PUBLIC FINANCES AND ACCOUNTS
CENTRAL
GOVERNMENT’S
GENERAL ACCOUNTS:
TEN YEARS ON
A new step beckons
Thematic public report
Summary
February 2016
g
DISCLAIMER
This summary is intended to aid in understanding and using the
report prepared by the Cour des comptes.
Only the report is legally binding on the Cour des comptes.
Contents
Summary of thematic public report of the Cour des comptes
Introduction
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1
The
desire
to
modernise
central
government
accounting
and overhaul management practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2
Ten years on, the accounts have been overhauled but remain
underused . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3
This approach needs to be revitalised with a view to improving
public management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
Recommendations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
3
Purpose of the survey
In Spring 2016, for the tenth year in a row, France’s central government will
release financial statements drawn from accrual-based general accounts that it
keeps pursuant to the provisions of Article 27 of the Constitutional Bylaw on
Budget Acts (LOLF) of 1 August 2001.
Now that it has sufficient distance to evaluate the benefits and limitations of
these accounts, which are closely modelled on the corporate accounting system,
the Cour des comptes has conducted a survey to assess the central government’s
general accounting system.
The Cour des comptes did not seek in this survey to describe or assess the
picture of the central government’s financial position as conveyed by the
general accounts, nor did it set out to recall the concerns raised during
certification of the accounts.
Rather it sought to examine the process used to draw up the accounts in order
to assess to what extent the choices made addressed the expectations of the
LOLF and the goal of making good use of public funds. The analysis assumed an
unchanged legislative framework.
ù
Part One of the report takes a retrospective look at the reasons for introducing
general accounts into the central government accounting system and recalls the
main features of these accounts.
Part Two endeavours to assess the current situation of central government’s
general accounts by describing the benefits and limitations of the system,
particularly in terms of the expectations set out in the LOLF.
Part Three offers two sets of recommendations, which seek respectively to
improve the process of drawing up central government’s general accounts and
to ensure that these accounts are put to greater use.
Introduction
5
Summary of thematic public report of the Cour des comptes
1
The desire to modernise central
government accounting and
overhaul management practices
7
A largely obsolete accounting
system
Launched at the end of the 1990s, the
reform of the central government
accounting system was designed to
address
criticism,
particularly
concerning the system’s inability to
faithfully record central government’s
assets, report all of its obligations and
describe its financial relations with
other public bodies.
The reform also stemmed from a
determination to overhaul central
government management practices
to align bring them into line with
those of the most advanced countries
and major corporations.
Unlike social security administrations,
which starting in 2000 gradually
replaced their cash-based accounts
with an accruals-based approach,
central government has maintained
its budget accounting approach. In
2006, it added general accounts,
which are kept separately according to a
specific set of accounting standards and
are certified by the Cour des comptes.
Ambitious reforms
Ten years on, the survey by the Cour
des comptes reveals that these
choices facilitated the implementation
of
central
government’s
general
accounts and helped these accounts
achieve their primary goal, namely to
improve the information available
on central government’s assets and
obligations
Source : Cour des comptes
Reforming the central government accounts
Summary of thematic public report of the Cour des comptes
The desire to modernise central government
accounting and overhaul management
practices
8
A transitional period took place
during which the authorities had to
get to grips with new accounting
tools that were both more powerful
but also more demanding than the
traditional systems, without radically
changing the budget processes.
However, as the analysis by the Cour
des comptes shows, maintaining and
even
strengthening
the
budget
accounting system may have created
problems in terms of interactions
between the various components of
the central government accounting
system.
With no bona fide cost accounting
system in place, central government’s
general accounts were deprived from
their inception of a major outlet,
whose absence could not be offset by
the cost analysis accounting method
introduced by the LOLF.
Summary of thematic public report of the Cour des comptes
2
Ten years on, a modernised
accounting system whose benefits
have yet to be properly harnessed
9
Undeniable benefits
on the accounting front
Keeping general accounts has helped to
significantly improve knowledge of
central government’s assets and liabilities.
Keeping general accounts has promoted
shared work by managers and accoun-
tants by expanding their respective roles
and upgrading the shared tools made
available to them.
Keeping general accounts has sped up
organisational reform, the deployment
of risk management methods within
central government departments and
the implementation of new procedures
modelled on those used by large cor-
porations, particularly in the area of
account certification.
Keeping general accounts has had a
positive
impact
on
the
budget
accounts and national accounts and on
the accounts of other public bodies.
Overall, there is a consensus – including
in international comparisons – that the
general
accounts have materially
and
positively
contributed
to
making central government’s financial
position more transparent and moder-
nising central government’s financial
services.
A process drawing heavily
on central government’s
resources
The process of preparing the financial
statements
requires
substantial
resources, notably within management
departments.
It raises numerous recurring challenges,
including
complex
transactions,
understaffing, inadequate training and
lack of backing from personnel. In
addition, the support measures for
managers provided by accountants
are insufficient.
