Documents | Cour des comptes

Télécharger le PDF, 360 Ko
Page de la publication
Envoyer à un ami
Partager cette page sur Facebook
Partager cette page sur Twitter

OUR DES

OMPTES

Executive

Summaries

2011

Disclaimer

Annual Public

Report

hese executive summaries are designed for ease of

reading and use of the report of the Cour des comptes.

Only the report is legally binding on the Cour des

comptes. The responses of the administrations and other

interested bodies have been integrated into the report.

The 2010-2013 plan

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Tax expenditures: A major budget issue

. . . . . . . . . . . . . . . . . . . . . .12

A few tax expenditures dedicated to the development of companies

and jobs

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Employment bonus: tax expenditure with increasingly

indeterminate objectives

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Retirement reserve fund (Fonds de réserve des retraites or FRR) :

Abandoned ambition, risky reorientation

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

The French compensation system for partial unemployment: An

insufficiently used tool

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

The campaign for the fight against the Influenza A(H1N1) epidemic :

assessment and lessons learnt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

The healthcare system in French Polynesia and its financing

. . . .28

The public support to export companies

. . . . . . . . . . . . . . . . . . . .30

Offsetting the public electric utilities charges

. . . . . . . . . . . . . . . . .32

Higher education and Research clusters (PRES): In need

of a new impetus . . . . . . . .…………………………………

....

…34

National Research Agency (ANR): First findings

and outlook… . . . . . . . . . . . .…………………………………….36

Executive summaries of volume 1:

Comments from the financial courts

Table of contents

Annual public report

Executive summaries

Annual public report

Executive summaries

Table of contents

Irregular migratory movements to French Guiana, Mayotte and

Saint-Martin

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

Management of natural hazards in the Overseas Departments

. .42

Agricultural support policy in the Overseas Departments

. . . . . . .45

A first assessment on the outsourcing activities at the ministry of

defence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .…48

Management of the Rhône-Alpes ski area

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

Territorial continuity with Corsica

. . . . . . . . . . . . . . . . . . . . . . . . . .53

Government workers at the Ministry of equipment and

civil aviation 55

The “one-quarter fare” of the military servicemen

. . . . . . . . . . . .58

Particularities of the remuneration of military reserves

. . . . . . . .61

SOVAFIM: An operator with no real usefulness

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

Paris Habitat’s new headquarters

. . . . . . . . . . . . . . . . . . . . . . . . . . .63

Exemptions of allowances paid to sports referees and judges :

An ill-adapted tool

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

The national museum of sport: A poorly monitored project

. . . . .68

Annual public report

Executive summaries

Table of contents

I - The Cour des comptes finds

Public water and sanitation services: Encouraging

developments

.....................

………………………………………...72

Agencies receiving charitable funding. . . . . . . . . . . . ..……………74

The “decrystallisation” of pensions of nationals of territories

previously under French sovereign rule………………..…………76

Financial regulatory authorities………………………..……77

Central services in charge of Overseas France…………………...78

Geology and mining research office (Bureau des recherches

géologiques et minières or BRGM). .

. .. . . . . . . . . . . . . . . ………80

Air navigation personnel. . . . . . . . . . . .. . . . . . . . . ………………82

II - The Cour des comptes insists

The CNRS in the new landscape of research……. . . . ……….…83

Preparation and monitoring of the execution of the Central

Government’s budget

...........................................................................

…85

The effects of the certification of the financial statements of the

Central Government

.......................................................

…………..…86

Executive summaries of volume 2:

Implementation of the recommendations of

the financial courts

Table of contents

Legislative measures concerning Social Security and

retirement...………………………………………. . . . . .….……..88

Coface

.....

……………………………… . . ..……………………..89

Reorganization of the collection of apprenticeship tax in the fields

of transport and logistics . . . . . . . . . . . . .. . …………………………90

GIP Housing and social actions for marginally homeless and

homeless persons……………………………………………...…92

Ecole nationale de la voile et des sports nautiques

.............................

III - The Cour des comptes warns

Chorus and the Financial Reporting Systems of the Central

Government

........................................................................................

…...95

Centre national de la fonction publique territoriale (CNFPT)

..........

Grand port maritime de Marseille: social dialogue breakdown

and decline

..........................................................................................

…...99

Accounting agencies of public schools (lycées and colleges)…

.....

102

Etablissement public d’insertion de la défense (EPIDe) ……

......

103

The participation of France in the European permanent military

corps…..…………

.............

………………………………….…

....

104

Annual public report

Executive summaries

Executive summaries of

volume 1

Comments from the financial

authorities

Annual public report

Executive summaries

The 2010-2013 plan

A fast and strong recovery of all the

public accounts is essential to a return to

sustainable growth, to preserve the

Central

Government’s

programme

expenditure capacity and to maintain

confidence. It must be part of a

planning that is precise and credible.

The Cour des comptes conducted

an audit to determine whether the

public accounts were following the

course described in the public finances

planning laws and whether the measures

selected by the Central Government to

decrease public deficit from 7.7% of

GDP in 2010 to 3.0% of GDP in 2013

were sufficient. .

Worsening of the

structural deficit in 2010

In 2010, the public deficit sharply

veered off the path laid out in the first

planning law -- adopted in early 2009 for

the years 2009 to 2012 - as a

consequence of the crisis, but also

because of inadequate expense control

and because the rules introduced by the

planning law were not followed.

Putting aside the effects of the crisis

put aside, the recovery plan and other

extraordinary

transactions,

public

expenditures rose by 1.4% in volume in

2010.

The increase was lower than the

average recorded over the past ten years

(2.3%), but greater than the medium-

term objective of the first planning law

(1.0%) and too high to contribute to the

reduction of the structural deficit.

Conversely, the latter, having already

reached 5.0% of GDP in 2009, was

aggravated by long-lasting reductions in

compulsory withholdings, of 0.3% of

GDP, which were not in compliance

with the rules of the planning law.

More ambitious objectives

and regulations for the

2011-2014 planning

As the Cour des comptes had

recommended, the rules established by

the

second

planning

law

December 2010 for the years 2011 to

2014 now impose, each year, a structural

effort to decrease public deficit by

capping expenditure and setting a

Cour des comptes

The 2010-2013 plan

Annual public report

Executive summaries

minimal return for the compulsory

withholding increases.

However, the scope of these rules

presents some limitations: In particular,

some budget acts or some ordinary laws

may challenge the provisions of the

planning laws as was shown by the VAT

decrease in the food and catering

industry. Far-reaching reforms are still

needed

achieve

the

public

expenditure changes sought.

Insufficient structural

effort in 2011

The increase in expenditures plan-

ned by the Central Government for

2011 is still 1.4% in volume, not inclu-

ding exceptional factors or those related

the

economic-situation.

The

slowdown compared to the trend of the

past ten years presupposes the achieve-

ment of approximately €13bn in savings

from

expenditures,

not

including

interest charges on debt, but those that

have been identified by the Cour des

comptes total approximately €5bn.

Even if there is a 1.4% increase in

expenditures in 2011, which is still pos-

sible, such would exceed the target of

the planning law for 2011- 2014 (0.8%)

and it would still be too sharp to contri-

bute to significantly reducing the struc-

tural deficit.

The structural effort to reduce the

deficit will result only from measures to

increase the compulsory withholdings,

which would increase income by €10bn

in 2011 (0.5% of GDP). Certain

measures only have a temporary effect

however and the efficiency of perma-

nent measures equals €7.5bn.

This structural effort shows a

distinct reorientation of budget policy,

but it is still a long way from the €20bn

effort that the Cour des comptes had

recommended achieving every year

from 2011 onwards in its report of June

2010 on the situation and prospects of

public finances in order to stabilise and

then rapidly decrease public debt.

The decrease in deficit by 1.7 point

of GDP prescribed by the Government

for 2011 depends, for its largest portion,

on the removal of exceptional or tem-

porary measures (recovery plan, one-off

overrun in 2010 of the reform of the

business tax, among other things). It is

also based on a favourable assumption

(2.0%) of an increase in GDP.

Beyond 2011, recovery

measures to be defined

The expenditure and revenue objec-

tives set out in the planning law starting

in 2012 represent a structural effort for

a decrease in deficit by approximately

0.65 points of GDP each year, which

remains, once again, below the one-

point of GDP recommended by the

Cour des comptes.

Furthermore, it is very difficult to

identify, in the documents accompa-

nying the planning law and the draft

reforms of the Government, the mea-

The 2010-2013 plan

Annual public report

Executive summaries

sures aimed at increasing compulsory

withholdings and decreasing expendi-

tures that make it possible to achieve

this effort. As in the stability pro-

grammes presented by France for 12

years now and as in the planning law for

2009-2012, the recovery measures are

poorly documented beyond the first

year of planning.

And yet, the analysis of certain line

items shows that the changes in expen-

ditures planned by the Government

require implementing reforms that are

significantly more ambitious than those

already announced. In a September

2010

report

the

Central

Government’s total payroll, the Cour

des comptes had underscored that sim-

ply stabilising its amount, when the

three-year budget anticipates a decrease

from 2010 to 2013, would imply free-

zing the public service point value until

2013 and much stricter capping on pay-

grade increase.

The increase in GDP and public

revenues could finally be lower than the

forecasts in the planning law, which

would make it much more difficult to

bring the deficit to 3.0% of GDP in

2013. For the plan described in the

public finances planning law to be fully

credible, the structural effort must be

more ambitious and the measures

necessary to achieve it must be specified

without delay.

Tax expenditures :

A major budget issue

“Tax expenditures” refer to legal

provisions overriding a reference tax

standard resulting in a loss of revenues

for the Central Government. In prac-

tice, the borderline, for a given tax or

fee, between what is to be considered as

overriding and what is to be treated as a

simple application of the rule often

sparks debate.

High and sharply rising

cost

After being fairly stable from 2000

to 2004, the number of tax expenditures

listed in the appendix to the budget acts

rose from approximately 400 to 500

from 2004 to 2009 and their total cost

increased by 43%. The cost of tax

expenditures listed on the official list

thus reached €68bn in 2009, not inclu-

ding recovery measures, i.e. 30% of the

Central Government’s net tax revenues.

