO mem"er nations agree upon. The ,TR7 covers resource planning for the
follo+ing "udget #ear and the four su"se'uent planning #ears. It is for+arded "# the
R77B to the &ouncil for decision at the "eginning of each #ear. It is essentiall# a
resource planning document! eBpressing resource re'uirements in "road 'uantitative
terms. B# eBpressing "udgetar# re'uirements +ithin the &apa"ilit# 7ac8age frame+or8!
the ,TR7 esta"lishes the lin8 "et+een NATOMs militar# common resources and the
AllianceMs strategic o"9ectives.
The ,TR7 provides an overvie+ of the medium term feasi"ilit# and afforda"ilit# of
previousl# endorsed and future programmers! including manpo+er. The ,TR7 addresses
issues +hich are of particular relevance to each of the militar# common resources of
N%IR7! militar# "udget and international manpo+er. %pecificall#! the ,TR7 sets
resource allocation ceilings for the N%I7 and the militar# "udget for the neBt "udget #ear
and provides planning ceilings for the follo+ing four planning #ears.
It is revie+ed and revised annuall# and retains an out)#ear perspective over five #ears.
Through this agreed plan! nations commit to their annual NATO "udget contri"ution
levels. The amounts of the contri"utions are eBpressed as national percentage shares. The
actual amounts are in euros ) NATO1s standard monetar# pricing unit
The result of the medium term financial planning consists of information regarding
resource allocation needs! +hich +ill "e included in and form the "asisi of the Near term
plan! meaning the "udget.
The "udget contains financial figures regarding the funding needs for the neBt fiscal #ear
and should validate and prioriti*e the re'uirements identified in the ,TF7. It also
validates the costs related to civilian personnel! O0, and N%I7 O0, tail. It is
su"mitted to the ,B& togehter +ith &ommanderMs Impact %tatement. The screening of
the proposed "udget figures is conducted "# the ,B&! as at this point the "udget is onl# a
proposal and has not #et "een approved. As such! cuts or free*ings can "e imposed "# the
,B& regarding the proposed "udget figures. After the screening process! the ,B&
approves the annual Budget
Authori*ations.
II.1.1.?. T#pes of ,TF7C&R7 7ro9ects
T#pes of ,TF7C&R7 7ro9ects
The pro9ects featured in the ,TF7C&R7 are an# ,inimum &apa"ilit# Re'uirement
-,&R. considered appropriate for the &ommand and eligi"le for funding "# the ,ilitar#
Budget -,B..
T#pes of pro9ects eBamples -A&T./
K ,andator# -Legal o"ligations and (ealth and %afet# re'uirements.
K $ssential to the fulfillment of the mission!
K Important to the fulfillment of the mission
K 4esira"le to the fulfillment of the mission .
T#pes of pro9ects eBamples -A&O./
K Froup 1 > Legal o"ligations! (ealth and %afet# re'uirements! %pend)to)%ave
K Froup : > $ver#thing else.
II.1.1.J. Budget preparation and approval c#cle
Budget preparation and approval c#cle
1. Budget guidance/ this guidance is issued "# the ,ilitar# Budget &ommittee ,B&! for
the N,AMs! containing polic# and guidance for the preparation and su"mission! +ithin
approved resource allocations! of annual "udget estimatesI it contains information a"out
currenc# eBchange rates and inflation rates! guidance related to polic# changes! outlines
su"mission deadlines and the Budget %u"mission Figures -funding ceiling..
:. 7reparation of the draft "udget/ the N,AMs prepare the draft "udget "ased on the
inputs re'uested from Fund ,anagers -Fe" > ,ar.I the Budget Officer and Financial
&ontroller revie+ the su"mission. The draft "udget is developed ta8ing into account the
prioriti*ation issue ) the funding needs not covered due to this prioriti*ation are su"mited
for inclusion on the 5nfunded List. The 4raft Budget $stimates are prepared +ithin
April),a#.
?. 4raft "udget pre)screening/ the process implies a "rief "udget su"mission to %trategic
&ommand "udget staff! +hich anal#se the su"mission regarding technical
complianceCaccurac# and give feed"ac8CadviceCpresentation strateg#. The &ommanderMs
Impact %tatement is also anal#sed for operational issues of concern. Finall#! the "udget
draft recieves the Financial &ontrollerMs &ertification! +hich underlines activit# changes
and the level of ris8 and assumptions used in the "udgeting process.
