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OUR DES

OMPTES

Executive

Summaries

2012

hese executive summaries are intended to help the

reader consult the annual public report issued by the

Cour des Comptes.

Only the report is legally binding on the Cour des Comptes.

Responses from public administrations and other interested

bodies have been inserted in the report.

Disclaimer

Annual Public

Report

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Introduction

he 2012 Annual Public Report of the Cour des Comptes comprises three

volumes:

- Volume 1 presents observations and recommendations taken from a selection

of audits, investigations and assessments completed in 2011 by the Cour des Comptes,

the regional or territorial chambers, or jointly by the Cour des Comptes and the region-

al or territorial chambers.

- Volume II examines how local authorities, administrations and other audited

bodies have implemented the observations and recommendations formulated by the Cour

in previous years.

- Volume III concentrates on activities conducted by the Cour des Comptes and

the regional and territorial chambers during 2011.

The annual report issued by the

Cour de discipline budgétaire et financière

is appended to these three volumes.

This document comprises 44 executive summaries:

- The first 24 executive summaries (1 to 24) cover the 24 texts compiled in

Volume I, in the order of the corresponding sections (Public Finances, Public Policy,

Public Administration) and, for each section, in the order of the corresponding chap-

ters and sub-headings.

- The next 20 executive summaries (25 to 44) cover the 20 texts compiled in

Volume II, in the order of the corresponding sections (The Cour des Comptes Notes

Progress, The Cour des Comptes Delves Deeper, The Cour des Comptes Gives

Warning) and sub-headings.

There are no executive summaries for Volume III.

I - Public Finances

Public finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

“Girardin” tax incentives to promote development

in French overseas territories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Local tax incentive measures in New Caledonia and

French Polynesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

VAT fraud in carbon trading

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

TRACFIN and combatting money laundering . . . . . . . . . . . . . . . .25

National management of tax audits . . . . . . . . . . . . . . . . . . . . . . . . .29

The Banque de France: a new strategy to confront a

more volatile environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

II - Public Policy

Emergency relief for agriculture

. . . . . . . . . . . . . . . . . . . . . . . . . . .35

Combined road-rail transport in France: initial lessons learnt

and challenges for the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

Decentralising road networks: the end result

. . . . . . . . . . . . . . . . .40

Volume I Executive Summaries

Observations

Contents

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Contents

Executive Summaries:

Annual Public Report of the Cour des Comptes

Policy on aid to crime victims

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

Social housing: geographical priorities . . . . . . . . . . . . . . . . . . . . . . .44

The public service retirement system in New Caledonia:

reform is vital

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

What’s happening with ENS elite schools? . . . . . . . . . . . . . . . . . . .48

Thematic advanced research networks

. . . . . . . . . . . . . . . . . . . . . .51

Passing the bachelor’s degree: ministerial plan and action taken by

universities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

III - Public Administration

Subprefectures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

Managing state worker status in the Ministry of Defence . . . . . . .59

Initial training and recruitment of teachers

. . . . . . . . . . . . . . . . . .62

Human resource planning in local government

. . . . . . . . . . . . . . .65

Public hospital services in Marseille (AP-HM): project to

computerise patient records fails . . . . . . . . . . . . . . . . . . . . . . . . . . .67

Real estate assets in the public health sector not appropriated

to health care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69

Seaside towns in Languedoc-Roussillon

. . . . . . . . . . . . . . . . . . . . .72

Tellurium mining theme park in Val d’Argent (Haut-Rhin):

a predictable failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74

Contents

Executive Summaries:

Annual Public Report of the

Cour des Comptes

I - The Cour Notes Progress

Academic inspectors from the Paris educational authority: overdue

action against abusive practices

. . . . . . . . . . . . . . . . . . . . . . . . . . . .78

Fighting cancer: much stronger coherence and proper direction

.80

Administrative jurisdictions: management considerably

improved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82

Council for voluntary sales of chattels by public auction

(CVV): successful reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84

Lay-offs: welcome merger of two reclassification contracts

. . . . .86

Voh-Koné-Pouembout Joint Water and Waste Board

in New Caledonia: a project supported by the territorial

accounts chamber

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88

II - The Cour des Comptes Delves Deeper

Tax expenditure: reductions remain limited

. . . . . . . . . . . . . . . . . .90

Port reform: implementation marked by compromise . . . . . . . . . .93

Volume II Executive Summaries

Follow-up on Recommendations

Contents

Executive Summaries:

Annual Public Report of the Cour des Comptes

Use of European Social Fund credits: improvements evident, but

action remains too dispersed

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97

Care for elderly in the health care system: progress is too slow

. .99

State defence industries: vigilance required . . . . . . . . . . . . . . . . . .102

Major cultural projects: blocked by budget issues . . . . . . . . . . . . .104

France Télévisions: work in progress . . . . . . . . . . . . . . . . . . . . . . .106

Transition to broader responsibilities and powers in seven

Paris universities: not always smooth sailing . . . . . . . . . . . . . . . . .108

Professional development contracts: more widespread impact

required to face the economic crisis

. . . . . . . . . . . . . . . . . . . . . . .110

Recovery plan for Pont-Saint-Esprit (Gard): regional chamber

recommendations only partially implemented . . . . . . . . . . . . . . . .112

III - The Cour des Comptes Gives Warning

Intermittently employed entertainment industry workers scheme:

massive deficit and abuse persist

. . . . . . . . . . . . . . . . . . . . . . . . . .114

Perinatal care policy: urgent need to take action . . . . . . . . . . . . . .117

Regional planning grant: marginal, inefficient

and poorly managed aid

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120

Management of civil servant pensions: risk of curtailed

reform

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122

Volume I

Executive Summaries

Observations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Public finances

An audit of the current and

prospective state of public finances in

France presented by the Cour des

Comptes in its June 2011 report was

updated to take account of the marked

deterioration in the outlook for growth,

severe tension in the euro area bonds

market and the new Government meas-

ures to reduce the public deficit.

Deficit well above the euro

area average in 2011

The French National Institute of

Statistics

and

Economic

Studies

(INSEE) will publish the general gov-

ernment accounts at the end of March.

Available information suggests, howev-

er, that the deficit, having exceeded 7%

of GDP in 2009 and 2010, should not

veer significantly in 2011 from the

Government’s forecast of 5.7 % of

GDP in the economic, social and finan-

cial report.

The deficit remains distinctly above

the euro area average (3.7% of GDP in

2011, excluding France according to

European Commission estimates) and

remains far from the deficit level

required to reduce the debt-to-GDP

ratio, currently at approximately 2.5% of

GDP. Consequently, this ratio has con-

tinued to climb with debt approaching

85% of GDP, or some €1,700 billion at

the end of 2011.

Public expenditure growth in vol-

ume was estimated at 0.7% in 2011 but

has reached 1.4%, excluding exceptional

factors, namely the impact of stopping

the 2009-2010 recovery plan. Although

this rate of increase is lower than the

average recorded for the previous 10

years (2.2%), it is still too high relative to

potential GDP growth to contribute to

reducing

the

structural

deficit.

Nonetheless, a structural effort achieved

by increasing compulsory withholding

taxes reduced the deficit by 0.5 percent-

age point of GDP. Halting the recovery

plan also contributed 0.4 percentage

point of GDP to reducing the deficit.

The public finance audit to be pre-

sented in the June 2012 report of the

Cour des Comptes will cover these gen-

eral government accounts in more detail

for the 2011 accounting period.

Deficit reduction depends

mostly on economic

situation in 2012

The planned reduction in the struc-

tural deficit for 2012 is 1.25 percentage

point of GDP, a level exceeded only

twice in the past 20 years. This target

assumes a marked slowdown in spend-

Public finances

Executive Summaries:

Annual Public Report of the Cour des Comptes

ing, however, with the rate of increase

limited to 0.8% in volume, which has

not been fully achieved. This rate of

increase in public spending and the

effects of the higher compulsory with-

holding taxes are in line with the stabili-

ty programme and the Public Finance

Planning Act.

The extent of deficit reduction in

2012 will also depend on the economic

situation, currently displaying a very

uncertain outlook for the next few

months. The Government’s target for

cutting the deficit from 5.7 to 4.5% of

GDP is based on a combination of

favourable GDP growth assumptions

and elasticity in compulsory withholding

taxes. New recovery measures will be

necessary to meet this deficit reduction

target, if, as the latest forecasts from

international agencies suggest, growth

proves to be weaker than predicted by

Government. Only a very small portion

of the €6.6 billion contingency reserve

fund may be used for this adjustment.

Other European countries are also

engaged in efforts to restore health to

public finances. France’s public deficit is

expected to remain above the European

average in 2011 and 2012, and above

Germany’s public deficit, predicted as

close to 1% of GDP. While Germany’s

debt will be brought down to 81% of

GDP by the end of 2012, France’s pub-

lic debt is forecasted as approaching

90% of GDP.

Difficulty in fulfilling

public finance predictions

after 2012

The public finance figures forecast-

ed by the Government beyond 2012,

with a deficit target of 3% of GDP in

2013, will be difficult to meet without

taking new measures, since they depend

on a combination of very favourable

assumptions involving GDP growth,

elasticity in revenue and a slowdown in

spending. The volume increase in public

spending should therefore be limited to

0.2% in 2013. To meet this target, the

Government has tightened up standards

for increasing public and social security

spending, without, however, adequately

specifying the reforms it plans to imple-

ment to achieve these goals.

Reducing the deficit -

a major issue

If the reduction in the structural

deficit planned in the stability pro-

gramme fails to materialise, France’s

debt could continue to rise to as much

as 100% of GDP in 2015 or 2016,

bringing with it significant hikes in inter-

est rates as the State’s creditors weigh up

the risks, which in turn would worsen

public finances.

In this context, the particularly high

percentage of public debt in France

held by non-residents is sometimes con-

Public finances

Executive Summaries:

Annual Public Report of the

Cour des Comptes

sidered to be a risk factor. In reality, the

core issue is the overall debt owed by

public and private agents to external

lenders. This external debt must be

reduced by bringing the current balance

of payments to equilibrium.

Runaway public debt would limit

not only any possible leeway in econom-

ic and social policy, but also economic

growth. Although austerity plans have a

negative, if temporary, impact on eco-

nomic growth, the consequences of ris-

ing indebtedness would be more serious.

Confidence on the part of econom-

ic agents is required to limit this negative

aspect of reducing the public deficit, but

it could be eroded by consistently

readjusting recovery plans whenever

growth forecasts are revised downward.

Confidence can only be created by cred-

ible planning, based on sufficiently con-

servative growth forecasts and the

measures needed to stabilise and then

reduce public debt in a sufficiently near

term.

Greater structural effort

required

Structural measures to reduce the

deficit as of 2011 amount to some 5

percentage points of GDP, i.e. €100 bil-

lion. The reduction achieved in 2011

and planned for 2012 represents 1.5 to

2.0 percentage points of GDP. More

than half of the work remains to be

achieved. It is therefore vital to swiftly

aim for an additional structural effort of

at least 3 GDP percentage points by

programming precise measures.

This should be the core objective of

the stability programme to be presented

in April 2012, reflecting France’s

European commitments, which would

not prevent the new Government that

emerges from elections held in spring

from changing the nature of the adjust-

ment measures. France, which has rarely

adhered to its prior commitments, will

only be able to restore its credibility by

quickly defining precise additional meas-

ures to meet its objectives and by fulfill-

ing obligations to its European partners.

The structural deficit reduction

effort completed in 2011 and planned

for 2012 would mainly be achieved by

increasing

compulsory

withholding

taxes. Government should focus on cut-

ting spending, although it is clear that

efforts to curtail public spending are

more challenging when GDP growth is

weak. The task calls for very difficult

decisions that go beyond measures

taken to date. A number of examples

are given in the report.

Nonetheless, further increases in

compulsory withholding taxes will be

necessary. After examining implementa-

tion of the Court’s recommendations

on tax expenditure, it appears feasible to

reduce these costs by more than €15 bil-

lion compared with 2010.

Public finances

Executive Summaries:

Annual Public Report of the Cour des Comptes

The report issued by the Cour des

Comptes on the current and prospective

state of public finances in France pub-

lished in June 2011 suggested other

ways of reducing compulsory withhold-

ing taxes, which are still relevant. As

emphasised in its March 2011 report on

taxes and social contributions in France

and in Germany, the additional revenue

generated must be part of a medium-

term fiscal strategy aimed at improving

the potential for growth and job cre-

ation and equitable distribution of the

efforts required.

Executive Summaries:

Annual Public Report of the

Cour des Comptes

“Girardin” tax incentives

to promote development in

French overseas territories

The

Revised

Budget

Act

11 July 1986 set out the guidelines for

tax reductions to promote investment in

French overseas territories. These fiscal

incentives were subsequently modified,

chiefly by the 2001 Budget Act,

followed by the scheme for French

overseas territories known as the

“Girardin Act” of 21 July 2003, and the

Economic

Development

Act

for

Overseas Territories (LODEOM) of

27 May 2009.

The Girardin Act of July 2003

broadened existing tax incentives to

make

them

attractive.

The

Economic Development Act subse-

quently reformed certain measures that

involved investment in housing.

Tax incentive schemes

Tax incentives have long been one

of the State’s favourite ways of support-

ing the economy in French overseas ter-

ritories. They concern a broad range of

investment opportunities, including pro-

ductive investment and housing invest-

ment. Individuals and companies are

eligible for tax exemptions, which are

applied against income tax for the for-

mer and corporation tax for the latter.

These “investing taxpayers” operate

either on their own account, or on

behalf of third parties to whom they

rent their investments. This arrange-

ment is known as a rental-contract

investment.

The tax incentive that applies to

these rental-contract investments does

not release any long-term private sav-

ings in favour of overseas territories.

From a financial point of view, the tax-

payers merely advance funds to the State

for a few months. The State pays back

the money at rates of up to 40%, net of

tax.

In 2005, tax revenues totalling €680

million were lost to the treasury as a

result of these tax incentives. The

amount lost almost doubled in 2010,

reaching €1 230 million.

Inadequate control

The tax administration has no con-

trol over this loss of tax receipts.

Depending on the amount and type of

investment, transactions establishing eli-

gibility for tax reductions are either car-

ried out as of right, or must be

submitted to the tax authorities for prior

approval. For transactions as of right,

the aid is distributed “on demand”, with

no checks in principle. Transactions

subject to approval must fulfil the con-

ditions set out in the Act before they can

be approved. Only the legislator can

stem the flow of lost tax receipts by

“Girardin” tax incentives to

promote development in French

overseas territories

Executive Summaries:

Annual Public Report of the Cour des Comptes

tightening the eligibility criteria for tax

exemptions or by limiting the individual

amounts of the reductions. Limits have

been set gradually since 2009, but it is

still too early to assess their full impact.

Inefficient measures

The main problem with these tax

incentives is their inefficiency. For pro-

ductive investments, on average only

60% of the tax reductions are indirectly

returned to companies in overseas terri-

tories, while 40% goes to benefit

“investing taxpayers” - although the risk

is practically zero. Housing tax incen-

tives suffer from the same flaw.

Moreover, the nature and complexi-

ty of these schemes leave them open to

fraud. In turn, fraud is difficult to detect

since the “investing taxpayers” are scat-

tered throughout France, operating

through investment brokerage struc-

tures and leases on investment proper-

ties located in overseas territories.

Inadequate assessment

Assessing the effectiveness of these

tax incentives would first require defin-

ing their objectives in order to select the

appropriate indicators and relevant tar-

gets. It would also require that the

administration have knowledge of

which operations benefit from these

incentives. Yet, despite the fact that

these schemes have been applicable for

quite a long time, the administration

only has knowledge of those transac-

tions that have been approved, i.e.

approximately half of the tax expendi-

ture.

While a number of attempts to

assess the schemes did not rule out

some positive impact on investment in

overseas territories, none unreservedly

concluded that they were effective. In

fact, several evaluations highlighted a

number of contrary outcomes, particu-

larly the construction of housing under

the scheme that failed to meet the needs

of the inhabitants and aids that proved

irrelevant to sector needs, especially in

the hotel industry.

The only indicator available for pro-

ductive investment tax credits is the

ratio of tax expenditure to each direct

job expected to be created by the

approved investments: this expenditure

continues to increase and in 2009 was

over the exorbitant figure of €700,000.

The

combination

the

Girardin housing tax incentives with

other tax measures specific to overseas

territories could lead to unequal treat-

ment of tax-payers in Metropolitan

France and those in overseas territories.

“Girardin” tax incentives to

promote development in French

overseas territories

Executive Summaries:

Annual Public Report of the

Cour des Comptes

The Cour des Comptes recom-

mends overturning the Girardin tax

incentives and instead, promoting pro-

ductive investments and the incentives

defined

the

Economic

Development

Act

for

Overseas

Territories (LODEOM) to encourage

construction of socialhousing.

If the Government considers it

necessary

support

productive

investment and social housing in over-

seas territories, other less costly mech-

anisms must be considered.

Recommendations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Local tax incentive

measures in New

Caledonia and French

Polynesia

In addition to national tax incen-

tives, French Polynesia and New

Caledonia have also implemented local

tax incentive schemes.

Taken together with national tax

incentives, these schemes

support

investors through tax credits of up to

73% of the cost of investment projects

and may represent an overall tax expen-

diture for the State and local authorities

greater than the value of the project

itself.

Excessively costly tax

expenditure

Local tax incentive measures are a

burden

overseas

government

finances, as they deprive them of

resources (7.3% of operating receipts in

French Polynesia and 2.8% in New

Caledonia), a negative impact that is all

the more important when there is not

much leeway in the budget.

Moreover, these fiscal aids have the

potential to create multiple windfall

effects, banks being the main beneficiar-

ies, by accumulating approximately one

fourth of the tax credits in both

territories.

Groups of companies, acting either

as tax investors or as operators or both,

for different projects, were in a position

to benefit from particularly advanta-

geous tax optimisations made possible

by these aids.

Little evidence to support

economic impact

The macroeconomic outcome of

the tax incentive schemes showed that

they did not achieve their goals in either

New Caledonia or French Polynesia,

because of inefficiency in the sectors

supported and dispersion of part of the

aid, which did not contribute to devel-

opment.

Local mechanisms gave priority to

the hotel sector (70% of tax credits in

French Polynesia and 50% in New

Caledonia). The substantial support

offered to the luxury hotel sector was

not economically efficient, as is evident

from the Polynesian example, as the

increased hotel supply did not propor-

tionally increase tourist receipts. On the

contrary, the support generated a double

crowding-out effect, as new hotels sup-

planted the old and even competed in

price with lower category hotels.

The appropriate directives were not

enacted to prioritise the contribution of

the

measures

development.

Rebalancing efforts in New Caledonia

to improve the geographical spread of

economic development were ineffective.

In French Polynesia, almost 80% of

Local tax incentive measures

in New Caledonia

and French Polynesia

Executive Summaries:

Annual Public Report of the

Cour des Comptes

these aids were concentrated in the two

islands of Tahiti and Bora-Bora.

Without a reliable statistical tool, the

impact of these local tax incentive

measures on business and job creation

are difficult to measure. In addition,

their

long-term

sustainability

uncertain.

Local tax incentives, especially when

used cumulatively with incentives at

national level, have often resulted in rel-

egating the operating profitability and

economic viability of the aided projects

to the background.

Poorly-defined tax

incentive policies

Legal oversight of local tax incen-

tives in French Polynesia has long

proved very deficient. It was only in

2009 that the amendments to the crite-

ria for determining the eligible base and

the reduction in the tax credit rate appli-

cable to hotel construction restricted tax

optimisation opportunities, which had

been wide open for 15 years or more.

On the other hand, while New

Caledonia implemented and strictly

applied approval and inspection proce-

dures from the outset in 2002, the

Caledonian system still offers advanta-

geous tax exemption opportunities.

The aid strategy remains badly

defined in both territories. Tax incen-

tives have no precise objective other

than the very general goal of acting as a

lever for economic development.

No real impact analysis

Neither of the two local govern-

ment authorities seems to have ever

doubted the economic impact of the

tax-incentive projects, to the point

where no real analysis of their impact

on employment or added value has been

conducted.

Local tax incentive measures

in New Caledonia

and French Polynesia

Executive Summaries:

Annual Public Report of the Cour des Comptes

The Cour des Comptes makes the

following recommendations for both

territories:

prepare a consistent aid strategy

by stabilising and reducing the number

of sectors and geographical areas

aided and by reinforcing development

through strategic action plans agreed

in consultation with stakeholders;

review the current parameters of

tax schemes to reduce the budget cost

of the measures, particularly by cap-

ping the credits granted, especially in

the case of double tax exemptions;

reinforce

oversight

the

schemes, focusing in particular on

guaranteeing transparency of approval

decisions;

examine the results, using rele-

vant measurement instruments to

assess the outcome for employment

and added value.

Recommendations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

VAT fraud in

carbon trading

Extremely large-scale

fraud

Between the third quarter of 2008

and June 2009, VAT fraud in the carbon

trading market developed in France,

undoubtedly involving the highest

amounts ever detected by tax authori-

ties. The Cour des Comptes estimates

the tax loss to the State from this fraud

at €1.6 billion. The scam was halted only

after the administration issued a tax

instruction on 11 June 2009 exempting

carbon quotas from VAT.

quotas represent the carbon

dioxide emission quotas allocated by the

State each year to the most polluting

industrial sectors (11,000 in Europe,

1,000 of which are in France). Under

the European Directive of October

2003, every year these carbon dioxide

emitters must return a volume of emis-

sions equal to the ceilings set for them

the previous year, or acquire credits in

the emissions trading market to offset

actual, verified emissions over that ceil-

ing. Companies that reduce their emis-

sions below their ceiling can freely trade

their excess quotas on the market. The

European emissions trading scheme has

seen a considerable increase in trades

since 2005.