The ratio was 18% in 2004, and -- had it

stayed at that level -- the budget deficit

would have been €27bn less in 2009.

Moreover, the 2009 cost of the items

removed from the list of tax expendi-

tures since 2004 stands at €75bn.

This sharp rise in the cost of tax

expenditures since 2004 has coincided

with the implementation of a “zero

volume” increase rule for the Central

Government’s budget expenditures. In

addition thereto, the cost of tax

decreases and credits, which are the tax

expenditures that are the easiest to subs-

titute for budget expenditures, rose

142% between 2004 and 2009. The

creation and extension of certain tax

expenditures made it possible to bypass

the budget rules.

A vague concept, little

known costs

There is no definition for the “refe-

rence tax standard” in France and, even

less so for the measures that may be

considered overriding. The list of tax

expenditures appended to the budget

bills is extremely incoherent. Thus,

many measures for the discontinuation

or decrease of tax expenditures presen-

ted by the Central Government in the

2011 Budget Act concern arrangements

that were never on the list or that have

been recently removed therefrom. The

Cour des comptes would like tax expen-

ditures to be given a precise definition

and the list to be reviewed from this

standpoint.

Their cost, as presented in the bud-

get documents, must be interpreted with

caution, firstly because they are often

higher than the revenues that would

have been obtained had they been remo-

ved. In fact, it is estimated without

taking into account any behavioural

changes, often impossible to accurately

quantify, which could result from such

discontinuation. Secondly, the informa-

Cour des comptes

Annual public report

Executive summaries

Tax expenditures :

A major budget issue

Annual public report

Executive summaries

tion available could be insufficient to

correctly quantify the cost. Finally, it

corresponds to the loss of revenues

compared to what would have resulted

from the application of a reference stan-

dard, but such standard is not explicitly

stated and may vary from year to year.

The Cour des comptes would like to

see an improved quantification of the

cost of tax expenditures. Projecting the

development of this cost is certainly an

even more delicate matter, but the

ministry of finance significantly unde-

restimates its increase by merely rene-

wing the latest cost recognized for more

than half of tax expenditures. Pending

the possible implementation of a more

reliable method, the Cour des comptes

recommends calculating a tax expendi-

ture cost increase similarly to the reve-

nue from the corresponding tax or to

the nominal GDP.

Rules remain flexible

The planning law for the years 2009

to 2012 had provided for a pledge rule

according to which the creations and

extensions of tax expenditures should

be offset, for each year, by decreases and

removals of an equivalent total amount.

This rule was not followed in either

2009 or 2010 and the measures adopted

since the filing of the planning law have

contributed to a €1.9bn increase in the

cost of tax expenditures in 2010.

The new planning law, adopted in

December 2010 for the years 2011 to

2014, sets, for each of these years, the

minimal efficiency of the new measures

for the increase in compulsory withhol-

dings, which could take the form of a

decrease in tax expenditures. Moreover,

it includes more specifically the tax

expenditures by stipulating that the

amount of their total cost may not

increase. Considering the level already

reached and the condition of the public

finances, a significant decrease in this

cost rather than a simple stabilization

thereof should be sought. In its report

of June 2010 on the public finances

situation and outlook, the Cour des

comptes had recommended decreasing

it by €10bn, and by the same amount

that of the social niches.

The measures adopted in the

Budget Act for 2011 will reduce the cost

of tax expenditures from the official list

by only €0.5bn in 2011, and this cost will

remain 7% higher than the amount rea-

ched in 2008. The effect of certain mea-

sures will be nevertheless deferred past

2011 and the return expected in 2012 is

€2.4bn. By adding measures relative to

the arrangements not included on the

tax expenditure list, but very similar to

those that are, the total impact on the

public accounts would be €4.3bn in

2011 and €6.2bn in 2012.

The latter

amount is still quite far from the €10bn

target recommended by the Cour des

comptes.

Therefore, the effort to decrease the

cost of the tax expenditures must be

continued.

Recommendations

Tax expenditures :

A major budget issue

Annual public report

Executive summaries

Specify the definition of tax

expenditure provided in the appen-

dices to the Budget Bills and revisit the

resulting list; expanding the field to

taxes allocated to other public organi-

zations ;

Improve their costing process

and, in the absence of any reliable

forecast method, instead of renewing

it from one year to the next, have it fol-

low the change of the revenue from

the corresponding tax or the GDP ;

Replace, in the next planning

law, the freeze of the total cost of tax

expenses by a clause imposing mea-

sures to discontinue or decrease the

tax expenditures whose total return

exceeds a minimum amount ;

Expand the cuts and “shave

off ” costs at least from all the income

tax reductions and credits ;

Complete the systematic assess-

ment of tax expenditures set out in the

previous planning law and take the

results into account in the Budget Bill

for 2012 ;

Base the revision of the tax

expenditures on the work of the Cour

des comptes, which has often demons-

trated the inconsistencies in the expen-

ditures and their disproportionate cost

with respect to the results obtained.

Cour des comptes

Annual public report

Executive summaries

A few tax expenditures

dedicated to the

development of

companies and jobs

The tax expenditures that are favou-

rable to companies and to job creation

have an economic impact that is difficult

to measure, considering that they are

part of a movement of far-reaching

reforms of company taxation, which

have contributed to improving the envi-

ronment in which the latter are growing.

Their follow-up is even more impe-

rative considering that companies know

how to use them quickly and optimally.

Their cost is heightened and the

windfall effects are sizeable.

Particular attention should be paid

to monitoring the changes in the costs

of certain arrangements, which could

call into question, in whole or in part,

some of them, without that adversely

affecting the balance of taxation of

companies in France.

Real cost of tax expendi-

tures often higher than its

original valuation

The valuation of tax expenditures

which concern companies as well as of

measures considered as methods for the

calculation of tax (programme 134 of

the Budget Act) is not satisfactory.

Generally, the initial valuations of the

cost of tax expenditures specific to

companies prove to be lower than the

actual cost resulting from their effective

implementation.

The valuation of the principal tax

expenditures put in place in the recent

period illustrates how difficult it is to

provide Parliament with reliable infor-

mation on which it can base its decision

as to whether to introduce them; that is

how striking the differences found can

be.

These differences can be explained

by the use of traditional valuation rules,

by an underestimation of the number of

beneficiaries and by the responsiveness

of companies, which are quick to imple-

ment new measures for the purpose of

tax optimisation.

Budget issues of tax

expenditures specific to

large groups insufficiently

taken into account

The tax consolidation system, the

budget cost of which is valued at close

to €20bn, is particularly attractive. It

makes it possible to offset the losses and

gains of member companies or to

deduct the financial expenses without

real limitation. The application condi-

Annual public report

Executive summaries

A few tax expenditures dedicated to

the development of companies

and jobs

tions are very favourable. It offers

numerous possibilities to neutralize

intra-group transactions. The neutraliza-

tions lead, year after year, to decreases in

the taxable profit of groups compared

to those that would result from the sim-

ple offset of losses and gains, represen-

ting on their own a cost of over €2.3bn.

Certain paths could be explored in

order to limit the cost of this treatment,

without challenging the fundamental

principle of offsetting gains with losses

of companies within the same group.

The worldwide consolidated profit

treatment enables an international

group to determine its taxable income in

France, by offsetting gains with losses of

its at least 50%-held subsidiaries and of

its foreign operations.

This optional treatment can be very

favourable. While it has, undoubtedly,

been useful in helping the international

development of the largest French

industrial groups, this is no longer the

case today, in an environment in which

companies achieve a major portion of

their profit abroad. Its removal could be

considered.

Use of the PEA to shelter

significant capital gains

from tax

The tax treatment of the stock

savings plan (plan d’épargne en actions

or PEA) was created in order to incite

taxpayers to invest, over the long term,

their savings into company stock, by

enabling them to benefit from a tax

exemption on their income from divi-

dends and on realized capital gains.

Expanding the PEAs to include

unlisted companies has led to significant

tax optimization practices and even to

abuse. This is done by including in a

PEA stocks of unlisted companies at

per unit values below their true value, in

order to place on the plan, for the same

capped amount, the largest possible

number of stocks, in order to benefit

from an exemption from capital gains,

the amounts of which have no common

denominator with those that can be

recognised with those that it is possible

to recognise when such capital gains are

achieved through domestic savings. An

anti-abuse mechanism could be imple-

mented in order to limit capital gain

exemptions.

Annual public report

Executive summaries

A few tax expenditures dedicated to

the development of companies

and jobs

Recommendations

Do not be too quick to reclassify

a tax expenditure as a tax calculation

method, as this could prevent in the

future querying the relevance of the

measure and the need to preserve it ;

Anticipate, during the prepara-

tion of the Budget Acts, the rapid res-

ponse of companies to new measures,

in order to better assess their costs and

to limit their effective application only

to the situations corresponding to the

objectives defined by law ;

Assess the tax expenditures

which correspond to the neutralisation

of intra-group transactions, planned

for the tax treatment of the group ;

Study the consequences from

the discontinuation of the worldwide

consolidated profit treatment, which

seems to no longer respond to an eco-

nomic need ;

Introduce an anti-abuse mecha-

nism, in order to limit the amount

represented by exemptions on capital

gains realised on the sale of stocks of

unlisted companies included in a PEA,

as this applies to limiting dividend

exemptions.

Employment bonus : tax

expenditure with

increasingly indeterminate

objectives

The employment bonus (prime pour

l’emploi or PPE) introduced by the Law

of 30 May 2001 aims, according to the

terms of the general tax code, to moti-

vate people to return to or continue

their occupational activity. It is calcula-

ted only on the basis of earned income

and is awarded to tax households for

each person exercising an occupational

activity. Its amount increases for

incomes ranging from 0.3 to 1 of the

growth-linked guaranteed minimum

wage (salaire minimum interprofession-

nel de croissance or SMIC), after which

it decreases for those up to 1.4 times the

SMIC.

It is broadly spread: close to one out

of four households receives it (8.2 mil-

lion beneficiaries in 2009) for an average

amount of approximately €500 per year.