Furthermore, several problems persist
over the reliability and auditability of
the financial statements, which is why a
qualifed opinion is still issued.
An accounting system
that has yet to find its place
In comparison with central government’s
budget accounts and national accounts,
the general accounts are underused.
Summary of thematic public report of the Cour des comptes
Ten years on, a modernised accounting system
whose benefits have yet to be properly harnessed
Source : Cour des comptes
The picture of central government’s
financial position provided by the
general accounts is not systematically
used by Government, sufficiently
analysed by Parliament, or fully taken
on-board by central government’s
creditors and credit rating agencies.
As a result, the general accounts have
had little impact on administrative
management
practices.
Their
contribution to budget reliability
and fairness has also fallen short of
expectations.
10
Overhauled but underused accounts
Summary of thematic public report of the Cour des comptes
3
An approach that needs
to be revitalised in order
to improve public management
11
While the general accounting system’s
benefits fall short of the efforts
undertaken by authorities and more
particularly lawmakers’ expectations,
the introduction of general accounts
into the central government accounting
system has not been a failure. In fact, a
new phase is beginning during which
central government must seek to take
better advantage of the investments
made since the LOLF was passed in
2001.
To do that, it must endeavour to lower
the costs of keeping the general
accounts while expanding the use made
of them. By improving the process used
to draw up the financial statements, the
authorities could free up resources that
are currently being used to keep the
central
government
general
accounts and address the issues at
the source of the qualified opinions
issued by the auditor. These resources
could then be channelled towards more
effectively harnessing the available
data and supporting public managers
and external users.
To achieve these goals, the authorities
need to set up a strategy to develop
the general accounts with a view to
modernising
public
management.
Implementation
of
this
strategy,
which will require political impetus,
should be coupled with measurable
three-year targets and should also be
the subject of an annual report to the
National
Assembly
and
Senate
Finance Committees.
Summary of thematic public report of the Cour des comptes
Recommendations
1.
faire figurer, en loi de finances ini-
tiale et en loi de règlement, la
décomposition des soldes, structu-
rel et conjoncturel, de l’article limi-
naire pour l’État comme par sous-
secteur d’administrations publiques
(recommandation partiellement
2.
modifier
la
présentation
du
tableau d’équilibre des ressources
et des dépenses dans les lois de
finances en déduisant des recettes
fiscales brutes de l’État les seuls
remboursements et dégrèvements
relatifs à des impôts d’État pour la
détermination des recettes fiscales
nettes
(recommandation
reconduite).
3.
établir et rendre public un
document de référence précisant
les méthodes et le processus de
prévision des recettes pour les prin-
cipaux impôts (recommandation
reconduite).
4.
réaliser et publier, dans l’annexe
Voies et moyens du projet de loi de
finances, des analyses approfondies
des écarts entre prévision et exécu-
tion
de
recettes
fiscales
(recommandation reconduite).
Synthèse du rapport public thématique de la Cour des comptes
To improve the process used to
draw up central government’s
general accounts, the Cour des
comptes
makes
the
following
recommendations:
1.
ensure at all times that the efforts
demanded are proportionate to
the expected benefits of greater
accounting reliability, give more
consideration to the needs and
restrictions of managers, and provide
a stable and realistic accounting
framework;
2.
revitalise coordination of central
government’s financial services by
appointing correspondents within the
public finances general directorate,
improving accounting documentation
and assisting managers to make use
of IT reports;
3.
conduct a systematic examination
of all concepts used in the budget
accounts and general accounts to
identify potential areas of reconcilia-
tion and ensure the necessary
interactions;
4.
develop accounting skills in
management
departments
by
identifying
existing
expertise,
adapting training programmes
and improving the ability of
ministerial inspection units to act
in accounting areas;
5.
complete by 2017 the general
introduction of billing units and in the
short run make the investments to
ensure that, whenever warranted, the
process of drawing up central govern-
ment accounts can be integrated,
automated and dematerialised;
To ensure that the general
accounts are used more exten-
sively, the Cour des comptes
makes
the
following
recommendations:
6.
quickly
provide
ministry
accountants with complete access
to general accounts data covering
the decentralised services under
their responsibility, and, further
out, ensure that the scope of their
responsibilities is more consistent
with that of managers;
7.
set up a trial within several pilot
ministries to systematically distribute
accounting reports corresponding to
each ministry’s scope of responsibility;
8.
develop
cost
accounting
in
management departments wherever
warranted and reassign to this some
or all of the resources currently allotted
to
the cost analysis accounting
method, based on an assessment of
the latter’s actual utility;
9.
. complete the preparatory work
required
to
combine
central
government’s
accruals-based
accounts with those of its main
operators, so that this can take
place by 2020;
10.
by 2016, set up a three-year
strategy to develop use of the general
accounts, coupled with measurable
targets and giving rise to an annual
report to the National Assembly and
Senate Finance Committees.