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OuR DeS COMPteS

Summaries

Part I

Observations

Public Finances

Public Policies

Public Management

ummaries are intended to facilitate the understanding

and use of the report produced by the Cour des

comptes. Solely the original report is legally binding on the

Cour des comptes. The responses of administrations and

other bodies concerned are included in the report.

Disclaimer

Annual Public Report

2014

Introduction

The 2014 annual public report

produced by the Cour des comptes

comprises three parts, only the first two of which have corresponding

summaries :

Part I

which comprises two volumes (I-1 and I-2), outlines the

obser-

vations and recommendations

drawn from a selection of audits, surveys

and evaluations carried out in 2013 by the Court, regional and territorial

courts of accounts, or the Court in conjunction with regional and territo-

rial courts of accounts;

Part II

focuses exclusively

on the actions

taken by the authorities,

administrations and other audited bodies following the observations and

recommendations made in previous years;

Part III

provides an overview of the

activities

of the Court and the

regional and territorial courts of accounts over the course of 2013.

The annual report produced by the

Cour de discipline Budgétaire et

Financière

(French ‘Budget and Finance Disciplinary Court’) is attached

as an appendix to these three parts of the report.

The present instalment comprises a series of summaries of the 19 texts

that make up Part I, ‘Observations’.

These 19 texts are divided into three parts:

first part: public finances (1)

;

second part: public policies (10)

;

third part: public management (8).

Summaries

of the Annual Public Report by the

Cour des comptes

First part – Public Finances

The overall situation of public finances (at the end of January 2014) . . . . .8

Second part - Public Policies

Chapter I - Agriculture

Food Safety: insufficient inspections by the Ministry of Agriculture . . . . .14

SAFER: the excesses of an agricultural and rural development policy tool .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Chapter II - Defence and space

Franco-British cooperation on aircraft carriers: a net loss for the French

public finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Space transport: a strategic ambition, a priority for lowering costs . . . . . .23

Chapter III - Education and youth

From boarding schools for excellence to boarding schools for success: the

chaotic conduct of a social and education policy . . . . . . . . . . . . . . . . . . .28

Civic service: high ambition and an increase in uptake to be controlled

.32

Chapter IV - Health and social cohesion

The health of prisoners: progress still vital

. . . . . . . . . . . . . . . . . . . . . . . .36

Disability-related taxation: a stack of measures with no coherence . . . . .39

Summary of Part I

Observations

Table of Contents

Summaries

of the Annual Public Report by the

Cour des comptes

The conversion of hostels for migrant workers into social housing: a policy

to be overhauled

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

Chapter V - Tourism

Tourism in French overseas territories: an essential spurt . . . . . . . . . . . . .46

Third part - Public Management

Chapter I - The State

Customs tax duties: a role and an organisation to be reconsidered . . . . . .52

The National Centre for Educational Documentation (CNDP) and its net-

work: an obsolete model, a much-needed reform . . . . . . . . . . . . . . . . . . . . .54

Public equity investments: a poorly managed transaction in the armaments

sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57

Chapter II - Local authorities

The subsidies allocated to associations by the Provence-Alpes-Côte d’Azur

region and the Bouches-du-Rhône department: the necessary risk control

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

Railways in the Dauphiné: the failure of the restructuring of a departmental

transport authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

Chapter III - Social security organisations

The CIPAV (Inter-professional Pension and Contingency Fund for the libe-

ral professions): disorderly management, deplorable service to insured par-

ties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70

Chapter IV - Private subsidised organisations

The French Film Archive: a revival and new issues . . . . . . . . . . . . . . . . .74

Chapter V - Public-private partnerships

The public-private partnerships of the Hospital 2007 plan: a poorly

controlled procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78

Summaries

of the Annual Public Report by the

Cour des comptes

Table of Contents

First part

Public Finances

The overall situation of the public finances

(at the end of January 2014)

the overall situation

of public finances

(at the end of January 2014)

In 2013, a reduction of

deficits, actual and structu-

ral, slower than expected

The first information communica-

ted by the government on the execution

of the State budget in 2013, which has

not yet been audited by the Court,

shows a deficit greater than was expec-

ted. The deficit for the public adminis-

trations overall could therefore be grea-

ter than 4.1% of GDP. However, signi-

ficant uncertainties remain concerning

the full accounts for the public adminis-

trations, which will not be published by

INSEE until the end of March 2014.

The analysis by the Court is therefore

based on the accounts for 2013 associa-

ted with 2014 Finance Act, which pro-

vides for a deficit of 4.1% of GDP.

The reduction in the actual public

deficit, of 4.8% of GDP in 2012 to

4.1% planned in 2013, was only half as

much as that set by the Public Finance

Programming Bill of December 2012

(0.7 of a point instead of 1.5).

Firstly, downward revision in the

GDP growth forecast, and secondly, the

forecast elasticity in public income in

relation to GDP each explain about half

of this gap of 0.8 points expected com-

pared to what was planned.

The reduction in the structural defi-

cit was also slower than forecast, due to

the downward revision in income elasti-

city.

In spite of structural savings (1.7

percentage points of GDP) of an extent

unequalled in the past, which mainly

covered obligatory deductions, the

actual and structural deficits of 2013 are

greater, by one percentage point of

GDP, to those in the Planning Act. They

would have been lower by 0.2 percen-

tage points of GDP if public expendi-

ture had increased as planned in April

2013 in the stability programme.

The delay became more pronoun-

ced in relation to the track for the return

to balance.

The actual and structural deficits of

2013 remain greater than European

Union and Eurozone averages.

In 2014, a deficit reduc-

tion objective whose out-

come is uncertain

From 2013 to 2014, the government

forecasts a reduction in the actual deficit

from 4.1% currently forecast to 3.6% of

GDP, and a reduction in the structural

deficit from 2.6 to 1.7% of GDP.

The

Haut Conseil des finances

publiques

(French High Council for

Public Finances) considered that the

GDP growth forecast (0.9%) was plau-

sible but that the government’s macroe-

conomic scenario had elements of fragi-

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

the overall situation of public finances

(at the end of January 2014)

lity, particularly concerning changes to

employment.

Forecasts for the growth in receipts

from corporate tax, income tax and pay-

roll deductions, which were made by the

government based on this GDP growth

forecast, appear too favourable. The

overall elasticity in public income could

therefore be lower than forecast (1.0)

leading to a possible loss of income of

between

€

2 billion and

€

4 billion.

New measures to increase obliga-

tory deductions, written into the finance

and social security financing bills for

2014, as well as in prior texts (tax on

heavy goods vehicles) will have a yield

that is down by

€

1 billion to

€

2 billion

compared to what was expected last

September, due to amendments made to

these bills, the suspension of the imple-

mentation of the tax on heavy goods

vehicles

and

decisions

the

Constitutional Council.

Given the trend in public expendi-

ture, as estimated by the government,

the savings necessary for the growth in

public expenditure by volume to be limi-

ted

0.4%,

announced

September, stand at about

€

15 billion.

The savings for which the content is

detailed in the finance and social secu-

rity financing bills are greater than in

previous years. Given the new expendi-

ture, they should nevertheless be insuffi-

cient to limit the growth in public

expenditure

0.4%

volume.

Cancellations of credits will therefore

be necessary during the administration

process to reach this objective and

achieve the structural savings planned

for 2014 (0.9 percentage points of

GDP), which essentially covers expendi-

ture. Furthermore, there is no safety

margin

cope

with

unforeseen

expenses, which arise practically every

year.

In total, the downward revision in

the elasticity of income and the product

of new measures could result in actual

and structural deficits greater by

€

3 bil-

lion to 6 billion to those forecast by the

Government, unless the public expendi-

ture for 2014 is reviewed downwards by

the same amount.

Public debt will continue to grow in

2014 and will exceed

€

2,000 billion at

the end of the year.

Additional savings to be

agreed between 2015 and

2017

The Planning Act forecasts bringing

the public accounts into structural

balance by 2016. This due date was not

changed

the

Council

the

European Union in spite of the postpo-

nement, to 2015, of the objective of an

actual deficit brought down to 3% of

GDP.

Given the delays compared to the

track of the structural balances in the

Planning Act (1.0 percentage point of

GDP in 2013 and 0.6 percentage points

in 2014), the structural savings neces-

sary in 2015 and 2016 are higher than

specified by the Planning Act and will

represent another 0.7 percentage points

of GDP for both of these years.

To make these savings in 2015 and

2016 entirely on expenditure, then to

reduce the rate of obligatory deductions

in 2017, as the government plans to do,

the combined savings required over the

period 2015-2017 exceed

€

50 billion.

This will be even greater if the objec-

tives for controlling expenditure and

reducing the deficit for 2014 are not rea-

ched and if potential growth is reviewed

downwards.

Although their extent is unprece-

dented, these savings, which correspond

to a slight increase in the volume of

public expenditure, appear possible

without compromising the quality of

public services and the effectiveness of

redistribution.

Their

achievement

requires all-out effort and resolute

action by all public authorities.

Summaries

of the Annual Public Report by the

Cour des comptes

the overall situation of public finances

(at the end of January 2014)

Second part

Public Policies

Chapter I

Agriculture

1 - Food Safety: insufficient inspections by the

Ministry of Agriculture

2 - SAFER: the excesses of an agricultural and

rural development policy tool

Summaries

of the Annual Public Report by the

Cour des comptes

Food Safety:

insufficient inspections by

the Ministry of Agriculture

The food safety policy concerns all

actions aiming to ensure safe and harm-

less food of animal or vegetable origin.

It includes measures that contribute to

the quality of primary production

(unprocessed vegetables and animals

intended for consumption), the proces-

sing of foodstuffs, their transport and

distribution.

In France, several administrations

are responsible for implementing this

policy,

mainly

the

Ministry

Agriculture (Directorate-General for

Food), which is the subject of the pre-

sent text, and the Ministry of the

Economy

(Directorate-General

for

Competition, Consumption and the

Fight against Fraud), as well as their

local services.

Too few inspections

Concerning vegetables, inspections

relative to the use of pesticides by far-

mers remain very low (inspection rates

of 1.2%), even though these inspections

have increased from 600 per year in

2005 to 6,500 in 2011. They almost

exclusively occur amongst those reques-

ting subsidies under the common agri-

cultural policy (CAP), practically igno-

ring arboriculture and market gardening.

Contaminants in vegetables, particularly

heavy metals, are not subject to a

control plan by the Ministry of

Agriculture.

Inspections establishments for the

production and processing of foods-

tuffs

animal

origin

(134,335 establishments) and in direct

delivery establishments (371,631) drop-

ped by 17% between 2009 and 2012. In

abattoirs, France is finding it hard to

comply with European requirements in

matters of inspections.

The «inspections covering» foods-

tuffs of animal origin coming from

other countries in the European Union,

which lead to numerous anomalies

being found (25% for meat products,

21% for unpasteurised milk and milk-

based products) are few in number and

are not implemented in certain depart-

ments.

Supervision of self-moni-

toring to be improved

European regulations give profes-

sionals themselves the responsibility for

setting up a food safety control system,

which includes self-monitoring, while

the Member States are responsible for

second-level controls. The regulatory

provisions for improving the way the

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

self-monitoring is carried out by profes-

sionals have not been taken.