The cost of the measure for the Central

Government has nearly doubled bet-

ween 2001 and 2009, from €2.5bn to

over €4bn.

An ambiguous measure

with several goals

The PPE has a multiplicity of objec-

tives (return to work, supplemental

income, rebalancing of income tax, sup-

port in the moderation of the SMIC).

The numerous adjustments introduced

in it year after year, added to the increase

in number of the other mechanisms

intended to motivate people to return to

work, have made it even more confu-

sing.

The PPE can be paid to households

whose income is clearly over the ave-

rage, but conversely, it excludes people

having difficulties finding work.

This lack of a clear target prevents it

from being a tool to motivate people to

return to work, considering that its

amount remains inadequate, despite the

twofold increase in its overall cost.

Created in December 2008 with theore-

tically similar objectives, the earned

income

supplement

(Revenu

Solidarité Active or RSA “activité”),

both in terms of amount and in terms

of the number of beneficiaries, does

not call into question this finding.

Strategy steering and

budget management fai-

lures

The PPE is not managed by the

departments of the ministries responsi-

ble for the budget and finances or by the

general delegation of employment and

vocational training (délégation générale

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

à l’emploi et à la formation profession-

nelle or DGEFP). Serious uncertainty,

representing for three years one quarter

of the amount announced, is affecting

the estimate of its cost for the Central

Government’s budget.

Improvements have however been

made to the management of income

declarations, thanks to a number of

innovations (pre-filled declarations,

reminder procedures, taxpayers certifi-

cation). The PPE, with which taxpayers

are familiar, is a benefit that is easy to

obtain. The tax procedure makes it pos-

sible for it to be paid out to the majority

those entitled to it without needing to

take any special steps.

Nevertheless, persistent fraud makes

it crucial to have a tax control that is sui-

table for the high number of beneficia-

ries and the low level of the amounts of

each bonus.

The need to make a

political

choice

with

respect to the objective of

the measure and its link to

the RSA “activité”

If the reiterated objective of the

PPE is to motivate people to return to

work, then its amount has to be increa-

sed so that it can truly become an incen-

tive and to start targeting beneficiaries

whose earned income is insufficient to

naturally motivate them to return to

work.

The resulting decrease in the

number of beneficiaries would make it

possible to increase the amount of the

bonus, without increasing the overall

expenditure.

The RSA “Activité” should then

become part of the PPE, whose simple

method of payment makes it more of

an incentive compared to the RSA,

which is complex to manage.

Should the idea of changing the

PPE at the expense of the RSA “acti-

vité” not be adopted, two other paths

could be considered :

- discontinuing the PPE: the RSA

“activité” would then remain the only

measure providing income to low paid

workers as an incentive to re-enter the

labour market ;

- preserving both measures: in this

case, their objectives should be clearly

differentiated. The RSA “activité”

would be the measure used to incite

people to resume an occupation, while

the PPE would become an income sup-

plement for those who are already

employed

but

are

have

modest

resources. In that case, the PPE would

have to be structured so as to also take

into account the family situation of the

beneficiaries.

Employment bonus : tax

expenditure with increasingly

indeterminate objectives

Employment bonus : tax

expenditure with increasingly

indeterminate objectives

Annual public report

Executive summaries

Recommendations

Should the PPE be maintained :

Designate a true leader who will

provide strategic management, selected

according to the objective retained,

income or work ;

Secure the registration mode for

all the tax expenditure related to

income tax, a vital step for the imple-

mentation of a performance measure ;

Present in an appropriate man-

ner the total cost of the tax expendi-

ture, the amount of tax deductions and

of refunds in the form of bonuses;

Set up a selective control not

based on prior examination of certain

declarations selected on the basis of

the irregularities they present;

Include time worked on the pre-

filled declarations based on the hypo-

thesis that the measure would remain

an incentive to return to work ;

Improve the reminder proce-

dures for taxpayers that may be eligible

for the PPE ;

Eliminate all cheque payments

and all payments in cash with a view to

phasing in payments via bank wire

transfers.

Annual public report

Executive summaries

Cour des comptes

Retirement reserve fund

(Fonds de réserve des

retraites or FRR):

Abandoned ambition, risky

reorientation

The retirement reserve fund (Fonds

de réserve des retraites or FRR) was

created in 1999 to establish a reserve,

designed, originally, to reach €150bn

and intended to contribute, starting in

2020, to the financing of the retirement

schemes of employees and craftsman

and industrial and commercial profes-

sionals. The Fund was a new instrument

for France, embodying the desire of the

Central Government to set long-term

ambitions. It was supposed to be funded

annually through various contributions

(surplus from the national old-age insu-

rance fund (Caisse nationale d’assurance

vieillesse) or from the old-age solidarity

fund (Fonds de solidarité vieillesse), pri-

vatisation proceeds, fees, among other

things, and interest income from the ins-

titution’s investment on the markets.

An abandoned ambition

In June 2010, the missions of the

FRR were radically modified, since the

Government had announced that it

intended to use its resources during the

ramp up period of the retirement

reform. The Fund, the assets of which,

as at 1 November 2010, stood at

€36.2bn, would now be supposed to pay

annually, starting in 2011 and until 2024,

an amount of €2.1bn at current rate to

the social debt redemption fund (Caisse

d’amortissement de la dette sociale or

CADES), the latter receiving, in addi-

tion, allocations and transfers of taxes

previously given to the institution

Results below expecta-

tions after six years

The annualised performance (3.1%)

from June 2004 to the end of 2010

stands below the cost of the Central

Government’s borrowings (3.45%) over

the same period, which means that, for

the period under consideration, there

was an increase in public debt. It is true

that the poor performance was only

recorded in the first six years of a fund

designed and managed as a long-term

investor, after a very large-scale financial

market crisis. The Cour des comptes,

nevertheless, found that the crisis was

not the only factor that could explain

the result observed. It found that the

Central Government had not given any

strategic orientation to the FRR that

would enable it to be guided by stable

and precise objectives; it did, conversely,

contribute to placing the Fund in an

unstable environment by planning on

several occasions to withhold in whole

Retirement Reserve Fund (FRR) :

Abandoned ambition, risky

reorientation

or in part resources of the institution,

and by regularly decreasing the annual

amount for the allocations made

(€5.5bn in 2002, €1.5bn in 2010).

Furthermore, the investment policy of

the Fund was not totally adapted: invest-

ments on the financial markets were

made during periods of high prices,

with a high proportion of equities. It

had an inadequate response to the finan-

cial crisis.

A risky reorientation

The change in the nature of the

FRR presents serious risks. It had,

indeed, built its financial strategy on the

premise that it was a long-term investor

and could therefore take risks, since the

losses, if any, would smooth out over

time. The new conditions with a ten-

year shorter horizon for its liabilities

reduce the Fund’s chances to return to a

satisfactory annualised performance,

considering that it will not be able to

apply, over the long term, an investment

policy that would enable it to seize the

opportunities that the financial markets

would present. The short-term choice

that was made presents one risk: the

reserves booked by the FRR will not be

there if the retirement schemes’ losses

continued beyond 2020.

Management in need of

improvement

The FRR’s situation requires, in any

event, an improvement of its gover-

nance and management. The Cour des

comptes recommends clarification of

the roles of the supervisory board and

management board and a more active

role for the audit committee of the ins-

titution. It further underscores that pro-

gress needs to be made in terms of

administrative

management

which,

entrusted by law to the Caisse des

dépôts et consignations, could be

improved both in terms of costs and in

terms of services. The Cour des

comptes also recommends that the FRR

reviews the conclusions to be drawn

from the changes in progress in relation

to the extent of the outsourcing of its

activities. The law stipulates that finan-

cial investments be made through agent

financial companies the cost of which

was high and whose usefulness seems

less relevant with the sharp decrease of

the equities portfolio. This obligation of

outsourcing could be fully or partially

challenged. The FRR should then exa-

mine the consequences of this reorgani-

zation for its statutes and governance

methods.

Annual public report

Executive summaries

Retirement Reserve Fund (FRR) :

Abandoned ambition, risky

reorientation

Annual public report

Executive summaries

Preserve, referring to the Central

Government, a framework that would

enable the FRR to manage its portfolio

with a stabilised horizon for its

liabilities ;

Research the possibility, for the

FRR, to challenge the obligation to

outsource the financial management of

its portfolio and that aimed at entrus-

ting the Caisse des dépôts, in whole or

in part, with the financial management

of the assets concerned. ;

Examine the consequences of

this reorganization for the statutes of

the establishment and on its gover-

nance methods ;

Continue to improve internal

management, notably in the area of

accounting.

Recommendations

The French compensation

system for partial

unemployment : An

insufficiently used tool

Partial unemployment (or short-

time working) has been one of the prin-

cipal tools called on in Europe to help

face the economic crisis. This work-time

adjustment measure allows an employer

to reduce the work time of employees

whenever there is a temporary decline in

business

without

breaking

the

employees’

employment

contract.

During off-work periods, the remunera-

tion of the employees is covered, in

whole or in part, by the public authori-

ties (the Central Government in France,

unemployment insurance in Germany).

Partial unemployment is thus for

employees a tool for securing their pro-

fessional situation and, for businesses,

an instrument to preserve their produc-

tive capacities.

Limited revival of a

system fallen in disuse

Over the past two years, the French

partial unemployment system grew

stronger. Largely fallen into disuse

during the 2000s, it was revived when

the crisis occurred. However, the

European comparison made by the

Cour

des

comptes,

notably

with

Germany, Italy and Belgium, shows that

the intensity with which it was brought

to action was clearly lower than that in

certain neighbouring countries. Thus,

Germany had up to 1.53 million

employees in partial unemployment at

the height of the crisis (2nd half of

2009), while France had only 275,000 as

at the same date.

The amounts allotted

to partial unemployment in the two

countries reflect the difference: while

the public finances cost for this arrange-

ment was €610m in France for 2009, it

is estimated at €6bn in Germany for the

same year. Likewise, the portion of the

population of employees concerned by

partial unemployment was clearly lower

in France than in Belgium or in Italy.