J. ,anagement Board screening/ the A&O ,anagement Board -A,B. performs this
screening! after the draft "udget is presented "# the %& Financial &ontroller. 4uring this
process! representation of all -su"ordinate. 7rinciple Budget (olders are present.
;. Final "udget production/ after the final screening! the "udget is then translated into
French! is reproduced if neccessar# and a list of potential errors correctins -&orrigenda.
shall "e developed if needed.
2. %creening "# ,B&/ The ,B&! formed from representatives from all nations! pla#s a
crucial role in this process as it screens the "udgets preseented "# the Financial
&ontrollers! +hich ans+er the 'uestions from ,B& mem"ers. It also revie+s the reports
of national technical eBperts on Automated 4ata 7rocessing -A47.! communications
-&O,,%. and Aeronautical Issues -AFA$..
Budget %creening Results
K Funding Re'uirements Recommended for approval
K Funding re'uirements Recommended for Free*e -pending further clarification andCor
additional information.
K Funding re'uirements recommended for Reduction
K &onfirmations
K Information re'uests
K Budget Revie+ 4ocuments
The responses to the Budget Revie+ comes in the form of inputs from the Budget
holders! consolodated -put toghether. into &onsolidated BR responses! comprised of
&onfirmations C Free*ings C Additional info re'uests
H. ,B& Approval of the "udget/ the ,B& apporved the "udget +ithin the resource
allocation figure -RAF. and ensures the interim financing -if no approval.. It also issues
the Initial Budget Authorisation 4ocument and +ith this step provides the shift to "udget
eBecution phase -spending of the "udget..
The ,B& also monitors the eBecution of the approved "udgets and authori*es
ad9ustments to the authori*ed "udgets +hich eBceed the po+ers of the Financial
&ontrollers.

II.1.1.;. References
References
http/CC+++.entrepreneur.comCtrade9ournalsCarticleC1?1?2?1.html
http/CC+++.glo"alnato.orgCindeB.phpN
optionOcomPcontent0vie+Oarticle0idO19;/thePmedium)
termPresourcePplanPmtrp0catidO2H/natomilitar#commonfundedresources0ItemidOJJ
II.:.1. ,ilitar# "udget implementation
O"9ective-s.
O"9ective %&O 11;1J
II.:.1.1. Overvie+ of Budget $Becution &#cle
Overvie+ of Budget $Becution &#cle
The Budget $Becution Dear "egins +ith the receipt of the Budget Authori*ations and the
introduction of "udget figures into accounting s#stems! ta8ing into consideration the
Activit#CIR, codes. The neBt step is the calls -re'uests. for cash > the %&s co)ordinate
calls +ith NATO (Q and the (Qs re'uisition cash from %&s.
On approval of the annual "udget! the %trategic &ommanders are authori*ed/
o To enter into commitments and ma8e pa#ments for the purpose for +hich credits are
approved
o To enter into o"ligations +ithin the approved &ontract Authorit# granted
The accounting is done in accordance +ith International 7u"lic %ector Accounting
%tandards -I7%A%..
The encum"rances -"udget o"ligations. are recorded in the form of reservations and
-pending. &ommitments! +ith the neBt step "eing the comparison and recording of the
actual eBpenditures against commitments.
II.:.1.:. %teps in the eBecution c#cle
%teps in the eBecution c#cle
Fenerall# spea8ing the eBpenditure "udget eBecution c#cle includes the follo+ing stages/
) Authori*ation and apportionment of appropriations to spending units/ after the "udget is
approved "# the legislative "od#! spending units are authori*ed to spend mone# through
various mechanisms! such as ministr# of finance +arrants! decrees! and apportionment
plans.
) &ommitment/ the commitment in the "udgetar# sense should "e defined as the legal
commitment! +hich consists of placing an order or a+arding a contract for deliver# of
specified goods! services! or ph#sical assets. %uch a commitment entails an o"ligation to
pa# -a lia"ilit#. onl# +hen the supplier has complied +ith the provisions of the contract.
If the goods are not delivered or the services not rendered! the commitment +ill not entail
a lia"ilit#! and it should "e +ritten off.
) Ac'uisition and verification -at this stage! lia"ilities are recogni*ed./ the verification
stage immediatel# follo+s the deliveries. It consists of verif#ing the conformit# of the
delivered goods! or rendered services! and the "ill +ith the contract or the order and
recogni*ing the de"t to+ard a third part# -the supplier.