Therefore, self-monitoring is of

variable quality and –anomalies are not

necessarily reported to State services.

Numerous anomalies with

insufficiently restrictive

consequences

The inspections carried out by the

Ministry of Agriculture show a high rate

of anomalies, greater than 50% for ins-

pections relative to the use of pesticide

products by farmers. For validated ins-

pections in establishments, an average

anomaly rate was found in 38% of cases

and a major anomaly rate in 7% of cases

in 2012.

However, the consequences of ano-

malies are few and insufficiently restric-

tive. They vary greatly from one depart-

ment to another for no apparent reason

Lastly, France does not make suffi-

cient use of the options specified by

European regulations to pass on the

cost of inspections to professionals.

Food Safety

The Court issues the following

recommendations:



implement the orders specified

by the regulations to oblige laborato-

ries to send anomalous results on

foodstuffs to the State services as soon

as these anomalies present a risk for

public health;



more broadly apply the provi-

sions of article L. 202-3 of the French

rural and maritime fishing code (

code

rural et de la pêche maritime

) speci-

fying the option to subject laboratories

performing self-monitoring analyses

to a qualification recognition proce-

dure

run

the

Ministry

Agriculture ;



make sure that inspections are

targeted at those professionals who are

most at risk, ensure the quality of ins-

pections (compliance with procedures,

observation of essential points, appro-

priate rating, etc.) and ensure that the

consequences are appropriate (more

numerous and more restrictive conse-

quences);



for vegetables, extend the risk

analysis to silos, to at-risk zones and to

contaminants and improve the inspec-

tions carried out pursuant to the

«Health package»;



strengthen

the

«inspections

covering» products of animal origin

coming from the European Union.

Recommendations

SAFeR: the excesses of an

agricultural and rural

development policy tool

The 26 land management and rural

establishment agencies (SAFER) are

public limited companies incorporated

at the beginning of the 1960s to buy and

re-sell agricultural land and farms by

using, where necessary, pre-emptive

rights granted to them by the law.

They employ 986 staff. In 2012, they

purchased 9,700 assets representing

86,600 hectares for a total value of

€

1.1 billion.

Broadening of the SAFERs’

scope of action

Two factors have strongly affected

the activity of the SAFERs: the end of

the period of major land regrouping and

the reduction in the market for agricul-

tural land under the effect of urbanisa-

tion and development: the share of agri-

cultural land went from 62% of the

national territory in 1960 to 51.4% in

2010.

The SAFERs’ scope of action has

gradually broadened. At the same time,

their pre-emptive rights were extended,

firstly to the entire rural market, then, as

part of environmental policies. The

SAFERs thus became property opera-

tors in the rural environment, including

in non-agricultural activities.

This development was accompanied

by closer relationships with local autho-

rities. Nevertheless, these relationships

have appeared to develop unequally

across the territory. Also, a greater role

is expected in the area of forestry.

An essential refocusing of

SAFERs on their duties

«Substitution» transactions, which

allow a change of ownership without

the purchase of assets by the SAFER,

have taken an ever more predominant

place as a means of intervention in the

market (in 2012, 68% of the land area

and 78% by value).

Such a development is not unrelated

to the broad extension of exemption

from registration duties, which the

SAFERs benefit from, to «substitution»

transactions (in 1999) and to sales of all

«rural assets» (in 2000), which repre-

sents a tax advantage of

€

65 million,

borne essentially by the local authorities.

Just the «substitution» transactions gave

them tax benefits of

€

42 million in

2012.

This tax advantage increasingly

concerns transactions relative to rural

buildings, although it was intended to

allow intervention for public interest

Summaries

of the Annual Public Report by the

Cour des comptes

the SAFeRs

Summaries

of the Annual Public Report by the

Cour des comptes

reasons, particularly to allow young far-

mers to set up in business. However,

this latter purpose now represents less

than a third of the retrocession activities

of the SAFERs.

Improving the transpa-

rency of the SAFERs’ acti-

vities

An increasing number of practices

and legal arrangements, generally car-

ried out for tax optimisation purposes,

may act against the duty of transparency

in the rural property market which is

incumbent upon the SAFERs. These

types of transaction should be declared

to the SAFERs.

The statistics on the activity of the

SAFERs remain fragmented and diffi-

cult to interpret. The use of cost

accounting, which identifies the cost of

each activity, would allow the SAFERs

to improve the quality of their adminis-

tration.

Lastly, the opening of the decision-

making bodies of the SAFERs to

players other than those of the agricul-

tural world should continue. The essen-

tial relationships with the regions and

regional State services require that the

areas of responsibility of the SAFERs

correspond to those of the regions or

inter-regions.

A network to be controlled

Two organisations coexist at natio-

nal level, the «Fédération nationale des

SAFER»

(FNSafer)

and

«Terres

d’Europe-SCAFR». They are very clo-

sely interrelated, with common respon-

sibilities, sometimes similar activities

and closely linked personnel. The situa-

tion of these two entities must be clari-

fied, giving the first the responsibilities

of a network head and the second the

unique role of a provider of capital.

The State representatives have little

involvement, particularly at the level of

the Boards of Directors. There is there-

fore incomplete monitoring of the long-

term activity plans. It is necessary to

strengthen State control of the property

strategies carried out by the SAFERs.

Lastly, the procedure for assigning

State subsidies (

€

3.99 million in 2012)

appears particularly cumbersome and

should be simplified, taking greater

account of the difficulties of a particu-

lar region or compliance with the agri-

cultural policies set by the State. The

State should also quickly settle the situa-

tion concerning the repayment of the

2010 instalment of the advance granted

to the SCAFR (

€

1.5 million).

Summaries

of the Annual Public Report by the

Cour des comptes

the SAFeRs

These findings lead the Court to

issue the following recommendations:



reserve the exemption from

registration duties to transactions rela-

ting to general interest duties exercised

by the SAFERs;



recover the 2010 instalment of

the advance granted by the State;



ensure that the decisions taken

in the SAFERs are transparent;



specify a long-term activity plan

covering 2015-2020 for each SAFER

and develop the partnership with local

authorities according to the priorities

of the State agricultural policy;



re-group the SAFERs so that

their responsibilities at least corres-

pond to those of the administrative

regions and reduce the number of local

establishments;



establish cost accounting;



clarify the breakdown of roles

between the FNSAFER and the

SCAFR company, re-grouping the stu-

dies and advice to the SAFERs in the

federation.

Recommendations

Chapter II

Defence and space

1 - Franco-British cooperation concerning

aircraft carriers: a net loss for the

French public finances

2 - Space transport: a strategic ambition,

a priority for lowering costs

Summaries

of the Annual Public Report by the

Cour des comptes

Franco-British cooperation

concerning aircraft carriers:

a net loss for the French

public finances

A national project re-laun-

ched in a Franco-British

framework

Since 1980, France initially planned

to have two aircraft carriers, but only

one, the Charles de Gaulle, was built and

entered active service in 2001, while the

project for a second aircraft carrier was

postponed several times, essentially for

budgetary reasons.

At the beginning of the 2000s, the

Franco-British

rapprochement

defence matters offered new prospects

for cooperation in arms procurement:

from

2002,

high-level

discussions

concentrated more specifically on bilate-

ral cooperation in aircraft carriers, and,

on 18 November 2004, at the

Lancaster

House

summit, the two countries

announce their intention to cooperate in

building three aircraft carriers, –two for

the United Kingdom and one for

France.

A memorandum of

understanding dated

March 2006 defined the

terms of the cooperation,

which were unbalanced to

the detriment of France

The memorandum signed in 2006

was not based on real cooperation, but

upon payable access, by France, to the

results of British studies.

Both parties effectively undertook

to develop the detailed definition of the

common part of the design based on

the British work. They intended, where

applicable, to identify possibilities for

the grouped supply of certain elements

common to the French and British air-

craft carriers, to «generate benefits and

savings for both parties», but without

this constituting a commitment. In prac-

tice, the only commitment concerned

France which, in return for access to the

British studies, had to pay an «entrance

ticket» for an amount of

€

103 million

(

€

112 million constant 2013).

Thus concluded, the Franco-British

memorandum of understanding did not

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

Franco-British cooperation on

aircraft carriers

constitute an agreement to cooperate on

a common industrial project, but just an

off-the-shelf purchase by France from

the United Kingdom of certain studies.

The lack of a common

industrial project

Several reasons could lead one to

believe, even before signature of the

memorandum, that no common indus-

trial project could be implemented.

Firstly, based on the work underta-

ken by the British, it was clear that the

development timetables of the two

countries could not coincide.

Secondly, technically, the approaches

of the two countries significantly diver-

ged, particularly concerning the aviation

installation (choice of aircraft and their

means of take-off and landing).

Furthermore, the British had esta-

blished a procurement policy based on

the choice of a network of national sup-

pliers (

preferred suppliers

), which was

incompatible with the application of the

optional component of the memoran-

dum covering the possibility of com-

mon industrial purchases.

Lastly, the industrial reorganisation

strategy of the United Kingdom led the

British

Ministry

Defence

announce the breakdown of the

construction of the two aircraft carriers

within British shipyards in December

2005.

Under these conditions, France had

no choice other than to abandon sharing

the industrial construction with the

British.

An expense taken as a

pure loss by France

Other than the «entrance ticket»

giving the French team access to the

British studies, two contracts, for the

amount of

€

102 million, were directly

related to the cooperation process.

However, the studies acquired in

return are now obsolete as the pro-

gramme for the second French aircraft

carrier was suspended in 2008, before

being abandoned in the Defence White

Paper of 2013. Ultimately, this coopera-

tion resulted in a cost of

€

196 million

(

€

214 million constant 2013) for the

public finances, with nothing in return,

since France found that it could not

continue with this cooperation.

Summaries

of the Annual Public Report by the

Cour des comptes

Franco-British cooperation

on aircraft carriers

The Court does not deny the

potential advantages of cooperation in

armament matters during periods of

budgetary restriction providing their

purpose is to share development costs

while guaranteeing the participating

states a fair share in the industrial bene-

fits.

The success of such collaborations

nevertheless requires several condi-

tions to be met: sufficiently close tech-

nical objectives, in-phase timetables

and the acceptance of an actual and

rational share in the workload for stu-

dies and manufacture.

In the case of the 2006 memoran-

dum, given the positions publicly taken

by the British authorities, none of

these conditions could be fulfilled,

even before the agreement was accep-

ted. The signature of a costly commit-

ment for France, by the Ministry of

Defence under these conditions, could

only be explained by the illusory hope

of «enshrining» a project that was doo-

med by national budgetary restrictions,

by giving it the backing of a symbolic

form of Franco-British cooperation.