The French economy thus took less

advantage of partial unemployment

than others such as Germany or Italy. Its

impact in terms of remaining employed

de facto seems to have been modest:

According to a study by the OECD, par-

tial unemployment contributed to the

preservation

251,000

jobs

Germany during the crisis, compared to

124,000 in Italy and only 18,000 in

France. Moreover, the use of partial

unemployment periods for the purpose

of training employees, which was diffi-

cult to implement, remained marginal.

Cour des comptes

Annual public report

Executive summaries

The French compensation system

for partial unemployment :

An insufficiently used tool

Annual public report

Executive summaries

Reasons for the under-use

of the partial unemploy-

ment scheme in France

The relative under-use of the partial

unemployment scheme in France seems

to be related to several causes:

-obsolescence of the legal mecha-

nism when the crisis broke out: the prin-

cipal parameters of the system (notably,

the rates of aid to businesses and the

level of remuneration guaranteed to the

employees) had not been revised, in

some cases, since the previous crisis in

1993.

The legal mechanism had to be

renewed urgently at the end of 2008,

with initially an update of what was in

place, followed by the creation in 2009

of a new system, known as “long-term

partial employment”. The latter includes

higher replacement remuneration paid

to the employees as well as higher aid to

businesses, due notably to the response

of unemployment insurance which

undertook to participate in the finan-

cing. However, the “long-term partial

employment” only entered into effect

once the peak of the crisis had already

passed, which can explain, to a certain

extent, the low level of use of partial

unemployment in France ;

structural factors related to certain

specificities of the economy and the

labour market: More than 80% of par-

tial unemployment concerns industrial

jobs. The portion of the latter being

lower in France (20% of the actively

employed population) than in Germany

(25%) or in Italy (28%), partial unem-

ployment logically concerned a narro-

wer public. The development of the

legislation applicable to the labour mar-

ket in France from the late 1990s

onward reinforced the external flexibi-

lity tools (fixed-term contracts or tem-

porary employment) and introduced

new work-time management methods,

notably the possibility to annualise it in

order to adapt the pace of work to that

of the business; this organisational

adaptability made it possible to avoid, at

least initially, the use of partial unem-

ployment ;

-insufficient incentives for busi-

nesses: In fact, while the compensation

of employees under partial unemploy-

ment is rather more favourable in

France than abroad, our system is

conversely less favourable than elsew-

here to employers who remain responsi-

ble, in the most commonly encountered

cases, for one fourth and potentially up

to half of the compensation of

employees, i.e. a level that is significantly

higher than that observed in neighbou-

ring countries, notably in Germany or in

Italy.

Make the legal mechanism more

attractive ;

Simplify its legal framework ;

Build upon the incentives aimed

at combining partial unemployment

and training.

Recommendations

The campaign for the fight

against the Influenza

A(H1N1) epidemic :

assessment and lessons

learnt

In order to contribute to a better

response by the public authorities in the

event of another national health crisis,

the Cour des comptes presents here its

main observations following two audits

conducted at the request of the compe-

tent Commissions of the Senate on the

use of public means in the campaign to

fight influenza in 2009, and of the

National Assembly on the role attribu-

ted

the

Health

Emergency

Preparedness and Response Agency

(Etablissement de préparation et de

réponse aux urgences sanitaires or

EPRUS) created in 2007.

A new and disappointing

crisis management system

This campaign was the first time the

new public system for the management

of a crisis was put to the test in the face

of a pandemic risk. Despite the positive

joint action of the administrations and

the active involvement of players

concerned, the situation reflected a

major disproportion between the size of

the financial means and of the organisa-

tion deployed therefor and the poor

vaccination coverage achieved, which

only reached just over 5 million people,

i.e. 8.5% of the population.

The actual cost for public finances

of the policy followed thus amounted to

60 Euros per vaccine used and over 110

Euros per person vaccinated.

A vaccination strategy

that lacked flexibility

The strategy intended to offer to the

entire population the possibility to be

vaccinated at centres created for that

purpose turned out to be excessively

rigid, with respect to the rapid adapta-

tions which would have been required

by the emergence of a more moderate

than anticipated health risk. The defi-

cient response and lack of flexibility

also affected the communication provi-

ded to the public and developed to sup-

port the campaign as well as the

contracts for the procurement of vac-

cines (signed without contingency

clauses) or the organization mode, too

exclusively based on special vaccination

centres.

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

Revise the national influenza

pandemic plan to further adapt it to

the needs of crisis management and

seriousness of the threat on the natio-

nal territoryl ;

Introduce in that same plan a

financial and budget component ;

Better estimate the reality of

the workload and the response time of

the decentralised services involved in

the local organisation of crisis mana-

gement ;

Not automatically exclude from

the organisation of the vaccination

campaign the hospitals or physicians

in private practice, considering the

role of local advisors that they must

play in terms of public health ;

Rethink the governmental com-

munication on the vaccination cam-

paign ;

In addition to managing any

health crisis, start a concerted effort in

favour of a vaccination policy to

enable a more objective appreciation

of advantages it has to offer ;

Organise a European coordina-

tion effort to reinforce the position of

the Central Governments in the nego-

tiation of procurement contracts for

vaccines.

Recommendations

The compaign for the fight against

the Influenza A(H1N1) epidemic :

assessment and lessons learnt

The healthcare system in

French Polynesia and its

financing

The French Polynesia Territory

(260,000 inhabitants) has a separate

healthcare system, for which it assures

the organisation, steering and manage-

ment, as part of its specific political and

administrative autonomy.

An overall performing

system

The healthcare organisation in place,

accessible to the majority of the popula-

tion, covers the entire territory and

combines preventive and medical care.

For activities not provided locally,

patients benefit from medical evacua-

tion through which they receive appro-

priate care in Metropolitan France or in

New Zealand.

The performance of the healthcare

system presents undeniable positive

aspects, especially when compared to

that of the countries that share with the

disadvantages of insularity and isolation

this overseas territory. The changes in

and level of life expectancy and of the

mortality rate place French Polynesia in

a favourable position. Means indicators,

such as the physician-to-population

ratio, are equivalent to or even higher

than those in the most developed coun-

tries of the South Pacific.

Deficient management

The political instability which the

overseas territory has been experiencing

since 2004 and the lack of continuity of

managers in charge of designing stan-

dards largely explain management defi-

ciencies

Numerous weaknesses, notably in

terms of healthcare safety, are not

addressed by regulations. There has

been no true healthcare policy since

2005.

The healthcare organization sys-

tem for French Polynesia is out-dated.

The opening of a new referral hospital

in 2010 would have offered the occasion

to overhaul it. The system in fact has

never been considered as the tool for

regulating the offer of hospital care and

optimal distribution of resources that it

should have been.

Finally,

the

information

about

healthcare availability is incomplete and

out-dated. The results from the most

recent general surveys on the health

condition of Polynesians go back to

1995.

The

Programme

for

the

Medicalisation of the Information

Systems (programme de médicalisation

des systèmes d’information or PMSI) is

insufficiently developed and underused.

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

The cost of the healthcare

system in French

Polynesia is high

Current healthcare expenditure,

never estimated since general social pro-

tection was introduced in 1994, was in

2008 over CFP72bn (€605m), or the

equivalent of 48.7% of the budget of

French Polynesia and 13% of its GDP.

Its growth rate, by far higher than that

observed in Metropolitan France, is

approximately twice as high as that of

the GDP. And yet, this trend seems dif-

ficult to curb both because of the mor-

bidity characteristics of the population,

combined with its aging, and because of

the consequences of the renovation of

hospital facilities.

Under these conditions, the two

main financiers of healthcare, the

Welfare Fund (caisse de prévoyance

sociale or CPS) and the Territorial

Administration, which must face gro-

wing budget difficulties related to an

unprecedented economic crisis, no lon-

ger seem able to ensure, as things stand,

the balance of the system.

A large-scale reform is

required to guarantee the

continuity of the system

Drastic savings measures seem

indispensable. Streamlining the health-

care entities, notably the hospitals and a

more efficient management of human

resources must be envisaged.

But the principles and mechanisms

of financing of the healthcare system

must also be overhauled. The overseas

authority should be able to set objec-

tives and define their performance indi-

cators and provide annual data derived

from the healthcare accounts. This

means that it will contrast with the usual

methods for the allocation of resources,

should enable it to set an annual health-

care spending target and to prepare

objectives and means agreements, in

order to ensure both a transparent and

quantified management of public poli-

cies in this sector.

Define and prioritise the health-

care objectives ;

Optimise the healthcare offer ;

Overhaul the principles and

mechanisms for the financing of

healthcare ;

Assert the pre-eminence of The

Territory Administration of French

Polynesia in the decision-making

process.

Recommendations

The healthcare system in French

Polynesia and its financing

The public support to

export companies

France, like its principal competitors

and in compliance with the competition

rules imposed by European Community

laws, the OECD (Organisation for

Economic

Co-operation

and

Development) and the World Trade

Organisation (WTO), is preserving

numerous laws intended to ease the

access of its companies to foreign mar-

kets. Public support however is intended

to be subsidiary with respect to the mar-

ket.

6.9% of French exports and some

10% to 15% of the export companies

received support in 2009.

An as yet incomplete reor-

ganisation

The great variety of players in

foreign trade within the public sphere

has led the Central Government to try

to create a better organisation for them.

It created an inter-ministerial commis-

sion to support international contracts,

tasked with coordinating the resources

allocated to the largest projects. It esta-

blished a public industrial and commer-

cial institution, Ubifrance, which now

has a network of economic missions

present in 44 countries.

This positive rationalisation of

public support levers is nevertheless yet

to be completed. The clarification of

the role of Ubifrance, whose action has

been updated, on the one hand, and that

of the other players - Oséo, Coface,

chambers of commerce in France and

abroad, private operators specialising in

international trade, regions – still seems

inadequate. As part of the renegotia-

tion, in 2011, of the objectives and

means agreement of Ubifrance, the

Central Government should define in a

more precise manner the public service

mission of that institution, following

the logic of subsidiarity with respect to

the private players in the field of export.

