NATO is an intergovernmental organisation that is funded by its member countries. NATO is therefore accountable to its member governments and their taxpayers for the financial resources provided to make the Organization function.
Publication of NATO budgets
In the spirit of transparency, each year NATO publishes the civilian and military budget totals, as well as the NATO Security Investment Programme (NSIP) budget. It also publishes an annual compendium of financial, personnel and economic data for all member countries. Since 1963, the latter has formed a consistent basis of comparison of the defence effort of Alliance members based on a common definition of defence expenditure.
NATO’s civilian budget (running costs for NATO Headquarters), military budget (costs of the integrated Command Structure) and NSIP (military capabilities) are commonly funded, i.e., they cover requirements which are not the responsibility of any single member, such as NATO-wide air defence or the command structure. All 29 members contribute according to an agreed cost-share formula, based on Gross National Income, which represents a small percentage of each country’s defence budget. This cost-share formula is published every year. Projects can also be jointly funded, which means that the participating countries can identify the requirements, the priorities and the funding arrangements, but NATO provides political and financial oversight.
Auditing of NATO accounts
Another measure of transparency was the establishment, in 1953, of the independent International Board of Auditors for NATO (IBAN), just four years after the creation of NATO. IBAN is responsible for auditing the accounts of the different NATO bodies. Its main task is to provide the North Atlantic Council – NATO’s principal political decision-making body – and member governments with the assurance that joint and common funds are used properly. The Board, composed of officials normally drawn from the national audit bodies of member countries, not only performs financial audits but also performance audits which review management practices in general.
In September 2014 at the Wales Summit, NATO leaders agreed to task “further work in the areas of delivery of common funded capabilities, reform governance and transparency and accountability, especially in the management of NATO’s financial resources”. With this renewed drive for transparency and accountability, a number of key reference documents are being made public:
- the NATO Financial Regulations, which govern financial administration;
- the Guidelines on Corporate Governance, which establish the principles to be followed to strengthen transparency and accountability; and
- the NATO Accounting Framework, which provides the minimum requirements for financial reporting in NATO.
This initiative builds on measures taken by Secretary General Anders Fogh Rasmussen (2009-2014), who introduced a NATO-wide reform process not only reflecting austerity measures taken in member countries, but seeking to make the Alliance more modern, efficient and effective. Each and every one of NATO’s political and military structures was streamlined and the acquisition of critical capabilities reassessed to ensure the Allies can provide greater security with more value for money. There ensued a reform of the military command structure, NATO agencies and committees, and of the working practices of staff at NATO Headquarters in Brussels, including financial procedures.
Secretary General Fogh Rasmussen reported, inter alia, on this NATO-wide reform in an Annual Report published every year of his tenure. He was the first secretary general to make this report public. Secretary General Jens Stoltenberg has continued the practice. Although the obligation to report to the North Atlantic Council is inherent to the Secretary General’s mandate (C9-D/4(Final) 1952), the report itself was always classified until its drafting was discontinued in 1984. However, in the same vein as Mr Fogh Rasmussen and Mr Stoltenberg, NATO’s first Secretary General, Lord Ismay (1952-1957), decided to make public a running account of the progress made by the Alliance during its first five years of existence (with only a cover note of confidential nature for the Council). “NATO – The first five years, 1949-1954” was released in booklet form in 1957.
Internal reform efforts continue to help improve governance, transparency and accountability. In 2016, NATO leaders at the Warsaw Summit made a pledge to develop a stronger and more consistent approach to prioritisation. The aim was to improve the link between political and military priorities and resource requirements. More recent initiatives therefore include, for instance, measures to accelerate the delivery of commonly funded capabilities across NATO and to reinforce the Organization’s risk assessment measures.