Conclusion

Summaries

of the Annual Public Report by the

Cour des comptes

Space transport: a strategic

ambition, a priority for lowe-

ring costs

Space transport in Europe

Europe currently has, with the

European Space Agency (ESA), an inde-

pendent space transport ability, based

on:

- a space port with an exceptional

geographical situation, –the Guiana

Space Centre (CSG -

Centre spatial

guyanais

), managed by the National

Centre for Space Studies (CNES -

Centre national d’études spatiales

), for

which France bears nearly 80% of costs;

- three launchers – a heavy launcher

(Ariane 5, the development and opera-

tional support for which is financed at

nearly 60% by France), a medium capa-

city launcher (Soyuz, for which com-

mercial flights have been performed

from the Guiana Space Centre since the

end of 2011, from facilities financed at

80% by France), and a small launcher

(Vega, the development of which is

mainly financed by Italy, but with

French investment of about 20%);

- a French operating company,

Arianespace, for which the primary sha-

reholder is the CNES;

- several leading industrialists, in the

first ranks of which is the Franco-

German company Astrium (EADS

group) and the French company

SAFRAN.

The budget that France contributes

to this overall, through the European

Space Agency or directly through the

CNES, on average over the last ten

years, is around

€

500 million per year.

Developing a less expen-

sive European launcher

Over the last few years, the appea-

rance of competitors in the market for

commercial launches (telecommunica-

tions satellites) and so-called «institutio-

nal» requirements for launches by admi-

nistrations and European public agen-

cies (civil or military earth observation,

observation of the universe, geoloca-

tion, etc.) only rarely require the use of a

heavy launcher such as Ariane 5, which

raises questions about the future of the

Ariane system.

Since 2005, commercial launches

have been in deficit (each launch of

Ariane 5, over the last ten years, has cost

an average of about

€

15 million for the

French taxpayer), and a large share of

European institutional space transport

requirements are fulfilled by the Russian

launcher

Soyuz

. The requirement to

carry out double launches (because of

the cost and the carrying capacity of

Ariane 5) for telecommunications satel-

lites is increasingly a commercial handi-

cap against the competition, particularly

Summaries

of the Annual Public Report by the

Cour des comptes

Space transport: a strategic ambition,

a priority for lowering costs

the American Space X, which is starting

to capture a strategic part of this mar-

ket.

The main countries concerned, par-

ticularly France, Germany and Italy,

have for several years been in agreement

in recognising that, firstly, it is impera-

tive to ensure balanced operation for

Arianespace commercial flights, and

secondly, it is desirable to eventually

have a European launcher adapted to

institutional missions. However, at the

last Ministerial Conference on Space, at

the end of 2012, no consensus was able

to be obtained on how to satisfy this

dual objective.

The possible options

France proposed rapidly develo-

ping a «modular» launcher, able to take

over from Ariane 5 for commercial

flights and from

Soyuz

for institutional

launches. Ariane 6, from this point of

view, would present a high version (abi-

lity to place 6 tonnes in geostationary

orbit) and a low version, equivalent to

Soyuz

Germany considered that, on the

contrary, it would be preferable to deve-

lop Ariane 5 «upwards», by increasing its

capacity and giving it a re-firing stage

(project known as the Ariane

5 midlife

evolution

or «Ariane 5ME»);

Italy intended to reserve its funding

capacity for the Vega launcher, while

showing an interest in the French pro-

posal, due to the predominance of solid

propulsion that could offer industrial

synergies between the components of

Vega and Ariane 6.

The Ministerial Conference of 2012

did not come to a decision. It was deci-

ded that the choice between Ariane

5ME and Ariane 6 would be postponed

to the Ministerial Conference on Space,

which would be held at the end of 2014.

Making more profitable

use of the Kourou

Spaceport

The Court expressed doubts, in a

summary ruling sent to the Prime

Minister at the beginning of 2013, about

the coherence of the options taken by

France. In effect, our country appears

ready to invest, through Ariane 6, both

in a direct competitor to

Soyuz

, even

though France had just spent nearly

€

500 million to make it possible to ope-

rate it from the Guiana Space Centre,

and in an option to extend Ariane 5 that

is incompatible with the rapid develop-

ment of Ariane 6.

Since then, on the French side, the

situation has significantly developed

towards greater coherence: the initial

concept of a modular launcher was

abandoned in favour of a simple laun-

cher with capacity of about half that of

Ariane 5 – this configuration should

both avoid direct competition with

Soyuz

at Kourou, eventually release

Arianespace from the restriction of dual

flights for commercial launches and, for

European requirements, provide a laun-

cher adapted to the heaviest institutional

payloads.

Summaries

of the Annual Public Report by the

Cour des comptes

Space transport: a strategic ambition,

a priority for lowering costs

Two uncertainties

Two

uncertainties

nevertheless

remain.

The first relates to the cost of

Ariane 6 launches. Given levels of com-

petition (and the level of the US dollar,

the reference currency in space trans-

port), the threshold of

€

70 million,

representing almost half the cost of the

Ariane 5 «launcher fired» (meaning the

empty launcher coming from the fac-

tory to which the various space trans-

port services are added), must not be

crossed. This implies great simplifica-

tion of the industrial system for produ-

cing the launchers, which is currently

very fragmented, due to the rule on «fair

industrial return» which applies to the

programmes of the European Space

Agency. To reach this result, the

European Space Agency initiated an

open European call for tenders based

on the new configuration of Ariane 6,

independent of the subscriptions of

Member States. The next few months

will show whether this process is viable

and whether it does produce the hoped-

for industrial simplification and cost

reduction effects.

The second uncertainty relates to

the convergence that may be envisaged

between the main partners, particularly

Germany (on the timetable for the deve-

lopment of Ariane 6) and, to a lesser

extent, Russia (concerning the cost for

delivering

Soyuz

launchers to Kourou,

and more generally, on the will to conti-

nue cooperation with Europe).

Lastly, the results depend on deci-

sions that the next Ministerial Council

of the European Space Agency will take

at the end of 2014, particularly concer-

ning the fate of the Ariane 5ME option,

upon which the timetable for the deve-

lopment of Ariane 6 depends.

The Court issues the following

two recommendations:



give priority to cost reduction in

the common studies on the future of

the Ariane system and its adaptation

to institutional and commercial requi-

rements;



to the extent that the European

Union has become an important insti-

tutional user of

Soyuz

and Vega, set

out to obtain increased participation

from the Union in the funding of the

corresponding infrastructure.

Recommendations

Chapter III

Education and youth

1 - From boarding schools for excellence to boarding

schools for success: the chaotic conduct of a

social and education policy

2 - Civic service: high ambition and an increase in

uptake to be controlled 32

Cour des comptes

From boarding schools for

excellence to boarding

schools for success:

the chaotic conduct of a

social and education policy

Since 1990, successive governments

have sought to revitalise boarding

schools. In 2008, the creation of experi-

mental «boarding schools for excel-

lence» (Sourdun (Seine-et-Marne) and

Montpellier), a component of the

Espoirs Banlieues»

(«Hope for the

Suburbs») plan, demonstrated this

proactive policy.

In 2010, displaying great ambition

with the creation of 20,000 places in

«boarding

schools

for

excellence»

(12,000 places in specific establishments

created for this purpose and 8,000

places approved in existing boarding

schools), this system was allocated a

budget of

€

400 million, funded by the

Future Investments Programme under

the authority of the Commissioner

General for Investment (GGI) and

managed by the ANRU. To date, contri-

butions from regional authorities have

brought the amount in the initial plan

more than

€

600 million.

Initial guidelines that were

imprecise

and never corrected

From the beginning, neither the

population groups targeted nor the edu-

cational results expected were defined in

a clear and consistent manner between

public decision-makers. There has been

no clear arbitration between a policy

that was designed as an educational ins-

trument, intended to modify the range

of educational services and run only by

the Ministry of National Education, and

a tool to serve a broader ambition inclu-

ding policies on cities, youth and the

fight against exclusion and coming

within an inter-ministerial framework.

This imprecision left the academic

authorities and establishment heads

with great freedom in recruitment.

Although this has allowed adaptation to

local requirements, it led to great diver-

sity in the groups of people received,

for reasons most often related to mate-

rial and budgetary contingencies.

The diversity of forms of establish-

ments has reduced national visibility of

the investment programme, confusion

reaching a peak with places reallocated

or approved in existing boarding

schools. The fact that the State interve-

ned unilaterally to create the first very

expensive boarding schools, within an

area of decentralised responsibility, has

added to this confusion.

Summaries

of the Annual Public Report by the

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

From boarding schools for excellence to boarding

Rapid generalisation, to

the detriment of educatio-

nal resources

Although the ANRU has endeavou-

red to fulfil the quantitative objectives

that were set, particularly by coming

within the normal framework of decen-

tralised responsibilities, the projects are

not coherent overall. Places in existing

boarding schools were created for rea-

sons far removed from the educational

and social objectives upon which the

decision should have been based: to

optimise under-used public infrastruc-

tures, or to obtain State funding for

regional authority projects that were

already decided under their own pro-

grammes.

Neither was the vigour of the pro-

perty programme run by the State ope-

rator matched by an equivalent effort to

determine the resources for the functio-

ning of establishments, particularly edu-

cational, by the Ministry of National

Education. These resources remained

contingent and unequal, as no national

standard was given. One would never-

theless have expected that, given the

planned reception of 20,000 boarders

under new conditions, the correspon-

ding resources would have been deter-

mined and provided for.

Ultimately, the shortcomings in the

means of providing finance and educa-

tional support to «boarding schools for

excellence» raises the problem of the

very credibility of the policy conducted.

A fragmented assessment

process with low impact

The assessment process, inherent in

an experimental policy, was fragmented.

The fact that a very costly assessment

was focused on the first establishment

created (Sourdun in the Seine-et-Marne)

according to terms where there was lit-

tle consensus between the public

players, led to the proliferation of

assessments. They were never coordina-

ted by the Ministry of National

Education, whose services, responsible

for assessing educational policies, were

totally absent.

Doubtless, the rules set by the

Future Investments Programmes led to

the preparation of an overall methodo-

logy which contributed to rationalising

the existing initiatives. But this process

of overall assessment did not begin. The

administration could therefore only base

its position on fragmented assessments,

for which the value is limited.

Constantly,

numerous

decisions

were taken without the result of the

assessments in progress being available.

Positive achievements

to be preserved

Despite the shortcomings in the

conduct of this policy, results are per-

ceptible: positive assessments by boar-

ders, modernisation of the public estate

of boarding schools, improvement of

teaching and educational practices in

«boarding schools for excellence», and

the rekindling of interest by families,

From boarding schools for excellence to boarding

schools for success

local authorities and those involved in

social action for this system as an addi-

tional instrument for the social inclusion

of youths in difficulty.

Clarifications necessary to

the continuation of the

programme under the

name «boarding schools

for success»

Although 8,000 places remained to

be opened pursuant to the first Future

Investments Programme, the effective

implementation of which runs until

2020, the continuation of the policy to

renew the range of public boarding

schools was confirmed in the Finance

Act for 2014 (

€

150 million for 6,000

places).

Consequently, the coherence of the

conduct of the public policy would be

improved by having an increased degree

of progress in the first programme, to

decide the extent of the second, or even

by having the beginning of execution of

the second programme dependent on

the completion of the first or, at least, a

shared assessment of the first compo-

nent.

Also, the policy on boarding schools

for excellence, then boarding schools

for success, will entail the commitment

€

550 million of State credits for the

construction or modernisation of pro-

perty intended for secondary school

education, placed under the responsibi-

lity of regions and departments, and for

the establishments that are their pro-

perty. The recurrence of significant

investment budgets in these areas, which

come under other public entities and

which have never been shared since the

first laws on decentralisation, also raises

numerous questions of principle.