A questionable support

target

The laws are poorly oriented

towards geographic areas where compa-

nies’ access to the markets is more diffi-

cult. Moreover, support could be awar-

ded in a more selective manner to com-

panies likely to export over the long-

term. The current target-setting policy

may be costly to public finances, as it

leads

exposing

the

Central

Government to a high rate of failure

which it assumes under its guarantee to

Coface. Generally, the budget risks rela-

ted to the Central Government’s guaran-

tee should be better framed and mana-

ged. The Parliament should be better

informed thereabout.

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

Recommendations

Define a “company internatio-

nalisation” policy that would take into

account its consequences in terms of

national employment ;

Improve the management of

this policy by :

- Providing a precise definition of

the

public

service

mission

Ubifrance in the next objectives and

means agreement signed by the

Central Government;

- Monitor the cross-agreements

signed between the various foreign

trade players and streamline their res-

pective roles ;

- Implement systems for the eva-

luation of the support tools ;

- Improve the monitoring mecha-

nism for the various financing and

support systems, including outside

OECD countries ;

Better target-setting for the sup-

port through:

- A more selective orientation of

the supports towards companies likely

to export over the long-term ;

- Limitation of the windfall effects

discontinuing

supports

for

prospecting such as SIDEX and the

tax credit ;

- Better control over budget risks

through an improved budget follow-

up of public guarantees granted to

Coface due to better informing of

Parliament, better understanding of

risks, in particular non-sovereign risks,

and efficient use of accrual accoun-

ting.

The public support to

export companies

Consequences from the

policy of support provided

to international develop-

mentl

The policy to support exports is

being reoriented in an uncertain manner

towards the support of the internationa-

lisation of companies, which leads to

French offers becoming part of the pro-

duction of subsidiaries or suppliers

abroad, in Europe or elsewhere. Public

guarantee financing of such export

contracts, which has flexible terms, may

lead to supporting strategies for the

delocalisation of the companies.

Offsetting the public

electric utilities charges

The contribution to the

public electric utilities

charges (contribution aux

charges de service public

de l’électricité or CSPE): A

substantial, yet overloo-

ked, amount (€1.7bn in

2009)

This contribution, which the consu-

mers pay directly when paying their elec-

tricity bills, serves to offset charges

inherent in the public electricity service

supported by various operators of the

electricity market: mainly, the support to

renewable energy and cogeneration, the

rate equalization in the Overseas

Departments and Corsica and the low-

income electric rates.

Since its creation by Article 38 of

the Law of 3 January 2003, the charges

that the CSPE is supposed to offset

have grown rapidly and uncontrollably,

while the contribution rate, for its part,

has remained unchanged, at €4.5/MWh

until 2010, as the Energy Minister has

refrained from modifying it.

Between 2004 and 2009,

total public utilities

charges rose from

€1.53bn to €2.55bn

Within those charges :

-The low-income rates, even though

increasing sharply, still only occupy a

marginal place (3.2% in 2008) ;

-the

rate

equalisation,

the

Overseas Department and in Corsica

rose from 23% in 2004 to over 45% in

2009;

- the energy purchases, which result

from the support to renewable energy

and cogeneration, occupy a predomi-

nant place, of close to two-thirds of the

amount of the charges.

Within those, the wind and photo-

voltaic sectors are gaining increasing

importance. Compared to the total

volume of electricity purchased, this

sector would only increase from 0.07%

in 2008 to 0.8% in 2010, but its relative

weight in the charges offset by the

CSPE would increase at the same time

by from 0.9% to 10.3%.

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

The CSPE basis has

increased at a slower pace

than the charges

The result from that is a growing

imbalance of the offsetting mechanism,

for the most part supported by EDF

which assumes more than 95% of the

charges of public electric utilities. The

company quantifies the accumulated

CSPE recovery loss at €2.6bn at the end

of 2010.

For 2011, the Energy Regulation

Commission (Commission de régulation

de l’énergie or CRE) estimates the fore-

casted charges at €3.47bn It values at

€12.90/MWh the contribution that

would be needed to offset them.

Admittedly, corrective measures

have just been taken. The 2011 Budget

Act allows an increase by €3/MWh for

the CSPE, whose total amount thus

becomes €7.5/MWh. Moreover, the

Central Government has, by decree of 9

December 2010, suspended for three

months, the obligation mechanism for

the purchase of electricity produced by

certain facilities using radiating solar

energy.

The Cour des comptes considers

however that these corrective measures

do not constitute a true remedy for the

structural drift in the current system.

Achieve control over the

growth factors for the public electric

utilities charges, the number one target

being the system of compulsory pur-

chase at too attractive rates which ope-

rates on an “open for business” basis ;

Inquire about the possibility to

continue supporting sectors that are

not among the governmental priorities

in terms of energy policy, such as the

co-generation ;

Re-examine from every angle

the overall system in order to make its

operation more readable and clarify its

tax status ;

Re-examine the financing of the

support for the development of rene-

wable energy by the consumer of

energy.

Recommendations

Offsetting the public

electric utilities charges

Higher education and

research clusters (PRES):

In need of a new impetus

A new momentum since

2006

The 2006 planning law for research

created research and higher education

clusters (pôles de recherche et d’ensei-

gnement supérieur or PRES), which

were supposed to be the privileged place

for structuring mutualisations between

institutions.

At 1 January 2011, 21 PRES had

been created. A real momentum was

launched. The ministry of higher educa-

tion and research favoured the emer-

gence of projects in the form of new

public institutions for scientific coope-

ration (établissements publics de coopé-

ration scientifique or EPCS).

Operation Campus, which is a real-

estate project with a capital of 5 billion

Euros, supported this movement, the

PRES being most often the principal

investigators of the selected projects.

Modest results

However, the PRES development

was thwarted, for several reasons: The

priority given, since 2007, to the imple-

mentation of the law relative to the free-

doms and responsibilities of the univer-

sities (libertés et responsabilités des uni-

versités or LRU law) which overshado-

wed the cooperative logic; insufficient

ministerial support, once the creation

wave had passed; a passive attitude of

the large research organisations; finally,

the piling up of multiple mechanisms of

various nature over the course of the

years with no links among them.

In fact, the results are significantly

below the expectations created. The

PRES still have a modest impact on trai-

ning. Site policies are struggling to

emerge for research. PRES governance

is often unsuited to their ambitions.

A needed clarification

The new financial means, notably,

“the growth-enhancing investments”

launched as part of the large loan, are

such as to favour the combination or

consolidation approaches and to streng-

then the role of the PRES.

However, the generally difficult

budget context imposes the obligation

to strive for an efficient use of the new

means granted.

From this viewpoint, the need to

clearly specify what is expected from the

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

Recommendations

Strengthen the support provi-

ded by the Central Government

through a contractualisation with the

PRES, the objective should be in the

long term the signature of a single site

contract and the definition of a shared

vision of the policies of the site bet-

ween the Central Government, the

local authorities, the higher education

institutions and the research bodies ;

Orient the future of the PRES

in two directions through contributed

support, when integration is the most

suitable formula for the creation of a

new public institution in which mem-

bers would merge; or, if a merger does

not seem appropriate, create long-

term bonding entities with a strong

identity and with reinforced skill sets

and responsibilities.

Higher education and research

clusters (PRES) :

In need of a new impetus

PRES is urgent. If these structures are

called on to be major players for the on-

going restructuring, they should then be

made the point of impetus and carriers

of site policies as well as true unifying

factors, in terms of training pro-

grammes, research and enrichment poli-

cies.

National Research

Agency (ANR): First

findings and outlook

Created in 2005, the National

Research Agency (Agence nationale de

la recherche or ANR), mostly issues

requests for proposals by research teams

and selects the winning proposals accor-

ding to criteria of scientific excellence.

To do so, it has had at its disposal since

2006 an annual programme budget of

approximately €800m. The Cour des

comptes wanted to prepare a first status

report regarding the activities of this

agency at a time when three major deci-

sions were taken: In June 2009, the

minister of higher education and

research announced the transition from

25% to 50% of the portion of credits

dedicated to requests for non-thematic

proposals, and the assumption by the

ANR of all the missions until then pro-

vided on its behalf by “support units”

housed within various research and

higher education institutions. Finally, the

ANR will manage €18.9bn of the

“growth-enhancing investments”, deci-

ded as part of the Big Loan (Grand

Emprunt). These decisions are intended

to change the nature of the agency, ini-

tially designed by the legislator as a more

streamlined organization.

Successful ramp-up

Created in 2005, the National

Research Agency was able to find its

place in the public policy of research

very fast. Its activities, turned towards

the financing of projects, complete an

important development of the French

research landscape by converging with

the practices of our principal foreign

partners. The ANR has brought in that

context formalised peer-evaluation-

based selection processes.

Beyond the sometimes lively debates

which have surrounded its creation, the

community of researchers has mobili-

sed to respond to the ANR’s request for

proposals: Since 2005, the agency has

received 5,500 projects belonging to

some thirty requests for proposals laun-

ched, it has selected 1,462 and commit-

ted close to €540m in credits. All in all,

between 2005 and 2009, the agency was

the recipient of approximately 25,000

research projects and had financed

5,800 for a total amount exceeding

€3bn.

Programme methods to be

consolidated

The rules that govern the allocation

of aid from the ANR were inherited

from out-dated systems, can be impro-

ved and have effects that should be cor-

rected..

First, the aids, in general delivered

for three years, can prove to be too

short in certain domains such as the

human and social sciences and mathe-

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

matics, and the quite rigorous rate of

project selection could lead to the elimi-

nation

the

most

innovative

applications.

Then, the ANR acts differently in

public laboratories and private laborato-

ries, in particular because of the fact

that public laboratories have financing

derived from the Central Government's

budget for their recurring operations.

Without

challenging

the

rationale

behind the various calculation methods

used for these two categories of benefi-

ciaries, in its inquiry the Cour des

comptes has found on a test basis that

the resulting ratio of participation is

very different: approximately 25% of

total cost for a public laboratory project

compared to close to 50% for a private

laboratory in 2009.