Fraudsters used the classic VAT

“carousel” system between companies

located in different member states of

the European Union: based on the prin-

ciples of the intra-Community VAT sys-

tem, companies, often created for the

purpose, purchased carbon credits VAT-

free in one member state, then sold

them in France invoicing VAT at 19.6%,

without passing on the VAT to the

Treasury, and “reinvested” the proceeds

of the sale in other fraudulent transac-

tions, before disappearing from the

scene and pocketing the VAT.

The fraudsters generally used off-

shore companies with a token amount

of registered capital, a mailbox address

and fictitious directors, which hid the

true perpetrators of the fraud.

The diverted funds were immediate-

ly transferred to countries known to be

fairly uncooperative in combatting

money-laundering

unconcerned

about meeting the commitments of the

Kyoto protocol.

VAT fraud

in carbon trading

Executive Summaries:

Annual Public Report of the Cour des Comptes

The three original flaws in

the European emissions

trading system

The extent of the fraud was facilitat-

ed by three loopholes in the European

emissions trading system. First, the

security of the VAT collection system

was not enhanced to prevent the type of

fraud which was all the more likely to

occur given the fact that these trades

were purely immaterial and took place in

the space of a few seconds. Second, the

EU retained the principle of allowing

practically uncontrolled access by any

individual or legal entity to the national

quotas registers. Last, the market was

not

subordinated

any

outside

regulation.

Some operating weaknesses on the

part of market operators (the trading

platform operator, BlueNext, and the

Caisse des dépôts et consignations

(CDC),

which keeps the quotas register and

bank accounts for BlueNext’s cus-

tomers) exacerbated these loopholes.

In addition, the delay in ending the

fraud stems from errors and failures on

the part of Finance Ministries.

Operational weaknesses of

market operators

The CDC and BlueNext met their

anti-money laundering obligations by

quickly reporting their suspicions to

TRACFIN. However, the procedures

for approving members authorised to

trade on the carbon exchange did not

close the original loopholes. Moreover,

having uncovered suspicious transac-

tions, they did not draw the necessary

conclusions by either refusing to close

the transactions in question, or by

applying the market operator’s discipli-

nary rules.

Even if suspicions did not consti-

tute certainty that fraud had been com-

mitted, the amounts at stake should

have

prompted

additional

checks.

Although it had the option, BlueNext

did not issue any formal notification and

did

not

suspend

any

members.

Transactions or trading sessions were

not suspended and the market was not

closed until the decision was made, on

11 June 2009, to exempt emissions trad-

ing from VAT and thereby end the

fraud.

Finally, the the CDC and BlueNext

were late to realise the systemic extent

of the fraud dawned and failed to fulfil

their role as expert consultants to the

tax administration.

Errors and failures on the

part of finance ministries

In a memo classified as secret sent

to the Minister of Finance and the

Minister

the

Economy

16 February 2009 for the attention of

their principal private secretaries, the

director of TRACFIN set out the infor-

mation required to uncover a fraud that

he suspected was taking place on an

extremely large scale.

VAT fraud

in carbon trading

Executive Summaries:

Annual Public Report of the

Cour des Comptes

This memo had no practical impact

on what followed, because the Head of

the Tax Audit Division in the General

Directorate

Public

Finances

(DGFIP) was never informed of its

contents.

TRACFIN, the tax investigation

agency (

Direction nationale des enquêtes fis-

cales,

DNEF) and one of the depart-

ments in the DGFIP took the initiative

in February 2009 to informally exchange

information on the fraud. The DNEF

would probably have saved time and

obtained more accurate information had

the files been officially exchanged.

In addition, the DNEF made an

error of judgement in giving priority to

identifying

the

criminal

offences

involved in the fraud (by definition a

slow process), to the detriment of

immediately launching the tax audits

that could have dissuaded the fraudsters

from continuing their activities and

thereby saved the public purse from

further loss.

The tax administration’s methods

and organisation proved inadequate.

The wide-scale extent of the fraud and

its rapidity in escalation were not cor-

rectly assessed by the DGFIP, nor did it

foresee the possibility of fraud on a

market

that

was

actually

very

vulnerable to it.

In a VAT collection system that

facilitated fraudulent practices, two

measures were vital to stop the VAT

carousel: initiate tax audits without delay

(it took until August 2009 to start

audits) and amend the VAT system

throughout that market. In the event,

seven months elapsed between the first

suspicious transactions reports submit-

ted by the CDC in November 2008 and

the decision to exempt trading from

VAT.

Two to three months could be con-

sidered to have been lost, leading to tax

losses of between €600 and €800 mil-

lion in that period alone.

VAT fraud

in carbon trading

Executive Summaries:

Annual Public Report of the Cour des Comptes

The Cour des Comptes makes the

following recommendations:

reduce the risks of a tax system

unsuited to the complexity of new

markets, by including tax audit require-

ments and specialist market knowl-

edge in the preparation of texts;

strengthen preventive oversight

of markets that are potentially vulner-

able to fraud to prevent carousels from

forming and accelerating;

detect

anomalies

intra-

Community trades early and provide

the resources necessary to act prompt-

ly in response;

no longer systematically subordi-

nate tax audit procedures to the con-

duct of criminal investigations in

order to safeguard the tax base;

provide central government with

the appropriate organisation and

resources to manage risks through tax

audits (see the insert on managing tax

audits on page 229 of this public

report).

Recommendations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

TRACFIN and combatting

money laundering

International mobilisation against

money laundering dates back to the G7

1989 summit held in Arche. The finan-

cial intelligence units created within the

Financial Action Task Force (FATF), an

inter-governmental body whose pur-

pose is to combat money laundering in

the OECD, spearhead this action.

The French financial intelligence

unit,

TRACFIN,

was

created

9 May 1990 as the coordination unit in

the Customs Directorate and became an

agency with nationwide operations (

ser-

vice à compétence nationale

) by the Decree

of 6 December 2006. It now operates

under the dual supervision of the

Ministers for the Economy and the

Budget.

Its role is to collect, analyse and

supplement

suspicious

transaction

reports (STRs) by cross-referencing the

information before sending it to the

judicial and other authorities when it

considers that an offence has been

committed.

General compliance with

FATF recommendations

TRACFIN and the French anti-

money laundering measures created by

the

Ordonnance

of 30 January 2009,

transposing

the

Third

European

Directive of 26 October 2005, largely

fulfil the FATF’s recommendations,

according to the evaluation it conducted

in 2010. However, this clearly positive

evaluation merits qualification.

Careful evaluation of

money laundering to opti-

mise AML measures

TRACFIN has been in operation for

more than 20 years, but knowledge on

how “dirty money” circulates has not

improved sufficiently. An OECD study

in January 2010 estimated the worth of

France’s underground economy at €220

billion, a figure greater than 10% of

GDP. It is important for TRACFIN to

make further efforts to quantify this

phenomenon, which concerns all eco-

nomic actors, and to understand the

mechanisms related to the complexity of

financial channels.

Partnership system to be

led by TRACFIN

From the detection end, the system

relies

Suspicious

Transactions

Reports (STRs) submitted by sectors

governed by reporting obligations (e.g.

credit institutions, insurance companies,

notaries, lawyers, casinos and estate

agents), while repression relies on

administrative

and

legal

penalties.

TRACFIN and combatting

money laundering

Executive Summaries:

Annual Public Report of the Cour des Comptes

Central to the process, TRACFIN must

define a clear strategy, comprehensible

by all actors, provide case typologies

and, in cooperation with regulatory

authorities, strengthen its instruction

and training policy.

The increasing flow of information

to TRACFIN means that the STRs must

provide quality information for the sys-

tem to operate efficiently.

Greater mobilisation

required

Credit institutions are the main

issuers

suspicious

transactions

reports: more than 13,000 out of some

20,000 in 2010. However, the entire

financial sector has not bought into the

anti-money laundering measures, with

low participation by mutual insurance

companies, insurance intermediaries

and financial investment advisors.

Not a single STR received by

TRACFIN in 2010 came from lawyers.

Real estate professionals report very few

suspicious transactions, although the

Directorate for Competition, Consumer

Rights, and Protection Against Fraud

(DGCCRF) found offences. In addition,

regulatory authorities have not been

appointed for a number of sectors that

are vulnerable to money laundering,

such as dealers in precious stones and

metals or sports agents. Finally, partici-

pation by professional associations

varies.

TRACFIN must adapt to

the scale and diversity of

money laundering

The 20,000 STRs involve a wide

range of different professions and relate

to offences as diverse as undeclared

work, tax fraud and organised crime.

TRACFIN must adapt its procedures:

enhance analysis, diversify skills, manage

case portfolios, and qualitatively assess

its performance based on the recom-

mendations

the

recent

FATF

evaluation.

Until now, TRACFIN, a structure

comprising 72 employees, has operated

on a relatively small scale relying on

individual skills.

A reorganisation in January 2011

focused its activities on intelligence and

analysis. However, TRACFIN still lacks

a clearly defined strategy for dealing

with incoming STRs, i.e. sorting them as

they come in, especially with respect to

the “least serious” offences. Despite the

substantial number of suspicious trans-

actions reports concerning undeclared

work and pending the legal framework

to allow it, no reports have been sent

spontaneously to the Social Security

Contributions

Collections

Office

(URSSAF).

TRACFIN and combatting

money laundering

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Room for improvement in

investigation management

Management of investigations must

also be improved. As a result of inade-

quate resources assigned to investiga-

tions and no strategy, 50% of STRs sent

for investigation in 2010 were not

analysed.

Moreover, too few reports are for-

warded to the judicial authorities, i.e.

about 400 per year. The number of new

information notes sent to judicial

authorities, in addition to the report

supplements submitted previously or

offences already handled by the author-

ities, is just over 250.

Although Startrac, the database used

by TRACFIN, is very secure, it should

be enhanced to expand investigation

functionalities and guarantee the rele-

vance of the information stored and its

statistical utility.

Anti-money laundering

and cracking down on

tax havens

Besides the changes required to bol-

ster the efficiency of the financial intel-

ligence unit, anti-money laundering

measures as a whole must also be acti-

vated more robustly by improving coor-

dination between anti-money laundering

and anti-tax fraud measures.

Stiffer penalties

Administrative penalties applicable

to professionals who fail to fulfil their

obligations have been established, but

remain practically unused for the most

part, except for the financial sector.

Criminal proceedings initiated as a result

of TRACFIN reports are difficult to

evaluate for want of complete statistics.

While improvements have been made to

mechanisms for the seizure of criminal

assets, legislative reforms are required to

enhance procedure efficiency.

TRACFIN and combatting

money laundering

Executive Summaries:

Annual Public Report of the Cour des Comptes

The Cour des Comptes makes the

following recommendations:

concerning French authorities:

establish an evaluation methodology

to improve quantification of money

laundering and anticipate develop-

ments;

undertake initiatives on an inter-

national level to complete projects

aimed at measuring the phenomenon

of “dirty money”;

define strategies and action pri-

orities for TRACFIN and formally set

them out in the Director’s letter of

engagement;

systematically organise provi-

sion of analyses and typologies for

sectors subject to reporting require-

ments and, working with the regulato-

ry authorities governing these sectors,

intensify training for the professionals

with the lowest participation levels;

remind regulatory authorities

about their reporting obligations;

recruit staff - through redeploy-

ment from finance ministries - to cope

with the unit’s new missions in terms

of both quality and quantity;

increase resources assigned to

investigations;

oversee the portfolio of current

cases to adjust the flow of new STRs

assigned to investigators;

as of the beginning of 2012,

implement the legal system for

exchanging

information

between

TRACFIN and the URSSAF;

amend legislation to make it eas-

ier for TRACFIN to use the objection

procedure.

Recommendations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

National management

of tax audits

The objectives of tax audits are

three-fold: the first is budgetary: to

recover revenue; the second punitive: to

impose sanctions on those who commit

fraud; the third deterrent: to prevent

fraud.

Having analysed audit activities in

the devolved services of the tax admin-

istration reporting to the General

Directorate

Public

Finances

(DGFIP) in 2010, the Cour des

Comptes turned its attention to the

audit activities of the three national spe-

cialist directorates, as well as the man-

agement and coordination of tax audit

policy as a whole.

Three national specialist

directorates dealing with

key issues

In the DGFIP, three specialist struc-

tures are responsible for:

- tax audit of the largest companies

by the National and International Audit

Directorate (

Direction des vérifications

nationales et internationales

, DVNI);

- tax audit of the wealthiest house-

holds by the National Audit Directorate

(

Direction nationale des vérifications de situa-

tions fiscales,

DNVSF);

- research, intelligence and investiga-

tions nationally and internationally by

the

National

Directorate

Tax

Investigations (

Direction nationale des

enquêtes fiscales

, DNEF).

These units handle a number of par-

ticularly complex cases, as well as the

most sensitive ones, often involving

quite substantial amounts.

Accordingly, besides the 13,000

employees tasked with tax audits in the

devolved tax offices, some 1,100

employees work in these three national

directorates. They employ 6% of the

corps of inspectors, but bring in one

fourth of the unpaid taxes and penalties

claimed by the tax administration.

The DGFIP’s tax audit department

is responsible for managing these three

specialist directorates, as well as for

defining national tax audit policy in cen-

tral government.

The activity of the three directorates

must be seen in the light of the magni-

tude of tax fraud, which is by nature dif-

ficult to estimate with accuracy. The

national anti-tax fraud coordinating

committee (

Délégation nationale à la lutte

contre la fraude,

DNLF) estimates that the

cost of all fraud, including social securi-

ty fraud, ranges from €25 to 39 billion.

Other institutions’ estimates of lost tax

revenue are higher. There is no updated

evaluation available on fraud according

to geographical area or business sector.

Beyond the estimates, tax auditing is

a major challenge for ensuring equality

National management

of tax audits

Executive Summaries:

Annual Public Report of the Cour des Comptes

amongst citizens, above all at a time

when the public deficit and public debt

are so high as to impose an additional

shared burden on the taxpayer.

Performance of

directorates varies, but

overall is unsatisfactory

The three directorates, like the

whole tax auditing system, were ignored

by the DGFIP reform, and results show

that they are underperforming.

For the most part, the DVNI suc-

cessfully developed its methods and

safeguarded its results. However, it

tends to concentrate on high-stake com-

panies, a focus which explains its results

from a budgetary point of view, but also

contributes to neglecting companies

where the stakes are lower. Attention to

different taxes by the DVNI is also

uneven, and VAT audits are consider-

ably less frequent than audits of corpo-

ration

tax.

Electronic

access

companies’ financial statements remains

to be developed.

The results achieved by the DNVSF

were disappointing, and the directorate

is not currently in a position to efficient-

ly audit the wealthiest taxpayers. An

analysis of additional assessments for

the past 10 years shows a decline in

audit efficiency. The directorate only

includes a little more than 10 of the 500

largest professional fortunes in its

schedule of personal tax audits on aver-

age every year. It is true that audits of

tax returns and support documents are

carried out every three years in principle.

Nonetheless, the number of in-depth

inspections is low and the frequency of

a wealthy taxpayer being subject to an

investigation into discrepancies in his or

her personal tax position is once every

40 years.

The efficiency of the DNEF is

compromised by the multiple nature of

its missions, the very low staff turnover

and its timidity in using IT tools.

Significant progress remains to be

achieved, as was clearly illustrated by the

massive VAT fraud uncovered in the

carbon trading market. The current time

frames for investigations are incompati-

ble with effectively combatting the most

serious incidences of tax fraud, such as

VAT carousels. A three-month long

internal procedure is required to sus-

pend a VAT number, a step that quickly

puts fraudulent companies out of

circulation.

Direction and organisation

to be reviewed

Tax audit policy is defined and

directed at national level by the

DGFIP’s tax audit department.

Reporting to the director responsi-

ble for taxation, this department has a

staff of about 100. It is responsible for

directing the system, coordinating tax

audits and investigating the most com-

plex or sensitive cases. In practice, it

does not sufficiently coordinate the

national directorates, which very recent-

ly led to reorganisation. In view of the

National management

of tax audits

Executive Summaries:

Annual Public Report of the

Cour des Comptes

resources involved, the objectives set for

the devolved services appear to be lack-

ing in ambition. The tax audit depart-

ments, which have had the benefit of

“ring-fenced” staffing levels, have been

assigned the same quantitative objective

(52,000 external tax audits) for the past

15 years, although modernisation and

the array of IT tools available have

made productivity gains possible. The

allocation of resources on the ground,

largely dictated by the rules and customs

surrounding employee mobility, point to

significant disparities between the densi-

ty of the fiscal system and the resources

allocated.

The

increasingly

international

nature of trade, the dematerialisation of

procedures, as well as the multiplication

and diversification of operators have

profoundly altered the challenges of tax

audits. Confronted with these major

changes, the organisation has remained

more or less as it was in the 1980s, and

the establishment of the DGFIP in

2008 was not accompanied by a review

of the quantitative and qualitative

changes required in the resources dedi-

cated to tax audits.

The administration must leave

behind the culture of making minor

adjustments on the margins, redefine

what it expects from the national tax

audit structures and their interaction

with the devolved services, and immedi-

ately design a tax audit target organisa-

tion to be structured over five years.

The Cour makes 10 recommenda-

tions, broken down into four priority

areas:

anticipate changes in fraudulent

operations more accurately;

ensure more dynamic manage-

ment of the system;

set more ambitious objectives

for tax audit departments;

improve staff management.

Recommendations

Cour des Comptes

The Banque de France:

a new strategy to

confront a more volatile

environment

Executive Summaries:

Annual Public Report of the

Cour des Comptes

The Cour des Comptes analysed the

financial statements and management of

the Banque de France as of 2004. It

examined how the unconventional

measures decided by the European

Central Bank (ECB) since 2008 have

affected the Bank’s financial position.

The Cour des Comptes did not

analyse the conduct of monetary policy,

since this does not fall within its

jurisdiction.

Banque de France

financial transactions

The Banque de France’s balance

sheet has tripled since 2003, driven

mainly by four effects: growth in circu-

lation of notes denominated in euro,

revaluation of the gold inventory and,

from 2008, the higher volume of refi-

nancing granted to credit institutions

and the increase in foreign exchange

reserves managed for central banks out-

side the euro area.

The Banque de France had mone-

tary resources that exceeded those allo-

cated to coordinating the liquidities

market and interest rates. This situation

enabled the bank to constitute signifi-

cant own-funds investment portfolios in

euros (€54 billion at the end of 2010),

mainly in 2007 and 2008.

The bank’s net income has made a

good recovery since 2004, driven

upwards by income from monetary pol-

icy transactions, until 2008, and then by

income from own-funds investment

portfolios from 2009. This improved

financial position resulted in a large

increase in the corporation tax paid and

the dividend distributed to the State.

2004 saw an agreement signed

between the Banque de France and the

State to sell 500 to 600 tonnes of gold

over a five-year period with the pro-

ceeds to be reinvested in foreign-

currency bonds.

The Bank completed the gold dis-

posal programme and sold a total of

589 tonnes, while other central banks

halted their sales of gold early as the

price per ounce rocketed.

Furthermore, as the euro rose

against sterling and the dollar in the

period 2004-2010, reinvesting the pro-

ceeds of gold sales in securities denom-

inated in these currencies generated

unrealised

capital

losses,

which

absorbed part of the exchange guaran-

tee given by the State to the Banque de

France.

The bank is now facing sharper risks

associated with the financial crisis. It

carries a share of the ECB’s sovereign

bonds purchase programme as part of

monetary policy, with any resulting rev-

The Banque de France

Executive Summaries:

Annual Public Report of the

Cour des Comptes

enues or losses being shared within the

Eurosystem. Its own-funds investment

portfolios also include non-zero credit

risk sovereign bonds in euro (up to 44%

of the portfolio at the end of 2010).

Management of own-funds portfo-

lios should focus first on security.

Faced with rising financial risks in a

period of financial crisis, the bank must

increase its capital. The effort should be

shared between the State, which should

agree to less generous dividends, and

the Banque de France, which should

tighten control of operating costs.

Adapting operations

in a time of crisis

The Banque de France implemented

a series of delicate and vital reforms in

the last decade, but it is imperative to

pursue more far-reaching measures as

the bank adapts its tasks and responsi-

bilities in the face of the financial crisis

and strives for economies of scale.

The Banque de France restructured

its network in the period 2004 to 2006;

however it remains vast, since it includes

almost one branch in every administra-

tive

département

and 32

infra-département

sites, with variations across these loca-

tions in both productivity and the activ-

ities carried out.

The Banque should assess the

options for optimising the fiduciary sec-

tor, examining the possibility of increas-

ing external recycling of banknotes.

Economic and financial analysis of

companies should be located at regional

inter-regional

level.

Cases

overindebtedness should be handled at

regional level, maintaining a local pres-

ence in partnership with other state

actors.

Overall, the Banque should pursue a

further reduction in the size of its net-

work, taking into account the specific

characteristics of each of its three main

business lines.

Two priorities: more

effective control of payroll

costs and a regenerated

relationship with the State

Control of operating costs, especial-

ly payroll, is key to the bank’s internal

management. The Banque de France

employs 13,000 people and payroll

accounts for more than 70% of operat-

ing costs.

General wage increases since 2005

were 3.3 points higher than in the pub-

lic service sector. In addition, social and

cultural expenditure still accounts for

11.5% of payroll. Modulation in both of

these areas is required during a time of

crisis.

The number of employees retiring is

expected

increase

significantly

around 2020. In this context, the

Banque should consider not replacing

two out of three employees retiring,

instead of the 50% non-replacement

rate observed over the period.