Summaries

of the Annual Public Report by the

Cour des comptes

From boarding schools for excellence to boarding

schools for success

Consequently, the Court issues the

following recommendations:



convert the status of the two

national public establishments at

Sourdun and Montpellier to public

local education establishments;



increase the reception capacity

of the main establishments at constant

investment;



increase the involvement of the

Ministry of National Education in

procedures for assessing the Future

Investments Programme;



develop the sharing of expe-

rience and teaching and educational

innovations between players on the

ground;



for future investments, in the

charter being prepared, select several

model formats of boarding schools

and specify the recruitment criteria;



abandon the concept of appro-

ved places;



quickly make the budgetary

choices related to reducing contribu-

tions from the Experimental Youth

Fund and the National Agency for

Social

Cohesion

and

Equal

Opportunities (

fonds d’expérimenta-

tion pour la jeunesse et de l’Agence

nationale pour la cohésion sociale et

l’égalité des chances

);



standardise and consequently

make choices concerning grants for

teaching and educational resources for

boarders, corresponding to the final

objective of 18,000 additional places

in boarding schools for excellence and

boarding schools for success.

Recommendations

Summaries

of the Annual Public Report by the

Cour des comptes

Civic service:

high ambition and an increase

in uptake to be controlled

Civic service, created by the law of

10 March 2010, was the successor to

voluntary civilian service, for young

people aged between 16 and 25

wan-

ting to commit to a collective project in

the general interest with approved legal

entities.

Managed by the Civic Service

Agency, it developed rapidly: 6,000

young people committed themselves in

2010, and nearly 20,000 in 2012, for a

total cost of

€

133 million to the State.

In 2013, a deceleration is expected, with

19,000 new entries, but the objective is

to reach 100,000 young people commit-

ted in 2017.

Initial results to be conso-

lidated

Although civic service is now gai-

ning the support of young people and

participating associations, progress must

be made to reach the objectives fixed by

the law in terms of social diversity.

Also, civic service is often perceived

by its beneficiaries as a tool for social

inclusion, alongside other arrangements

(work experience courses, work-based

learning, youth guarantee, the govern-

ment’s «jobs for the future» and «inter-

generation

contracts»

programmes,

etc.). However, its results in the matter

must be put into perspective.

The high rate of non-completion (a

quarter of contracts are terminated

before they are due to end) and the risk

of substitution for employment also

require vigilance.

Lastly, the agency has not conducted

any studies on the place of the commit-

ment for civic service abroad, which is

currently marginal, particularly with

regard to other forms of international

voluntary work.

Attention to be paid to the

quality of missions

Within the context of a planned

increase in the uptake of civic service,

the question arises of the ability to pro-

duce 100,000 high-quality missions each

year. Sources of new missions are found

in sectors (health and sport) and catego-

ries of organisations (small associations

and local authorities) where the risk of

substitution for employment is high.

There must therefore be increased vigi-

lance

when

preparing

cases

and

checking projects relating to new mis-

sions.

Increased training of tutors to

explain the specifics of civic service,

Summaries

of the Annual Public Report by the

Cour des comptes

Civic service

and improved civic and citizenship trai-

ning of young people, are essential.

Overall administration to

be improved

The agency must improve the way it

organises the regional leadership of

civic service, improving the connection

with decentralised services of the

Ministry of Youth and Sports.

It is based on a small number of

powerful voluntary service networks,

which have significantly contributed to

the success of the start-up phase. There

should now be diversification through

an active search for new partners, parti-

cularly local authorities which are

broadly ignoring the arrangement.

Furthermore, the large-scale use of

intermediation may present risks, which

should be reduced. The agency must

also design and implement a real stra-

tegy for control adapted to require-

ments. Therefore, the rate of increase in

uptake of civic service in the years to

come must be correlated with the

improvement of quality control for the

missions.

Lastly, on the ground, better coordi-

nation of the services responsible for

arrangements in favour of youth must

be sought, to oversee the proper

connection between civic service and

other instruments in favour of youth

employment or social inclusion.

A cost to be controlled

The programme to increase the

number of young people performing

civic service is outlined within a restric-

ted framework.

The budgetary sustainability of the

arrangement requires choices to be

made, both concerning the rate of

increase in uptake and concerning the

credits allocated to civic service, since

responsibility for100,000 young people

under current conditions of State finan-

cing would exceed the credits currently

allocated for the mission.

In this respect, budgetary tensions

have already led, in 2013, to a planned

adjustment of the duration of missions

to its minimum level, namely six

months, which is not optimal for all

volunteers.

Furthermore, the new counting

mode for 2014 (number of young peo-

ple performing all or part of their

voluntary service during the year, and

no longer only new entrants into the

system) is leading to a non-transparent

downwards revision of quantitative

objectives.

Consideration should be given to

the possibility of reducing the unit cost

of civic service. Setting a fixed-rate pay-

ment of a small amount for part-time

missions could be examined (each

volunteer currently receives net monthly

payment of

€

467.34, or

€

573.72 accor-

ding to social criteria, whether his/her

mission is 24 hours or 35 hours a week).

Summaries

of the Annual Public Report by the

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

Furthermore, it appears that the

State bears almost all the expense for

the full cost of civic service, in contrast

to what happens in Germany, for exam-

ple. A study should be carried out so

that the receiving organisations which

can do so pay their fair share of the cost

of civic service.

Ultimately, it is desirable for the

agency to adopt an approach aimed at

the qualitative development of the sys-

tem, overseeing the promotion of high-

quality missions accessible to all and

separate from paid employment, while

controlling the unit cost of contracts.

Civic service

Consequently, the Court issues the

following recommendations:



choose a rate of increase in

uptake for the civic service that is

compatible with controlling the risk of

employment substitution caused by

increasing the number of missions;



set annual objectives in terms of

the number of contracts concluded

and not the number of contracts in

force and make the essential choices

for matching the objectives with bud-

getary resources;



reduce the unit cost for the

State of civic service contracts, where

applicable, by reducing payment for

part-time missions and by abolishing

the subsidy allocated to associations

for the tutorial system;



fix precise objectives for social

diversity for the organisations recei-

ving a large number of volunteers.

Recommendations

Chapter IV

Health and social cohesion

1 - The health of prisoners: progress still vital

2 - Disability-related taxation: a stack of measures

with no coherence

3 - The conversion of hostels for migrant workers

into social housing: a policy to be overhauled

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

the health of prisoners:

progress still vital

Prisoners, of whom there were

nearly 68,000 in 2013, have significant

health requirements, particularly related

to higher prevalence of addictive beha-

viour, infectious diseases and, above all,

psychiatric disorders, than are found in

the general population.

The law of 18 January 1994 on

public health and social security protec-

tion profoundly reformed the case

management of their health, transfer-

ring it from the prison administration to

medical teams attached to health institu-

tions. Twenty years after the adoption of

this law, and while the 2010-2014 strate-

gic action plan aiming to remedy certain

persistent shortcomings is being com-

pleted, the Court and the regional Cour

des comptes sought to assess the pro-

gress that this arrangement has led to

and the difficulties that remain.

The supply of somatic

and psychiatric care is

still incomplete

Despite the almost doubling of the

health personnel working in health units

in each prison, the supply of somatic

care remains subject to great disparities,

particularly for certain medical speciali-

ties, notably psychiatry, due to changes

in medical demographics, the unequal

territorial distribution of health profes-

sionals and the fact that it is unattractive

to practice medicine in prisons. The

upgrading of premises and computer

systems, and the use of remote medi-

cine, still remain insufficient. Capacity

for somatic hospitalisation, improved by

the construction within hospitals of

235 secure rooms and 9 secure inter-

regional hospital units, paradoxically

appears under-used. The limited num-

ber of escorts available, hospitalisation

conditions and insufficient coordination

between health units, health institutions

and prison personnel combine to pro-

duce this outcome.

Other than the lack of psychiatric

personnel in prisons, the capacity for

hospitalising prisoners with mental pro-

blems is very limited: only 7 of the 17

specially equipped hospital units speci-

fied by the law of 9 September 2002

were open in 2013. Hospitalisation at

the request of a State representative in a

psychiatric institution that does not have

a specialised unit thus remains the main

mode of hospitalisation under condi-

tions that do not ensure satisfactory case

management of prisoners (placement in

isolation room or unit for difficult

patients, accelerated release of the

patient).

Summaries

of the Annual Public Report by the

Cour des comptes

the health of prisoners

Persistent obstacles to

overall case management

The obstacles to overall case mana-

gement of prisoners relate to the highly

variable level of cooperation between

the various players (prison and health

staff, prison services for social inclusion

and probation, magistrates, medical-

social services, social security organisa-

tions, liberal professions and health ins-

titutions, etc.), particularly at the end of

imprisonment, when the risks of termi-

nating treatment are the greatest.

The social security protection of

prisoners is not always effective due to

problems of affiliation, or obtaining or

resuming social security entitlements.

In spite of progress, any approach

towards health remains too often

dependent on the conditions of deten-

tion (imprisonment, violence, inactivity,

broken family links, shortcomings in

hygiene, prison overpopulation, etc.).

The rules for functioning and security

within prisons can make it difficult to

access treatment within institutions and

lead to breaches of medical confidentia-

lity, as regularly highlighted by the

contrôleur général des lieux de privation

de liberté

(General Inspector of Places

of Deprivation of Liberty). Prisoners’

access to external treatment is subject to

the availability of prison and police

teams to accompany and guard them.

Suspension and modification of sen-

tences for medical reasons remain mar-

ginal.

A public health policy to

be organised as such

Overcoming the difficulties obser-

ved assumes that it is possible to orga-

nise a public health policy that is able to

cope with the issues.

However, a national strategy is still

lacking and the mobilisation of regional

health agencies, which are nevertheless

explicitly responsible for assessing

requirements and defining the range of

treatment available in prisons, remains

very unequal. The constituents relative

to treatment of prisoners in the regional

health organisation diagrams are often

imprecise; the coordination work with

local players is underdeveloped. Only

half of the regional health/justice com-

missions, which were nevertheless crea-

ted in 2008, were instituted in 2012.

In addition, in the almost total

absence of changes to the funding

mechanism defined in 1994, most of the

financial cost related to the treatment of

prisoners was transferred from the State

to the health insurance system: while, in

the past, the State bore 76% of the

financial cost, this share is now no more

than 31%.

Moreover, the financial cir-

cuits put in place appear to be sources

of complexity and malfunction.

A redefinition of the funding proce-

dures is necessary, which should at least

involve regular revaluation of the

amount of the contribution paid by the

State to the ACOSS for each prisoner

and looking at the overall financial rela-

tionship between the State and the

health insurance system. The legitimacy

of including prisoners within the scope

of the CMU and the CMU-C could be

examined, as these arrangements are

also financed by national solidarity.

The improvement of the health case

management of prisoners must, ultima-

tely, come within a genuine process of

public health that is based, as is the case

in the United Kingdom, on epidemiolo-

gical monitoring of the prison popula-

tion and indicators covering results, not

just resources.

