PRESS RELEASE
Date: 25 September 2018
FINANCES AND PUBLIC ACCOUNTS
LOCAL PUBLIC FINANCES
The Cour des comptes has published its sixth annual report, produced jointly with the
regional courts of audit, on the financial position and management of local authorities
and their public institutions.
It offers a new analysis of the impact of the decrease in state funding
over the 2014-2017 period: although offset by the dynamism of tax-raising powers,
the decrease in the overall operating allocation (‘DGF’) had the intended effect
of stopping the rise in local expenditures. Even if they exercised less cost control in
2017, local authorities generated a financial surplus for the third year in a row,
confirming the overall improvement of their financial position.
Change in the financial position of the local authorities
Between 2013 and 2017, the
“
overall operating allocation
”
fell from €41.5 billion to €30.9 billion.
Operating expenses - the reduction of which was the primary aim of the decrease in state
funding - slowed thanks to the management efforts of local authorities, notably in the areas of
personnel expenses and goods and services procurement, and their weight relative to the GDP
has fallen since 2014. Local investment also decreased by 11% between 2013 and 2017.
Overall, the local public bodies recorded their highest surpluses since 2003. This nascent
recovery is nevertheless fragile in view of the trend seen in 2017, and modest compared to the
previous trajectory: the self-financing capacity of local authorities is still far from where it was
in 2011.
The uncertain prospects of local public finances beyond 2018
The central government’s new procedures for contracting with local authorities aim to limit the
increase in their operating expenses to 1.2% per year. If the return to inflation is confirmed,
this objective could be met only at the cost of an unprecedented reduction in the volume of
spending. In principle, these procedures aim to individualise the management efforts asked of
local authorities, in accordance with the recommendation of the Cour des comptes. In practice,
however, the differences of treatment remain modest among the 322 local authorities
concerned.
Local authorities should moreover benefit from more favourable growth of their resources from
2018 onward, due to the end of the decrease in financial assistance from the central
government, combined with the sustained increasein their tax revenues.
Beyond 2018, there is major uncertainty regarding the achievement of the trajectory laid out
by the public finance programming bill in 2018-2022. If the expenditure target is met at the start
of the period, local authorities should see a major increase in their savings, above and beyond
the financing needs for their investments. It is unlikely that this surplus will be allocated to the
reduction of their debt, since the vast majority of local authorities have a low level of debt. A
decrease in local taxes is also unlikely, given the gradual exemption of the residence tax
underway. The significant improvement in their financial balance could lead local authorities to
boost their infrastructure-building efforts or to break from the planned trajectory by recovering
operating expenses.
The reliability of local public accounts
A process aimed at improving the reliability of local authorities’ accounts is underway, in part
thanks to the work of the Conseil de normalisation des comptes publics (CNoCP). The adoption
of a single financial account would provide clarification in terms of financial information and the
improvement of accounting quality. For this reason, it should be tested with no further delay.
The experiment regarding the certification of local public accounts, led by the Cour des
comptes through 2022, provides useful guidelines to the local public sector by illustrating the
efforts still needed to achieve sufficient reliability in terms of internal control, accounting
procedures and financial information systems.
Municipalities’ pe
rformance of their scholastic and extra-curricular duties
Due to the growth of extra-curricular activities, the role of municipalities in scholastic and extra-
curricular matters has increased. They now cover 37% of education expenses, or nearly €16
billion, in primary school. Particular attention should therefore be paid to the monitoring of
costs. The Cour des comptes recommends the development of a spending framework, which
could also be a useful management tool. The drivers for managing expenses are limited, but
the existing room for manoeuvre, notably in terms of personnel management, should be used
more effectively.
The reform of school timetables provides a good illustration of the diversity of local choices
and related budgetary costs. The cost of this reform, two-thirds of which are covered by the
central government and the national family allowance fund, was highly variable depending on
the municipality, according to their size, their territorial location, their budgetary leeway, their
requirements w
ith regard to the quality of services offered and their desire to take the child’s
rhythm into greater consideration by adjusting school hours.
Finally, school networks need to adapt more extensively to changing demographics. The inter-
city dimension should be given greater consideration in the development of school zoning,
without it being necessary to transfer these duties to the Etablissements publics de coopération
intercommunale (EPCIs). The central government should moreover be more attentive to the
prior analysis of local conditions for the implementation of these reforms.
Recommendations
The Cour des comptes is issuing ten recommendations for the evolution of local finances and
the municipalities’ performance of their scholastic and extra
-curricular duties.
Read the report
MEDIA CONTACTS:
Ted Marx
Communications Director
T
+33 (0)1 42 98 55 62
ted.marx@ccomptes.fr
Denis Gettliffe
Media Relations Manager
T
+33 (0)1 42 98 55 77
denis.gettliffe@ccomptes.fr
@Courdescomptes
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Cour des comptes