Finally, the principal difference bet-

ween the aid granted to public and pri-

vate laboratories has to do with the fact

that the remuneration of permanent

staff is obviously excluded from the

basis of expenses eligible to receive aid

from the ANR in the case of public

entities. As a result, the agency essen-

tially provides support by financing

non-permanent staff: in 2008 it financed

over 15,000 fixed-term contracts. This

situation presupposes that ANR regu-

larly monitor what happens with such

staff and calls for contemplating a broa-

der basis of personnel expenses eligible

for aid from the ANR, regardless of

whether it has to do with financing of

partial teaching release time or bonuses

for principal investigators.

Weaknesses in terms of

finance and management

In financial, budget and accounting

matters, the audit by the Cour des

comptes drew attention to the weak-

nesses that would have to be overcome

before the ANR can provide the mana-

gement for third-parties of the €18.9bn

in growth-enhancing investments with

which it is to be entrusted.

Thus, the agency did show in its

accounts its multi-year commitments

until 2009 and for the audit by the Cour

des comptes it had to recognize a provi-

sion of more than €1bn in relation to

that. Its needs in budget payment are

calculated without taking into account

the effective calendar of the payment of

its aids: what results is a surplus of

€400m in payments from the Central

Government’s budget.

In this context, the decision to dis-

continue in three years the operations of

the support units is a gamble. Until

2009, these units accommodated by a

dozen higher education and research

institutions were managing 80% of the

requests for proposals of the agency.

The fact that this decision is not applied

under satisfactory conditions makes this

gamble all the more risky and pushes the

ANR away from the directions traced by

the legislator who wanted it to be a

more lightweight organization.

National Research Agency (ANR):

First findings and outlook

National Research Agency (ANR) :

First findings and outlook

A strategic positioning to

be clarified

Several of the systems provided for

by law were not applied. This is true par-

ticularly of the multi-annual contract

with the Central Government. The

negotiation and signing of such a

contract seem today necessary and

urgent. This contract will have to priori-

tise the objectives of the agency, among

other things, and specify the conditions

under which the planning of the agency

connects with the strategic priorities of

the Central Government.

Six years after its creation, the posi-

tioning of the aids provided by the

agency and the results obtained deser-

ved to be the subject of an evaluation

on the basis of an update of indicators

that would make it possible to assess the

efficacy and the specific efficiency of

the agency. Placing the activities of the

ANR in a multi-annual context becomes

all the more important since the 2011

Budget Bill stipulates granting it lower

amounts, thereby raising the issue of the

place finally reserved to the financing of

public policy and research projects.

With respect to strategy

Establish and sign without delay

the multi-annual contract stipulated by

the

law

between

the

Central

Government and the ANR that should

in particular clarify the objectives assi-

gned to the agency and its link to the

strategic priorities of the Central

Government and the choice of pro-

grammes giving rise to requests for

proposals ;

Building

indicators

the

impact of the activities of the agency

making it possible to measure its added

value ;

With respect to management

Control

over

the

agency’s

increase in workforce, by providing an

adequate management framework ;

Establish the annual allocations

of the ANR as payment

appropria-

tions based on a precise calendar of

the needs related to the commitments ;

With respect to the aid delivered

by the agency

Measure the ratio of actual aid

provided to public and private labora-

tories in order to substantiate the

deviations found or to absorb them;

Specify the borderline between

certain growth-enhancing investment

actions and the planning specific to

ANR ;

Ensure that the mechanism spe-

cific to the valuation of results from

public research that has received the

support of the ANR has been imple-

mented ;

Recommendations

Annual public report

Executive summaries

Annual public report

Executive summaries

Cour des comptes

Irregular migratory

movements to French

Guiana, Mayotte and

Saint-Martin

The size of irregular

migratory movements is a

major phenomenon in

French Guiana, Mayotte

and Saint-Martin

The borders of these territories are

particularly difficult to monitor because

of insularity or, for French Guiana,

because of an immense and sparsely

populated Amazon forest, as well as an

increasing attractiveness given that the

quality of life of the inhabitants of

neighbouring countries, culturally and

linguistically close, is considerably lower.

31,000 escorts back to

the border of foreigners

with irregular overseas

status in 2009

95% of these escorts were made

from Mayotte (close to two thirds),

French Guiana (approximately one

third) and from Saint-Martin. Their

number grew continuously between

2002 and 2009 and even exceeded that

reported for Metropolitan France. For

the first time in 2009, the number of

persons held in the overseas administra-

tive detention centres came close to that

of Metropolitan France, while in 2005 it

was less than one third of it.

The majo-

rity of that concerns Mayotte and

French Guiana.

The policy led has reached

its limits

These data reflect the persistent dif-

ficulties to control the irregular entries

into the territory rather than the efficacy

of the policy applied, which is for the

most part based on strengthening the

resources of the security forces.

1) The legal regime includes particu-

larities that have been reinforced by two

laws of 2006 and 2007 relative to immi-

gration and integration. The legal rights

of appeal of persons detained are more

limited than in Metropolitan France and

the deportation failures less frequent.

The exemptions from ordinary law,

based on the characteristics of the terri-

tories concerned, make it more difficult

for a judge to ascertain the regularity of

removal procedures.

2) The organisation of means to

control the irregular migratory move-

ments is not very satisfactory. In French

Guiana, the mechanisms used by police

at the borders are experiencing malfunc-

tions, because of unfortunate property

Irregular migratory movements to

French Guiana, Mayotte and

Saint-Martin

choices,

among

other

things.

Mayotte, the judicial response, in parti-

cular with respect to smugglers, has to

deal with the shortage of magistrates

and the overpopulation of the retention

centre in Majicavo. In Saint-Martin, the

action of the police at the borders suf-

fers from the dispersion of police sta-

tions

and

unsuitable

control

mechanism.

3) With respect to administrative

detention centres, deficiencies have

been found in the situation of women

and children as well as in relation to

healthcare and judicial assistance. The

professionalisation of the management

of the centres remains inadequate. The

Cayenne centre was brought up to stan-

dard in 2007, but its extension has to be

torn down before building a new one.

The Mayotte centre has been experien-

cing

recurring

overpopulation

for

almost ten years; the plan to build a new

centre announced for mid-2007 has

been postponed until June 2012.

4) General problems are poorly

resolved. The number of “repeat offen-

ders”, i.e. people who return to France

after having been escorted back to the

border, is not measured and the services

concerned have no targets in that res-

pect. The distribution of police work-

force at the borders is not rational:

French Guiana and Mayotte are unders-

taffed compared to the West Indies,

while the problems there are more

acute. In terms of air transport, the

plane specifically chartered since 2008

for French Guiana serves primarily for

internal flights, while its use is only fully

justified for direct deportations abroad.

5) The conducting of relations with

the neighbouring countries, ensured by

several ministries, seems to be poorly

coordinated. The results of a few initia-

tives taken these past few years do not

correspond to the challenges. In French

Guiana, the mixed commissions are

recent

with

Surinam

and

French

Guiana, Central Governments whose

practices are an important hindrance to

the removal of immigrants.

Regional cooperation

remains limited

In Mayotte, the negotiations started

by France in order to normalise its rela-

tions with the Union of Comoros did

not succeed. Few initiatives have been

taken to establish a true regional coope-

ration. The departmentalisation of

Mayotte, from which the Union of the

Comoros never admitted being separa-

ted, may not facilitate such a process. In

Saint-Martin,

while

the

treaty

Concordia of 1648 between France and

the Netherlands (the island, as the other

Annual public report

Executive summaries

Annual public report

Executive summaries

Periodically evaluate the advan-

tages and disadvantages of the overri-

ding legal provisions applicable to the

Overseas Territories ;

Adapt the detention centres

map; speed up the building a new

administrative detention centre in

Mayotte; supplement the social, medi-

cal and legal assistance ;

Further

professionalise

the

management of detention activities

and the deportation of immigrants

overseas ;

Systematically

measure

the

repeat offenses and set objectives in

relation to this for the departments

concerned ;

Take better account of irregular

migratory movement in the relations

with the neighbouring Governments,

notably by clarifying the distribution

of respective jurisdiction amongst the

ministries concerned.

Recommendations

Irregular migratory movements to

French Guiana, Mayotte and

Saint-Martin

Overseas Department, is not included in

the Schengen treaties), establishes free

movement between the two parts of the

island, joint control over the island’s air-

ports is still not in place. The draft

police cooperation agreement, finally

prepared, was still not signed in October

2010. The negotiation of a readmission

agreement was never seriously envisa-

ged.

Management of natural

hazards in the Overseas

Departments

The Overseas Departments are

highly exposed to natural hazards: earth-

quakes, tsunamis, cyclones, volcanic

risk, marine submersion and flooding.

The magnitude and diversity of

natural hazards have developed a “risk

culture” there, both among the popula-

tion and among the elected officials. But

its translation into practice suffers, nota-

bly at the level of the local authorities,

due to its limited human and financial

resources. As for the actions of the pur-

view of the Central Government, they

remain perfectible.

The prevention

mechanisms show several

insufficiencies

Not all risk prevention plans (plans

de prévention des risques or PPR) are

approved. Some of them are imperfect,

in particular in the West Indies: the

“swell and cyclonic tide” risk is insuffi-

ciently taken into account; micro seismic

zoning remains to be integrated, zoning

in Martinique remains ambiguous. The

approved PPRs are not always strictly

applied. The construction permit checks

are irregular. The fight against illegal

constructions is inadequate.

There is a “West Indies earthquake

plan” but it presents several deficiencies.

Its inter-ministerial features are inade-

quate. The association of local elected

officials was not planned initially. The

diversity of its objectives, without prio-

ritisation, presents a risk of dispersion.

Budget financing, of various origins,

rarely identifiable, are not subject to

multi-year

financial

planning.

The

balance of reinforcement and adapta-

tion expenditures for existing construc-

tion is mediocre. The training effort is

not sufficient to impact, within a reaso-

nable timeframe, all the players concer-

ned. The awareness raising methods

should be modernised.