The Court and the regional Cour

des comptes issue the following

recommendations:



in the next public health law,

identify the public health objectives

specific to the prison population,

based on results indicators with data

supplied by regular epidemiological

monitoring;



increase the available range of

treatment, with psychiatric treatment

as a priority, while accelerating the

modernisation of premises and the

procedures under which the medical

teams carry out their work, where

appropriate by the complementary use

of health insurance credits and by

ensuring greater consistency in the

conditions for case management;



improve accessibility to treat-

ment by generalising the framework

protocols between medical teams and

the prison administration according to

best cooperation practices observed,

and have the case management of pri-

soners come within a genuine health

programme going beyond release

from prison;



strengthen the role of regional

health agencies as linchpins of the

health policy for prisoners, in particu-

lar by overseeing the effective genera-

lisation of regional health/justice

commissions;



redefine the procedures for fun-

ding treatment for prisoners, particu-

larly by examining the possibility of

including them within the scope of

universal health coverage and univer-

sal complementary health coverage.

Recommendations

Summaries

of the Annual Public Report by the

Cour des comptes

the health of prisoners

Summaries

of the Annual Public Report by the

Cour des comptes

Disability-related taxation:

a stack of measures with

no coherence

The scope of disability remains dif-

ficult to determine; in spite of the clari-

fication provided by the law of 11

February 2005, the definition of disabi-

lity fluctuates according to its origin or

the assessment of its severity. The tax

legislation mixes, often without distinc-

tion,

disabled

persons,

dependent

elderly persons and sometimes even the

able-bodied.

The size of the population concer-

ned is also uncertain; by limiting our

consideration to the beneficiaries, in

their own right, of a pension or allo-

wance related to disability, we may esti-

mate that the disabled population repre-

sented about 4.7 million persons in

2011.

Taxation constitutes the second

means of State intervention, after finan-

cing allowances on budgetary credits;

but the cost of tax measures granted,

for which the order of magnitude may

be between

€

3.5 billion and

€

4 billion,

is not shown in the national accounts.

The question is therefore raised of

the real impact of this tax arrangement,

of its ability to satisfy the requirements

of the disabled and its contribution to

implementing public policy in favour of

the disabled.

The tax measures in

favour of the disabled are

numerous and dispersed

However, their presentation in the

budgetary documents is only partial: out

of 64 tax reduction measures in the

general tax code, only 37, dispersed bet-

ween a large number of budgetary pro-

grammes, are listed as tax expenditure in

the Finance Bill.

Most of these measures cover

elderly persons in modest circums-

tances, dependent and disabled persons,

or come within part of a broader policy.

This presentation means it is not

possible to have an overall understan-

ding of the resources devoted to the

disability policy. It makes it difficult to

understand tax policy in favour of the

disabled, which also concerns a great

variety of very different taxes.

The tax system is discon-

nected from disability

policy

As a result of the historical combi-

nation of disparate measures, the tax

system has not been re-examined to take

into account the objectives and priori-

ties set by the law of 11 February 2005

on disability.

Disability-related taxation

Tax measures, allowances and social

security loopholes come within the

same scope, with no real verification

that they are coherent and complemen-

tary. They relate to each other poorly;

some of them, which are sometimes

quite close in their intention, may set

out different disability conditions.

Taxation is a driver of ine-

quality between

disabled persons

By usually relying on decisions on

the recognition of disability, the general

tax code reproduces the inequalities

which are at the administrative origin of

the recognition of disability (disability in

the strict sense, civil disability, military

disability, work-related accidents and ill-

nesses) and according to the depart-

ments where the decision was taken.

The tax system gives greater consi-

deration to the origin of the disability

than its degree of severity, and takes

insufficient account of the income of

the persons concerned. It may intro-

duce, or worsen, income inequalities

between the disabled persons them-

selves. This is true in numerous cases,

between persons with a comparable

degree of disability, or between disabled

persons with different levels of income.

The effects of taxation in

favour of disabled persons

are not understood

The taxpayers who receive real

benefit from tax measures are limited in

number and often overestimated. The

cumulative effect of these is misleading;

in reality, few taxpayers can benefit from

all of the measures specified, particu-

larly concerning income tax.

The real cost of tax benefits granted

is not really known, any more than their

consequences for access to social bene-

fits, their impact on the income of disa-

bled persons or the service provided

concerning their requirements in terms

of social inclusion, mobility and home

support.

Summaries

of the Annual Public Report by the

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

The Court issues the following

recommendations:



improve understanding of the

number and situation of disabled per-

sons, particularly by improving know-

ledge of their income through surveys

by INSEE and the research depart-

ment, studies, assessments and statis-

tics from the Ministry of Social

Affairs;



rationalise the presentation of

tax expenditure forming part of the

policy in favour of disabled persons,

particularly by grouping it within pro-

gramme 157 and improving the rela-

tionship of its presentation with that

of budgetary expenditure relating to

the same policy;



supplement and improve the

reliability of existing estimates so as to

measure the overall impact of tax mea-

sures, both in terms of beneficiaries

and cost;



periodically update lists of

equipment

concerned

(surgical

appliances, housing equipment, etc.)

according to technical developments;



re-examine all tax and social

security measures with the aim of

improving their interrelationship (eli-

minate duplicates, incoherence and

pointless complexity; improve comple-

mentarity; take into account effects on

income disparities between disabled

persons), by revising, as a priority:

the measures relating to compen-

sation for disability: in particular, the

disability

compensation

benefit,

exemptions from charges and the tax

expenditure targeting the same objec-

tive (increasing the limit on expendi-

ture for domestic employees, deduc-

tion for equipment for the residence,

etc.);

the numerous aids to accessibility:

tax, social security (disability compen-

sation benefit, in particular) or others

(allowance for the improvement of

rented homes, in particular);

the various tax measures relative

to the transfer of assets.

Recommendations

Disability-related taxation

the conversion of hostels for

migrant workers into social housing:

a policy to be overhauled

Mostly built between 1968 and 1975

to meet the temporary requirements of

foreign workers who came to France

without their families, migrant workers’

hostels still housed 110,000 residents at

the end of 2012.

The gradual deterioration of the

buildings justified the introduction, in

1997, of a conversion plan involving

several financers, including the State,

local authorities and «Action logement».

This plan covered, firstly, renovating

dilapidated

hostel

buildings,

and

secondly, their conversion to social hou-

sing, to provide temporary housing to

persons experiencing difficulties finding

an independent home or keeping them-

selves in one.

Real improvements, but a

very limited number of

them

The renovations carried out impro-

ved the residents’ quality of life.

Between 2008 and 2012, nearly 7,000

very small bedrooms (less than 7.5 m²)

or bedrooms with multiple beds were

eliminated and nearly 10,000 housing

units of at least 12 m², mainly with their

own toilet facilities and kitchen, were

created.

However, after sixteen years of

implementation, these improvements

have benefited only slightly more than

300 hostels, out of some 700 existing

hostels. The delays result mainly from

the length of the consultation process.

The involvement of regional authorities,

particularly in identifying new land for

building, is decisive although unequal.

Inefficient administration

The monitoring of the renovation

plan, assigned to the Inter-ministerial

Committee on Housing for Immigrant

Populations (CILPI -

commission inter-

ministérielle pour le logement des popu-

lations immigrées

) is inefficient, whether

it concerns analysing requirements, esta-

blishing priorities or ascertaining what

has been done. There is no reliable and

ordered list of the hostels to be renova-

ted. The CILPI lists validated projects,

but does not monitor their implementa-

tion or their completion.

The work programmed over the

period 1997-2012 represented expendi-

ture of

€

1.57 billion. At the current

rate, and given the uptrend in costs,

investment of

€

3.4 billion spread over

20 years would still be necessary.

It seems essential to obtain an upda-

ted and rigorous analysis of renovation

requirements, to refocus the plan on the

most urgent situations and to redefine

the procedures for administration.

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

the conversion of hostels for migrant workers to

social housing

The difficulties of

conversion to

social housing

Turnover of residents is low, at a

rate of around 15%-18%. There are

various obstacles to the diversification.

The main obstacles are the exception

made, for residents housed in the hostel

before conversion, to the principle of

temporary housing attached to social

housing, the very low remainder to be

paid on the rental charge for those with

low incomes and the absence of alterna-

tives in zones where housing is tight.

The diversification of population

groups goes hand-in-hand with an

increase in their vulnerability, which

implies that the managers develop their

ability for social support. However, the

management of rented social housing,

for which the managers receive une-

qually divided public assistance, cannot

substitute for overall case management

reserved for social workers in the sec-

tors.

More than 40% of the occupants of

hostels, traditional residents who have

aged in the same place, are more than 60

years old. This causes constraints:

beyond habitual reluctance, specific dif-

ficulties of a cultural and financial

nature impede their orientation towards

establishments for housing dependent

elderly persons.

Thus, to increase the possibilities for

home support, adaptation of the home,

which generates extra costs, and deve-

lopment of social support are necessary.

Management risks to be

controlled

The problems created by over-occu-

pation and the presence of activities

related to the «informal» economy,

although eliminated when a hostel is

converted, may eventually reappear.

The size of increases in rental

charges following renovation, the prac-

tice of retired residents travelling back-

wards and forwards between France and

the country of origin, which leaves hou-

sing units empty, and the fixed-fee cha-

racter of the rent, which does not allow

managers to pass on the current

increase in charges, may damage the

economic equilibrium of the residences.

All of these difficulties in conver-

ting hostels to social housing bear wit-

ness to the sloppy administration of the

social component of the policy.

The Court issues the following

recommendations:



strengthen the inter-ministerial

administration of the policy of

converting hostels for migrant wor-

kers to social housing:

- by giving a minister responsibility

as lead manager;

- by increasing the association of

the managers of hostels in the defini-

tion and monitoring of the policy;



review the objectives of the

plan to convert the hostels, by targe-

ting priorities:

- in terms of requirements for

renovating hostels that are still fully

occupied or where bad or inappro-

priate housing conditions remain;

- in terms of converting hostels

not only into social housing, but also

into any other reception or housing

organisation;



update and improve knowledge

about those accepted in the converted

hostels and their requirements;



explicitly specify the temporary

nature of the stay in new occupation

contracts, both in hostels and social

housing



encourage, through support

measures, access to ordinary housing

for residents who desire it;



facilitate social rental manage-

ment by clarifying and harmonising

the conditions for its funding with

regard to the social requirements of

residents.

Recommendations

the conversion of hostels for migrant workers to

social housing

Summaries

of the Annual Public Report by the

Cour des comptes

Chapter V

Tourism

Tourism in French overseas territories: an

essential spurt

Summaries

of the Annual Public Report by the

Cour des comptes

tourism in French overseas terri-

tories: an essential spurt

Apart from a recent recovery, tou-

rism in French overseas territories has

been in crisis since the beginning of the

2000s, even though it represents an

opportunity for overseas island econo-

mies coping with high levels of unem-

ployment (between 20 and 30% depen-

ding upon the territories).