The State has imposed contradicto-

ry requirements on the Banque, asking it

to reduce its fixed costs on the one

The Banque de France

Executive Summaries:

Annual Public Report of the Cour des Comptes

hand, while assigning it new tasks on the

other. Such demands on the Banque de

France should be included in a contract-

ing strategy, founded on clearly defined

performance objectives in the areas of

quality of service and cost optimisation.

Accordingly, the State and the Banque

de France engaged in a review of their

relations, culminating in the signature of

a new agreement in December 2011.

The Cour des Comptes makes nine

recommendations for the Banque de

France and the State.

Financial management

take steps, jointly with the State,

to raise the Banque’s capital to be in a

position to withstand mounting finan-

cial risk;

agree on financial management

targets with the State, giving greater

consideration to security requirements;

at the end of 2012, check that

the new unified reserve mechanism for

the revaluation of gold and currency

reserves provides adequate protection

against exchange risk for the Banque’s

balance sheet;

Internal management

draw up action plans to 2020,

examining the goal of non-replace-

ment of two out of three retiring

employees;

moderate general wage increases

and non-wage benefits;

in this context, accelerate the

pace of social and cultural expenditure

cuts;

improve productivity gains in

support functions;

further downsize the network,

taking the specific characteristics of

each business line into account;

tie in performance objectives

with the contracting strategy between

the State and the Banque, including

quality of service and cost-cutting

indicators.

Recommendations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Emergency relief for

agriculture

Agriculture is susceptible to a range

of health, climate and economic contin-

gencies.

Since the reform of the Common

Agriculture Policy in 2003, responses to

crises are formed at national level.

Recurring relief for

substantial amounts

In the period 2006 to 2009 (includ-

ing amounts paid in 2010 for the previ-

ous year), the amounts paid out in

emergency relief amounted to a sizeable

€1.67 billion. This relief package was

broken down into 102 measures, with

subsidies varying from tens of thou-

sands of euro to €650 million. They

were distributed in response to 38 dif-

ferent crisis situations, 23 of which were

economic in origin (accounting for

more than €1.2 billion in aid), 12 cli-

mate-related and three health-related.

Relief

funds

were

distributed

through various mechanisms: fund to

alleviate the financial burden on farmers

(FAC), emergency loans (short-term

credit facilities and consolidation loans),

exceptional cash-flow aids, waiver of

social contributions, exemption or par-

tial reimbursement of taxes, and the

national agricultural disaster guarantee

fund for climate emergencies.

A number of sectors have benefited

from specific emergency measures for

several years: breeding (€289.4 million)

especially for sheep, viticulture (€156

million) and fruits and vegetables

(€137.6 million). The two most signifi-

cant programmes, the Barnier Plan at

the end of 2008 and exceptional market

support measures for agriculture at the

end of 2009, cover all sectors of agricul-

tural production.

More or less justified,

relief is often redundant

with diluted impact

Besides the fruit and vegetable sec-

tor, which has an alert system (limited to

price intelligence), the minister has no

relevant indicators to help establish a

precise analysis of agricultural sectors

when deciding to grant relief. Aid is gen-

erally granted as a result of requests

from professionals, often before the

actual consequences of the crisis are

known.

By aiming to provide a tailored

response to crisis situations, the ministry

ends up implementing an array of dif-

ferent subsidies - all essentially aimed at

easing the financial situation of farmers

for the same crisis. Management of this

plethora of measures comes at a high

price for both the administration and

Emergency relief for agriculture

Executive Summaries:

Annual Public Report of the Cour des Comptes

the farmers. The (disputable) comple-

mentary nature of the measures some-

times leads to a situation where one

measure cancels out another in the same

emergency plan.

In addition, the award criteria are

not sufficiently precise or selective at

national level. The responsibility for

determining award conditions falls to

officials in

départements

, resulting in dis-

persed relief, paid long after the emer-

gency created by the crisis.

The system is not only weak in the

attribution stage, it is also inefficient in

the evaluation process, since the

Ministry has no procedure for evaluat-

ing emergency plans after the fact, nor

does it have a mechanism for tracking

implementation of measures, other than

budgetary oversight.

Moreover, the way in which some of

these relief funds have been implement-

ed exposes France to the risk of dis-

putes at the EU level, especially with

regard to compliance with the individual

and national relief caps applicable under

the “de minimis” regime.

A different approach to

aiding farmers in crisis

These emergency relief measures,

which only take into account bad years,

may hinder needed structural changes.

State

intervention

should

reviewed in the more general context of

managing crises in agriculture in order

to make the sector less susceptible to

crises.

As the public purse strings are tight-

ened, the possibility of a risk coverage

system for agriculture must be consid-

ered, further integrating farmers’ indi-

vidual and collective responsibility.

The Cour des Comptes recom-

mends that the Ministry seize the

opportunities offered by the 2010

Agriculture Modernisation Act and

the reform of the common agricultur-

al policy to:

increase accountability of farm-

ers by promoting tools for risk man-

agement applied on an individual basis

(e.g. to smooth income variations

through deductions for contingencies,

by building contingency savings funds

and diversifying sources of revenue),

or on a collective basis (contracting

strategy, agriculture mutual funds,

agricultural insurance, etc.);

restrict the use of national soli-

darity funds for exceptionally large-

scale disasters, on the basis of

objective, qualitative data;

secure the legal conditions of

emergency relief in terms of EU law.

Recommendations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Combined road-rail

transport in France:

initial lessons learnt and

challenges for the future

Combined road-rail traffic in France

accelerates transport by placing trailer

trucks on special rail carriages.

The service expands the offer of

combined rail and road transport servic-

es, using the existing rail infrastructure

at the cost of a few adaptations. The

system is compatible with most hauliers’

fleets.

Transporting the trailers, without

their engines and drivers, delivers con-

siderable

productivity

gains,

even

though it requires more sophisticated

organisation of shippers and hauliers.

A service struggling to

prove its worth

The Act of 3 August 2009, imple-

menting the outcome of the French

Environment Round Table (

Grenelle de

l’environnement

) and the national commit-

ment to support rail freight, highlighted

the deficiency of combined road-rail

transport in France, in efforts to shift

the long-distance transport of goods to

rail, thereby reducing pollution.

The Cour des Comptes examined

the two combined road-rail transport

lines in operation in France, other than

the Channel Tunnel. One, the alpine

route, winds around the natural obstacle

of the Alps between Savoie and the

Piedmont region in Italy, and the other

crosses the plain covering a distance of

1,000 km or more between Perpignan

and Luxembourg. A number of the

technical characteristics of these two rail

links are unprecedented in Europe.

The alpine road-rail project was

launched after the Mont-Blanc tunnel

accident, but took 10 years to become

fully operational. To date, the link has

underperformed relative to its daily fre-

quency, freight volume and sales per-

formance targets.

The commercial opening of the

Perpignan-Luxembourg road-rail line in

September 2007 went ahead without

waiting for an assessment of the alpine

project. While this rail service is techni-

cally more accomplished and managed

with more determination than the previ-

ous one, it has not achieved financial

balance. Its development is currently

limited notably by space limitations at

the terminal platforms.

Research into the technical and eco-

nomic conditions at project start-up was

not sufficient. In particular, unforeseen

adaptations were required to cope with

limitations arising from the train gauges

on the rail network.

The services on these two lines have

limited capacity and have not yet proven

to be profitable. Reliability must also be

Combined rail-road transport

in France

Executive Summaries:

Annual Public Report of the Cour des Comptes

improved. Their efficiency in terms of

modal shift and their advantages for the

environment will remain limited, in a

context where alternative transport

solutions are scarce. To date, there has

been no socio-environmental evaluation

of public intervention in favour of

combined road-rail transport.

Exacting success factors

In a context of increasing demand

for transport, tougher environmental

requirements and upward pressure on

energy prices, the idea of shifting vehi-

cles from the road onto rails is regaining

momentum in France with a view to

reducing traffic levels, pollution, green-

house gases and energy consumption.

However, rail freight market share

continues to decline in France, despite

national and EU aids for combined

transport services.

Accordingly, the conditions for the

success of combined road-rail transport

are very demanding: frequent shuttles,

boarding

with

minimum

load-

ing/unloading time, assured journey

times, prices competitive with road

transport and renovation of the rail net-

work and platforms to reliably and safe-

ly transport heavy goods on a wider

gauge.

In more general terms, shippers and

hauliers require stable and quality access

to the rail network in line with tight

logistic flows.

In the light of these demands, it is

clear that, in Europe, direct or indirect

support and incentives to improve

financial ratios are required for this

combined transport mode.

Rail-road transport will be an

opportunity for freight transporters,

provided they can in time demonstrate

their capacity to operate without on-

going state aid.

Combined rail-road transport

in France

Executive Summaries:

Annual Public Report of the

Cour des Comptes

For the State:

promote interoperability and

contribute to the development of rail

highway standards at EU level;

when the plans for the Trans-

European Transport Network (TEN)

are being reviewed, work to obtain the

inclusion of the main infrastructures

used

the

road-rail

transport

services;

rebalance

competitiveness

between road and rail for the transport

of goods, or at the very least, do not

penalise competitiveness when taking

regulatory measures;

given the current state of public

finances, avoid a long-term operating

subsidy, including in the framework of

public service delegation, and give pri-

ority to establishing an economically

viable service that meets solvent

demand.

For the State and the infrastruc-

ture operator:

ease the burden of specific pro-

cedures that penalise the internal com-

petitiveness of the economic model

compared with traditional combined

transport (due especially to the

requirement for an advice of special

consignment - ATE);

opt for the widest possible gauge

and quickly finalise back-up routes to

improve service reliability and make it

less susceptible to railway works;

confirm acceptance of long

trains (longer than 1,000 metres) for

this service as soon as possible;

formally draw up reciprocal

agreements on traffic between the

Réseau Ferré de France and the oper-

ator, providing for financial compen-

sation, where relevant, and ensure

proactive feedback of information to

the service user.

For rail operators:

increase the current capacity of

existing and planned terminals;

reduce the unit costs of terminal

operation and hauling through compe-

tition between service providers.

Recommendations

Cour des Comptes

Decentralising road

networks: the end result

Executive Summaries:

Annual Public Report of the

Cour des Comptes

The act of 13 August 2004 trans-

ferred 18,000 km of main roads of local

interest to the

départements

, with manage-

ment of related personnel and resources

also transferred in full.

There were two stated objectives for

this decision: improve service to users

and promote more efficient manage-

ment of the road network, distinguish-

ing major roads with heavy traffic,

which remain the State’s responsibility,

from local roads, managed by the

départements

Cost of reform higher than

predicted for both State

and

départements

The State has met all of its financial

obligations. The cost to the State

of additional payroll costs for compen-

sation and temporary additional staff

amounts to €50 million. An additional

commitment of €23 million annually for

30 years is also required for new infra-

structure construction.

The total costs transferred under the

road network decentralisation project

from 2006 to 2011 amounts to €1.2 bil-

lion, €210 million of which was for

local-interest main roads alone. Payment

for these went to the regions,

départe-

ments

and overseas local authorities.

Added to this sum were non-recurring

subsidies totalling €180 million under

contracts

for

joint

State-regional

projects.

The

départements

bore the cost of

road repairs, which, according to their

figures, accounted for 30% of addition-

al expenditure after the transfer, com-

pared with 2005. Payroll costs rose by

€46 million nationally, reflecting the

more favourable allowances payable to

local authority personnel compared with

State employees. Lastly, the

départements

restructured the buildings transferred by

the State. The new expenditure arising

was not systematically optimised by the

obligation to use these buildings exclu-

sively for road-related purposes.

It is difficult to identify the costs of

local-interest main roads since there is

no differentiated cost tracking in the

accounts of

départements

. Accordingly, it

is impossible to accurately quantify the

discrepancy between the expenditure

incurred and compensation granted

(46%in the period 2007 to 2009 in the

sample

audited)

claimed

the

départements

Further reform required

It is vital to define a local transport

strategy. The fairly marginal nature of

the roads transferred in the context of

the existing network in the

départements

Decentralising road networks:

the end result

Executive Summaries:

Annual Public Report of the

Cour des Comptes

was no encouragement for them to

specify a roads policy, either from the

point of view of general strategy or a

multi-year plan. The lack of coordina-

tion between stakeholders, the State,

regions,

départements

and large metropol-

itan areas impedes efficient implementa-

tion of complementary tasks.

Moreover, there are no indicators to

evaluate the condition and performance

of a local network. Nonetheless, it can

be considered that the additional sums

allocated by many of them to repairing

the transferred roads contributed to

improving the quality of the roads, and

therefore, indirectly, the quality of the

service provided to motorists.

The tight budgetary constraints cre-

ate a new context for the

départements

owing to a substantial increase in social

expenditure, and for the State, focused

on optimising existing infrastructure.

Investment in the roads is not the sole

solution. As a result, consideration must

be given to an overall policy, incorporat-

ing the goals of sustainable develop-

ment.

This mixed assessment should not

however lead to overturning the princi-

ple of transferring a substantial part of

the main roads network commenced

since 2004, since its underlying sound-

ness can hardly be disputed. Ways and

means of improving it should, however,

be sought.

improve coordination between

all actors (the State, regions,

départe-

ments

and large metropolitan areas)

who contribute to defining transport

policy at local level. The road network

must be part of an overall policy for

moving people and goods, compatible

with sustainable development, while

retaining an itinerary-based logic;

find relevant indicators to evalu-

ate user satisfaction, ensuring that

these indicators are consistent with the

goal of improving road safety.

Recommendations

Cour des Comptes

Policy on aid to crime

victims

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Victims’ rights have evolved consid-

erably since the 1980s and the law now

makes room for victims’ rights in

criminal proceedings.

Inadequate knowledge of

victims, who in turn are

ill-informed about their

rights

An accurate evaluation of the num-

ber of victims of crime is hampered by

the low number of complaints lodged,

further accentuated by the lack of a

legal definition of victim in French law

and the diversity of statistical tools.

Confronted with dispersed and mul-

tiple texts referring - often indirectly - to

them, victims of crime struggle to

understand their rights. Although their

rights have been consolidated, victims

encounter difficulties in obtaining com-

pensation and gaining access to infor-

mation regarding the follow-up of

perpetrators, particularly during the sen-

tence enforcement stage.

Support by vulnerable

associations

To remedy the complexity of legal

provisions and procedures, the Ministry

of Justice has tasked the voluntary sec-

tor with providing support to victims, in

return for grants. Almost 180 associa-

tions are involved in defining and coor-

dinating the policy of aid to victims.

However,

uncertainty

regarding

their financial position creates vulnera-

bility for this network of associations.

They are dependent on different and

inadequately coordinated financial back-

ers, and their national coverage is both

incomplete and uneven. General coordi-

nation of the network is weak, despite

the signature of multi-year contracts

between the courts of appeal and the

associations specifying their objectives.

Responsibility for carrying out a system-

atic evaluation of the network’s quality

falls to the judges delegated to voluntary

sector policy, but given their overall

workload, these judges can only devote

5 to 15% of their time to aiding victims,

which is insufficient for the most part.

Unequal access to

compensation

Compensation for damages may be

ordered by the criminal court, if the per-

petrator of the crime is identified,

judged and solvent, or under certain

conditions, by the State. Compensation

remains random however. Without har-

monised scales, the level of compensa-

tion may vary considerably according to

jurisdiction.

Policy on aid to crime victims

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Moreover, victims must advance

payment of costs whose recovery is

uncertain.

The State’s compensation system is

relatively comprehensive and efficient.

The creation in 2008 of an association

enabling victims to recover compensa-

tion awarded by the courts (SARVI) has

facilitated access for victims, without the

need for them to undertake complex

legal procedures. The guarantee fund

for victims of terrorism and other

offences plays an additional role in rais-

ing funds to ensure comprehensive

compensation for victims, but uncer-

tainty remains over its financial position.

The Cour des Comptes recom-

mends:

Regarding knowledge of vic-

tims:

regular surveys to be conducted

by the Ministry of Justice.

Regarding support:

- regularly evaluate the quality of

services provided by associations;

- assess the work of judges dele-

gated to voluntary sector policy in the

area of aid to victims;

- more clearly define the work of

associations that falls within the scope

of strictly legal support;

evaluate the financial position of

associations to guarantee the long-

term sustainability of their work;

boost inter-ministerial coopera-

tion and ensure the visibility and use

of all public financing intended for

associations;

Regarding compensation:

facilitate victims’ compensation

claims by improving information on

the procedures to follow;

propose benchmark compensa-

tion scales to prevent large disparities

in amounts awarded.

Recommendations

Cour des Comptes

Social housing:

geographical priorities

Executive Summaries:

Annual Public Report of the

Cour des Comptes

There are approximately 4.5 million

social housing rental units in metropoli-

tan France, accounting for 16% of the

28 million residences. Rents are con-

trolled and housing is open to house-

holds on a means-tested basis.

Funding according two

types of zoning

In 2010, €594 million of payment

appropriations in the budget went to

finance 131,000 new social housing

units. To this should be added more

than €2 billion in associated tax expen-

diture (lower rate of VAT and exemp-

tion from property tax), subsidies from

local authorities and

Action logement

(the

former 1% housing financed by busi-

ness), plus the mobilisation of the

resources of the Caisse des dépôts et

consignations.

On the ground, resources are allo-

cated according to two types of zoning.

One is specifically designed to support

the construction of social housing,

while the other is aimed at private rental

investment, with no real connection

between the two.

Difficult to finance social

housing in high-cost areas

Despite these zoning measures, only

25% of social housing was constructed

in high-cost areas in 2009, according to

the Ministry with responsibility for

housing. As a result, the Minister

announced a major review of priorities,

on the agenda since 2006.

Largely unsuitable and

sometimes counter-

productive zoning

Paradoxically, this shift in policy was

undertaken based on maps drawn up for

private rental investment incentives. All

the components of actual social housing

needs cannot be defined based on this

information, however, due to the man-

ner in which the maps were prepared

and the predominant role of market cri-

teria in defining the indicators. The

maps also neglect to take into consider-

ation forward planning needs.

The coexistence of these two differ-

ent types of zoning, which both impact

the planning and financial balance of

housing development operations, along

with the impact of private investment in

certain geographical areas that produces

Social housing:

geographical priorities

Executive Summaries:

Annual Public Report of the

Cour des Comptes

the exact opposite of the expected

results, make it very difficult to build

social housing in certain high-cost areas.

The policy of concentrating financ-

ing in high-cost areas, effectively imple-

mented since 2010, is therefore based

on unsuitable or even counter-produc-

tive instruments, and results to date are

limited.

In an environment of increasingly

scarce public resources, the announce-

ment by government of the elimination

of tax incentives for private rental

investments at the end of 2012 cannot

help but emphasise the need for a

review of geographical priorities to

guide public social housing actions

towards the areas of greatest need.

develop specific zoning for

social housing planning and ensure it

is coherent with zoning for individual

housing aid;

continue to improve knowledge

at national level of the social housing

stock and its changes, and take inven-

tory of private rental housing stock

subsidised by tax expenditure meas-

ures;

base new social housing zoning

on expanded national data and on

local studies validated by regional

housing committees;

in addition to housing market

economic data, select criteria including

the importance of existing social

housing, its occupancy, households’

ability to pay and the difficulty they

experience in gaining access to hous-

ing other than social housing;

involve housing professionals,

local authorities and social landlords in

drawing up zoning;

plan to review zoning every

three years; establish a rolling schedule

by region according to this periodicity

and provide regional prefects with the

ability to adapt to the local situation,

after consulting all local actors.

Recommendations

Cour des Comptes

Public service retirement

system in New Caledonia:

reform is vital

Executive Summaries:

Annual Public Report of the

Cour des Comptes

New Caledonia’s local pension fund

manages

the

pension

system

for

employees of the public service system

specific to New Caledonia (8,500 con-

tributors, 3,700 pensioners). In its audit

of financial years 2004 to 2010, the New

Caledonia

territorial

chamber

accounts noted a deterioration in the

financial position due to the very bene-

ficial nature of the current retirement

system.

An attractive system

In early 2010, the average retirement

age was 54.7. More than 70% of pen-

sioners received a higher retirement

income than people retiring from the

private sector in New Caledonia. Not

only that, but the system dependency

ratio has weakened consistently in

recent years: in 2009 there were only

2.41 contributors for one pensioner.

Worrying outlook

The reforms undertaken by the

competent local authorities have proved

to be unequal to the task of curbing the

monthly structural deficit of some

€500,000, and the fund’s reserves have

been depleted from €225 million in

1998 to €83.8 million in 2010.

With the legislation unchanged,

almost 35% of civil servants currently

working should reach the average retire-

ment age around 2020, while recruit-

ment of new staff should be limited by

the new budgetary restrictions imposed

on public sector employers.

Overall reform needed

Overall reform must be undertaken

without delay to guarantee payment of

public service pensions in the medium

term. The Caledonian authorities must

act quickly using the main levers avail-

able to them: the retirement age, the

contribution period for eligibility for a

full pension, employers’ and employees’

contributions and pension amounts, or a

combination of these factors if neces-

sary.

Follow-up to the reform must also

be put in motion to ensure adjustments

as needed in the light of the impact over

time.

Public service

retirement system

in New Caledonia

Executive Summaries:

Annual Public Report of the

Cour des Comptes

reform the Caledonian civil ser-

vant retirement system based on the

four possible levers available: the

retirement age, the contribution peri-

od for eligibility for a full pension,

level of contributions from employers

and employees and pension amounts;

follow up the reform to make

adjustments as needed in the light of

the impact over time;

develop tools, especially audits,

to improve management of the retire-

ment system.

Recommendations

Cour des Comptes

What’s happening with

ENS elite schools?