) Issuance of a pa#ment order/ +hen the goods and services are verified! the authori*ing
officer issues a pa#ment order! +hich is for+arded to the officer responsi"le for ma8ing
the pa#ment.
) 7a#ment/ the "ill is paid "# cash! chec8! or electronic funds transfer
The "udget transactions in the NATO "udget eBecution stage impl# reservations!
commitments! eBpenditures and transfers.
A "udget reservation contains information a"out amounts of mone# in funds that have
"een reserved for an initiative or initiative element.
In the middle of the #ear a ,id)Dear Revie+ -,DR. has to "e prepared! +ith the purpose
of advising nations of transfers completed. It contains a re'uest for the reallocation of
funding for remainder of #ear! compensation for eBchange rate changes! funding for ne+
legal o"ligations and funding for ne+ items. The aim is to set the transfer counter to *ero.
The level of this revie+ is at %trategic &ommand! +ith the ,ilitar# Budget &ommittee in
charge +ith the revie+ and approval.
The neBt step in the "udget eBecution c#cle refers to the Lapsa"le &redit reporting.
Lapsa"le credits -a form of temporar# credits! +hich ma# "e discontinued. are used to
used to address unfunded re'uirements! in a formal call in Octo"er. An informal
reporting should "e made until ?1 4ecem"er.
The report should also address the carr#)for+ard of uneBpended "alances of
commitments! as eBceptional &arr#)For+ard of uncommitted credits can "e authori*ed "#
the ,B&s. At the close of third financial #ear! credits for carried for+ard commitments
lapse.
At the end of the fiscal #ear -?1st 4ecem"er.! the closure of the Fiscal #ear ta8es placeI at
this point are completed the final transfers. The end)of)#ear reporting includes the
follo+ing/
o The Budget $Becution %tatement! referring to authori*ations! commitments! carr#
for+ard amounts! pa#ments and lapses
o Trial Balance.
All these reports are consolidated at %& level and result in %tatement of Financial
7osition! %tatement of Financial 7erformance! and &ash Flo+ %tatement.
II.:.1.?. Audits
Audits
The audits are performed during the entire "udget eBecution period. The audits consist of
the follo+ing procedures/
) an internal revie+ procedure dra+n "# the Financial &ontroller -F&.! focusing on local
proceduresCoperations and non)Appropriated Funds -NAF! e.g. ,AA..
) an internal audit performed "# %& audit organisation! thruogh reports to the %trategic
&ommand F& and an annual report direct to the %trategic &ommanders
) an eBternal audit performed "# an International Board of Auditors -IBAN.! through
Reports via %trategic &ommander to &ouncilI the &ouncil refers the reports to ,B& for
commentCaction and adverse reports revie+ed "# Ad)(oc Froup of Financial &ounsellors
II.:.1.J. References
References
K +++.nato.intCdocuChand"oo8C...Ch"393J.htm
K http/CCfindarticles.comCpCarticlesCmiPmJ31CisP1P?CaiP11J?21?CpgP:C
II.:.:. $FL
O"9ective-s.
O"9ective %&O 11;19
II.:.:.1. $LF
II.?.1. NATO militar# and civil "udget committees
O"9ective-s.
O"9ective %&O 11;::
II.?.1.1. The organi*ation and 7la#ers
The organi*ation and 7la#ers
II.?.1.:. The NATO Office of Resources
The NATO Office of Resources
$volution of the NATO Office of Resources -NOR.
The NATO Office of Resources -NOR. "rings together! under the direction and
leadership of the 4irector NOR! all international staff +or8ing on NATO militar#
common)funded issues +ith the aim of reinforcing militar# common)funded resource
management at the NATO (Q.
The NOR provides integrated staff advice and support to the %enior Resource Board
-%RB.! the ,ilitar# Budget &ommittee -,B&. and the Infrastructure &ommittee -I&. as
+ell as their &hairmen.
It also provides secretariat support for the &ivil Budget &ommittee -&B&.. The NOR
provides staff advice to the divisions of the I% and I,%! and other "odies as re'uired! on
NATO militar# resource issues.
It +as esta"lished in ,a# :33H! +ith the aim to optimi*e support to the Resource
&ommittee structure! as it "rings together staff from the Budget &ommittees %upport
%ection -previousl# part of the Office of the Financial &ontroller.! and the Resource
7olic# &oordination %ection and the %ecurit# Investment 4irectorate -"oth previousl#
part of the 4efence Investment 4ivision..