Numerous Central

Government buildings,

essential in the event of

crisis, non compliant with

standards

For teaching institutions, while the

assessments have just been completed

for the most part, the works have only

started. One portion of the low-income

housing inventory is vulnerable while,

for private housing, individuals do not

have the means to request an assessment

of the vulnerability of their homes; the

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

earthquake assessment is not mandatory

when a transaction takes place.

The recognition of natural

hazards is still imperfect

The land-use planning policy still

poorly accounts for the volcanic risk.

While the population awareness rai-

sing efforts at the beginning of each

“cyclonic campaign” seem satisfactory,

the information about high-wind struc-

tural detailing is less systematic.

For flooding, the flood warning

reform,

initiated

2003

Metropolitan France, has not yet been

applied in the Overseas Departments,

the preparation of preventive action

plans for flooding is behind schedule.

The recognition of the risk of marine

submersion

often

inadequate.

Numerous actions remain to be carried

out to prevent the risk of landslides

The weaknesses of crisis

management

For the volcano logical and seismo-

logical risks, the building of the obser-

vatory in Martinique is not compliant

with earthquake-proofing standards.

The observatories are not equipped for

large scale earthquakes; the mechanism

of financing of the observatories is

uncertain, even to ensure the equipment

maintenance. The tsunami alert systems

for the Indian Ocean and especially the

Caribbean are not completely satisfac-

tory, because of the deficiencies of the

equipment.

The decrease in armed forces on

location required provision for additio-

nal human resources either on a perma-

nent or temporary basis. Several contin-

gency plans should be updated.

La réduction des moyens des forces

armées sur place nécessite de prévoir

des moyens humains supplémentaires

d’intervention, à titre permanent ou

temporaire. Plusieurs plans de secours

méritent d’être actualisés.

Feedback is generally received, but

the practical consequences to be dedu-

ced are not established precisely, and the

identification and measurement of the

costs are inadequate.

Compensation mechanism

While the application of the “natu-

ral catastrophes” treatment is limited in

scope because of the small proportion

of people insured, the implementation

of the relief fund, financed by the

Central Government’s budget, calls for a

few observations. Agricultural opera-

tions are the main beneficiaries as they

Management of natural hazards in

the Overseas Departments

Recommendations

Complete and improve the

natural hazard prevention plans, in

particular those related to earthquakes;

reinforce the fight against illegal

constructions ;

For the West Indies earthquake

plan, increase the involvement of local

authorities and contract with them;

establish multi-year planning; improve

the inter-ministerial nature of the

mechanism ;

Increase significantly the occu-

pational training effort; put in place a

control mechanism for building regu-

lations; make the earthquake vulnera-

bility assessment mandatory at the

time of real estate transactions ;

Stabilise the financing frame-

work for the volcano logical and seis-

mological observatories; clarify the

respective responsibilities of the pre-

fect and of Météo France

;

Include

the

Overseas

Departments, and as a priority those

of the West Indies, in the overhaul of

the national alert network ;

Complete

the

contingency

plans; require local authorities to esta-

blish a communal safeguard plan (plan

communal de sauvegarde or PCS);

plan “volcano” exercises in the West

Indies; improve feedback ;

Adapt

the

compensation

mechanism to motivate prevention ;

Examine the possibilities to

make the farms of the Overseas

Department eligible for the agricultu-

ral catastrophe coverage; apply rigo-

rously uniform rules for the relief

funds.

Management of natural hazards in

the Overseas Departments

Annual public report

Executive summaries

are eligible for the agricultural catas-

trophe fund.

The application of the rules as well

as their control lack rigour. Sometimes

several years pass between a catastrophe

and the full payment of aid to the local

authorities.

The

significant

compensation

expenses (€85m from 2007 to 2009)

must in fact be compared with those,

overall rather small, dedicated to pre-

vention.

Annual public report

Executive summaries

Cour des comptes

Agricultural support

policy in the Overseas

Departments

The relative weight of agriculture is,

in the four overseas departments

(Guadeloupe,

French

Guiana,

Martinique and Reunion), greater than

in Metropolitan France. While the por-

tion of the population working in agri-

culture is however of the same order as

that in Metropolitan France (3.5%), the

strong demographic growth makes agri-

cultural production an essential local

economic issue.

The agricultural sector

public support policy

raises substantial financial

aid

European agricultural aids are part

of a special European programme. Its

component concerning the ultra-peri-

pheral regions, named POSEI (pro-

gramme d’options spécifiques à l’éloi-

gnement et à l’insularité – options speci-

fic to remote areas and insularity pro-

gramme), applies to the four depart-

ments. As part of POSEI-France,

implemented in 2006, then in 2007, for

the banana sector, a double choice has

been presented: maintaining the export

crops that are “structuring” (banana and

sugar-cane-rum) and favour the diversi-

fication of products, with a view to

improving self-sufficiency. The amount

of aid paid was increased, with as an

objective the preservation of jobs in the

agricultural sector. Outside of this pro-

gramme and the European aid to rural

development, national aid has also pro-

gressed significantly, notably after the

social unrest in 2009 and the organisa-

tion of the "Overseas Convention". All

in all, the amount of agricultural aid

paid to Overseas France increased by

40% between 2008 and 2010, rising

from €370m to €520m (estimated

amount); it is favourable to the banana

and sugar cane sectors.

In relation to the control of the

Overseas agricultural economy develop-

ment office (Office de développement

de l’économie agricole d’outre-mer or

ODEADOM), which pays a portion of

that aid, the Cour des comptes has

found that that the organisation, tasked

by the rural code to carry out an assess-

ment of the agricultural aid paid in

Overseas France, was not fulfilling the

role ascribed to it. As a result, the Cour

des comptes strove to prepare the

assessment and evaluate the contribu-

Agricultural support policy in the

Overseas Departments

tion of aid for sustainable agricultural

development.

Public aid represented, in

2008, 28.6% of the value

of the Overseas

Departments’ agricultural

production, in other

words, double the propor-

tion reported in

Metropolitan France

This average covers significant diffe-

rences resulting from the concentration

of aid in the banana sector: 64.7% for

Martinique, 32.8% for Guadeloupe,

14.5% for Réunion and 8.4% for French

Guiana. The budgetary effort of the

Central Government for banana produ-

cers in the West Indies also takes other

forms: thus, the Central Government

has written off claims on the repayment

of loans, to the amount of €49.2m;

European aid repayments have also

been requested from the Central

Government by the European Union

(€88.4m).

Preserving aid to the banana sector,

while its production was declining, has

resulted in aid per ton between 2007 and

2009 doubling that recorded between

2002 and 2006.

The current aid per hec-

tare of banana plantations in the West

Indies

exceeds

€15,000,

i.e.

over

€300,000 for a 20-hectare farm. This

support did not even materialise in the

preservation of jobs, the latter having

decreased by more than 40% in the

banana plantations in the West Indies.

The priority given to export crops,

which are nevertheless not very compe-

titive on the global market, leaves only a

small portion of the aid for the other

local produce. As a result, despite the

increase in the overall amount of aid,

the supply of the population with local

products has generally diminished and

the trade balance of agricultural and

food products has deteriorated. Thus,

the coverage rate of the trade balance

for these products is of the order of

20%. The situation is even worse for

organic agriculture.

The issues raised by the

pollution related to the

treatment of banana trees

The Cour des comptes analysed the

consequences of the pollution by chlor-

decone (an insecticide still used in 1993),

both from a budget point of view and

on other produce. The Cour des

comptes would like to see the payment

of aid linked to compliance with envi-

ronmental regulations, to which the

“sustainable

banana”

plan

should

contribute.

All the findings led to questioning

the suitability of the agricultural deve-

lopment model used for these depart-

ments.

Annual public report

Executive summaries

Annual public report

Executive summaries

Redeploy the aid by favouring

the diversification of products and

processing circuits, with an objective

of reducing imports ;

Take into account the “carbon

footprint” in the economic reasoning,

with a view to favouring a more endo-

genous development of productions ;

Link the payment of aid to strict

compliance with environmental regula-

tions, and, generally, to better targeted

sustainable development objectives ;

Conduct a follow-up of the

“chordecone plan” jointly with the

ministry of health, in particular with

respect to the impact on agriculture

and aquaculture ;

Improve the integration of sec-

tors between producers and the pro-

cessing industry with a view to res-

pond to local consumption and deve-

lop advertising in favour of these sec-

tors ;

Use the real property control

tools, notably those stipulated in the

Law of 27 July 2010 for the moderni-

sation of agriculture and fishing ;

Require the ODEADOM to

prepare a report on the Overseas

Departments’ agricultural aid, as stipu-

lated by the rural code ;

Favour extending the beneficia-

ries of the special procurement treat-

ment, in particular in the animal feed

sector ;

Entrust ODEADOM with the

payment of all the POSEI and related

national aid, while reinforcing its

control over investigation and liquida-

tion, for each of the mechanisms

concerned.

Recommendations

Agricultural support policy in the

Overseas Departments

A first assessment on

outsourcing activities at

the ministry of defence

Outsourcing aims to contract out to

specialised companies tasks previously

performed internally in order to enable

the refocusing of activities on the so-

called “core business” missions and

obtain service of an equal or a higher

quality at a lower cost.

Outsourcing, a more fre-

quent practice

The ministry of defence, which

must be able to face external crisis situa-

tions, traditionally produced most of

the services it needed internally. The dis-

continuation of the draft led to a first

wave of outsourcing (for ancillary tasks

in particular). This movement accelera-

ted with the discussions related to the

ministerial reform strategy (2003), follo-

wed by the general review of public

policies (revue générale des politiques

publiques or RGPP) in 2006.

This policy takes on a particular

dimension at the ministry of defence as

it is carried simultaneously in all the

reforms which are otherwise engaged:

jointness of forces, overhaul of the ter-

ritorial establishment of the units, crea-

tion of defence bases, adaptation to the

new operational format approved follo-

wing the works of the White Paper on

defence and national security published

in 2008.

Several sectors of the ministry

which could be the subject of major

outsourcing, likely to concern numerous

jobs, have been identified.

First assessment on out-

sourcing

The Cour des comptes has exami-

ned more than ten cases, their methods,

costs and benefits.