Executive Summaries:

Annual Public Report of the

Cour des Comptes

The elite higher-education system

formed by the

Ecole normale supérieure

(ENS) network was restructured in the

mid-1980s and now comprises three

colleges, Ulm, Lyon and Cachan, all of

which were audited by the Cour des

Comptes.

Shared challenges

ENS schools must successfully work

their way into the competition of world-

wide university rankings.

They have expanded their intake to

master’s graduates recruited on the basis

of their application files, alongside

nor-

maliens

, ENS students recruited through

selective competitive examinations after

completing a preparatory programme,

endowed with a special “civil servant”

status entitling them to funds to pay for

their eduction, in return for working as

a civil servant after graduation. ENS

schools have also seen increasing diver-

sification of all their students’ profes-

sional vocation. The proportion of

normaliens

who pass the competitive

examination to become a teacher (

agréga-

tion

) is falling, while the ENS systemati-

cally encourages them to continue their

education to doctoral level.

The Liberties and Responsibilities

of Universities Act, enacted on 10

August 2007, also encouraged ENS

schools to establish alliance strategies.

Different strategies

The failure of the proposed merger

between Ulm and Cachan in 2005 rein-

forced the independence of the ENS

schools and accentuated centrifugal

forces in the system. Since then, each

ENS has separately defined its own

strategy and makes its own decisions on

university alliances.

Ulm adopted its own strategy of

excellence, increasing its independence

from the major Paris universities and

opting for alliances with the large neigh-

bouring colleges of Montagne Sainte-

Geneviève and the Université Paris

Dauphine.

Lyon on the other hand decided to

ally with the Lyon group of universities.

Cachan announced its intention of

joining the future Paris-Saclay campus,

which will mean moving to new facili-

ties, with the future of its branch at

Rennes remaining uncertain.

The cost of excellence

Both Ulm (2004-2005) and Cachan

(since 2007) experienced a similar crisis.

The ENS’s ignorance of its actual

financial position was brought to light

when Cachan’s own resources were

called on to fund the d’Alembert build-

ing project: the combination of overes-

timating

working

capital

and

its

What’s happening with ENS elite

institutions?

Executive Summaries:

Annual Public Report of the

Cour des Comptes

financing requirement resulted in a cash

flow crunch.

While Ulm turned around its situa-

tion from 2006 onwards, at the price of

an exceptional budgetary aid from the

State (€2 million), which was subse-

quently made permanent, the same can-

not be said for Cachan, which faces

continued uncertainty, with finances in

critical condition.

Other management deficiencies

were also revealed, in particular, poor

knowledge of costs and no implementa-

tion of cost accounting measures.

The most shocking management

failure concerns the commitment oblig-

ing students to teach in a school for 10

years, minus their years at the ENS, to

pay back the remuneration received to

support their studies.

General inertia characterises this

area, owing to deficiencies in following

up students and the dilution of respon-

sibilities between the ENS, follow-up

officers and the Ministry, which is

responsible for triggering the repayment

clause if the 10-year commitment is

breached. Five such cases were found at

Ulm and Cachan where students leaving

public service spontaneously offered to

repay their education and were unable to

do so.

The low teacher-student ratio and

average costs per student mean that the

ENS system is a high-cost education

model.

Neither the ENS schools nor the

Ministry know the unit cost of their

education and research activities, and

the metric is not included in their per-

formance criteria.

Change needed

Although they are independent and

formulate their own strategy, national

policies nonetheless apply to the ENS

network.

However, the Ministry has been hes-

itant to act on several issues, and many

questions remain.

Compared with the growth in the

number of higher-education graduates

and research personnel in the last gener-

ation, the stability in the number of

nor-

maliens

may appear to be an anomaly.

Similarly, the more selective compet-

itive entrance process for the ENS

schools seems surprising, in the light of

targets set for equal opportunity and the

diversification of the social background

of the nation’s elites.

Finally, the increase in ENS num-

bers, due entirely to the intake of uni-

versity

graduates

(as

opposed

normaliens

) has led to two student popu-

lation groups and situations, which,

although different from one ENS

school to another, are a source of com-

plexity and lack of transparency.

In terms of the rules of the game

operating between universities and the

ENS network, it is difficult to under-

stand how Ulm has been able to devel-

op an alliance strategy that includes no

university other than Paris Dauphine -

in reality an elite institution of higher

education, even though the Ministry’s

What’s happening with ENS elite

institutions?

Executive Summaries:

Annual Public Report of the Cour des Comptes

stated policy is to promote greater coor-

dination between the two categories.

Prudent, but open, consideration

must be given to the status and payment

of students: although it is true that

financial incentives intended in principle

attract

excellent

students

into

research and teaching are legitimate, the

current conditions for awarding them

are overly uniform and fall short of

achieving this objective.

An overall review could open the

way for a wide range of options, book-

ended by the two hypotheses below:

one whereby students would be

offered the choice of status best suited

to their vocation, as devised by the Lyon

ENS when preparing its bylaws after the

merger;

and

another

radical

hypothesis, which would consist of

devolving payment credits and scholar-

ships to the ENS schools for their

nor-

maliens

and students. It would be up to

the ENS schools to define a policy of

financial incentives combining the

objectives of social equality and attract-

ing excellent students to higher educa-

tion teaching and research.

Recommendations

For the ENS network:

improve budgetary and account-

ing practices and use cost accounting;

develop management by objec-

tives with greater reliance on perform-

ance indicators, while including the

cost of education;

boost their real estate manage-

ment function;

improve follow-up of students

after education.

For the Ministry of Higher

Education and Research:

adjust and clarify financial sup-

port for the ENS based on pre-

defined criteria;

explain the predominant princi-

ples for cooperation between the ENS

schools and universities and their pos-

sible merger;

devolve full responsibility for

follow-up of the 10-year commitment

to ENS schools;

working with ENS schools,

examine the status and payment con-

ditions for

normaliens

;

in this context, foster growth in

the number of students and

normaliens

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Thematic advanced

research networks

A new form of scientific

cooperation

The 2006 Research Programme Act

created thematic advanced research net-

works (RTRA) to promote the forma-

tion of a dozen “research campuses” in

France to rank with the best in the

world, working on future challenges in

areas such as economics, physics, infor-

mation sciences and communication.

Each network was to include a num-

ber of higher education and research

institutions and facilities. The specific

legal

framework

Scientific

Cooperation Foundation was intended

to facilitate access to private funding

and to ensure agility.

There were 13 RTRAs created, two

of which are managed by a single foun-

dation. The State financed the 12 foun-

dations to the tune of €201 million in

matching funds for founding endow-

ments totalling €54,175 million.

Very disparate structuring

impact

The goal of the research act was to

increase the international visibility and

appeal of the research facilities and lab-

oratories in the RTRAs. The legal status

applicable to foundations allowed flexi-

ble financial management, which was

intended to attract the best French and

international scientists.

However, most RTRAs failed to go

beyond the simple principle of cooper-

ation between laboratories. They did not

succeed in increasing their visibility.

The Ministry did not properly over-

see this new instrument. It does not

know whether or not the programme

has been effective, even though the

agreements signed with the RTRAs end

in 2012.

Scientific cooperation

foundations: warped legal

instruments

The legal status given to a “scientif-

cooperation

foundation”

was

designed to promote specific objectives

through

long-term

and

gradually

increasing capital allocations. Capital

allocations from the State and the

founders were supposed to guarantee

their continuity.

In general, these foundations were

diverted from their purpose. For the

most part, they did not endeavour to

increase their initial endowment and in

the main failed to attract private capital.

On the contrary, by virtue of the law

and using the private accounting proce-

dures authorised by their legal status,

they financed their activities by drawing

Thematic advanced research

networks

Executive Summaries:

Annual Public Report of the Cour des Comptes

heavily on their endowment, several

foundations taking the risk of exceeding

the threshold leading to wind-up.

Risk of duplication of

scientific cooperation

structures

Thematic advanced research net-

works are about to be overtaken by new

forms of scientific cooperation, namely

laboratories that constitute centres of

excellence.

Not only was the initial purpose of

the Research Programme Act (to pro-

vide greater clarity in research organisa-

tion) left unachieved, but complexity

actually increased.

Recommendations

The following are the Cour des

Comptes’ recommendations for the

Ministry of Higher Education and

Research:

protect the successful RTRAs

and wind up those that have not ful-

filled their objectives by requesting the

dissolution of scientific cooperation

foundations when they have spent

most of their endowments;

initiate effective oversight of sci-

entific cooperation foundations, partic-

ularly through their government-

appointed auditors;

review the basic principles and

reserve the status of scientific coopera-

tion foundation for specific, long-term

projects, funded by irrevocable capital

allocations;

ensure that research cooperation

schemes are consistent, especially those

covered by future investments, and sta-

bilise the tools made available to the

scientific community in the long term.

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Achieving the bachelor’s

degree: ministerial plan

and action taken by

universities

Only one-third of students entering

university will complete their bachelor’s

degree. Half of the bachelor’s students

in their first year pass into their second

year of studies. These two statistics

alone summarise the problem of failure

in the bachelor’s programme.

On top of this, despite widespread

adoption of the European “Bachelor’s,

Master’s, Doctorate” (BMD) standard,

the bachelor’s degree is not recognised

as a professionally qualifying diploma.

This situation led the Ministery of

Higher Education and Research to the

launch the “Achieve the Bachelor’s” plan

in December 2007. The plan involves

863,000 university students out of a

total of 1,437,000.

The Cour des Comptes examined

this specific initiative based on a sample

of 23 universities.

Minimum guidance for an

ambitious plan

The Ministry’s reform plan had

three very ambitious objectives at the

outset: halve the first-year failure rate in

five years; make the bachelor’s degree a

professionally recognised diploma as

well as a springboard for further educa-

tion; and, in accordance with the Lisbon

strategy, increase the number of higher-

education graduates per age group to

50% in 2012.

With €730 million in credits spread

out over five years, the Ministry did not

deploy the necessary direction nor over-

sight to ensure that this additional pub-

lic expenditure was employed efficiently.

Organised in the framework of a

call for projects to universities, the dis-

tribution of this credit allocation could

hardly be termed selective.

Earmarking these additional funds

undoubtedly helped to consolidate the

measures already undertaken by the uni-

versities, but they used these monies

cautiously without ensuring adequate

oversight.

For its part, the General Directorate

for Higher Education and Professional

Integration

(

Direction

générale

pour

l’enseignement supérieur et l’insertion profes-

sionnelle

, DGESIP) was not particularly

attentive as to how the funds were used

by the various institutions.

Measures taken by all

universities to improve

successful completion of

the bachelor’s degree

Most universities took action to pro-

vide greater support for their bachelor’s

students, although it is difficult to per-

ceive the relationship between this strat-

Achieving the bachelor’s degree

Executive Summaries:

Annual Public Report of the Cour des Comptes

egy and the “Achieve the Bachelor’s”

plan.

Shorter professional training pro-

grammes did not answer the ministry’s

call, however, due to the fact that they

were not part of an overall strategy to

guide baccalaureate graduates into these

streams.

The universities focused on three

priorities:

- improving orientation prior to

entry to university: the universities

invested in the “active orientation”

approach, and the “post-baccalaureate

admission” system, in coordination with

college rectors; universities also intensi-

fied their links with secondary schools

to enhance the transition between sec-

ondary and higher education;

- improving the educational quality

the bachelor’s programme by strength-

ening the courses for “vulnerable” stu-

dents, developing personalised tutoring

for students, offering a wider range of

options for switching courses during the

bachelor’s programme and introducing

professional development into the

curriculum;

- initial investment in employability

programmes for students, with the

development of specialist services and

increasing the number of links with the

economic sector.

The changes in the bachelor’s pro-

gramme are very real indeed.

The traditional academically orient-

ed curriculum is gradually giving way to

more flexible programmes and widen-

ing its focus to take in the wider econo-

my.

Accordingly, the new bachelor’s

degree, set out in the Order of 1 August

2011 and presented as a degree that also

focuses on employability, seems to be

the result of a trial-and-error process.

The new milestone to be passed in

2014 will come at a cost, since the num-

ber of teaching hours for future bache-

lor’s programmes has been set to 1,500

hours - a cost that the Ministry has not

determined to date.

Achieving the bachelor’s degree

Executive Summaries:

Annual Public Report of the

Cour des Comptes

The Cour des Comptes makes

three recommendations:

If the “Achieve the Bachelor’s”

plan is renewed, allocation of credits

should give priority to more clearly

identified and assessed projects in

order to boost the incentive nature of

the

credits,

while

using

them

optimally;

with the expected changes in the

baccalaureate

population

(split

between general, technological and

vocational baccalaureates), encourage

holders of general baccalaureates to

enter university; adapt the intake

capacities

short

programmes

(advanced technicians sections (STS)

and

technological

institutes)

improve access for those holding

vocational and technological baccalau-

reates;

with a view to implementing the

“new bachelor’s degree” Order of 1

August 2011, evaluate the costs arising

from the remodelled bachelor’s pro-

grammes without delay.

Recommendations

Cour des Comptes

Subprefectures

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Based on the historical map of 342

districts, the network of 238 subprefec-

tures has to date remained outside the

scope of reform of French territorial

administration.

The gap between the major socio-

logical and administrative changes that

have taken place in the country and this

almost intangible network continues to

widen.

Fewer traditional missions

Ending their function of issuing and

checking the authenticity of official

documents deprives most subprefec-

tures of their traditional role.

Suppression of this document deliv-

ery service has caused a certain amount

of confusion. It would be appropriate

to reframe this reform nationally to

avoid applying different approaches

depending on the geographical area or

the individuals in question.

In addition, no scheme has been

established to facilitate redeployment of

this staff. The inertia of the subprefec-

ture map has hindered the pooling of

tasks and resources.

In the light of this loss of sub-

stance, the Minister has adopted a uni-

form

approach

whereby

all

subprefectures are organised based on

the principles of mission administra-

tion, under the control of the subpre-

fect. Reform in this case is only superfi-

cial, since the subprefect has always

fulfilled this function.

It does not always justify the dis-

trict’s territorial jurisdiction, because the

services they are tasked with are deliv-

ered at the

département

or regional level.

Unreformed network

Whereas studies concentrating on

revamping administration at the subpre-

fecture level have never culminated in a

national plan, adjustments are possible,

without a loss of state presence: twin-

ning of territorial positions, appoint-

ment

administration

advisors

(CAIOM) to replace subprefects, creat-

ing “Government bureaus” or sub-

offices to replace subprefectures.

Use of these options has so far been

very restrictive: two positions twinned,

three administration advisors appointed

out of a total of 115 positions, a single

“Government bureau” project, since

changed to a sub-office project, but as

yet not completed.

An outdated map, overdue

for change

No significant amendments have

been made to the national district map

since 106 districts were eliminated in

Subprefectures

Executive Summaries:

Annual Public Report of the

Cour des Comptes

1926. At the time, this reform was justi-

fied by modernisation and improved

communications.

Since

1926,

districts

were

restored or created. Districts created

since 1962 were in response to urban

development projects; however, these

changes were not fully correlated nor

were they made according to consistent

criteria. Contemporary changes have

been characterised by the creation of

new districts, with none shed, unlike in

former periods.

The average population of a “terri-

tory”, where a district (

arrondissement

)

coincides with a subprefecture, is

137,000 inhabitants: 48% of districts

have less than 100,000 inhabitants and

25% have less than 60,000. Differences

in population distribution continue to

increase.

Changes to district boundaries since

2004 concern only 15% of the map, and

only six

départements

were entirely

redrawn.

This result is disappointing, espe-

cially since rationalisation of intercom-

munal cooperation is currently in

progress.

Short-sighted national

strategy

Although no overall assessment of

the cost of the subprefectures exists, it

is estimated at €220 to 250 million,

excluding real estate charges.

Areas where savings can be made,

such as a stronger collegial team around

the prefect with some territorial posi-

tions cut, creating sub-offices, reducing

residential costs by appointing territorial

advisors and pooling staff as a solution

to dilution, have neither been tried nor

examined in greater depth.

Subprefecture personnel numbers

fell in 2010 at almost twice the rate of

the State’s territorial administration as a

whole.

The impacts of this decline have

been mixed: human resources in the

small subprefectures, the majority, have

been considerably reduced and could

reach a critical level.

Behind the imposing facade of

nationwide

coverage,

the

human

substance of the prefecture system is

missing.

No real estate strategy

The subprefectures represent 36%

of prefecture buildings. More than half

of the area is used for residential and

reception purposes, with these uses

sometimes accounting for more than

double the space taken up for adminis-

tration.

Generally speaking, properties are

too large and unsuited to current public

and administrative requirements. The

cost of upkeep is no longer proportion-

al to the Ministry’s budget and repre-

sents a burden on prefecture budgets.

Urgent needs are not being met, such as

services for foreign nationals at the

Saint-Denis subprefecture.

Subprefectures

Executive Summaries:

Annual Public Report of the Cour des Comptes

It is vital to define a real estate strat-

egy. But it is difficult to determine

which criteria should serve to define this

strategy, since the map is intangible and

property is made available to local

authorities free of charge, putting a

freeze on change.

This

institutional

immobility

deprives the State of gains from ratio-

nalisation and savings. Thirty years after

the first devolution programme, it is

necessary to clarify who occupies these

holdings, the State or the

départements

(who own the sites). Failing this, subpre-

fecture property will be increasingly dis-

proportionate, unsuitable and costly.

Recommendations

For the organisation of local

government authority:

adapt the district map to today’s

socio-demographic and administrative

realities;

align the contours of urban dis-

tricts with metropolitan area bound-

aries and suburban districts with the

intercommunal

metropolitan

area

boundaries;

resolve indecision on the future

of the smallest districts and subprefec-

tures by investigating their actual situ-

ation and ensuring the viability of the

sites that are maintained;

With respect to management of

the subprefecture network:

determine the human, social,

budgetary and real estate conditions

required to transform the subprefec-

tures into “mission administrations”

and adopt a more selective and differ-

entiated approach;

as a result, deduce the changes

to be made in the network (sub-office,

twinning, territorial administration

advisor), coordinated at national level

and in a sustainable framework;

oversee their implementation to

capture savings, especially real estate

savings;

decide on a real estate strategy in

line with functional orientations and

budget resources to reduce and ratio-

nalise the real estate portfolio;

on the basis of established law,

renew negotiations with the

départe-

ments

for the provision of buildings,

while leaving open the possibility of

having recourse to the law after a given

time period;

review enforcement of the

reform involving the system for issu-

ing official documents to remedy dis-

parities in access to the service, the

organisation of tasks and allocation of

personnel.

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Managing state worker

status in the Ministry

of Defence

The defence sector is the chief

employer of state workers, accounting

for almost 30,000 of the 44,511 current-

ly employed.

This work force is employed either

directly by the Ministry, its public under-

takings or by two weapons manufactur-

ers, DCNS and Nexter.

Status diverted from its

original purpose

This specific legal status was created

to ensure that the State disposed of a

work forced trained to manufacture or

perform maintenance on a wide range

of equipment and systems, mainly for

military purposes.

The status of state worker, based on

aspects of both public and private law,

has been largely diverted from its

purpose.

In 2009, only 43% of state workers

belonged to a professional sector devot-

ed to specialisations considered as prior-

ity activities by the Ministry for Defence

for

keeping

military

equipment

operational.

More than half of these state work-

ers in the Ministry of Defence were

hired for less technical work, in con-

struction or catering mostly, jobs which

in other government departments are

normally carried out by civil servants or

contract employees, or outsourced.

Overdue reform of

recruitment policy

This category of recruitment, which

did not require persons with a state

worker profile, concerned 20% of the

state workers recruited in 2005, 12% in

2006, and 15% in 2007.

It was not until 2008 that this per-

centage shrank to 3%. From 2007

onwards, the Ministry expanded the

possibility of using civil servants to

meet its needs, extending it to specific

specialties in 2010.

Since 2009, the Ministry of Defence

has also tried recruiting personnel on

fixed-term contracts, with the option of

becoming permanent, at salaries equiva-

lent to those offered in the private sec-

tor, for positions previously filled

exclusively by state workers.

High price tag for public

finances

In the period 2000-2010, at constant

euros and for comparable functions,

state workers were paid significantly

more than civil servants in the Ministry

of Defence.

Managing state worker status

in the Ministry of Defence

Executive Summaries:

Annual Public Report of the Cour des Comptes

Comparison of the salaries received

by a state worker and a civil servant

without any particular qualification,

where both are capable of doing similar

jobs, yields a net annual salary differen-

tial of between €1,512 and €3,816

depending on the year.

The lowest difference in salary

between a state worker and a qualified

civil servant in this period was €1,692

and the highest was €4,488. In a com-

parison between two team supervisors,

the highest disparity found was as much

as €4,776 per year.

This situation is further aggravated

by a generous advancement policy and a

favourable retirement system, combin-

ing the benefits of the public and pri-

vate sectors and dependent for its

financial equilibrium on the subsidy paid

by the State budget.

In total, the cost to the budget for

state workers exceeds €2 billion, distrib-

uted almost equally between payroll and

pension costs.

Inadequate management

Statistical and administrative knowl-

edge on employees is approximate. The

legal basis for a very large proportion of

remuneration is irregular. Employment

and skills management seems dominat-

ed mainly by efforts to support restruc-

turing, which happen to be effective.

Managing state worker status

in the Ministry of Defence

Executive Summaries:

Annual Public Report of the

Cour des Comptes

stop

the

use

“state worker” status to fill positions

of all kinds in the Ministry of

Defence;

evaluate contract recruitment

since 2009 to fill positions requiring

advanced technical skills;

review rules on raising salaries;

for state workers working in the

Ministry of Defence:

- regularise the legal basis for the

main salaries, compensation and pre-

miums paid to certain categories of

personnel;

- establish an information system

to monitor all management parame-

ters for these employees over time and

define a true employment and skills

policy;

- review the rules and calculation

methods for promotion;

as needed, change work organi-

sation to optimise integration of

requirements to maximise use of

infrastructure and limit overtime;

prepare an accurate assessment

of measures implemented for state

workers in the context of the restruc-

turing support plan.