The NOR faces a series of challenges! deriving from the fact that it is dual hatted! serving
"oth the %ecretar# Feneral and the three national chairmen. Traditionall# it is an
Infrastructure organi*ation manned +ith engineers! +hich deals +ith resources
management! including "udgets. Also! considering that most of the pro9ects NOR deals
+ith stretch over more than 1 #ear! life c#cle costing of ma9or pro9ects is a challenge! due
to the difficult# of estimating the costs for medium and long term. Another challenge
relates to the tempo in manning vacant positions and the fact that the ,ilitar# Budget
&ommitee +or8s at a faster tempo than N%I7! leading to potential lags in the documents
chain.
The NATO Office of Resources -NOR. is composed of Three Branches/ 7lans 0 7olic#!
%ecretariat 0Finance and ,anagement 0 Implementation. The NOR 4irector has
traditionall# "een a 5% &ivil servant.
II.?.1.?. The Resources &hallenges
In terms of resources! the Alliance currentl# faces a variet# of challenges! deriving from
the need to correlate the Level of Am"ition +ith the resources availa"le to NATO.
A vision +ithout resources is a hallucination. And #et the gap "et+een the missions
NATO is called to ta8e on and the means it has to perform them is gro+ing da# "# da#.
$ven as it conducts operations! NATO needs ade'uate capa"ilities to continue the
process of force transformation across the Alliance. The capacit# to train to higher
standards on more tas8s and to transform forces and practices +hile conducting high
operational tempo deplo#ments re'uires a larger proportion of usa"le forces.
$ven capa"ilities that are read# to deplo#! ho+ever! can "e unavaila"le due to the high
cost of deplo#ment itself. For eBample! $uropean NATO mem"ers o+n approBimatel#
1!333 attac8 and approBimatel# :!333 transport helicopters! "ut have deplo#ed no more
than a small fraction of these to I%AF! +here the# are urgentl# needed. The Alliance
urgentl# needs to eBamine +a#s to alleviate such costs through changes in ho+
operations are funded or essential capa"ilities are fielded.
NATO has tried the full arra# of incentives and mechanisms to encourage its mem"ers to
maintain sufficient levels of read# forces and defense investment. In each case! the
initiative fell short > sometimes ver# short )) of agreed goals. ,oreover! +e are in the
midst of a deep economic crisis of indeterminate length. For these reasons! +e do not
"elieve that NATO can eBpect an# gro+th in resource availa"ilit#. The opposite is more
li8el# )) declining defense resources on "oth sides of the Atlantic over a sustained period.
Fenerating political +ill to invest in militar# capa"ilities is a uni'ue national
responsi"ilit#. $ach mem"er government ma8es its o+n case to pu"lics and parliaments.
%ome argue that such investment is necessar# to 8eep the Alliance strongI others stress
concerns over national securit#I still others point to countering terrorism and insta"ilit# in
Afghanistan rather than dangers at home. Ahatever the rationale! mem"er governments
should ma8e it clear that modern defense capa"ilities cannot "e regenerated from lo+
levels in one or t+o #earsM time! should a threat suddenl# come into pu"lic focus. Nor
should mem"ers rel# solel# on other allies +hile foregoing "asic defenses of their o+n.
7olitical +ill also affects decisions to emplo# capa"ilities alread# on hand. NATO
commanders must constantl# navigate the nature of multiple national caveats! for
instance! +hich represent the conditions under +hich forces have "een committed.
NATO leaders need to achieve as "road a consensus on missions as possi"le in order to
reduce the preference for national caveats.
Another challenge is related to the dimension of the NATO (Q and the organi*ational
structure! prone to "ureaucrar# and intricate documents flo+.
One re'uirement is the need to reform the NATO Bureaucratic %tructure/ The
International %taff and International ,ilitar# %taff -I%CI,%. are the "ac8"one of NATO
(Q! fulfilling man# important da#)toda# functions to support decision)ma8ing in the
NA& and the ,ilitar# &ommittee.
(o+ever! "oth staffs have hardened into "ureaucratic stovepipes! often performing
duplicative functions and +or8ing in an uncoordinated fashion that undercuts efficienc#.