A sector in crisis

Even though it significantly contri-

butes to the local economy and employ-

ment, over the last decade tourism in

French overseas territories has suffered

a disaffection that is even more wor-

rying given that competitor destinations

are highly dynamic. Social crises related

to the high cost of living, as in the

French Antilles, and health crises (chi-

kungunya) on Reunion Island, cannot

solely explain the poor results for

French overseas tourism.

A lack of dynamism in the

local authorities

The regional authorities (regions or

countries in French Polynesia) primarily

responsible for tourism have not been

able to define and drive an innovative

policy. Tourist strategies are based on

development plans that are often old,

with no truly dynamic approach. The

French Antilles are still distinguished by

mass tourism and Reunion Island is

hesitating between the development of

seaside tourism and nature tourism. The

tourism committees are developing their

own strategies, sometimes in contradic-

tion with those of the regional authori-

ties. Assets, such as the wealth of the

cultural and natural heritage, are insuffi-

ciently promoted and coordination with

other public and private players is ineffi-

cient, particularly for developing tourist

sites.

Inefficient public action

The regions and French Polynesia

are struggling to act on the three factors

that make a successful tourist policy:

- promotion of the destination: this

is both too preferential and poorly

directed. It remains dependent on a

French clientèle and demonstrates a lack

of professionalism. New initiatives such

as «the Vanilla Islands» at Reunion

Island, or «destination contracts» in the

French Antilles still remain handicapped

by operational weaknesses;

- access to French islands: this is

made more difficult by specific visa

requirements, which do not exist in the

neighbouring competitor islands. There

are few regular flights from European

cities other than Paris. The obligation,

with most companies, to change air-

ports, is another inconvenience. The

ticket prices calculated according to the

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

yield management method (according to

the rate of occupancy) may reach a dis-

suasive level;

- the supply of hotels: having redu-

ced over the last few years, this cannot

be sufficient to cope with a substantial

increase in tourist flows and correlated

air traffic. Its quality does not always

correspond to the demand. Existing aid

has not led to the desired results.

Overall, the aid arrangements are not

clear and the tax relief measures have

not achieved their goals.

The Court and the regional and

territorial courts of accounts recom-

mend:

For the regional authorities:



draw up an up-to-date strategic

plan, based on observation of the sec-

tor, setting priority policies over the

medium term;



request tourism committees to

implement an operational action plan

within a programme to develop tou-

rism and leisure;



effectively

coordinate

the

actions of the various public and pri-

vate players, particularly in the area

related to tourist developments and

nature activities;



develop a training and aware-

ness-raising policy for professionals

and the population in order to better

respond to the expectations of an

international clientèle;



simplify and stabilise the regio-

nal arrangements for aid to hotel

investments and set up a single point

of contact;



improve coordination concer-

ning land availability and prepare a

strategy concerning existing wasteland;



provide long-term definition of

the priority target countries and topics

and assess the results obtained.

For the State:



eliminate the «Girardin» tax

relief in favour of productive invest-

ment and replace them by other means

of intervention, less costly for the

State budget and more effective.

Recommendations

tourism in French overseas territories

Third part

Public Management

Chapter I

The State

1 - Customs tax duties: a role and an organisation

to be reconsidered

2 - The National Centre for Educational

Documentation (CNDP) and its network:

an obsolete model, a much-needed reform

3 - Public equity investments a poorly managed

transaction in the armaments sector

Summaries

of the Annual Public Report by the

Cour des comptes

Customs tax duties: a role and

an organisation to be reconsi-

dered

As well as its duties to regulate

international trade and to protect citi-

zens and consumers against dangerous

and prohibited goods, customs, in tax

matters, manages more than 70 indirect

taxes, representing annual income of

around

€

68 billion, mainly related to

goods (tobacco, alcohol and oil pro-

ducts), energy, waste, polluting subs-

tances and means of transport.

The taxes managed by

customs constitute a com-

posite and insufficiently

effective group

Numerous taxes for which income

is low are characterised by mediocre

performance and, in some cases, admi-

nistration costs that are clearly dispro-

portionate.

Most taxes are still managed by

organisations that are too numerous,

too dispersed and insufficiently speciali-

sed. It would be appropriate to carry out

regrouping to allow customs to have

more effective administration units

grouping expertise that is able to admi-

nister complex taxation.

The separation of administration

from tax inspection tasks is still insuffi-

cient and leads to the dispersal of ins-

pection abilities to the detriment of effi-

ciency.

Concerning computerisation, cus-

toms is significantly underdeveloped

and needs to catch up, particularly in

order to improve the service provided

to users and reduce costs.

Several duties currently

undertaken by customs as

part of, or at the margins

of, its tax duties, should

be reconsidered

In wine matters, customs has tasks

that go far beyond the requirements of

its tax duties. Certain taxes, such as the

tax on sporting events, several catego-

ries of port dues or the tax on gaming

circles and houses, should be assigned to

other authorities. Certain obsolete taxes,

such as the tax on flour and cereals or

the tax on automatic appliances, should

be abolished and replaced.

Self-assessment of VAT

upon import should be

established

The payment of VAT at the time of

customs clearance, on goods coming

from outside the European Union, is

inconvenient for companies and has

unfavourable consequences for the

attractiveness of French ports and air-

ports. Its replacement by self-assess-

ment, which is the common law pay-

ment mode for VAT upon import, is

called for. It implies interconnecting

computer applications belonging to the

Cour des comptes

Customs tax duties

Summaries

of the Annual Public Report by the

Cour des comptes

Recommendations

The Court issues the following

recommendations:

Concerning its duties:



transfer the collection of non-

tax information to the wine-producing

profession and transfer monitoring the

potential of wine production to the

Ministry of Agriculture;



re-examine the legitimacy of

taxes on flour and cereals and propor-

tionately increase the other taxes on

beneficiary organisations;



substitute the tax on automatic

appliances with a fine and substitute a

tax credit for reimbursement of the

domestic tax on the consumption of

energy products (TICPE);



transfer the administration:

- of port dues to the port authori-

ties;

- of the tax on sporting events to

local authorities;

- of the tax on gaming circles and

houses to the Directorate General of

Public Finances (DGFiP).

Concerning its administration:



accelerate the reduction in the

number of regional establishments;



generalise, and eventually make

the online declaration and online pay-

ment of all taxes managed by customs

mandatory for professional taxpayers;



separate the functions of admi-

nistration and inspection and group

the inspection functions at the inter-

regional level;



create a single point of contact

for registry dues and for ship registra-

tion;

Concerning collection:



set up self-assessment for VAT

upon imports and, to this end, inter-

connect the computer systems belon-

ging to customs and the Directorate

General of Public Finances (DGFiP);



group the collection function

within the Directorate General of

Public Finances (DGFiP).

customs and the DGFiP, which would

also combat fraud more effectively.

The existence, in France, of two

networks to collect taxes and duties, that

of the DGFiP and that of customs, is

currently not adapted to changes in

public accounts administration.

Summaries

of the Annual Public Report by the

Cour des comptes

the National Centre for

educational Documentation

(CNDP) and its network:

an obsolete model,

a much-needed reform

The

National

Centre

for

Educational Documentation (CNDP -

Centre national de documentation péda-

gogique

) forms, together with the

Regional Educational Documentation

Centres (CRDP -

centres régionaux de

documentation pédagogique

), a network

of 31 national public administrative ins-

titutions, known as SCÉRÉN (culture,

publication and resources services for

the national education department).

2013, this network had a budget of

€

135.7 million (including

€

92 million

of government grants) and employed

1,918 staff.

Its purpose is to provide teachers

with resources and educational services

necessary to the exercise of their profes-

sion.

Educational resources that

are not adapted to the

requirements of the edu-

cation system and deve-

lopments to it

The choice of publications (57 col-

lections and 17 journals for 547,000

copies in 2012) is rarely made from an

assessment of the requirements of tea-

chers. The few satisfaction surveys that

exist show that even the most well-

known journal does not meet with their

approval and is not considered as an

educational support. Digital distribution

remains very marginal. Turnover has

therefore dropped by 23% since 2006.

The CNDP marketing network is

too extensive. The 122 points of sale,

half of which have turnover of less

than

€

18,000 and only one of more

than

€

1 million, are structurally in defi-

cit and do not correspond to new

modes of document distribution.

The CNDP also provides its publi-

cations to 133 media libraries and 233

collection points, the traffic for which

has not been checked since 2009.

that date, most of the media libraries

had less than 1,000 registered users.

However, the points of sale and media

libraries employ 31% of staff.

The rapid development of new dis-

tribution and marketing modes is cau-

sing this vast network to lose most of its

usefulness. Its drastic restructuring, or

even its abolition for marketing, must be

envisaged, thus freeing margins that can

be redeployed to develop a range of

benefits and educational services adap-

Cour des comptes

the National Centre for educational

Documentation

Summaries

of the Annual Public Report by the

Cour des comptes

ted to the digital public education ser-

vice and the requirements of new tea-

ching and educational colleges (ÉSPÉ -

écoles supérieures du professorat et de

l’éducation

A complex and expensive

organisation

The 31 regional centres which form

this public network have a total of about

180 places of reception, not reliably lis-

ted and not administered by the CNDP,

due to the lack of a centralised compu-

ter system. Their administration requires

36% of their staff, a high proportion of

whom are occupied in the «self-adminis-

tration» of the network.

The administration of activities by

the CNDP comes up against the auto-

nomy

other

establishments.

Therefore, the editorial range still relates

to the decisions of 31 editorial commit-

tees.

The work towards commonality

undertaken by the CNDP, which is real,

cannot, in the current legal framework,

produce significant simplification, har-

monisation and savings.

The ministerial supervi-

sory authority is confron-

ted with strategic choices

Strategic supervision has been inef-

ficient: firstly, ministers, mainly those

from

the

Ministry

National

Education, have considered the CNDP

as nothing more than an agency provi-

ding resources and fulfilling specific

orders. Secondly, the school projects

prepared by the organisation since 2008

have not led to a long-term contract

covering objectives and performance

with

the

Ministry

National

Education.

And yet, the share of State grants in

income has increased very significantly;

for the CNDP, it increased from 60% in

2006 to 76% in 2012 and for the CRDP,

from 62% to 68%.

This increase should

have been limited, given the lack of a

clear strategic vision.

The audit on the modernisation of

public publication, carried out in March

2007, recommended a radical reapprai-

sal of the educational documentation

and publication system and mentioned

the abolition of the network as a scena-

rio. These recommendations led to

nothing.

Six years later, the law on planning

and policy for the reform of French

public schools makes this reform of the

CNDP and CRDP indispensable if their

very existence, in the short term, is not

to be compromised. The recommenda-

tions of the Court will request strong

support to the personnel in the network,

whose jobs are likely to change, as well

as to the local education authorities,

whose environment is likely to change.

the National Centre for educational

Documentation and its network

Summaries

of the Annual Public Report by the

Cour des comptes

Recommendations

The Court issues the following

recommendations:



define a range of publications

according to teachers’ requirements;



abolish the distribution network

and reconfigure the network of media

libraries;



review the duties and statutes of

the activities relating to the CNDP;



unify the network within a sin-

gle, national administrative public ins-

titution;



greatly reduce the number of

network establishments;



set up cost accounting for each

activity;



on this basis, prepare a contract

covering

objectives

and

performance.establish cost accoun-

ting;

If the duties and organisation of

are not re-examined, an approach

coherent with the recommendations

of the Court, the question of the abo-

lition of the CNDP and CRDP net-

work could gain reappear in the near

future, due to funding requirements

for the public digital education service.

