CERTIFICATION OF THE FRENCH CENTRAL GOVERNMENT
FINANCIAL STATEMENTS FOR THE YEAR 2014
Executive Summary
The French Central Government financial statements and the audit opinion from the
Cour des Comptes
are attached to the Budget
Settlement Bill for the elapsed financial year. These documents provide transparent information on the financial situation of the
Central Government to the Parliament, which is responsible for approving the Budget Acts. They are addressed, more broadly, to
citizens, investors and observers of the public finances.
The Financial Statements in a few key figures
The task of the Court
In accordance with Article 27 of the Constitutional Bylaw
on Budget Acts (LOLF) of 1 August 2001, the Central
Government has, since 2006, implemented an accrual
accounting of its transactions, based on rules that only
differ from those applicable to companies due to the
specifics of its action.
Each year, the Central Government thus presents its
financial statements in a document entitled "French
Central
Government
Financial
Statements",
which
includes a balance sheet, an income statement, a cash
flow table, a list of its off-balance sheet commitments
and an explanatory appendix.
At the end of 2014, these items represented:
-
€966
billion of ass
ets, €1,778
billion of debts and
€71
billion of net negative cash (fund deposits from
public entities);
-
€135
billion of provisions, mostly relating to the
economic and social interventions of the Central
Government and tax disputes;
-
€473
billion of gross charges and €396
billion of gross
income, repres
enting an annual deficit of €77
billion.
Ultimately,
total
liabilities
exceed
assets
by
€1,018
billion.
In addition, off-balance sheet commitments stood at
around
€3,400
billion, half of which for civil and military
pensions and a quarter for guarantees.
Item 5 of Article 58 of the Constitutional Bylaw on Budget
Acts (LOLF) assigns the
Cour des Comptes
the task of
certifying that the Central Government accounts give a
true and fair view of its financial situation.
The certification is a written and reasoned opinion issued
by the
Cour des Comptes
under its own responsibility. It
consists of collecting the elements necessary to obtain
reasonable assurance that the accounts comply with the
applicable rules and principles.
Professional standards in financial auditing specify that
an opinion without qualifications cannot be expressed if
significant difficulties are identified and not resolved
following the audit.
Changes in qualifications issued by the
Cour des Comptes
on the Central Government Financial Statements
2006
2007
2008
2009
2010
2011
2012
2013
2014
The financial information system
Ministerial internal control and internal audit
Central Government income
The Ministry of Defence's assets and liabilities
Long-term financial assets
The property estate
Non-financial liabilities
The road network
Specific capital assets
Other long-term
financial assets
Rate swap
contracts
Cash accounts
The accounts of the
public authorities
Provisions for risks
Qualifications maintained
Qualifications gradually removed
Other capital assets
and inventory belonging to civil ministries
The account of transactions by COFACE
The fund for the redemption
of the social security debt
Financial years
Savings funds centralised
at the Caisse des dépôts
Since the 2013 financial
year: relaunch the
process of improving the
reliability of the financial
statements.
Financial years 2009-2012: fewer than ten
qualifications stabilising at seven.
The Government is preparing for the transition, on
1 January 2012, of the general accounts to the
Chorus software.
2006 financial year: Central
Government financial
statements established for
the first time and certified
Since the entry into force of the LOLF in 2006, significant progress
has regularly been made in keeping the accounts of Central
Government transactions on an accrual basis.
This progress has led, in eight years, to the removal of thirteen
qualifications thanks to great effort by the Government and constant
dialogue between the latter and the
Cour des Comptes
.
The 2014
financial statements were therefore certified with five significant
qualifications
maintained since the first certification.
More broadly, the
Cour des Comptes
endeavours to support the
continuous improvement of the reliability and sincerity of the Central
Government financial statements by identifying, in its audit opinion,
the areas in which progress should be made by the Government so
that it can, in successive stages, achieve certification with no
qualifications.
In detail: the five substantial qualifications issued on the financial statements for the year 2014
What subjects do the qualifications cover?
What is the reason for the qualifications?
The financial information
system
At least 300 applications spread across all of the ministries form the information
system for ensuring Central Government administration in numerous areas
(accounting, tax, pay, operating expenses, property, cash, etc.).
Amongst these, the enterprise resource planning software Chorus occupies a
central place, since it is the sole application used by the Central Government
for accrual and budgetary accounting, used by more than 55,000 agents in the
centralised and decentralised administrations.
The financial information system has stabilised since the implementation of
Chorus was successfully completed at the end of 2011. A project for
dematerialising invoices and travel expenses has been launched and will
continue until 2017.
The functionalities offered by Chorus are not sufficiently exploited to ensure that the
records are reliable, and inappropriate practices dating from before its installation
are still too often possible and hinder the auditing of the accounts.
The procedures for connecting Chorus to the applications that send it accounting
entries, which remain in the format of the old chart of accounts, require numerous
and complex intermediate processing operations which is therefore a source of a
significant risk of errors.