Ahile "oth staffs should "e revie+ed "# an outside +or8ing group to determine ho+ the#
might "e reorgani*ed! a reform that could "e underta8en no+ is to increase the
integration of the staffs at NATO (Q! +hich +as "egun on an eBperimental "asis a fe+
#ears ago. %uch a miB of civilian and militar# staffs is 8e# to implementing the
Lcomprehensive approach.=
%treamline the &ommand %tructure/ The NATO command structure is in a perpetual state
of reform! and has transformed from the compleB organi*ation of the &old Aar to a
configuration more suita"le for eBpeditionar# operations outside the NATO region.
(o+ever! as NATO evolves! so must its command structure! and there is still some
unfinished "usiness.
%treamline the &ommand %tructure/ The NATO command structure is in a perpetual
state of reform! and has transformed from the compleB organi*ation of the &old Aar to a
configuration more suita"le for eBpeditionar# operations outside the NATO region.
(o+ever! as NATO evolves! so must its command structure! and there is still some
unfinished "usiness.
One criticism is that %(A7$! despite "eing a strategic command! still has too much
operational control that should "elong to the commander in the field. %(A7$ should
remain principall# a strategic level command.
%econd! NATO head'uarters are not standard! often compleB and at times
incomprehensi"le. &ommand relationships can hamper rather than facilitate command.
,ost of the NATO command structure is still undeplo#a"le! necessitating the creation of
ad hoc head'uarters to serve as RFOR and I%AF! +hile large staffs sit almost idle at
fiBed locations in $urope.
Finall#! the role of Allied &ommand Transformation -A&T. as an Lengine for
ransformation= is also under the microscope. A&T is critici*ed as having a +ea8 impact
on transformation! failing to have ac'uisition authorit#! and lac8ing credi"ilit# at NATO
(ead'uarters. %ome have al+a#s "een concerned that the current arrangement > a dual)
hatted supreme commander as head of "oth A&T and 5.%. Eoint Forces &ommand
-EF&O,. )) ma# not give that commander the time needed to devote to the difficult
transformation tas8 at NATO.
The peacetime esta"lishment -7$. revie+ provides another challenge to the Alliance
resources management. In Eul# :332! the NA& tas8ed the ,& to conduct a 7eacetime
$sta"lishment revie+ of the AllianceMs command structure! including dedicated
head'uarters and other NATO installations! to identif# a militar# structure that is more
effective +ith regard to operational and transformational tas8s! and more afforda"le in
manpo+er and financial terms. Throughout :332 and :33H! the ,& +as activel# engaged
in overseeing the anal#sis and +or8 "eing done to develop a streamlined command
structure capa"le of handling more operations over longer distances! as dictated "# the
AllianceMs level of am"ition agreed at the :332 Riga %ummit. This proved to "e a
challenging tas8! given the political ramifications of reorgani*ing infrastructure that
eBists in some of NATOMs mem"er nations. B# end :33H! the ,& +as a"le to gain
consensus for modest changes to the NATO command structure footprint. The revie+
then moved to the neBt phase! +hich involves the anal#sis of 8e# components of the
structure to identif# areas of overlap and duplication that could assist in ma8ing the
organisation more deplo#a"le. This +or8 +as intended to "e completed "# the end of
Eune :33! +ith principal recommendations to "e provided to (eads of %tate.
The +a# NATO spends mone# for operations and infrastructure is opa'ue! complicated
and does not go far enough to lessen the financial "urden on nations deplo#ing on
missions. &hanges are needed to improve financial efficienc#! increase militar# capa"ilit#
and cover costs that other+ise give nations an eBcuse not to deplo# on operations.
Because additional common funding contri"utions +ill not come easil# from nations!
greater effort must "e made to re)direct spending of common funds from political and
militar# "ureaucratic structure to improving deplo#a"ilit# and capa"ilities. This is
routinel# done through such mechanisms as 7eacetime $sta"lishment revie+s! "ut the#
have not produced the needed results.
The I%AF eBperience has caused NATO to rethin8 ho+ it funds operations. (o+ever!
more +or8 needs to "e done to permit the use common funds to cover operational costs
and to purchase common e'uipment. The Lcosts lie +here the# fall= principle! +hich
places the costs of participating in Alliance operations on the nations actuall# ta8ing part!
has "een under attac8 for man# #ears. %till! that principle is largel# follo+ed! ma8ing it
not onl# onerous to ta8e part in deplo#ments! "ut providing nations an eBcuse not to
participate "ecause the# cannot afford to. The financial crisis ma8es it imperative for
NATO to develop a ne+ approach to funding operations and common e'uipment/
&ost)share operations. Although +ealthier allies feel the# alread# pa# too much into
common funds and do not feel it is fair for them to increase their contri"utions to
common funding! poorer allies often cannot cover costs to deplo# on missions. If
+ealthier nations do not contri"ute more to common funds! fe+er allies +ill participate in
Alliance missions.