Cour des comptes

Summaries

of the Annual Public Report by the

Cour des comptes

Public equity investments: a

poorly managed transaction

in the armaments sector

In 2011, two public companies in

the defence sector, the industrialist

GIAT Industries (terrestrial armaments)

and the financial company SOFIRED

(support to defence restructuring) and

their supervisory authorities (Ministry

of Economy and Finance and the

Ministry of Defence) were approached

by a small Alsace industrial group,

Manurhin, the main shareholder in

which was Thannberger, specialised in

the manufacture of tools for producing

munitions, mainly focused on exports,

and employing about 130 persons near

Mulhouse, in order to help it resolve

serious funding difficulties.

Referring to a request from the staff

of the Prime Minister, the Treasury

Department services invited the two

public companies to study the possibi-

lity of an equity investment, in the form

of an equity loan.

A confused decision

During the summer of 2011, based

on information supplied by the consul-

tancy firms that were contacted, SOFI-

RED and GIAT-Industries expressed

reservations about this project, particu-

larly due to insufficient information on

the real financial situation of the small

industrial group, both concerning the

holding company and its various French

and foreign subsidiaries.

In spite of these reservations, the

Chairmen of both groups submitted a

proposal to their Board of Directors to

subscribe to a capital restructuring, at

€

2 million each: this transaction would

have the effect, given the simultaneous

intervention of private partners, mainly

Slovakian and, to a lesser extent,

German, of constituting a public group

representing about 47% of the capital

of the SME, indirectly placing the State

as the primary shareholder in Manurhin.

Faced with this proposal, the State

representatives on both Boards of

Directors did not adopt a common posi-

tion: the Directors from the Ministry of

Defence voted in favour of the propo-

sal, while those from the Ministry of

Economy and Finance abstained or

voted against it. It was finally thanks to

the votes of independent Directors and

those representing the personnel that

the proposal obtained a majority in both

public companies, with an inter-ministe-

rial decree ratifying this decision by

authorising the investment.

The capital contributions were made

at the beginning of 2012.

Summaries

of the Annual Public Report by the

Cour des comptes

A difficult capital invest-

ment

Because of persistent disagree-

ments, not only within the supervisory

administrations, but also between the

managements of GIAT Industries

(which remained very reserved) and

SOFIRED (favourable to the interven-

tion), the negotiation of a shareholders’

agreement (

term sheet

) with the private

partners turned out to be unbalanced to

the detriment of the State: faced with

the Slovakian company Delta Defence,

which contributed

€

3 million, the

governance arrangements significantly

marginalised the State, which was never-

theless the principal shareholder in the

recapitalised group. Effectively, under

the terms of this agreement, manage-

ment power was placed exclusively in

the hands of private partners within a

Board of Directors dominated by the

representatives of the Slovakian share-

holder, while a Supervisory Board, in

which the representatives of public sha-

reholders were in a minority, was suppo-

sed to have extensive powers of infor-

mation concerning its management.

This arrangement did not function

well: the Supervisory Board, in which

the public shareholders were represen-

ted, was not able to obtain the informa-

tion that it requested from the Board of

Directors. The Board also obstructed a

financial audit of the group, as well as

an attempt to establish a connection

with the German partner present in the

capital.

The costly intervention of

several consulting firms

Part of the capital contribution was

immediately

consumed,

for

about

€

804,000, by fees charged to the issue

premium. These charges partly corres-

ponded to audit and lawyers’ fees (for

about

€

300,000), while various fees

(about

€

500,000) were paid to external

service providers.

the

instigation

GIAT

Industries, shortly after the capital

increase, Manurhin’s audit committee

requested, in April 2012, its auditors to

examine the fees paid to various service

providers to assist the company in the

search for partners and in the related

restructuring of the group.

The report covers the period from 1

January 2011 to 31 March 2012. It

shows that, during this period, ten

consulting companies were paid by

Manurhin for these transactions, for a

total amount of

€

1.2 million. This

amount

does

not

include

about

€

300,000 charged to the issue premium,

which corresponded to legal services

and could, in every case, have been

deducted from the capital contributions

of the new partners.

Given the small size of the com-

pany, various technical jobs could only

be done by external service providers,

but their combined amount should not

have exceeded a few tens of thousands

of euros.

Public equity investments

Summaries

of the Annual Public Report by the

Cour des comptes

Questions were belatedly

raised about the margina-

lisation of the public part-

ners

In mid-2013, talks broke down bet-

ween the group of public shareholders

plus Thannberger, and Delta Defence.

In particular, it was alleged that

members of the Board of Directors

representing the latter did not reply to

requests for information from the audit

company commissioned by GIAT

Industries and SOFIRED.

On 11 October 2013, the two public

shareholders obtained a majority within

the Supervisory Board to discharge the

Board of Directors that was in the

hands of Delta Defence.

A new Board of Directors was

constituted in such a way as to provide

better guarantees of transparency for all

shareholders

Manurhin.

The

Slovakian investor disputed the validity

of this decision in court, but its chal-

lenge was rejected by the Mulhouse

Court of First Instance, giving a sum-

mary ruling on 14 January 2014.

Whatever the outcome, favourable

or unfavourable, of attempts to protect

the interests of the Manurhin group,

carried out under the impetus of the

public shareholders since autumn 2013,

the Court notes that the State commit-

ted to this operation under ambiguous

and debatable conditions.

Conclusion

Retrospectively, it appears that, as

soon as the principle of public support

to redress the financial situation of

Manurhin was accepted, the State

should have:

quickly examined the various

options allowing it to provide its sup-

port according to the most appropriate

procedures (investment in the form of

capital or equity loan, use of a single

vector rather than several public part-

ners with different vocations, whether

or not it was appropriate to associate a

little-known foreign partner at this

stage, etc.);

impose a formal and clear inter-

ministerial choice to avoid dissent per-

sisting within its own services and bet-

ween its own representatives, weake-

ning its ability to defend its own inte-

rests and those of Manurhin, a situa-

tion which still persists.

Public equity investments

Chapter II

Local authorities

1 - The subsidies allocated to associations by the

Provence-Alpes-Côte d’Azur region and the

Bouches-du-Rhône department:

the necessary risk control

2 - Railways in the Dauphiné: the failure of the

restructuring of a departmental transport

authority

Summaries

of the Annual Public Report by the

Cour des comptes

the subsidies allocated to

associations by the Provence-

Alpes-Côte d’Azur region and

the Bouches-du-Rhône

department: the necessary

risk control

The Provence-Alpes-Côte d’Azur

regional Cour des comptes endeavoured

to assess the effectiveness of the proce-

dures put in place by the Provence-

Alpes-Côte d’Azur region and the

Bouches-du-Rhône

department

improve their control of the specific

risks caused by paying subsidies to asso-

ciations.

A poorly supervised pro-

cess for selecting

applications for subsidies

Called upon by numerous associa-

tions of all sizes, operating in various

sectors, for recurrent or specific opera-

tions, the local authorities concerned

have not defined precise criteria for

selecting applications.

The very general wording of the

objectives that underlie their interven-

tions leaves great autonomy to the ser-

vices responsible, in each sector, for

allocating subsidies. This is done accor-

ding to an approach based on the alloca-

tion of funds, as the local authorities

have not established investigation pro-

cedures that provide a correctly docu-

mented and secure selection mode. The

substantiating documentation that asso-

ciations are requested to provide is

insufficient and poorly used. The infor-

mation provided to commissions of

elected representatives is incomplete.

Parallel decision-making circuits, partly

unofficial, have substituted for investi-

gation procedures by the services.

Irregular

or inefficient

allocation

The procedures for allocating subsi-

dies used by the two local authorities

cause legal and economic risks.

At the legal level, the obligation to

sign an agreement with the association

soon

the

subsidy

exceeds

€

23,000 is sometimes disregarded. The

same is true of compliance with the

applicable rules concerning public sub-

sidies and open competition, when the

subsidised activities, in reality, resemble

services provided.

Cour des comptes

the subsidies allocated to associations by the

Provence-Alpes-Côte d’Azur region and the

Bouches-du-Rhône department

Summaries

of the Annual Public Report by the

Cour des comptes

At the economic level, it is not rare

to find over-funding, if we combine the

public subsidies received, which the

local authorities should have detected.

Partner associations have thus applied

to the region and the department for

identical actions.

Monitoring to be improved

by strengthening control

and internal audit

The improvement of the monito-

ring of subsidies granted involves

improving the content of agreements,

which is often insufficiently precise, and

also the use of tools that are already

available to local authorities in the

context of these agreements. The clause

specifying the reimbursement of the

subsidy in case its use is not substantia-

ted should also be more frequently used.

Likewise, compliance with legal

obligations incumbent on associations

concerning the keeping and production

of accounts and financial statements is

unequally checked by the local authori-

ties. Associations receiving subsidies

greater than

€

153,000 are thus subject

to the obligation to designate an auditor.

The regional Cour des comptes never-

theless noted that the examining ser-

vices, with regard to the associations,

were insufficiently demanding concer-

ning the production of the documents

specified by the regulations. Also, the

activity reports are often inconsistent,

even though they constitute an essential

means of organising objective and

documented discussions between the

associations and the local authority that

finances them.

The necessary improvement in the

monitoring

granted

subsidies

requires a more overall development of

control and internal audit. Both local

authorities have taken measures in this

direction, but there is still room for

improvement. The audits conducted do

not always sufficiently identify risks and

only have limited effects on internal

procedure control.

Recommendations

In the light of these findings, the

Court and the regional Cour des

comptes issue the following recom-

mendations for the two local authori-

ties concerned:



prepare a list of the risks in the

procedure for assigning and monito-

ring subsidies;



establish formalised proce-

dures for examining requests for sub-

sidies, specifying the selection criteria,

the relevant information and the

checks to be made and ensuring that

these checks are traceable at every

stage of the procedure;



develop personnel training in

the examining services covering the

identification of risks, internal control

and the analysis of financial data;



ensure compliance with the

obligation for a contract agreement

for subsidies greater than

€

23,000 and

lower this threshold, where applicable,

with regard to the characteristics of

the sector;



in the agreements, specify the

purpose of the subsidies, the proce-

dures for reporting their use and their

evaluation criteria. Specify penalties

for the non-application of contractual

commitments and implement them

before renewing a subsidy;



precisely define the duties and

responsibilities of the internal audit

service, in accordance with the princi-

ples of an internal audit charter.

Summaries

of the Annual Public Report by the

Cour des comptes

the subsidies allocated to associations by the

Provence-Alpes-Côte d’Azur region and the

Bouches-du-Rhône department

Cour des comptes

Railways in the Dauphiné: the

failure of the restructuring of

a departmental transport

authority

The semi-public company (SEM)

«Voies ferrées du Dauphiné» is one of

the main operators of inter-urban trans-

port by coach in Isère. It was founded in

2006 from the restructuring of the

departmental transport authority of the

same name, for which the financial

situation had severely deteriorated. This

change of status was intended to make

the company competitive again and

diversify its customer portfolio.