Recommendations

Cour des Comptes

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Initial training and

recruitment of teachers

The reform of initial training and

recruitment of teachers was adopted in

a cabinet meeting on 2 July 2008.

Referred to as “masterisation”, the

measures were implemented at the start

of the 2010-2011 school year with two

objectives in mind:

- raise the requirement for the

recruitment of teachers to a master’s

degree, rather than a bachelor’s;

- provide better training through

direct practical classroom time.

Incomplete assessment of

the reform’s impact

In the previous system, newly

recruited teachers became trainees in a

teacher training college (IUFM) and

provided only one third of regulatory

teaching service obligations. They are

now assigned to schools with a full-time

service obligation.

Raising the qualification level to a

master’s degree has yielded an immedi-

ate gain equal to two-thirds of person-

nel, which for 2011 translated into a net

reduction of 9,567 positions and sav-

ings of some €370million annually.

However, this amount does not take

other as yet unquantified effects into

account, such as the cost for the univer-

sity system of extending the length of

study, or the cost of reorienting candi-

dates who fail the competitive recruit-

ment examinations, namely three-quar-

ters of students from “Teaching”

master’s programmes.

Failures related

to implementation

The speed at which this reform has

been implemented has allowed the

Ministry to cut budgeted positions to

meet the requirement not to replace

50% of those retiring, but has caused

difficulties. New teachers are often con-

fronted with unfavourable conditions

for the exercise of their new profession,

while 70% of them have no prior teach-

ing experience.

Thus, contrary to official guidelines,

trainee teachers were assigned to priori-

ty primary schools, and in a larger pro-

portion

than

permanent

qualified

teachers in seven educational districts.

In secondary education, some were

obliged to work overtime (35% in an

educational district in eastern France).

Others were assigned to several schools,

which was bound to make integration

particularly difficult for them. Finally, a

large percentage was assigned to at least

three teaching levels.

The total training hours for trainee

teachers after recruitment was set to one

third of their compulsory teaching

Initial training and

recruitment of teachers

Executive Summaries:

Annual Public Report of the

Cour des Comptes

hours, in addition to those hours, which

equates to one third more working

hours than a permanent teacher. Much

of the criticism of this reform related to

this additional workload. To alleviate

this difficulty, in primary teaching, edu-

cational authorities reduced the teaching

load for teachers to attend these courses

in the first quarter of the 2010-2011

academic year only. In secondary teach-

ing, only six educational authorities were

able to offer this arrangement through-

out the academic year.

Although trainee teachers consider

tutoring to be the best training method,

a ministerial survey of secondary teach-

ing revealed that 23% of trainees were

not assigned to the same school as their

tutor.

Lack of articulation

with the aims of

formal education

An Order of 12 May 2010 lists the

10 very general competencies required

of future teachers. However, since the

Ministry has thus far not distributed a

professional set of standards for the

teaching professions, they cannot influ-

ence the content of training delivered by

universities.

The amount of practical training for

teachers before being assigned to a class

of pupils under the new system is not

necessarily longer than under the previ-

ous one, i.e. 12 weeks.

Likewise, despite the objectives set

by the Education Code, only nine sec-

ondary teaching training hours were

devoted to managing different levels of

pupils’ ability in 2010-2011. A survey in

July 2011 showed that 69% of trainee

teachers were dissatisfied with their

training.

The Planning Act for the Future of

Schools of 23 April 2005 set out a core

curriculum of knowledge and skills,

which assumes continuity of learning

between primary and secondary levels,

but the competitive teacher recruitment

tests remain different for both levels

and no review has been initiated with a

view to creating common initial training

models.

In addition, raising the degree

requirement for eligibility to sit the com-

petitive recruitment examinations has

reduced the potential pool of appli-

cants: there are over 300,000 less stu-

dents studying for their master’s than

those working on their bachelor’s. As a

result, the pool of applicants in 2011

was reduced by more than 50,000, or

one third of registered applicants in one

year alone. The actual attendance rate

for the school teachers’ competitive

recruitment examination fell from

50.3% of registered candidates in 2010

to 42.4% in 2011 and from 65.9% to

51.6% for the secondary teachers’ cer-

tificate of aptitude exam (CAPES). The

selectivity ratio for the secondary teach-

ing competitive examinations dropped

considerably: the “passed/present” ratio

went from 22.7% to 32.5% for the

CAPES. Shrinking the pool of appli-

cants has even resulted in recruiting dif-

Initial training and

recruitment of teachers

Executive Summaries:

Annual Public Report of the Cour des Comptes

ficulties for some positions: in 2011, 826

positions in secondary education were

left unfilled, 376 of these for mathemat-

ics, 155 for modern languages and liter-

ature, and 131 for English.

Recommendations

In addition to the vital progress to

be made in organising the first year of

employment for trainee teachers, the

Cour des Comptes makes four main

recommendations

accompany

reforms:

prepare a system of reference

for master’s programmes preparing

students to sit the competitive recruit-

ment

examinations

for

teachers,

including the minimum practical train-

ing periods in the classroom;

organise competitive recruit-

ment examinations before or at the

start of the master’s programme, to

avoid a situation, in case of failure,

where students train for a profession

they cannot exercise;

release trainee teachers from

teaching hours, at a constant budget

cost, depending on the specific diffi-

culties of their assignment;

establish an information system

and database to evaluate whether

training actions are fit to meet teach-

ers’ needs.

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Human resource planning

in local government

Human resource planning is a way

for local government authorities to plan

for changes in HR policy and aim to

achieve the best possible match between

their requirements and resources.

Despite the major human resource

challenge represented by the 57,700

local government employees, this for-

ward-looking process was implemented

on a very limited scale for the 1.9 million

jobs in local government structures at

the end of 2009.

The need for human

resource planning

In 2010, payroll charges accounted

for one third of total operating expens-

es (half for the municipalities), and the

equivalent of three quarters of invest-

ment spending.

An ageing population creates many

difficulties for local authorities in terms

of recruitment, organisation and the

transmission of know-how.

The transfer of many State employ-

ees, the allocation of new powers to

local government authorities, and trans-

fers of powers from municipalities to

intercommunal structures have also dis-

rupted human resource planning, with-

out generating savings.

Emergence of best

practices

Human resource planning depends

first and foremost on the willingness of

local executive powers.

Forward planning requires an analy-

sis of the existing employee structure,

and the application of natural or forced

flows to determine future resources.

This must be followed by an assessment

of strategic objectives relevant to man-

power, occupations and skills to deter-

mine future needs. By cross-referencing

resources against needs, gaps can be

identified and action plans prepared as a

result.

The importance of human resource

departments in the local government

structures is not marginal, but their role

is often limited to short-term manage-

ment.

Improvement

opportunities

Local authorities must first improve

their

knowledge

their

human

resources.

An analysis of positions and occu-

pations constitutes an essential, but neg-

lected, preliminary step towards true

human resource planning. The process

must include factors related to changes

Human resource

planning in

local government

Executive Summaries:

Annual Public Report of the Cour des Comptes

in occupations and the local authority’s

medium- and long-term structural

objectives.

Lastly, forward planning and simula-

tion features are often lacking in both

human resource management charts

and information systems.

Recruitment should contribute to

achieving a better match between posi-

tions and employees, but often takes

place on an as-needed basis rather than

in response to an analysis of need.

Skills and career management could

also contribute to matching resources

with future needs: employee evaluations,

advancement, promotions, and adjust-

ing bonuses and allowances all consti-

tute levers in this respect.

On-the-job training actions are not

systematically based on a coherent strat-

egy and analysis of needs.

Recommendations

Incorporate human resource

planning in the local authority’s

overall strategy:

- make dynamic use of social

reports for long-range planning;

- integrate the HR dimension in

preliminary impact studies;

- define needs in the medium term

and evaluate the gaps to be filled;

- clarify and guide consideration of

budgetary limitations to optimise and

control payroll costs;

- implement a multi-year approach

during budget debates;

Adopting an approach based

on occupations and skills:

- inventory and manage jobs

according to occupations and skills;

- adapt recruitment to this occupa-

tion-oriented architecture;

- define individualised career paths

according to occupation;

- organise employee evaluations

based on required skills;

- optimise use of career and remu-

neration tools;

- roll out training targeted at occu-

pations.

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Public hospital services

in Marseille (AP-HM):

project to computerise

patient records fails

The IT public procurement con-

tracts engaged in by public hospital

services in Marseille (

Assistance Publique

Hôpitaux de Marseille

, AP-HM), and in

particular its electronic patient records

project, were audited by the Cour’s

regional chamber of Provence-Alpes-

Côte d’Azur.

Flawed approach to an

ambitious project

The AP-HM launched its electronic

patient records project in the problem-

atic context of obsolescent information

systems and strained budgets. The proj-

ect set out to combine the programmes

handling medical data and administra-

tive data into one information system.

Its aims included coordination of care,

management and pricing.

The principles that served to pre-

pare the specifications and organise the

consultation, however, were ambiguous.

The services required were not clearly

defined during discussions between the

AP-HM and the vendor, a consortium

including an American company with

no real experience of the French

hospital system.

A series of errors and

delays

Having been postponed eight times

in three years, the project ended in fail-

ure. As it stood, the IT application was

incapable of delivering administrative

and medical management of patients in

a hospital structures such as the

AP-HM.

The lack of understanding between

the vendor, who intended to deliver the

software “as is”, and the hospital’s IT

department, which wanted the software

tailored to the specific needs and organ-

isation of the AP-HM, partially explains

this failure, as well as the fact that the

AP-HM’s IT teams were not sufficiently

qualified to supervise a project of this

scale.

To remedy this situation, the AP-

HM launched a new call for tenders in

July 2009 for the purchase of adminis-

trative

and

financial

management

software, and medical and pharmacy

information systems software (the

latter

portion

subject

further

procrastination).

Assistance publique-Hôpitaux

de Marseille (AP-HM)

Executive Summaries:

Annual Public Report of the Cour des Comptes

A particularly high

price tag

The total cost of reorganising AP-

HM’s information systems may be esti-

mated at €14 million, with €12.5 million

for the electronic patient records project

and €1.5 million for the second contract.

The hospital incurred losses of €5.5

million for the purchases, provisions

and services related to the electronic

patient records project and the acquisi-

tion of new software for the pharmacy.

On top of this, €5.1 million was spent

on human resources and communica-

tion, bringing the total to €10.6 million

with nothing positive to show for

AP-HM.

The disruption suffered for three

years also had a negative impact on the

hospital’s revenue: billing was compro-

mised and lost revenue exacerbated the

very high cost of the project.

Faltering at the top

Slack management of hospital infor-

mation systems at national level appears

to be an additional risk factor in a con-

text where public funds appropriated in

the 2007 and 2012 Hospital Plans were

increased substantially in this sector.

It is questionable whether or not the

Ministry for Health made the right deci-

sion in granting a €9 million subsidy to

the AP-HM under the 2007 and 2012

hospital plans.

Recommendations

The Cour des Comptes and the

regional chamber recommend:

that in the future, the hospital

request the expertise required to

analyse and define its needs for large-

scale IT projects;

that the supervisory authorities,

the Ministry of Health and the region-

al health boards (ARS) give priority to

efficient strategic oversight of hospital

IT projects, requiring prior analysis

with the appropriate support docu-

mentation and an evaluation of work

already under way as a prerequisite for

the funding granted under the 2007

and 2012 Hospital plans;

that the Ministry of Health

examine the possibility of awarding

the project management contract for

all complex hospital medical comput-

erisation projects to a single operator.

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Real estate assets

in the public health

sector not appropriated

to health care

Real estate assets belonging to the

public health sector include private

property assets (such as housing, land,

vineyards, etc.) - referred to as “unallo-

cated wealth” - concentrated in a small

number of institutions, as well as for-

mer hospital sites, no longer in service

after the transfer of activities to more

modern facilities.

Given the deterioration in hospital

finances, it is vital to optimise these

assets to generate new income and avoid

upkeep costs for infrastructures that are

no longer used for patient care.

Multiple challenges

The first challenge is financial. In

the period 2002-2010, the income from

private assets amounted to €83 million

(operating income and asset disposal)

per year for public health care facilities.

Three of these, the

Assistance publique-

Hôpitaux de Paris

(AP-HP), the

Hospices

civils de Lyon

(HCL) and the

Centre hospi-

talier (CH) de Beaune

accounted for 60%

of this operating income.

However, the potential income and

proceeds from asset disposal are far

higher. Inadequacies in the hospital

accounting systems and the lack of a

national inventory make it impossible to

arrive at a clear estimate of the value.

The second challenge concerns hos-

pital housing policies. Hospitals with

private assets, particularly large universi-

ty hospitals, are in a position to offer

employees hospital accommodation and

housing allocated on the basis of socio-

professional criteria. The AP-HP enjoys

the largest holding, with more than

11,000 housing units. This policy

appears poorly managed and an in-

depth review is called for.

Finally, the valuation of private

assets goes beyond the interests of the

hospital that owns them. Releasing very

large tracts of public land, often in city-

centre locations, constitutes a major

urban rehabilitation issue. But the goals

pursued by municipalities or intercom-

munal authorities who hold decision-

making powers in urban planning

matters may not be compatible with the

hospital’s goal of optimising the pro-

ceeds of asset disposal. A quality dia-

logue with local authorities and a

far-sighted approach to difficulties are

determining factors for the success of

reconversion projects.

Real estate assets in

the public health sector

not allocated to health care

Executive Summaries:

Annual Public Report of the Cour des Comptes

Asset valuation: a

demanding task for public

health care facilities

With a few exceptions, private assets

have not been very actively managed by

hospitals: private assets rented at low

prices and poorly maintained, unused

sites (former sanatoriums) that are total-

ly or partially abandoned, sites not suit-

able for the health care or medical-social

activities carried out or provided free of

charge

external

partners.

The

Hospices de Beaune is the exception, as

its vineyards generate income of some

€7 million per year.

With financial constraints and the

need to modernise hospital infrastruc-

ture, some facilities have become more

aware of the potential gains represented

by these assets and in recent years have

engaged in optimisation policies that

sometimes involve large-scale asset dis-

posal

programmes.

The

Assistance

publique des hôpitaux de Marseille

(AP-HM)

projects revenues of €92 million from

2009 to 2014; the

Hospices civils de Lyon

have begun conversion of the Hôtel-

Dieu, but the yield is limited by the

restrictions on this XVIIth century

building located in the heart of the city.

The AP-HP has only recently publicly

announced an explicit value develop-

ment strategy.

Leaving aside these few initiatives,

all hospital administrations must be

ready to engage in an active asset man-

agement strategy. This change requires

acquiring technical skills as well as

resolving a number of legal obstacles,

but these prerequisites should not be

used as a pretext for a wait-and-see

attitude.

Firmer guidance needed

at national and regional

level

Optimising management of private

assets has not been a priority for the

Ministry of Health. A number of recent

initiatives (a national inventory project,

experiments to test a support structure

for asset disposal operated by the

national agency for supporting perform-

ance in healthcare and medical/social

facilities (

Agence nationale d’appui à la per-

formance

, ANAP), have yet to produce

concrete results, but could help in

efforts to create value from private

assets.

It is imperative to define an explicit

national policy, relayed in the field by

regional health boards (

Agences régionales

de santé

, ARS). Facilities that do not have

the required skills to successfully com-

plete these projects should be able to

contract the task to a national agency,

which could be the ANAP.

Real estate assets in

the public health sector

not allocated to health care

Executive Summaries:

Annual Public Report of the

Cour des Comptes

improve budget and accounting

information for private hospital real

estate assets, systematically specifying

the market value of assets not allocat-

ed to health care in the notes to finan-

cial statements;

put a stop to anomalies in hospi-

tal housing policy by:

- ensuring housing is reserved

strictly for employees whose presence

is vital for safety reasons, and in the

case of senior management, exclusive-

ly for CEOs where there is an on-site

housing requirement;

- revising hospital housing alloca-

tion and pricing policy;

- for hospitals located in areas

where property is scarce, reserving the

option of providing housing for hos-

pital personnel based on specific

socio-professional criteria and regular-

ly evaluating the results and the costs;

make it compulsory to prepare

an appendix to hospitals’ multi-year

agreements on targets and resources

to include the real estate master plan

and, where necessary, including sug-

gestions for creating value from assets

not allocated to health care;

quickly clarify the legal provi-

sions applicable to asset management

after voting of the Hospital, Patients,

Health and Territoriality Act, especial-

ly the legal bearing of opinions issued

by France Domaine (the State proper-

ty management agency) and the scope

of application of priority rights grant-

ed to municipalities;

define a national real estate man-

agement strategy and broaden the

remit of the State Real Estate Board to

the hospital sector;

confirm the role of the regional

health boards in managing real estate

policy by creating tools (real estate

master plans) to optimise asset value,

and by systematically taking value gen-

erated from private assets into account

when financing investments.

Recommendations

Cour des Comptes

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Seaside towns in

Languedoc-Roussillon

The Languedoc-Roussillon regional

chamber of the Cour des Comptes

audited the management of roughly 15

seaside towns. It noted two main

findings:

- these municipalities are relatively

affluent, although the expenditure asso-

ciated with the arrival of tourists in the

summer is substantial;

- nonetheless, they have trouble

managing activities launched to develop

tourism.

Specific management

issues

Seaside towns may have double the

expenditure of other towns with the

same demographics, due to the need to

provide facilities to cope with the mas-

sive arrival of tourists in high season.

On the whole, tourist towns general-

ly also have greater resources than oth-

ers to finance this expenditure.

In general, seaside towns are not in

financial difficulty. Their financial posi-

tion has become tighter however, owing

to the need to renovate the large resorts

built at the end of the 1960s and the ris-

ing cost of maintaining the fragile shore.

Frequent violation of

urban planning rules

Two unusual urban planning phe-

nomena are of concern in Languedoc-

Roussillon:

the

construction

recreational dwellings without a permit,

and building in the flood plains.

- Extension of unauthorised construction

of recreational dwellings

The construction of illegal recre-

ational dwellings has become endemic.

The practice is known locally as “cabin-

isation” and has assumed worrying pro-

portions

some

areas,

where

authorities are unable to keep it under

control.

- Construction in flood plains

A number of seaside towns have yet

to adopt the flood risk prevention plan,

and where such a plan exists, towns con-

tinue to issue building permits in high-

risk areas.

Seaside towns in

Languedoc-Roussillon

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Often poor management

of tourist activities

Beach concessions are often award-

ed to beach operators without competi-

tive bidding, oversight of agreements is

not up to par, and the fees charged hard-

ly favour municipalities.

Marinas are governed by more spe-

cific management rules (specific budget

documents required, enforcement of

commercial taxation). Breach of these

rules, which occurs regularly, can lead to

substantial tax adjustments for munici-

palities.

Attracted by budgetary advantages

(income from games) and economic

gains (job creation, tourist attraction),

municipalities tend to grant facilities to

casino operators, sometimes without

adequate understanding of the applica-

ble laws.

Recommendations

Although aware of the sometimes

difficult context for seaside towns, the

Cour des Comptes and the regional

chamber consider that more robust

management of tourist activities is

required.

They make the following recom-

mendations, to be supported by cen-

tral government services:

improve collection of the visi-

tor’s tax;

improve oversight of enforce-

ment of urban planning rules and

beach concession rules;

bring management of marinas

into line with applicable laws and reg-

ulations;

implement more balanced rela-

tions with casinos.

Cour des Comptes

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Tellurium mining theme

park in Val d’Argent

(Haut-Rhin):

a predictable failure

The tellurium mining theme park

was opened in spring 2009, with the

support of Val d’Argent intercommunal

authority in the Haut-Rhin region.

The plan behind the theme park was

to use the site of the old Sainte-Marie-

aux-Mines silver mines to develop

tourism and revitalise the valley, eco-

nomically depressed following the

decline of the textile industry.

Not viable from the outset

The failure of the tellurium mining

park stems above all from the valuation

errors made by the Val d’Argent inter-

communal authority. Its desire to

breathe new life into a struggling area

led it to embark on investments that

were shaky from both a socio-economic

and operational point of view.

Analysis of this failure also revealed

the role of other public stakeholders,

particularly the State, the Alsace region

and the

département

of Haut-Rhin, who

subsidised the project without sufficient

research into its economic viability.

Two-thirds funded by the State, the

European Union, the Alsace Region and

the Haut-Rhin

département

, the invest-

ment generates revenues for the Val

d’Argent

intercommunal

authority

slightly greater than 1% of the invest-

ment amount, with no rent paid and no

depreciation of the facilities.

Aggravating start-up

conditions

It is not possible to absorb the initial

deficit resulting from incoherent and

negligent management despite the

efforts undertaken. Visitor numbers

have been much lower than forecast

since it opened. Balanced operation of

the park covering all costs is now out of

reach.

The fragmented nature of the struc-

tures and the lack of coordination

between local associations further hin-

der the development of the tellurium

mining park.

In fact, the park is a significant and

long-term burden on the finances of the

Val d’Argent intercommunal authority

and its tourist office.

Tellurium mining theme park in

Val d’Argent (Haut-Rhin):

a predictable failure

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Recommendations

For

the

intercommunal

authority:

conduct an overall financial,

technical and commercial audit to

identify future costs for the Val

d’Argent intercommunal authority;

make a well-argued decision, not

excluding the possibility of closing the

park completely;

if it is decided to continue the

project, precisely define the operating

conditions, including the legal, finan-

cial and accounting aspects, based on

an honest provisional budget and a

sound financial plan.