Increase and "roaden the use of common funds to procure common e'uipment for
operations. Ahile the Alliance has increased the use of common funds to procure
common e'uipment for operations! such use is often "loc8ed "# some nations +ho Ldo
not +ant to pa# for a capa"ilit# t+ice.= %uch a short)sighted vie+ ma8es it eas# for some
nations to avoid shouldering the "urden "# pleading povert#. NATO militar# authorities
should suggest additional e'uipment that NATO could purchase and ma8e availa"le to
nations and so ma8e it easier for them to deplo#.
&oordinate e'uipment procurement +ith the $5. This has the potential for the greatest
efficienc#! "ut is the hardest to implement. Both NATO and the $5 share common
capa"ilit# shortfalls that could "e met more efficientl# if those shortfalls are met in a
common procurement. ,uch of such cooperation has "een stalled "# political issues!
industrial "ase issues! as +ell as "# the sheer compleBit# that comes +ith common
procurement "# nations. ,ost efforts! even on a small scale! have failed misera"l# in the
past. (o+ever! a ne+ approach at cooperative procurement should "e considered "# a
+or8ing group that includes representatives of transatlantic industr#
The onl# source of greater capa"ilit# in the near term is to improve +hat is alread# on
hand. That re'uires mem"ers to generate economies +ithin current defense "udgets. The
Alliance needs to ma8e a num"er of ma9or changes/
Reconsider NATOMs am"ition of t+o large and siB small operations simultaneousl#!
+hich it cannot fulfill for at least 13 #ears! and is not attuned to the mission set +e have
set forth.
Increase the usa"ilit# of NATOMs 1:!;33 person formal command structure! none of
+hich is deplo#a"le.
Loo8 for capa"ilities +here the pooling of assets "# some mem"ers can "e agreed!
such as the &)1H airlift initiative among 1: mem"ers and partners.
Reorgani*e +here practical into multinational units comprised of national component
forces or even national niche forces.
$Bpand civilian capa"ilities availa"le to NATO "# energi*ing and implementing the
&omprehensive Approach.
Rene+ emphasis on consolidating R04 investment and sharing technologies.
Loo8 earnestl# at collective procurement or contracting for transport helicoptersI
intelligence! surveillance and reconnaissance -I%R. assetsI and centrali*ed logistics! along
the lines of the consortium purchase of strategic airlift "# a group of NATO mem"ers
descri"ed a"ove.
Redou"le efforts to shift spending a+a# from personnel and infrastructure costs in
national defense "udgets! and to+ards investment! training! and readiness. The goal is
smaller! "etter e'uipped! more deplo#a"le forces.
Bolster Alliance capacities to support mem"er statesM national efforts to safeguard
against c#"er attac8s from +hatever source.
II.?.1.J. The &ivil Budget and Future &hallenges
II.?.1.;. The ,ilitar# Budget and Future &hallenges
The ,ilitar# Budget and Future &hallenges
LOA O Level of Am"ition
&NI% O &ommunication! Navigation and. Identification %#stems
AO, O Allied Operations and ,issions
II.?.1.2. The N%I7 Budget and Future &hallenges
The N%I7 Budget and Future &hallenges
A&T &7 O Allied &ommand for Transformation &apa"ilit# 7ac8ages
7$ Revie+ and 7ersonnel &hallenges
II.?.1.H. The Ne+ NATO (Q 7ro9ect
The Ne+ NATO (Q 7ro9ect
(N B$ O (ost Nation Belgium
47R(QB O 4eput# 7erm)Reps Ne+ (ead'uarters Board
II.?.1.. References
References/
K http/CC+++.nato.intCissuesCnorCindeB.html
K http/CC+++.nato.intCdocuCupdateC:33HC3;)ma#Ce3;13".html
K The Aashington NATO 7ro9ect! 4aniel (amilton! &harles Barr#! (ans Binnendi98!
%tephen Flanagan! Eulianne %mith! Eames To+nsend Fe"ruar# :339 Atlantic &ouncil of
the 5nited %tates &enter for %trategic and International %tudies &enter for Technolog#
and National %ecurit# 7olic#! N45 &enter for Transatlantic Relations! Eohns (op8ins
5niversit# %AI%