The Isère department, the majority

shareholder in the SEM with 80% of

the shares, established a relationship

with an industrial partner, Kéolis, which

holds a 15% stake and which is also the

holder of a technical assistance contract.

The 2012 inspection by the regional

Cour des comptes showed that the SEM

had not succeeded in adapting to its new

competitive environment and that the

department bears a heavy responsibility

for this situation due to the manage-

ment restrictions that it imposed upon

the SEM.

A failed adaptation to the

market being opened to

competition

The opening of the market to com-

petition and the arrival of a new player,

Car Postal, from 2010, destabilised the

SEM «Voies ferrées du Dauphiné»,

which, in 2011, lost the contract for the

Grenoble Agglomeration including four

express lines considered as the only pro-

fitable ones. The loss of this contract

resulted from lack of competitiveness

related to salary costs that were too

high, partly inherited from the former

transport authority. Its consequences

had an even greater impact on the com-

pany as it was unable to diversify its cus-

tomer portfolio.

The result of this was a rapid worse-

ning of its financial situation – opera-

ting income became negative in 2011

€

1.2 million) and the management

was slow in reacting to this.

A stalemate that was par-

ticularly costly for the

department

The department had concluded a

shareholders’ agreement with Kéolis

which, by assuring Kéolis that it would

be the exclusive industrial shareholder in

the SEM, exposed the department to

being solely and indefinitely responsible

for the liabilities of the company in case

of bankruptcy.

However, at the same time, the tech-

nical assistance contract concluded bet-

ween the SEM and Kéolis at the initia-

Summaries

of the Annual Public Report by the

Cour des comptes

tive of the department did not make the

company competitive again and it pro-

ved to be even more costly in that it

implicitly included a margin intended to

remunerate Kéolis’s capital contribu-

tion, instead of dividends.

In 2011, the department established

a partnership charter with «Voies ferrées

du Dauphiné» intended to improve its

control. But by giving the Chairman of

the General Council the right to review

almost all management decisions, the

said charter reduced the autonomy of

the company’s management.

In this context, the department was

called upon to save the SEM from ban-

kruptcy by providing new cash and

undertaking, together with Kéolis, to

raise new capital. According to the

terms of the recovery plan validated by

the department in the spring of 2013,

the department should have invested

nearly

€

15 million in the SEM by 2015.

At the same time, the committee of

heads of the financial services, chaired

by the departmental manager of public

finances, granted the SEM delays in the

payment of public debt.

A necessary strategic

change to exit the crisis

The Court considers that the

department had an alternative solution

to recapitalisation, for which it is prepa-

ring to bear most of the cost. It could

have sold its shares to an industrialist,

after having initiated insolvency procee-

dings, so as to force the minority share-

holders to recognise the loss of their

investment.

The department of Isère was unable

to manage the contradiction in which it

placed itself. Indeed, as the authority

organising transport, it was successful in

containing the increase in its transport

budget by arousing greater competition,

but as majority shareholder in the SEM,

it greatly contributed to its failure to

adapt to the new market conditions.

Ultimately, the financial interest of

the main industrial shareholder in the

success of the company was low and its

liability was insufficiently implicated in

case of difficulties to allow the company

to recover sustainably. The department

must therefore envisage opting for a

local public company, selling a greater

part of the capital of the company to

the leading industrial shareholder, or

total privatisation.

Summaries

of the Annual Public Report by the

Cour des comptes

«Voies ferrées du Dauphiné»

The Court and the regional Cour

des comptes issue the following

recommendations to the semi-public

company «Voies ferrées du Dauphiné»

and the department of Isère:



in the short term, establish a

recovery plan for the semi-public

company, including restructuring the

liabilities and reducing the manage-

ment constraints imposed by the main

shareholders;



review the technical assistance

contract concluded with Kéolis, both

regarding its content and its remunera-

tion and monitoring procedures, so

that binding obligations to provide

both resources and achieve results are

introduced, associated with penalties

in case targets are not met;



remove, from the partnership

charter, the provisions that withdraw

the prerogatives that should belong to

the control bodies;



more generally, make the status

of operators coherent with the degree

of control that the department wishes

to exercise, with three options: main-

tain a semi-public company with a

significantly greater investment from

the leading co-shareholder, create a

local public company, or privatise the

current semi-public company.

Recommendations

Summaries

of the Annual Public Report by the

Cour des comptes

«Voies ferrées du Dauphiné»

Chapter III

Social security organisations

The

CIPAV

(Inter-professional

Pension

and

Contingency Fund for the liberal professions):

disorderly management, deplorable service to insured

parties

Summaries

of the Annual Public Report by the

Cour des comptes

the CIPAV (Inter-professional

Pension and Contingency Fund

for the liberal professions):

Particularly chaotic administra-

tion, Deplorable service to insu-

red parties

The Inter-professional Pension and

Contingency Fund for the liberal pro-

fessions (CIPAV -

caisse interprofes-

sionnelle de prévoyance et d’assurance

vieillesse des profession libérales

) is the

largest of the ten funds attached to the

National Pension Fund for the liberal

professions (

Caisse nationale d’assu-

rance vieillesse des professions libé-

rales

). It manages the basic scheme, on

behalf of the latter, and administers

supplementary pension and death-disa-

bility schemes for one in two members

of the liberal professions, i.e. 550,000

affiliates

including

250,000

self-

employed entrepreneurs, representing

more than three hundred professions.

Particularly chaotic admi-

nistration

In 1959, the CIPAV formed the

«Berri group» with three other funds in

order to pool its resources with theirs.

In order to avoid the hegemony of the

CIPAV, which represents three quarters

of the insured parties concerned, the

decision-making autonomy of each

fund was retained, creating vague gover-

nance to the detriment of the stability of

the managing teams and the efficiency

of the pooled functions.

The management of the CIPAV’s

reserves (

€

2.1 billion in 2012), which

are strongly up largely due to the rapid

increase in the number of contributors,

has been particularly mediocre and

lacking in transparency: the investment

of these funds, intended to guarantee

payment of the pensions of insured

parties, has generated average annual

profitability clearly lower than the

changes to the reference share and bond

indices. A financial department was only

created in 2010. Until 2010, the CIPAV’s

Investments Commission had no dele-

gation to the Board of Directors and it

was not until 2009 that an ethics code,

which is –nevertheless obligatory–, was

adopted. This situation favoured non-

compliance with elementary rules on the

distribution of risk. Thus, the CIPAV,

for several decades and until 2012, assi-

gned the same portfolio manager more

than three quarters of the amounts to

be invested. At the end of 2012, it still

retained 37% of the total assets. The

Cour des comptes

management of the estate of office

buildings was every bit as defective and

is characterised by low profitability, due

in particular to the use of agents subject

to little control and poor monitoring of

unpaid bills. In 2008, the CIPAV spent

€

95 million to purchase, with other

funds, a building that was sold before

completion with the aim of setting up

its head office there, before being obli-

ged to buy a second building (

€

150 mil-

lion) for reasons of urgency, leaving the

first vacant for more than a year.

The «Berri group» also deliberately

refuses to apply the rules on public pro-

curement, which are nevertheless bin-

ding upon it. In 2012, more than 82% of

expenditure was not committed within

the context of formalised competition.

Lastly, the modernisation of the

computer system, which was begun in

2004, is still not completed, in spite of

expenditure (

€

24 million) nearly ten

times greater than the initial estimate

(

€

2.5 million), due in particular to lack

of formalisation by the contracting

authority and the lack of organisation of

an information systems department

until 2008. The significant worsening of

the productivity of agents of the CIPAV

is not unrelated to these difficulties.

Deplorable service to insu-

red parties

Major

malfunctions

affect

the

CIPAV’s administration of its insured

parties at all stages: affiliation, calcula-

tion and collection of contributions and

settlement of pensions.

On 1 January 2011, a single proce-

dure was established for the affiliation

of independent workers (skilled trades-

men, shopkeepers and the liberal pro-

fessions), for which the social security

regime for the self-employed (RSI -

régime social des indépendants

) was the

prime contractor. The CIPAV neverthe-

less refuses to refer to the directory of

liberal professions established by the

RSI. It continues to use an empirical list,

based on which it disputes the decisions

of the RSI, which causes numerous case

rejections and chaos in the files.

Thousands of persons coming under

the RSI, or who have ceased their activi-

ties, are affiliated to the CIPAV. On the

contrary, the liberal professions, who are

equally numerous, escape it.

The collection of contributions, and

therefore the monitoring of the pension

rights of insured parties, is seriously

degraded. The poor quality of the file of

contributors and the insufficient know-

ledge of income used as the basis for

contributions leads to a high number of

automatic assessments, a quarter of

which concern those insured by RSI.

The circuit for payments made by deb-

tors does not have all the required secu-

rity conditions: several incidents of

misappropriation have taken place.

Despite the costly use of a centralising

bailiff, debtors are not seriously pur-

sued. Thus, although the limitation

period is three years, the CIPAV has not

notified any distraint from 2007 to 2009

or in 2011 and 2012. In 2011, more than

38,000 debtors escaped any recovery

action.

Summaries

of the Annual Public Report by the

Cour des comptes

the CIPAV

Summaries

of the Annual Public Report by the

Cour des comptes

the CIPAV

Recommendations

The Court issues the following

recommendations:



appoint a temporary adminis-

trator in case of failure to implement,

without delay, by the CIPAV, a plan to

rectify its management, associated

with a precise timetable and results

targets;



strictly comply with the unique

affiliation procedure applicable to self-

employed workers;



comprehensively and quickly

give credit for the rights acquired by

insured parties pursuant to the contri-

butions paid, taking particular care to

restore the rights of self-employed

entrepreneurs;



impose upon all retirement

funds for the liberal professions the

requirement to recruit their managers

and accountants from amongst the

social security managers;



merge the funds of the «Berri

group» or, failing this, establish a

union of funds.

The settlement of pensions is every

bit as mediocre. Firstly, the fund pays

the first arrears after long delays, even

though its insured parties have uneven

incomes. In 2012, less than one case in

two of direct entitlement or reversion

pensions gave rise to a payment at the

normal due date and this percentage

reached only 15% for those with multi-

ple pension schemes. Furthermore,

checks before and after payment in set-

tlement are very poor, even though the

extent of anomalies that they would

detect shows that it is essential to

improve them.

These malfunctions are causing

increasingly heated discontent amongst

insured parties, who have the greatest

difficulties in contacting the fund: the

two centres that it has only manage to

handle one call in four on average.

The CIPAV also refuses to include

self-employed entrepreneurs who are

exercising one of the liberal professions.

No seats are reserved for them on the

Board of Directors. Three quarters of

them did not take part in the ballot to

renew this body in July 2011. More

seriously, until 2013, the fund did not

even

record

their

entitlements.

Moreover, the CIPAV undervalues them

in the absence of any legal basis, with

the corollary of also limiting the share

of contributions that the State must pay

in their favour.

Chapter IV

Private subsidised

organisations

The French Film Archive: a revival and

new issues

Cour des comptes

the French Film Archive:

a revival and new issues

The

French

Film