The other applications, which do not send accounting entries but nevertheless carry
operational data, also have significant limitations which make it difficult or impossible
to substantiate the accounts.
Ministerial internal control
and internal audit
Central Government operation involves numerous stakeholders and information
systems within the framework of multiple processes. These may have design
faults or errors which may occur in their use, causing, in certain cases,
erroneous or incomplete accounting records.
To prevent the occurrence of these risks or, failing this, to detect and correct
their effects, a set of procedures and actions known as "internal control" must
be defined, formalised and implemented by the ministries, based on a
description of the administration processes concerned and an analysis of the
risks that relate to them.
Internal audit services must also be put in place in order to assess the reality of
internal control and its efficiency.
The ability of ministries to organise their internal control and manage it is still
insufficient: the functioning of the governance bodies is not always effective; the list
of risks is rarely based on a formalised map of administration processes and, when
this is the case, it is generally confined solely to accounting transactions; the
reporting tools are too limited to measure the effectiveness of the controls; internal
audit is unequally organised and implemented.
This situation is even more problematic as, in many processes, such as cash or
payroll, internal control is not effective enough, which, firstly, prevents it from being
used for audit requirements and, secondly, is a risk for the reliability of the Central
Government accounts.
Central Government income
Net of European Union's budget contribution
(€20
billion), Central Government
income stood at €298
billion in 2014:
-
€139
billion in net VAT, representing nearly half of tax income;
-
€70
billion for income tax, €34
billion for corporation tax and €55
billion in
other income.
Moreover
, at the end of 2014, debts to taxpayers stood at €65
billion, while
advance payments or
reimbursements due stood at €83
billion. Off-balance
sheet, deficits likely to be posted by taxpayers amount to
€392
billion for
corporation tax and €15
billion for income tax, representing potential lower
taxation of about €63
billion and €2
billion respectively.
The shortcomings in the control of tax data and the processes applied to it prevent
from rendering an opinion on the reliability of the accounting records in matters of
Central Government fiscal income.
In particular, there is significant uncertainty concerning the comprehensiveness of
the list of tax debts and their correct evaluation at the close of the financial year.
In addition, the Central Government accounts do not satisfactorily show tax disputes
or taxes and duties assigned to other beneficiaries (such as the social security
scheme).
The listing and evaluation of off-balance sheet fiscal commitments given by the
Central Government or received by it are significantly insufficient compared to other
accounting areas.
The Ministry of Defence's
assets and liabilities
The Ministry of Defence manages three main categories of assets for the
requirements of its missions:
-
inventories
(€34
billion), particularly spare parts and ammunition, which
represents almost all of the inventory of the Central Government;
-
equipments
(€78
billion), such as aircraft, surface ships or submarines,
terrestrial machinery, armaments, etc.;
-
lands
and buildings (€15
billion), some of which are of a highly specific nature
(such as arsenals and air force bases).
Contingent dismantling or depollution operations must also be evaluated and
accounted for.
Audit procedures carried out have uncovered significant uncertainties, particularly
concerning:
-
physical inventories of inventories and equipments, which are incomplete or poorly
re-transcribed into the Central Government accounts;
-
evaluations of the same assets, not systematically justified, based on mixed
depreciation policies and determined by applying incorrect accounting methods;
-
the inventory taken by the ministry of its property assets does not agree with the
inventory in Chorus and the evaluation of these, which does not include damage
and other losses of value.
Long-term financial assets
The Central Government has equity investments in 2,014 entities, a little more
than a third of which it controls exclusively.
They
represent a total value of €254
billion on the asset side of its balance
sheet. The
Caisse des dépôts
,
Électricité de France
, the
Banque de France
and
GDF Suez
alone form 40% of this amount.
Other financial assets are added to these investments:
-
directly related debts (€41
billion in total, of which €30
billion for future
investments);
-
loans and advances (€
21 billion), rights concerning several funds with no
legal personality (€15 billion) and miscellaneous debts (€2
billion).
It is not possible to give an opinion on the reliability of the evaluation of a large
number of financial investments, due to lack of sufficient elements (audit reports, in
particular).
When these elements can be obtained, they frequently show anomalies in the
accounts of the entities concerned, thus confirming the uncertainty; these accounts
are also not always sent within the deadlines necessary for their use.
It has also been noted, for several years, that public hospitals, savings funds
managed by the
Caisse des dépôts
and certain loans granted at preferential
conditions are not correctly evaluated in the Central Government accounts.
Elsewhere in the world
France is one of the countries
within the euro zone that has its
Central Government accrual-
based financial statements
certified.
All Government Accounts are certified with six
qualifications.
Major impediments make it impossible to
render
an opinion on the federal government’s
accrual-based consolidated financial
statements.
Other than the Central Government accounts, the
law also gives the
Cour des Comptes
the task of
certifying those of the general social security
scheme.
The
Cour des Comptes
also certifies, upon their
request, the accounts of the National Assembly and
the Senate. It also has four mandates to audit the
accounts of international organisations.