In general,

local authorities must

make sure that projects to which they

commit public funds are economically

viable.

Information on the future operat-

ing conditions of the proposed facili-

ties and projected operating statement

must be required to support any proj-

ect backed by a public body, especially

in the case of tourist or leisure activi-

ties.

This recommendation also applies

to local government authorities that

finance projects while handing over

project management and operation

(i.e.

project

risks)

another

organisation.

Follow-up on

Recommendations

Volume II

Executive Summaries

Academic inspectors

from the Paris

educational authority:

overdue action against

abusive practices

In its 2010 Annual Pubic Report,

the Cour des Comptes reported on the

conditions for the appointment and

employment of twenty-two academic

inspectors from the Paris educational

authority (civil servants reporting to the

Ministry of Education), a situation char-

acterised by several anomalies, in

particular:

- appointment of cabinet members

(the President of the Republic, Prime

Minister or Minister) as inspectors,

despite

not

having

the

expertise

required to inspect the educational

authority’s secondary level teachers and

schools;

- the failure, in some cases, to actu-

ally perform inspection functions, with

new appointees continuing to be

assigned to their previous political

authorities;

- no oversight to ensure inspectors

perform their public duties.

Sanction by the CDBF

The Order of 13 July 2011 by the

Court of Budgetary and Financial

Discipline (

Cour de discipline budgétaire et

financière

, CDBF) sanctioned a minister’s

principal private secretary for not having

alerted the minister to the legal risks and

management difficulties arising from

these appointments, which have no legal

basis whatsoever. It also sanctioned a

chief education officer for not officially

recording that certain inspectors were

no longer entitled to their salary and

allowances, as they had not fulfilled their

duty as inspectors.

Academic inspectors

removed from the Paris

educational authority

By the Decree of 26 October 2009,

the Ministry of Education abolished the

academic inspector positions in the

Paris educational authority, effective on

26 October 2011.

Another Decree dated 26 October

2009 instituted a competitive procedure

based on qualifications for positions as

regional

academic

inspectors

and

schools inspectors (IA-IPR).Three such

competitions were organised in 2009,

2010 and 2011.

Since four Paris educational author-

ity academic inspectors opted for retire-

ment, the process potentially concerned

18 inspectors. 17 inspectors applied at

least once during one of the three ses-

sions: of these only one, who did not

fulfil the qualification requirements, was

forced to drop out.

Cour des Comptes

Executive Summaries:

Annual Public Report of the Cour des Comptes

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Academic inspectors from the Paris

educational authority

To date, 12 inspectors have success-

fully completed the competitive applica-

tion procedure and one of these

resigned in 2011.

Decrees issued by the President of

the Republic on 27 October 2011

removed six academic inspectors from

office, effective on 29 October 2011:

one returned to his previous position,

five were dismissed pursuant to the gen-

eral provisions applicable to non-per-

manent public employees.

The Cour des Comptes notes, how-

ever, that the academic inspectors of the

Paris educational authority who success-

fully passed the competitive application

procedure all attended the usual training

programme for regional academic

inspector trainees and school inspector

positions, although some would have

required further training, given their lack

of professional expertise and prior

experience.

The Cour des Comptes recom-

mends that, in the future, oversight of

regional academic inspectors and

school inspectors be performed by

their superiors, who are, in fact, fully

accountable for fulfilling this obliga-

tion, as was stressed by the aforemen-

tioned Order of 13 July 2011 of the

Budgetary and Financial Discipline

Cour.

Recommendations

Fighting cancer:

further improvements in

management

Cancer is a major public health

issue. There were some 207,000 new

incidences of cancer diagnosed in men

and 158,500 in women in metropolitan

France in 2011.

In 2008, the Cour audited the first

Cancer Plan (2003-2007) and in 2009

audited the French National Cancer

Institute (INCA). It made a number of

recommendations aimed at improving

their efficiency and effectiveness and

giving proper direction to their efforts.

The 2009 - 2013 Cancer

Plan: improving coherence

In accordance with the recommen-

dations of the Cour des Comptes, there

appears to be a distinct improvement in

the structure and oversight of the new

plan.

In the area of prevention, improved

oversight of epidemiological data has

gone hand-in-hand with a drive to

increase knowledge of risk factors. The

screening strategy organised for certain

types of cancer is gradually being imple-

mented. Screening management is cur-

rently

being

evaluated

and

the

involvement of non-hospital doctors is

being sought to remedy the low rate of

participation by the relevant target

groups.

The health service is expanding its

fleet of medical imaging equipment to

facilitate prompt diagnosis and follow-

up of cancers, especially in those

regions with the highest cancer mortali-

ty rates. Efforts have also been made to

shorten the waiting time for test results

obtained using this equipment.

However, the oncology treatment

approval thresholds, which should be

increased, are not due for review before

the end of 2012. The recommendation

to give the health authorities the right to

access former industrial sites not listed

classified

facilities

was

not

implemented.

INCA: striving for

progress

The State waited until January 2011

to sign an initial performance target

agreement with the INCA covering the

period 2010-2014, but it expressly fol-

lowed up on the Cour’s analyses and rec-

ommendations.

Coordination between the French

National Institute for Health and

Medical Research (INSERM) and the

INCA has also been defined more

specifically, although with some delay

(2011) and to the detriment of the latter.

Cour des Comptes

Executive Summaries:

Annual Public Report of the Cour des Comptes

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Fighting cancer

The

INCA

has

upgraded

its

accounting practices, management of

human resources and its information

system. It now audits how the subsidies

it grants are used.

The INCA continues to improve

governance

and

internal

audits.

Conflict-of-interest rules have been clar-

ified, and the members of its commit-

tees and boards are now required to

draw up declarations of interest.

The Ministry of Health and the

INCA have given careful consideration

to the Cour’s many recommendations,

intended to meet the significant and

diverse

public

health

challenges

involved in the fight against cancer.

Executive Summaries:

Annual Public Report of the Cour des Comptes

Cour des Comptes

Administrative

jurisdictions:

management improved

considerably

The

Conseil d’Etat

, supreme judicial

authority for administrative affairs in

France, not only judges and advises, it

also manages the eight administrative

appeal courts, 42 administrative courts,

11 of which are in overseas territories,

and the National Court of Asylum (

Cour

nationale du droit d’asile

, CNDA).

Since the previous audit by the Cour

des Comptes in 2000, with case volume

constantly on the rise (by 6% per year),

management of the Conseil and the

effectiveness of its administrative juris-

dictions have undergone profound

changes.

Efficient management

methods

In addition to increasing its head-

count (+ 2.5% per year on average from

2007 to 2010), substantial efforts were

also committed to improving human

resource management:

- diligent and dynamic management

of administrative magistrates;

- increase in the number of court

clerks and decision-support personnel,

particularly judicial assistants.

Moreover, as of 2008, the Conseil

d’Etat drew up monthly statistical indi-

cator tables, providing a complete

overview of its jurisdictional activities,

the ratio of workload to resources, with

a comparison between jurisdictions and

with previous years.

It also acquired tools to ensure the

legal soundness of its rulings.

The Conseil undertook many reno-

vation projects to improve conditions in

the workplace, in buildings often old

and unsuitable for judicial activities.

Courts were created, particularly in the

Paris region, to handle the increase in

case volume.

Procedures modernised

Several series of reforms initiated in

2000 aimed to simplify and reduce pro-

cedures in force in administrative juris-

dictions.

In particular, they broadened the

range of cases in which judges may rule

alone.

Taking into account summary pro-

ceedings,

ordonnances

and cases handled

by a single judge, less than 40% of cases

(36.8%, according to the 2010 statistics)

were heard by a panel of judges for

administrative courts in metropolitan

France.

For administrative appeal courts,

70% of cases were handled by a panel of

Executive Summaries:

Annual Public Report of the

Cour des Comptes

judges, 12% by a single judge and 18%

ordonnances

This reform movement continued

with the Act of 17 May 2011 providing,

in certain cases, that the presiding judge

on the panel of judges may propose to

dispense the public rapporteur from

presenting his conclusions concerning a

petition to the court.

Enhanced efficiency

The average foreseeable time to

hearing, or the number of settled cases

at the end of the year, divided by the

annual judging capacity, i.e. the number

of appeals judged in net series data, fell

from 1 year, 7 months and 20 days in

2002 to 10 months and 27 days for the

administrative courts, and from 2 years,

10 months and 21 days to 11 months

and 16 days for the administrative

appeal courts.

The volume of work performed by

magistrates also grew significantly:

+30% between 2002 and 2009, for all

magistrates and all types of cases.

Nonetheless, these averages hide large

disparities, especially in the administra-

tive courts, as the jurisdictions in the

Paris

region

are

particularly

overburdened.

This positive report notwithstand-

ing, the Cour is fully aware of the lim-

its reached in terms of increasing

productivity. The Cour des Comptes

recommends:

rebalancing the distribution of

personnel and workload between juris-

dictions and magistrates, to help

absorb older pending cases;

improving the quality of man-

agement of its real estate portfolio;

pursuing the goal of dematerial-

isation, with work already well under

way;

where applicable, introducing

procedures for alternative dispute res-

olution (using preliminary administra-

tive procedures, for example) to limit

the rising number of cases in adminis-

trative jurisdictions.

Recommendations

Administrative jurisdictions

854

Executive Summaries:

Annual Public Report of the Cour des Comptes

Cour des Comptes

Council for voluntary

sales of chattels by

public auction (CVV):

successful reform

From

2000,

the

Council

for

Voluntary Sales of Chattels by Public

Auction (

Conseil des ventes volontaires de

meubles aux enchères publiques

, CVV) was

tasked with approving, auditing and

training some 400 voluntary sales com-

panies. These operations generate trans-

actions worth almost €2 billion per year.

Lack of prerogatives

confirmed by events

at Drouot

An audit by the Cour in 2009 and

2010 revealed that the CVV’s articles of

association and powers were not appro-

priate for its regulation mission. The

audit pointed out that the CVV did not

have the necessary powers to deal with

the events that occurred at the Hôtel des

ventes in rue Drouot at the end of 2009

(presumed thefts and misappropriation

of objects by professionals), as well as

serious

dysfunctions

CVV

management.

Since then, a legislative change and

internal reorganisation measures largely

met the Cour’s recommendations.

Reinforced powers under

the Act of 20 July 2011

The Act of 20 July 2011 sets out the

articles of association of the CVV, now

an official regulatory authority. It has

specific and extensive powers with

respect to operators. In addition to

recording the declarations in lieu of

agreement, its tasks include identifying

best practices, promoting quality of

service and above all, preparing a set of

ethical obligations in coordination with

professional organisations, a move

strongly recommended by the Cour des

Comptes.

Its disciplinary function has also

been clarified, with the law specifying

the rules for composing disciplinary

bodies and preventing conflicts of

interest.

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Stabilised management

The CVV has resolved the problems

in its administrative and financial man-

agement, with improved supervision.

The Minister of Justice now decides the

rates applicable to professional dues col-

lected to finance the CVV.

The CVV has all the legal resources

it needs to regulate the voluntary sales

market. It must perform its mission in

full, establishing relations of trust with

the professionals operating in the

sector.

Council for voluntary sales of

chattels by public auction (CVV)

Executive Summaries:

Annual Public Report of the Cour des Comptes

Cour des Comptes

Lay-offs: welcome

merger of two

reclassification contracts

Up until 2011, there were two

schemes to support employees laid off

from their jobs: personalised re-employ-

ment programmes, created under the

unemployment

insurance

system

(93,000 beneficiaries in 2010), and

employment transition programmes, an

experiment tested by the State in 33

labour pools (17,000 beneficiaries in

2010).

In 2010, the Cour des Comptes crit-

icised the increasingly competitive

nature of these two measures, which

had recorded declining success in pro-

viding people with jobs since the begin-

ning

the

financial

crisis.

Its

recommendations included merging the

schemes, targeting them to the most

vulnerable employees, operation by a

single provider, the national employ-

ment agency (

Pôle emploi

), and a better

balance in financing between the State,

unemployment insurance, social security

and business.

Creation of the

professional security

contract in 2011

The Act of 28 July 2011 for the

development of work-study placements

and increasing job security, preceded by

the national cross-sector agreement of

31 May 2011 and its enforcement agree-

ment of 19 July 2011, provided positive

responses to most of these recommen-

dations.

This law creates a single job security

contract to replace the two previous

schemes. Effective since 1 September

2011, the conditions for implementing

the law are specified in the national

cross-sector agreement. This new con-

tract must be offered in companies

employing less than 1,000 people to all

employees to be laid off, provided they

have been in the company for at least

one year.

Nonetheless, targeting of the most

vulnerable workers still falls short. The

current experiment is limited to €2 to €3

million per year aimed at people at the

end of their fixed-term contract or tem-

porary assignment.

A single operator:

Pôle emploi

The employment transition pro-

gramme

management

company

(SGCTP), to be wound up at the request

of the Cour des Comptes, will conclude

its engagement on 31 December 2012,

Executive Summaries:

Annual Public Report of the

Cour des Comptes

leaving the national employment agency,

Pôle emploi, as the single operator,

tasked with:

- organising an enhanced individual

support programme, for a maximum of

12 months, based on a supervision ratio

of one advisor for 50 beneficiaries;

- collecting employers’ contributions

on behalf of the national organisation

for the management of unemployment

benefit schemes (UNEDIC) and paying

benefits to recipients equal to 80% of

their previous salary and capped at four

times the social security ceiling.

Financing not

balanced yet

Unlike benefits paid to other job

seekers, the job security subsidy is not

subject to certain social contributions

(CSG-CRDS), as recipients are regis-

tered as trainees in the system. The new

scheme is funded by social security con-

tributions paid by employers and

employees and withheld on the employ-

ee’s severance pay, representing up to

three months of wages. The resulting

lost income for the social security sys-

tem can be estimated at €400 million per

year for 100,000 recipients.

Consequently,

the

Cour

des

Comptes renews the following three

recommendations:

reserve the new scheme for

those likely to encounter the most dif-

ficulty in finding employment after

being laid off;

no longer consider beneficiaries

as trainees in professional training pro-

grammes, so that social contributions

are taken out of their remuneration;

return the social contributions

based on severance pay to the social

security system.

Recommendations

Lay-offs

Executive Summaries:

Annual Public Report of the Cour des Comptes

Cour des Comptes

Voh-Koné-Pouembout

Joint Water and Waste

Board in New Caledonia:

a project supported by

the territorial

accounts chamber

The Voh-Koné-Pouembout Joint

Water and Waste Board (SIVOM VKP)

was formed in January 2008 by the three

municipalities

(Voh,

Koné

and

Pouembout) in New Caledonia. It is

located in the same region as a large

nickel production plant. The invest-

ment, totalling €3.4 billion, is the key to

rebalancing economic activity in New

Caledonia, in favour of the northern

province, according to the Nouméa

accord.

The board’s remit is a vital one: the

current population of 12,000 is expect-

ed to double in the space of 10 years,

and the water supply poses particular

difficulties with periods of water scarci-

ty in some areas.

The territorial chamber’s recent

audit report included nine recommenda-

tions to accelerate transfer of powers,

clarify the board’s operating and financ-

ing methods, and review its scope of

action.

All of these recommendations have

been or are currently being implement-

ed by the board.

This example illustrates how con-

structive dialogue between a local exec-

utive power and the auditors can lead to

swift results to improve public adminis-

tration, especially in New Caledonia

where intercommunal cooperation is

still in the early stage.

It is also a further illustration of the

intention of the Cour and its regional

and territorial chambers to contribute to

developing intercommunal cooperation

in France, pursuing progress made in

this area in 2005 and 2009.

Executive Summaries:

Annual Public Report of the

Cour des Comptes

VKP Joint Water and Waste Board

(SIVOM VKP)

To facilitate the development of

intercommunal cooperation as a mod-

ern form of public administration, the

Cour des Comptes and the territorial

chamber make the following recom-

mendations

for

the

Caledonian

authorities:

plan to review the Commune

Code in New Caledonia with the State

to introduce the possibility of devel-

oping other forms of cooperation in

addition to the board.

Recommendations

Cour des Comptes

Executive Summaries:

Annual Public Report of the Cour des Comptes

Tax expenditure:

reductions remain limited

Tax

expenditure,

sometimes

referred to as “tax loopholes”, invento-

ried in reports appended to the budget

bill cost an estimated €72.7 billion in

2010 in lost revenues for the State, or

29% of net tax revenue, up 60% since

2004.

In its 2011 Annual Public Report,

the Cour des Comptes recommended

clarifying the definition of tax expendi-

ture and reviewing the list of such items,

improving estimation and forecasting of

their cost, reducing this cost, adjusting

the rules for revising this expenditure

and conducting systematic evaluations.

An audit of the follow-up to these

recommendations shows that some

were followed, but much remains to be

accomplished.

A clearer definition

Tax expenditure arises from exemp-

tions from basic taxation standards,

which, until 2011, were not defined. As

a result, the list appended to the budget

bill was unsatisfactory and the total cost

of such tax expenditure remains uncer-

tain. The extent of the challenge

involved in such an inventory can be

illustrated by the cost (€62 billion in

2010) of the measures regarded as tax

expenditure in 2005 and which are now

no longer considered as such, although

they still exist.

The definition of tax expenditure

was improved in the report appended to

the 2012 budget bill and is now in line

with international best practice.

Nonetheless, the basic standards

used are debatable. For example, it is not

consistent to consider the reduced VAT

rate applied to school cafeterias or

equipment for the disabled as a tax

exemption, but not the reduced VAT

rate for art objects, collectors’ items and

antiques. Certain tax measures present-

ed by the Government as part of its

strategy to reduce tax loopholes are not

in the inventory appended to the

budget bill.

The procedures used to prepare this

list should therefore be improved to

ensure that it is relevant.

Cost estimates could be

improved

The methods used to estimate the

cost of tax expenditure improve each

year, and these efforts must be contin-

ued. The forecasted cost changes are

subject to a certain bias, however, that

tends to underestimate tax expenditure.

For example, if the forecasted cost is

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Tax expenditure

too difficult to estimate, the administra-

tion uses the last known cost. As a

result, the total cost of tax expenditure

in 2011 was underestimated by more

than €700 million.

The Cour des Comptes reiterates its

recommendation that tax expenditure

estimates should grow proportionally to

GDP or to revenue from the tax in

question, failing a more reliable method.

Cost-cutting efforts…

In view of the worrying state of

public finances and the limited useful-

ness of many items of tax expenditure,

the Cour des Comptes’ 2011 Annual

Public Report recommended cutting the

cost of measures included in the list of

tax exemptions by €10 billion compared

with 2010, without taking into account

the impact of stopping the recovery

plan.

For a constant tax base and exclud-

ing the recovery plan, the new measures

taken since 2008, particularly in the

2011 and 2012 Budget Acts, could

reduce this cost by some €11 billion by

2013, but spontaneous growth in expen-

diture would be about €6 billion. The

net result would be a reduction of about

€5 billion compared with 2010.

…which should be intensified

The rule in the Public Finance

Planning Act governing changes in tax

expenditure was probably complied

with in 2011. It will certainly be

observed in 2012. It is not restrictive

enough, however, since it only calls for

stabilising the cost in terms of value,

whereas cost should be greatly reduced.

From this perspective, cuts in tax

expenditure should be applied across

the boards (the current proposals apply

to only 22 tax credits and tax cuts out of

48). It would be preferable to base deci-

sions on in-depth analyses to eliminate

inefficient tax exemptions.

The tax expenditure assessment

committee at the Ministry of Finance

issued a report in the summer of 2011

estimating the cost of slightly efficient

or inefficient tax expenditure at €40 bil-

lion. While this figure should be consid-

ered with caution, it nonetheless reveals

the sizable margins remaining to effec-

tively reduce tax loopholes.

In its report on the current and

prospective state of public finances

published in June 2011, the Cour des

Comptes highlighted the tax expendi-

ture issue, which cost the State a total of

€13 billion, a large portion of which

could be reduced or eliminated. In the

2012 Annual Public Report, it turns its

Tax expenditure

Executive Summaries:

Annual Public Report of the Cour des Comptes

attention to the tax credit for investment

in overseas territories, which it proposes

to abolish completely.

It is therefore possible to meet the

objective of reducing the cost of tax

expenditure. The Cour des Comptes

recommends aiming for a reduction of

more than €15 billion. While efforts to

reduce the public deficit primarily target

public spending, further increases in

compulsory

withholding

taxes

are

nonetheless inevitable. Priority must be

given to expanding the tax base, rather

than increasing the rate of taxation.

The Cour des Comptes reiterates

the recommendations in its 2011

annual report and stresses the follow-

ing points:

while the definition of tax

expenditure is clearer, the procedures

for taking inventory of tax expendi-

ture must be improved;

the cost of tax expenditure must

be updated at least proportionally to

changes in GDP or in revenue from

the tax in question, failing a more reli-

able method;

the current target for reducing

tax expenditure lacks ambition and

should be set to €15 billion.

Recommendations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Port reform:

implementation

marked by compromise

Under the 1992 port reform, the

ports transferred dockers to handling

companies, and kept lifting equipment

and gantry crane operators on their

staff.

The new reform measures ushered

in by the Act of 4 July 2008 overhaul

governance of the seven largest ports in

metropolitan France

(1)

and transfer

equipment (lifting equipment and gantry

cranes) and operating personnel to the

handling companies.

In its 2010 Annual Public Report,

the Cour des Comptes noted that the

2008 reform incorporated many of its

comments,

but

implementation

remained cautious. The 2011 audit con-

firmed this analysis.

The first stage of reform seems to

have proceeded smoothly: enactment

was implemented as of 2008; seven

large

seaports

were

created

November; new governance bodies

were set up in the first quarter of 2009;

each port adopted a plan of strategy

quickly, with ambitious traffic and

investment targets.

In spite of this progress, difficulties

soon emerged.

Thwarted ambition

Reform measures were implement-

ed in a context of economic crisis, exac-

erbated by labour unrest marked by a

series of strikes. Traffic in the seven

ports declined almost 10% from 304

million tons in 2007 to 274 million tons

in 2010. Of the three main ports, only

Le Havre maintained its rank as the

sixth largest port in Europe. Marseille

dropped from fourth to fifth place and

Dunkirk from 10

to 14

The ambitious traffic targets must

be revised, the financial trends predicted

in the strategic plans having lost their

validity. At Le Havre and Nantes, for

example, the investments planned up

until 2013 are currently 44% below the

forecasted levels.

____________

(1) Marseille, Le Havre, Dunkirk, Nantes-Saint-Nazaire, Rouen, Bordeaux and La Rochelle, in

order of traffic volume.

Port reform

Executive Summaries:

Annual Public Report of the Cour des Comptes

Costly conditions for

equipment transfer

The transfer of lifting equipment

and gantry cranes was negotiated with

the handling companies. Their con-

cerns, heightened by the crisis, were

taken into account for the most part,

resulting in high transfer costs for the

ports.

The sale was transacted at very low

prices, often even below book value. On

top of this, tooling was mostly acquired

by the handling firms using balance-of-

sale financing granted by the port at

attractive rates. In addition, several of

the latter agreed to pay compensation

for the provisional operating deficit of

some terminals.

There are explanations for some of

these concessions, such as the transfer

of surplus equipment or personnel, or

the difficult economic conditions weigh-

ing on operations at a number of termi-

nals. Another factor has to do with the

pressure on them to complete the trans-

fer within a tight deadline, which result-

ed in unbalanced negotiating conditions.

Moreover, there is a risk of closure

to new entrants arising from the fact

that the discussions were conducted

with the handling firms currently in

operation.

Difficult and costly

transfer of personnel

The transfer of personnel, qualified

as “secondment”, took until the end of

the first half of 2011 in a climate of

severe labour disputes surrounding the

negotiation of the unified collective bar-

gaining agreement applicable to both

dockers and the transferred personnel.

In the end, only 410 out of approx-

imately 890 employees transferred

(46%) joined private handling compa-

nies as dockers, more or less meeting the

reform objectives. More than half were

“seconded” to a port subsidiary, a com-

pany in which the port has a sharehold-

ing, or an employers’ grouping to which

the port sometimes belonged.

Maintenance personnel, who were

also due to be transferred, were often

assigned to structures reporting directly

to the port (i.e. within the port or in a

subsidiary), which represent a high risk

of generating losses and difficulties.

With the exception of one port, as

part of the transfer deal each employee

received

secondment

premium

between €7,000 and €18,000.

A “right of return” was also includ-

ed in employees’ entitlements for the

first three years of secondment, and

beyond this time, as part of “a guaran-

tee in the case of lay-off ”. The limit set

for this guarantee by the law was seven

years after secondment, which was

Port reform

Executive Summaries:

Annual Public Report of the

Cour des Comptes

extended to 14 years by the national

framework agreement, with local agree-

ments giving up to 25 years.

In 2010, the ports put aside over

€100 million in provisions to cover the

social costs of the reform, which is far

from the full amount.

Running counter to general pension

reform, the new collective bargaining

agreement signed in April 2011 estab-

lished an early retirement scheme for the

very broadly defined category of jobs

considered as “heavy work”.

Actuarial projections as of 1 January

2011 estimate the total rights of the

employees concerned at €137 million.

This cost could rise in line with local

adaptations of the agreement.

Port competitiveness:

the challenge remains

Despite its difficulties and short-

comings, the reform has the potential

for positive outcomes in time, but under

certain conditions.

Productivity has increased, with the

same work now being performed with

less equipment and fewer employees.

Nonetheless, the real gain will be

achieved by reorganising the work of

operators within the handling struc-

tures.

Reliability is essential for a port and

it is imperative to improve it. To do this,

labour unrest must be calmed.

A dynamic commercial strategy,

reflected in a resolute attitude on the

part of the ports’ general management

and the terminal operators, must be

confirmed, above all through the ports’

pricing policy. The State, which has

taken an increased hand in governance,

must halt its port strategy, since it can-

not be boiled down to the recovery plan,

which incidentally is behind schedule.

Port reform

Executive Summaries:

Annual Public Report of the Cour des Comptes

Concerning the major seaports:

extricate

themselves

from

sources of additional costs as quickly

as possible: aids, to some terminals;

commitments to subsidiaries or com-

panies in which they took a majority or

minority shareholding;

adapt their workforce to their

actual needs, which means not system-

atically replacing employees taking

early retirement, or implementing a

personnel management programme;

review the strategic plans, which

were drawn up in excessive haste and

include unrealistic and inconsistent

objectives;

Concerning the major seaports

and port communities:

carefully

monitor

measures

implemented to enhance work organi-

sation efficiency at the terminals and

improve overall reliability;

Concerning the State:

draw up a multi-year contract to

set

out

reciprocal

undertakings

between the State and the major sea-

ports, specifying the objectives for

each, as well as the State’s investment

support and dividend policy;

in the texts, include a “property

manager” mission for the chief execu-

tive officers of the major seaports cov-

ering the economic development and

commercial promotion of the ports,

without in so doing exempting the ter-

minal operators from their responsibil-

ities;

prepare strategic guidelines for

the ports and adhere to them;

clarify choices for sustainable

development, after consulting the

ports’ new governing bodies.

Recommendations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Use of European Social

Fund credits:

improvements evident,

but action remains too

dispersed

The European Social Fund (ESF),

together with the European Regional

Development Fund (ERDF), is one of

the main instruments for implementing

the European Union’s cohesion policy.

The priorities set in the Lisbon Strategy

and, more recently, in the Europe 2020

Strategy set objectives for increasing the

overall employment rate and for creat-

ing more jobs for younger and older

people.

In the period 2000-2006, France

received total credits of €1 billion per

year. Under the current 2007-2013 pro-

gramme, it will receive credits of almost

€800 million per year.

In its 2003 and 2006 annual public

reports, the Cour des Comptes empha-

sised the country’s difficulties in using

these credits and in building a control

and management system according to

European requirements. It highlighted

the following in particular:

- the persistent risk of losing

European credits (“automatic decom-

mitment”) in the event of a shortfall in

credit take-up;

difficulties

complying

with

European rules on justification of

credits;

- weaknesses in planning manage-

ment and deficiencies in the organisa-

tion of the directorate responsible for

employment and vocational training,

(

Délégation générale à l’emploi et à la forma-

tion professionnelle,

DGEFP), tasked with

directing the attribution of these credits

within mainland France;

- shortfalls in evaluating actions that

received funding, measuring manage-

ment costs and electronic monitoring of

action taken.

The

Cour

des

Comptes

has

analysed follow-up to its previous rec-

ommendations.

Improved planning

management

A number of improvements have

been made:

- the DGEFP reorganised its

department, changed it into a subdivi-

sion, overhauled its teams and organised

management actions to avoid losing

credits;

- it has started to streamline credit

justification procedures, since, to date,

their complexity has blocked the way for

using ESF funds;

Use of European Social Fund credits

Executive Summaries:

Annual Public Report of the Cour des Comptes

- efforts have also been made to

reduce the overly long payment lead

times (200 days on average after submis-

sion of the initiative report).

The assessment system and proce-

dures have also been improved: quanti-

fied objectives have been set, follow-up

of accomplishments has been organ-

ised, and information on what has

become of the beneficiaries of the proj-

ects funding is beginning to be known.

However, management costs have

not been assessed and the rationalisation

of computer tools is not complete.

Strategy too broad and

actions spread too thin

The main finding is the difficulty

experienced by France in setting priori-

ties for the use of ESF funds:

Strategy, management architecture

and the projects funded are not consis-

tent with a coherent line of action, mak-

ing it unclear as to what purposes are

being served by the ESF, while also

complicating management decisions:

- most of the active policies target-

ing the labour market and populations

excluded from employment are eligible

for ESF funding, whereas European

principles call for focusing on a few spe-

cific priorities;

- more than 300 agencies and local

authorities were selected as intermediate

management levels;

- 9,000 to 10,000 agencies receive

credits, often for small amounts.

The Cour des Comptes has there-

fore made five recommendations for

future planning:

refocus strategy around a few

priorities;

reduce the number of intermedi-

ate management levels;

continue efforts under way to

simplify procedures and shorten pay-

ment lead times;

measure management costs, a

recommendation already made but not

implemented;

rationalise

computer

tools,

which is in process but not complete.

Recommendations

Executive Summaries:

Annual Public Report of the

Cour des Comptes

Care for elderly in the

health care system:

progress is too slow

Ageing of the French population

calls for changes in the health care sys-

tem to accompany this fragile communi-

ty.

In its 2003 report on application of

the Social Security Budget Act, the Cour

des Comptes made a number of recom-

mendations to achieve this goal. Eight

years

later,

reports

how

implementation

these

recommendations has progressed.

Epidemiological

record-keeping

remains limited

Existing data, more or less specific

to the elderly, fail to provide sufficient

information on their state of health to

allow health authorities to take action

should a given indicator give reason for

concern.

The National Health Monitoring

Institute (

Institut national de veille sanitaire

INVS) is working on a project to insti-

tute a wide-scale monitoring system for

the elderly that aims to keep records of

their physical health and state of

dependency according to age group.

A public health policy with

uncertain results

The Public Health Act of 9 August

2004 and a number of national or

regional plans set objectives that indi-

rectly concern the elderly (via pro-

grammes on pain, disability, etc.) or

specifically

target

this

population

(through programmes to reduce the

number of inappropriate medical pre-

scriptions, etc.).

Without recent data and indicators,

it is difficult to measure the extent to

which these objectives have been

reached. This situation is compounded

by insufficient coordination between

these plans.

The national health insurance sys-

tem does not prioritise the elderly in its

public health initiatives, although some

of the targets negotiated as part of the

collective agreement signed with doc-

tors specifically concern this age group.

Care for elderly in the health

care system

100

Executive Summaries:

Annual Public Report of the Cour des Comptes

Care resources remain

insufficiently adapted and

coordinated

Training of doctors to meet the

needs of the elderly must be intensified.

Geriatric teaching personnel in universi-

ty hospitals remain under the 2010 tar-

gets in the solidarity plan to support

seniors. The 1,600 practicing doctors

who obtained continuing education

accreditation in gerontology in 2010 and

2011 represents an insignificant portion

of the 53,700 general practitioners in

practice.

The French Drug Safety Board

(

Agence française de sécurité sanitaire des pro-

duits de santé,

AFSSAPS) and the

National Health Authority (HAS) rolled

out several initiatives to stimulate aware-

ness in the general public and among

health care professionals on the need to

keep a close watch over adverse reac-

tions to drugs and promote the correct

usage of medication for the elderly.

Reassessment of authorised propri-

etary drugs frequently prescribed for

older people must be reinforced, taking

into account any risks identified through

drug safety monitoring.

The vulnerability of the elderly

requires close coordination between all

health-care sectors to prevent sudden

deterioration in their state of health and

avoid emergency hospitalisation. 40% of

those over 80 require emergency hospi-

talisation every year.

In hospitals, the solidarity plan for

seniors provided that more geriatric

beds and mobile teams to improve care

to the elderly would be allocated, espe-

cially in emergency departments. The

number of dedicated geriatric beds per

1,000 people aged over 75 exceeds the

target set in the plan. But only 13% of

the 645 emergency departments were

reported to have a specific and compre-

hensive geriatric care team.

The creation of multi-disciplinary

care solutions involving all disciplines

must be pursued.

The coordination of medical care

and social welfare is of central impor-

tance. Difficulties persist, despite efforts

to reorganise local information and

coordination centres and the State’s rec-

ommendations on coordination with

the health-care system. The creation of

regional health boards and their cooper-

ation with medically-oriented social wel-

fare organisations should improve

cooperation within the health care sys-

tem.

Care for elderly in the health

care system

101

Executive Summaries:

Annual Public Report of the

Cour des Comptes

increase epidemiological knowl-

edge of the elderly population accord-

ing to the priorities set by the INVS;

improve coordination of nation-

al public health plans aimed directly at

the elderly and include joint indicators

specifically concerning this target

group;

focus efforts on converting

medical specialty beds to geriatric beds

and reallocate them to convalescent

care and geriatric rehabilitation;

evaluate the outcome of AFSS-

APS and HAS initiatives to improve

drug prescription practices;

monitor the activity of regional

health boards to ensure they are work-

ing effectively with General Councils

to provide an overall solution to the

health care needs of the elderly.

Recommendations

Cour des Comptes

102

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State defence industries:

vigilance required

The State has a controlling interest

in four of the main defence industries in

France:

- SNPE is a specialist in energy-gen-

erating materials: powders, explosives

and materials for civilian-use rocket

launchers and nuclear ballistic missiles;

- GIAT Industries is a public under-

taking specialising in the production and

maintenance of land-based weapons

systems;

- DCNS is a leading naval defence

specialist active in the construction and

maintenance of warships;

- The

Service industriel de l’aéronautique

(SIAé) is a public undertaking operated

directly by the armed forces.

In its 2009 Annual Public Report,

the Cour des Comptes issued recom-

mendations to these four manufactur-

ers, focusing on restructuring their

activities and optimising maintenance of

defence equipment and systems.

Industrial restructuring

Only one major restructuring opera-

tion has taken place in the past two years

in the area under consideration: in April

2011, Safran acquired the SNPE Group

affiliate

specialised

missile

propulsion.

Further

industrial

restructuring

operations were planned for December

2011, between GIAT-Industries and the

Thales Group, in the munitions sector.

Asset protection

The Cour’s vital recommendation

on the protection of capital assets in

State undertakings in the defence sector

has not always been complied with.

Whereas the Cour recommended

retaining public control throughout,

thereby ensuring the State remains the

main shareholder in these strategic

defence activities, the entire propulsion

business was sold to a private company,

Safran.

The State has a 30.2% holding in

Safran and therefore is not in a position,

as it had hoped, to guarantee a blocking

minority through double voting rights.

There was a positive development in

April 2011 however, when the Safran

general meeting of shareholders adopt-

ed a statutory provision, in principle

allowing the State to maintain its posi-

tion as the group’s main shareholder.

With respect to the tie-up between

DCNS and Thales, which the Cour des

Comptes prefers to see completed, the

decision by the Thales board on 15

December 2011 to raise its stake in

DCNS to 35% was a welcome boost, as

a mid-sized company joined forces with

a global defence group.

103

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Cour des Comptes

State defence industries

Maintenance of defence

equipment

The State rationalised procedures,

breaking maintenance down into two

levels: operational, carried out in the

armed forces, and industrial.

Duplication

maintenance

resources between industry and the

army as a direct result of this rationali-

sation was avoided by transferring all

industrial maintenance of land-based

equipment to GIAT-Industries.

The SIAé will be responsible for

conducting maintenance on any flying

equipment for the air force, the navy or

the army (reform under way).

Procurement

The Ministry of Defence considers

that it no longer has the budget to

ensure a continuous flow of orders to

industry and therefore uses two proce-

dures where possible;

- to maintain the expertise of its

most sensitive engineering and design

offices, it awards contracts for demon-

strators (prototypes);

- to maintain the most strategic

industrial capacities, it awards multi-year

contracts providing better visibility for

companies than annual contracts.

In the light of these developments,

the Cour des Comptes makes two rec-

ommendations:

pursue industrial restructuring

nationally and internationally to ensure

that a “critical mass” is maintained

with respect to competitors;

in this context, systematically

ensure that the State maintains a suffi-

cient stake in these new structures to

guard against undesirable acquisitions

of interest.

Recommendations

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Cour des Comptes

Major cultural projects:

blocked by budget issues

The Cour des Comptes issued a

severely critical report in 2007 on major

investments made by the Ministry of

Culture that revealed cursory financial

estimates, deficient scheduling, costly

changes in direction and significant

deadline overruns.

It called for improved performance

in contracting public projects and sug-

gested ways of tightening up project

management.

In 2011, the Cour audited the 35

largest operations, either completed or

under way in the period from 2007 to

2011, for total expenditure of €1.9 bil-

lion.

Noteworthy changes

in oversight

The Cour’s recommendations con-

cerning administrative oversight, terms

and conditions for contracting works

and project management of its real

estate projects were taken on board by

the

Ministry

Culture

and

Communication.

This is evident from the creation of

the

Cultural

Heritage

and

Land

Development

Projects

Operator

(

Opérateur du patrimoine et des projets immo-

biliers de la culture

, OPPIC), which

replaced the National Public Works

Office (

Service national des travaux

, SNT)

and the Contracting Authority for

Cultural Works (

Etablissement de maîtrise

d’ouvrage des travaux culturels

, EMOC).

The

reform

the

National

Monuments Centre (

Centre des monuments

nationaux

, CMN) and of the status of

chief architect for historical monuments

is another step in the right direction.

Insufficient management

Operating management of major

projects, however, remains overly sus-

ceptible to a large number of contingen-

cies.

On-time and on-budget metrics

remain below par, with an average cost

overrun of about 25% and average

delays of 30 months.

In view of the amounts at stake and

the risk of losing control over costs and

forecasted operating expenses, the Cour

des Comptes draws the Ministry’s atten-

tion to the risks of budget overruns for

major cultural investment projects.

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Major cultural projects

improve cost accounting and

quickly draw up the OPPIC’s perform-

ance contract;

complete

implementation

multi-year real estate strategy schemes

(SPSI) for the Ministry’s 80 operators;

develop master plans for the fol-

lowing sites and/or institutions: Parc

de la Villette, Palais de Chaillot, Grand

Palais, Palais Royal, Manufacture de

Sèvres, Manufacture des Gobelins et

Mobilier National, Ecole nationale

supérieure des Beaux-Arts et Ecole

nationale supérieure d’architecture -

Paris Malaquais site, Musée de Cluny,

Palais de Compiègne, Château de

Fontainebleau and Château d’Ecouen;

assess reform measures applied

to chief architects for historical monu-

ments (ACMH);

lower the limit requiring referral

to the interministerial commission for

real estate projects (

Commission min-

istérielle des projets immobiliers,

CMPI) to

€10 billion;

finalise the operating budgets

and bylaws of the Museum of

European

and

Mediterranean

Civilizations

and

the

Paris

Philharmonic;

immediately define the operating

conditions for the Salle Pleyel after

2015.

Recommendations

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Cour des Comptes

France Télévisions:

work in progress

In October 2009, the Cour des

Comptes issued a public report high-

lighting the delicate state of the France

Télévisions Group following the reform

instituted by the Act of 5 March on

audio-visual communication and the

new public broadcasting service.

The creation of a “joint venture”

from the merger-absorption of former

channels (France 2, France 3, France 4,

France 5 and RFO) took place in a try-

ing context, with falling audience num-

bers and a worrying financial position at

the end of 2008.

Financial turnaround to be

consolidated

In 2009, 2010 and 2010, France

Télévisions enjoyed higher than forecast

advertising revenues and was thus in a

position to fund its programming strat-

egy, bear the costs related to higher sales

and post a positive result.

Given the particularly fraught eco-

nomic environment, however, this turn-

around must be consolidated. France

Télévisions must be especially vigilant

about protecting its financial balance

and accelerate its drive to capture sav-

ings and synergy.

This is a crucial issue in the light of

the decision to remove advertising from

public channels by 2016.

In any case, the current state of the

public purse excludes any additional

budgetary commitment from the State

to offset revenue losses.

Painstaking implementa-

tion of the joint venture

Much remains to be done to pool

resources, consolidate human resource

management and develop the diversifi-

cation resources required for its “global

media” strategy.

It is also vital for France Télévisions

to take stock of the rapidly unfolding

changes in its environment, especially

related to the rising number of free-to-

air channels, whose impact in terms of

audience numbers should not be under-

estimated.

News sector still

untouched by reform

Looked on by France Télévisions as

one of its emblematic areas, news and

information programming needs further

reform to cut costs. Quantitative objec-

tives, quality standards and targeting of

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productivity gains are all lacking in pre-

cision so far.

Further

significant

efforts

are

required to extend initiatives to pool

information resources beyond technical

resources, to ensure interoperability

between the company’s information

portals and Internet sites, and tighten up

management of their human and finan-

cial resources.

Unbalanced relationship

between France

Télévisions and

independent production

companies

In addition to the legislative and

regulatory obligations governing rela-

tions between France Télévisions and its

producers, more demanding require-

ments covering estimates, performance

reporting and management control of

programme costs are ways to control

spending that should be reinforced.

France Télévisions

The effectiveness of progress

achieved or underway must be proven

by France Télévisions’ results, especial-

ly in the context of the next agreement

on targets and resources signed for the

period 2011-2015.

In an uncertain environment, this

agreement must be seen as the

roadmap for the future.

Recommendations

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Cour des Comptes

Transition to broader

responsibilities and

powers in seven Paris

universities: not always

smooth sailing

The broader responsibilities and

powers instituted by the Liberties and

Responsibilities of Universities Act of

10 August 2007 gives universities the

right to pay all members of personnel

and to proceed with the devolution of

their real estate assets.

To take on these broader responsi-

bilities and powers, however, universities

must be in a position to produce reliable

financial statements.

In 2009 and 2010, the Cour des

Comptes audited seven major Paris uni-

versities, six of which had made the

transition to broader responsibilities and

powers.

Persistent accounting

weaknesses

In the urgent and solemn report

sent to the Minister for Higher

Education and Research and the

Minister for Finance on 21 April 2011,

the Cour des Comptes highlighted trou-

blesome failures in the accounting pro-

cedures of these universities.

These weaknesses affected manage-

ment of capital assets, the reliability of

amortisation calculations, the principle

of separation of financial years and the

inventory of risks and commitments

burdening the universities’ accounts.

Heightened vigilance was called for

in two main risk areas, real estate and

personnel.

The Cour urged the ministers to

focus their attention on overhauling the

accounting instruction applicable to uni-

versities, to increase their awareness of

accounting quality and risk management

issues, and to take steps to ensure that

personnel assigned to accounting and

finance roles received the appropriate

training.

Tangible actions by

ministers

In their response to the Cour des

Comptes’ communication, both minis-

ters undertook to ensure that actions

under way to reduce accounting risks

would be sustained, in accordance with

its recommendations.

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Transition to broader responsibilities

and powers in seven

Paris universities

In particular, the accounting frame-

work for universities is being improved

through a review of Instruction M 9-3.

The Ministries started projects to sup-

port the universities in two complex

accounting areas, research contracts and

real estate assets.

Universities, who were also urged to

bolster their internal accounting and

financial control, must present a risk

analysis map and a multi-year risk man-

agement plan to the Board.

Trials and other preliminary work

prerequisite to the transfer of state-

owned real estate assets to the universi-

ties are progressing.

The Ministry is in favour of devel-

oping management tools to help univer-

sities take over responsibility for payroll

operations. The first assessment carried

out by educational authorities for 2010

expenditure showed that the transfer

had been achieved smoothly.

To establish a reliable cost analysis

system, the Cour des Comptes once

again recommends stronger risk con-

trol for real estate and payroll manage-

ment and, with even greater priority,

for information and management

systems.

Recommendations

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Cour des Comptes

Professional

development contracts:

more widespread impact

required to face the

economic crisis

In its 2010 Annual Public Report,

the Cour des Comptes turned its atten-

tion to an aspect of vocational work-

study training financed by business: the

professional

development

contract,

open mainly to young job seekers. Each

year, these contracts engage approxi-

mately 150,000 people. In 2010, funding

of €16 million was provided by a special

contribution equal to 7.3% of total

company training expenses.

The Cour des Comptes showed that

these contracts, intended to achieve last-

ing integration on the job market, failed

to match the results of the schemes they

replaced (orientation, retraining and

qualification contracts), due to the low

financial incentives and slack manage-

ment by either State agencies or employ-

er and labour representatives.

Two years after this first report, the

Cour notes that the impact of the sup-

port measures initiated in 2009 have

only recently become apparent. The

structural weaknesses in the profession-

al development contract persist.

Firmer direction

in management

The State has taken steps to rein-

force its role and mobilise those

involved in vocational training (employ-

er and labour representatives, Pôle

emploi and regional government servic-

es). As of 2012, the agreements on tar-

gets and resources ushered in by the Act

of 24 November 2009 will provide the

State with a stable instrument to guide

the action of agencies responsible for

collecting vocational training funds

(OPCA).

Lightening the cost

burden for employers:

stabilisation followed by

restored balance in 2011

A series of measures were imple-

mented. A flat-rate subsidy for hiring

young people under 26 (€1,000 to

€2,000 per new hire), depending on

their qualification, was introduced in

2009. The subsidy was replaced in April

2011 by new incentives to reduce the

cost of hiring employees on profession-

al development contracts, including

exemption from employers’ contribu-

tions for young people hired on new

professional development contracts in

SMEs, a flat-rate subsidy for employers

(AFE) for employing job seekers under

26, and a flat-rate subsidy of €2,000 for

employing people over 45.

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Professional development contracts

The hiring premium for 118,000

young people cost €140 million in 2009

and 2010, but had only a limited impact

by maintaining the numbers hired on

professional development contracts

during the economic crisis. In 2011, the

numbers hired on these contracts

increased 17%, reflecting the impact of

the new measures.

Persistent structural

weaknesses

Whereas the national cross-sector

agreement of 5 December 2003 men-

tioned “unqualified young people” as

the main potential beneficiaries of the

professional development contract, a

decreasing number of persons in this

category benefit from the scheme: even

if beneficiaries at baccalaureate level

and under still represent the vast major-

ity (66.5% en 2010), the percentage has

fallen from 71.7% in 2008, with a signif-

icant decline in the number of job seek-

ers

holding

general

secondary

education certificate or no diploma

whatsoever, from 9.1% of the total in

2008 to 7.7% in 2010.

Therefore, professional develop-

ment contracts were essentially used as

counter-cyclical measures from 2009 to

2011, to the detriment of their initial

purpose

providing

long-term

employment. Authorities were late in

providing the necessary resources to

support this choice, and did not provide

adequate management tools. The struc-

tural weaknesses of the professional

development contract, highlighted by

the Cour des Comptes in 2010, remain.

Consequently,

the

Cour

des

Comptes makes the following three

recommendations:

safeguard the purpose of profes-

sional development contracts: to pro-

vide people who have been unable to

find employment directly, usually due

to a lack of sufficient initial training,

with additional and appropriate train-

ing inside a company;

use the new tools available

(agreements with OPCAs, and financial

mechanisms intended to increase the

percentage of those on work-study

schemes in companies) to promote the

development of professional develop-

ment contracts to their full potential;

make sure that agreements on

targets and resources, when referring

to professional development contracts,

promote consistency between the serv-

ices offered and the needs of job seek-

ers, in terms of both quality and

quantity.

Recommendations

Cour des Comptes

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Recovery plan for

Pont-Saint-Esprit (Gard):

regional chamber

recommendations only

partially implemented

In its 2009 Annual Public Report,

the Cour des Comptes referred to the

multiple budget audits conducted by the

Languedoc-Roussillon regional chamber

for Pont-Saint-Esprit (Gard), a munici-

pality whose financial position had seri-

ously deteriorated.

Very fragile turnaround

This municipality of 10,000 inhabi-

tants had a budget deficit of over €13

million in 2008.

It is now on the road to reducing

this deficit, but recovery remains fragile.

The municipality is burdened with

numerous arrears and has no leeway,

since taxes are very high.

The new municipality officials, elect-

ed in February 2011, finally approved a

balanced initial budget and reduced tax

rates.

Unfortunately, new arrears were dis-

covered, implying that the budget bal-

ance

cannot

maintained

and

adjustment efforts must continue for

several more years.

Limited impact of

preventive measures to

restore budget balance

Implementation of budget control

measures came up against many obsta-

cles: municipality officials almost sys-

tematically objected to orders given by

the Prefect on the advice of the region-

al chamber of accounts, while continu-

ing to spend extravagantly.

By approving insincere budgets that

failed to comply with the regional cham-

ber’s recommendations, all the while

continuing to spend money on low-pri-

ority needs without having sufficient

funds, the municipality delayed the nec-

essary budget turnaround and accumu-

lated arrears.

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Recovery plan for

Pont-Saint-Esprit

The recommendations made in

2009 by the Cour des Comptes on pos-

sible improvements to budget control

procedures in the event of failure to

make the necessary adjustments during

a turnaround procedure remain valid.

The Cour des Comptes requests

that:

the general code governing local

authorities be amended to require the

deliberating body (the municipal coun-

cil for a

commune,

or municipality) ruling

on budget matters after the budget has

been decided and made enforceable by

a decision of the Prefect, to strictly

confine its budget decisions to remain

within the budget balance limits decid-

ed by the State’s representative, section

by section and for the whole budget.

Recommendations

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Cour des Comptes

Intermittently employed

entertainment industry

workers scheme:

massive deficit and

abuse persist

The unemployment scheme for

intermittently employed entertainment

industry workers comprises two sepa-

rate parts:

- the first is funded by unemploy-

ment insurance and is managed by Pôle

emploi. There are two appendices to the

general unemployment insurance agree-

ment to cover this sector: Appendix 8

for technicians and Appendix 10 for

performing artists;

- the second was created in 2004 by

the State for intermittently employed

workers who do not meet the condi-

tions for coverage under Appendices

8 and 10.

In the past 10 years, the Cour des

Comptes has audited the scheme for

these workers on several occasions. The

audits highlighted the system’s recurrent

deficit and its significant vulnerability to

fraud. The Cour also called for the abo-

lition of the temporary part of the

scheme funded by the State. The recent

follow-up audit reveals persistent prob-

lems.

Chronic €1 billion deficit

for about 100,000

beneficiaries

Spending under Appendices 8 and

10 amounted to €1.2 billion, for contri-

butions of only €250 million. The €1

billion deficit in 2010 represented one

third of the total unemployment insur-

ance

deficit,

but

intermittently

employed entertainment workers repre-

sent only 3% of job seekers.

Particularly favourable

payment rules remain

unchanged

Because of the intermittent nature

of their work, artists and technicians

enjoy very favourable qualification con-

ditions relative to the general entitle-

ment to unemployment insurance. They

also fare better under the rules (techni-

cians especially) than temporary work-

ers, employed under very similar

conditions. Moreover, although the gen-

eral unemployment insurance agree-

ment was changed to adapt to the

economic crisis, the rules for artists and

technicians have hardly changed since

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Intermittently employed

entertainment industry

workers scheme

2006, and their benefits are therefore

high: €11,844 on average per year in

2010. There is significant variation in

the amount: it can be as much as

€39,867 for the 10% of intermittently

entertainment workers at the top of the

scale, compared with €4,812 for the

10% at the bottom.

Steady rise in the number

of beneficiaries

The

number

intermittently

employed workers receiving benefits at

least once in the year continues to rise at

an annual rate of approximately 1%. At

the end of 2010, there were 106,619

artists and technicians, up from 102,223

in 2007. Alongside this increase there

has been a decline in the total hours

worked, from 65.9 million in 2007 to

59.5 million in 2009.

Abuse and fraud met with

inertia

The practice of “

permittence

” (where

workers are actually employed perma-

nently or quasi-permanently by the same

employer) is widespread. It involves

about 15% of those covered by

Appendices 8 and 10 and is fostered by

a permissive legal framework (a “cus-

tomary” fixed-term contract) and by the

advantages for both employees and

employers of “

permittent

” employment,

as opposed to a permanent position.

Recourse to this solution provides

employees with a higher income because

of the higher benefit rate, compared

with the general unemployment insur-

ance scheme, while employers have

lower direct payroll costs. Thus, the

unemployment insurance system is

practically denied any means to combat

abuse and fraud: although Pôle emploi

created an “anti-fraud prevention” unit

in 2009, results have been limited

(€800,000 in savings from fraud preven-

tion).

Consolidation of the

unemployment scheme

funded by the State

The State’s financial intervention in

the unemployment insurance scheme

for intermittently employed workers in

the entertainment industry followed the

disturbances that accompanied the 2003

reform. The new rules imposed addi-

tional restrictions on the conditions for

eligibility under Appendices 8 and 10.

To soften the impact of the reform on

those who now found themselves

excluded, a State-funded scheme was

created. A “special temporary fund”

came into operation in 2004, initially for

a period of six months. The fund was

subsequently renewed, rechristened the

“transitional fund”, and from 1 April

2007, the “solidarity and professional

development fund”. Despite the recom-

Intermittently employed

entertainment industry

workers scheme

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mendations of the Cour des Comptes to

end what was initially presented as tem-

porary measure, it was decided to

keep it.

Expenditure through the solidarity

and professional development fund was

kept under control, with only 968 bene-

ficiaries in the period from 2007 to

2010. It is not possible to assess the

measure for lack of adequate oversight.

The Cour des Comptes makes

three recommendations:

increase employers’ contribu-

tions and vary them according to their

use of intermittent employment;

pursue the approach begun in

2003 to differentiate between techni-

cians and artists; the latter seem to

enjoy far less favourable working and

payment conditions than technicians,

and it is difficult to justify maintaining

rules that differ so greatly from those

that apply to temporary workers, for

example.

for the “solidarity and profes-

sional development fund” managed by

the State, target training and re-training

actions to beneficiaries with lower

employment prospects in the perform-

ing arts, and measure the outcomes.

Recommendations

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Perinatal care policy:

urgent need to take

action

Events during pregnancy, delivery

and the first days of the newborn’s life

have a long-term influence on their

health. Therefore, perinatal care is a cru-

cial public health issue.

The 2006 assessment by the Cour

des Comptes of progress in perinatal

care was mixed. France’s efforts fell

short of what was required to bring the

country up to the level of other compa-

rable nations. Far from the hoped-for

improvements five years later, the situa-

tion has instead tended to deteriorate.

More cause for worry

than in 2006

The infant mortality rate has

remained stable in France at 3.8 deaths

in infants under one year old per 1,000

live

births,

contrast

other

European countries where the rate has

improved. France has dropped from

seventh in 1999 to twentieth in 2009

(out of 30 countries) in the European

ranking of lowest infant mortality rates.

Mortality during the first week of life

has actually increased slightly. Mortality

during the first 28 days of life per 1,000

births in France is equivalent to mortal-

ity during the whole first year in

Sweden.

There are also significant regional

disparities. In metropolitan France in

2009, the infant mortality rate ranged

from 2.7 (Corsica) to 5 (Alsace).

The infant mortality rate in French

overseas territories, which was already

three times the rate in the mainland at

8.8 vs. 3.6, is on an upward trend.

Half of maternal deaths in the most

recent period analysed, 2000 to 2006,

were considered to be “avoidable”.

The usual explanations given for

poor infant mortality figures (older

mothers, growth in the number of mul-

tiple pregnancies, the number of chil-

dren born to foreign nationals, or

mothers living in insecure employment

conditions) do not give the full picture,

and the determining factors contribut-

ing to this troublesome situation have

not yet been fully determined.

In parallel, available information

systems do not include all the indicators

deemed essential in Europe, such as the

rate of stillbirths, a missing piece of the

puzzle that is all the more alarming in

the light of the fact that France had the

highest stillbirth rate in Europe (9.1 per

1,000) in 2004.

Moreover, France is the only coun-

try in Europe that does not keep sys-

Perinatal care policy

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tematic records of the gestational age of

newborns or their weight at birth.

Government action falls

short

Implementation of the 2005-2007

perinatal care plan was partial, even

though it did lead to progress in a num-

ber of areas: according to the plan’s

assessment report, only 45% of the 90

measures in the plan were implemented

and at least 15% never left the starting

blocks.

In 2006, the Cour des Comptes stat-

ed:

“most of our performance improvements

will come from implementing policies that focus

on overseas territories and women suffering

from social exclusion”.

Yet, not all

départements

devote the

same energy to maternal and child wel-

fare services. Many fail to comply with

certain minimum standards of activity

and resources, while others exceed them

by a generous margin. Disparities are

therefore considerable, which can com-

plicate providing care to women a state

of vulnerability.

Likewise, of the 10 measures includ-

ed in the 2006-2007 perinatal care plan

for disadvantaged groups, only one was

successfully implemented.

In addition, the situation in overseas

territories was not given enough consid-

eration.

Urgent need to take

action

Faced with these findings, it is cru-

cial to restimulate all national and local

actors to improve our analysis of the

reasons for the current situation and to

respond as effectively as possible

through more efficient coordination of

efforts.

Perinatal care policy

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analyse the reasons for stagnating

infant mortality rates in metropolitan

France and for the rise in the overseas

territories, focusing on research in par-

ticular;

create a reliable indicator of still-

births to be in place as of 2012;

ensure that the

départements

com-

ply with their obligation to provide the

data from babies’ first health certifi-

cates;

review the perinatal information

system to bridge current gaps (reiterat-

ed recommendation);

organise a wide-ranging preven-

tion campaign, taking inspiration from

experiences in other countries, to

reduce the number of avoidable mater-

nal deaths;

systematically set up perinatal

morbidity and mortality reviews in the

perinatal care system;

strengthen prevention measures

aimed at disadvantaged women, by

ensuring more effective pyscho-social

care and improving coordination

between agencies (reiterated recom-

mendation);

mobilise maternity and child wel-

fare departments around precise goals

set at government level and taking the

characteristics of each area into

account (reiterated recommendation).

Recommendations

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Cour des Comptes

Regional planning grant:

marginal, inefficient and

poorly managed aid

A 2007 report estimated total public

aid to business, whether State-spon-

sored, from local government authori-

ties or the European Union, at almost

€65 billion. The monies were paid out

under at least 6,000 schemes, 22 of

which were European and 730 national.

They include the regional planning

grant (

Prime à l’aménagement du territoire

PAT), created in 1982. The PAT is a

State-sponsored grant intended to sup-

port long-term job creation and the

development of economic and research

activities in a number of priority areas in

the country.

Ten years after its last public recom-

mendations, the Cour des Comptes

audited all 400 or so PAT files reviewed

by the Regional Development and

Planning Inter-ministerial Delegation

(

Délégation interministérielle à l’aménagement

du territoire et à l’attractivité régionale

DATAR) between 1 January 2005 and

June 2010.

Failures abound

The Cour detected negligence in the

administration’s examination of aid

applications: incomplete study of eco-

nomic merit, unfavourable opinions not

taken into consideration and undue

advantage afforded to some companies.

Other incidences of negligence con-

cern monitoring of undertakings: unsat-

isfactory inspection of programme

conduct, failure to collect down pay-

ments and low overpayment recovery

rate.

Disappointing results

Payment of the PAT grant is intend-

ed to meet two objectives: enhance

attractiveness and support areas in diffi-

culty. An annual credit of around €40

million appears very inadequate to meet

such challenges.

During the period 2005-2009, 356

companies were awarded a grant for

supposedly creating, sustaining or reini-

tiating 38,625 jobs, only 11,000 of

which seem directly attributable to the

grant.

On this basis, the amount of aid per

job would be far above the initial esti-

mates (€5,200) at €16,900.

Furthermore, it would be important

to check that the jobs created still exist

five years after the aid programme (or

three years in the case of SMEs), in

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Annual Public Report of the

Cour des Comptes

Regional planning

grant

accordance with European regulations.

This information is never checked.

Whether or not the grant acts as an

incentive is not always verified: in many

cases, the companies receiving the grant

would have made the investment, even

without it.

Marginal aid

The surplus of available aids to

business not only nationally but also and

especially locally illustrates the marginal

nature of the PAT.

The research aspect of the grant is

the most representative example of this.

The €5 million earmarked for research

every year seems totally disproportion-

ate to other R&D support funds, for

example the research tax credit, at an

annual estimated cost of €4 billion, is far

more significant in terms of job cre-

ation results.

Based on its findings, the Cour des

Comptes recommends that:

the PAT be reviewed.

The

same

objectives

can

achieved using other more efficient and

appropriate aid channels, sponsored by

the State or local authorities.

Recommendations

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Annual Public Report of the Cour des Comptes

Cour des Comptes

Management of civil

servant pensions: risk of

curtailed reform

Need for far-reaching

reform

Prior to the current reform, a num-

ber of organisations were involved in

managing civil servant pensions, which

were not centralised in any way:

- at the starting point, the host min-

istries, tasked with producing the service

records for their civil servant employees

near retirement, which represents a

heavy workload;

- a national service tasked with

recognising and calculating civil servant

pensions;

- at the end point, the metropolitan

payment centres, part of the General

Directorate of Public Finances (

Direction

générale des finances publiques,

DGFIP),

responsible for paying pensions.

The Cour had shown that while this

organisation provided a reliable service,

it also involved much duplication and

unsatisfactory productivity rates.

The system was reformed based on

the Cour’s recommendations according

to three priorities:

- as for private-sector employees,

individual retirement accounts were cre-

ated for each civil servant and used to

automatically and continuously register

their pension entitlements throughout

their career, and since 2007, to facilitate

sending out individual statements;

- information on active employees

and retirees was improved, in accor-

dance with the pension reform act of 21

August 2003;

- transition, in time, to a simplified

pension determination process, based

on individual accounts and yielding pro-

ductivity gains, especially in the host

ministries.

In the autumn of 2011, the Cour

audited the system to assess the out-

come of this reorganisation.

Uneven progress

Management of the reform was

clarified in 2009 with the creation of the

State Pension Department (

Service des

retraites de l’Etat

, SRE), which reports to

the DGFIP. It has extensive powers

across the pension management chain.

A strategic coordination committee with

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Executive Summaries:

Annual Public Report of the

Cour des Comptes

Management of

civil servant pensions

representatives from the host ministries

was also formed to help implement the

reform. Not all ministries, however, dis-

played the same degree of involvement.

The number of payment centres in

metropolitan France declined from 24

to 12 in 2011. At the same time, the

Rennes and Bordeaux centres saw their

headcount increase to handle queries

from retired civil servants.

Keeping own information systems

within some ministries does not appear

consistent with the reform’s goal of

streamlining the processing chain.

The job of setting up individual

retirement accounts, consisting of

inputting all the data pertaining to the

civil servant’s career and checking relia-

bility, is still in progress. The pace is too

slow to reach the objective of complet-

ing 100% of the accounts by 31

December 2012. Additional human

resources must be allocated to this

priority task.

The reform could be

undermined

Reorganisation can only succeed if

the host ministries withdraw from the

pension management chain. Most of

them nonetheless wish to remain very

involved in providing the future retiree

with information, helping him or her

make decisions, and processing the

retirement application file, even though

the State’s pension service will soon be

in the best position to provide complete

and reliable information to retiring civil

servants, through the individual retire-

ment accounts. Maintaining redundant

structures between ministries and the

pension department would considerably

diminish the benefits of the reorganisa-

tion under way. The end result would be

a much smaller reduction in the number

of jobs required in the pension manage-

ment chain than currently predicted

(eliminating 757 full-time equivalents

out of 2,352 by 2016, or 32% of the

total headcount).

The

Cour

des

Comptes

recommends:

disengaging the host ministries

from the pension management chain,

to be quickly and explicitly confirmed

by the Prime Minister, so that the

reform is not undermined and that it

yields the expected productivity gains.

Recommendations