The outsourcing carried out did not

reduce the operational capacity of the

armies but, the reality of economic

gains that such activities provide seems

difficult to assess. Important progress

remains to be accomplished by the

ministry to use outsourcing wisely and

efficiently, in particular in terms of cost

analysis and separation of the “core

business” activities.

Five conclusions may be

drawn :

1. The outsourcing of the defence

ministry continues to have limited bud-

getary impact: Approximately €1.7bn in

2008, which is a little over 4% of the

ministry’s budgetary appropriations

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

(excluding pensions). The development

of outsourcing since the beginning of

the decade is real; however, the near

doubling of the volume of expenditures

recorded between 2005 and 2008 cor-

responds for the most part to changes in

scope. The externalisation level of the

ministry is slightly lower than that

reported by the German ministry of

defence (5% of budget) and below that

reported for the United Kingdom

(25%).

2. The on-going outsourcing activi-

ties do not challenge the operational

capacity of the armies. They are even

sometimes indispensable for the accom-

plishment of missions, notably in terms

of strategic transport (92% of tonnage

transported is as part of outsourced

contracts). The armed forces must spe-

cify what “core business” is in order to

clearly determine the scope of “out-

sourceable” activities without running

the risk of facing one day operational

difficulties.

3. The outsourcing activities realized

had no material impact on the staff. The

projects identified under the RGPP

could, conversely, affect more than

16,000 positions. To ease their imple-

mentation, the ministry has requested

the inclusion in Article 43 of the Law of

3 August 2009 of provisions aimed at

facilitating the transfer of public per-

sonnel toward the service providing

businesses.

4. The participation of the SMEs in

the process, an objective made known

by the ministry, is not currently measu-

red. Moreover, it appears problematic to

reconcile this participation with the

objectives of economic streamlining,

which is more favourable to large

groups.

5. The reality of economic gains is

difficult to assess. The absence of cost

accounting makes it impossible to eva-

luate the cost of production under state-

controlled management and prevents

comparison with the cost of outsour-

cing. Progress has been made, but too

many studies do not yet distinguish bet-

ween the gains related to rationalisation

those generated by externalisation alone.

This distinction is however indispensa-

ble, particularly when the outsourcing

causes the parties to run the risk of las-

ting loss of purview.

Outsourcing activities

could lead to gains

Subject to the reservations presen-

ted, outsourcing activities could facili-

tate the reorganisations that would

otherwise be difficult to accomplish

(civil vehicles of the ministry), or deli-

cate when they relate to activities mobi-

lising sizeable personnel (security),

because of a significant difference in

terms of remuneration compared with

the private sector.

A first assessment on outsourcing

activities at the ministry of defence

Conversely, the examples analysed

call for prudence when they primarily

concern equipment: Thus, small gains

are expected at Dax (public private part-

nership for the supply of helicopters for

the school base), while surcharges are

visible in the lease, with option to pur-

chase, of the A340 of the Air Force.

Yet, in the current budget context, using

outsourcing to realise heavy and imme-

diate investments for which budget

financing is not available, at the price of

the payment of sustainable rent flows,

may be very tempting. The multiplica-

tion of outsourcing activities and part-

nership contracts for heavy operations

would contribute to reducing the budget

leeway, by rigidifying over the long-term

the operating expenditures (title 3 of the

budget). Furthermore, certain transac-

tions only offer economic advantages

due to third-party revenues whose reali-

sation is uncertain.

Also, regardless of their nature, to

be fully justified, outsourcing activities

must be based on their own merits.

Clarify the notion of

“core

business”, as well as that of “pillar”

when reference is made to them to jus-

tify the use of supplemental outsour-

cing activities ;

Develop solid preliminary cost

accounting which is essential to the

start of an outsourcing process in

order to be able to judge each project

on its own merits ;

Reinforce

the

analysis

and

management capacities of the ministry.

Recommendations

A first assessment on outsourcing

activities at the ministry of defence

Annual public report

Executive summaries

Annual public report

Executive summaries

Cour des comptes

Management of the

Rhône-Alpes ski area

Major resorts such as Val d’Isère,

Tignes, Avoriaz, Val-Thorens, Les

Ménuires, Courchevel, Méribel, Les

Arcs, La Plagne, Chamonix, medium-

altitude mountain resorts such as Les

Gets, Les Sept Laux and small resorts,

La Chapelle d’Abondance, Montricher-

Albanne/Les Karellis, Villard de Lans

made up the sample in this enquiry.

These resorts represent 80% of the tur-

nover of alpine resorts and 80% of

French winter business activity.

Multiple players

Several entities are involved in the

management

the

ski

areas:

Communes, ski lift operators under

direct or delegated state-controlled

management, tourism offices, leisure,

vacationing and well-being infrastruc-

tures,

mixed

ownership

event

organisers.

With respect to the sole manage-

ment of ski lifts, the dominant trend has

been however to delegate to private

companies, whether mixed ownership

or more frequently private companies.

In fact, the ski areas often escape the

control of local communities which

must assume wide-reaching missions

and combine several types of logic -

industrial, commercial and territorial.

Renegotiation with high

stakes

The soon to expire thirty-year

contracts, signed in application of the

Mountain Law of 9 January 1985, now

constitute a vital stake for the local com-

munities to which they were assigned.

The issue of their renewal or direct

management will be raised.

It would be in the interest of the

local communities to join forces and

face the united private operators in

order to constitute larger groups. The

local authorities, predominantly isolated,

are often weakened in their relationship

with the assignees. Thus, some of them

are unable to obtain information that

would help them to grasp the effect of

the choices made in price terms, notably

in relation to commercial innovations.

Multiple risks

A financial risk weighs on the local

communities, in a context of budget dif-

ficulties: in addition to existing agree-

ments, the local communities sometimes

are obliged to assume large scale invest-

ments, but also facilities related to event

organisation, without the assignees,

which benefit from their impact in

Management of the Rhône-Alpes

ski area

terms of guest occupancy of the sta-

tion, contributing to their financing.

At the same time, the resorts must

deal with the development of both sum-

mer and winter practices and respond to

a demand further directed toward vaca-

tioning and leisure, inducing new

expenses in addition to the special

charges for personnel and equipment

related to the traditional activity.

Environmental risks must also be

taken into consideration, notably for the

new amenities whose integration into

the landscape becomes a requirement.

There is also the issue of using

machine-made snow.

Finally, local communities must

manage a social risk, closely related to

their capacity to offer local employment

to the population, predominantly in the

area of tourism. A delegated manage-

ment of their ski areas consequently

limits their ability to influence local

employment.

Invest to remain competitive,

measure the financial risk of commit-

ments and carry out a comparative

analysis to select the best management

method (direct or delegated) of the

amenity depending on financial capa-

city ;

Unite by joining forces with the

local communities managing neigh-

bouring ski areas, to reach a balance

with respect to potential vendors,

many of whom are already grouped

together ;

Implement

multi-annual

investment plan ;

Provide, in the contracts with

the assignees, an incentive clause gua-

ranteeing to the assignees a benefit in

continuing the modernisation of

equipment, even in the last years of a

contract ;

Establish specific inventories

through joint surveys of the goods

allocated to operations, by separating

the goods that would be returned for

free to the local community at the end

of the contract and those that may be

taken over by the latter ;

While aiming to satisfy the

needs of users and building up the

loyalty of the customer base, interes-

ted both in authenticity and relaxation,

show prudence before starting costly

diversifications of activities, be they

winter or summer activities ;

Fully integrate the environmen-

tal concerns, and, generally, those of

sustainable development, in the prepa-

ration of projects and making of deci-

sions.

Recommendations

Annual public report

Executive summaries

Annual public report

Executive summaries

Cour des comptes

Territorial continuity

with Corsica

Since 1976, the territorial continuity

with Corsica principle has made it possi-

ble to reduce the constraints of insula-

rity.

The bodies involved

Since 1991, the territorial commu-

nity of Corsica (collectivité territoriale

de Corse or CTC) has replaced the

Central Government in defining the

public service obligations (obligations

de service public or OSP) on service

lines of its choice. Via its Corsican

transport office (office des transports de

la Corse or OTC), it signs agreements

with each of the companies that provide

public air or maritime transport.

An allocation known as territorial

continuity allocation (dotation de conti-

nuité territoriale or DCT) of a current

amount of €187m is allocated every year

by the Central Government to the CTC

which retrocedes it to OTC. The latter

then distributes it among each mode of

transport in order to finance obligations

made to carriers to ensure regular high-

quality service while applying lower

fares for certain categories of passen-

gers, including residents of Corsica.

Two mechanisms may then exist: the

delegation of public service or social

aid.

The global economy of the

principle of territorial

continuity experienced

significant transformations

between 2001 and 2009

The total number of passengers that

entered and exited Corsica on air or

maritime routes under the OSP increa-

sed by 30%, from 4m to 5.2 million.

This increase was for the most part

concentrated in the maritime routes bet-

ween Corsica and Toulon managed

under the “social aid” system, as a result

of which the OTC has to repay a lump

sum per passenger entitled to a reduced

fare.

The expenses in favour of

contracting companies

increased sharply

They exceed the amount of the

DCT paid by the Central Government,

the financial reserves of the OTC,

which totalled more than €40m in 2001,

are now exhausted.

Several reasons explain these finan-

cing issues aggravated by the freeze of

the DCT, which has not seen an increase

since 2009 :

- The significant increase in the

compensation per air passenger in 2003,

Territorial continuity with Corsica

which made it possible to restore the

financial balance of CCM, a mixed

ownership company of CTC ;

-the increase in “social” aid paid per

maritime passenger, directly related to

that of the number of passengers trans-

ported under this system ;

-the increase in compensation allo-

cated to the assignee maritime compa-

nies kept on routes serving Marseille,

despite a relatively sizeable drop in the

number of passengers transported on

the assigned lines ;

-the decrease in low-income fares,

the impact of which was not measured

with respect to the global economy of

the principle.

Management failures

The CTC, an organising authority,

was incapable of adapting the agree-

ments regarding, or contents of, the

public service obligations to the deve-

lopments of traffic or anticipating the

financial consequences.

The reports of the carriers, often

too succinct, were not properly used and

the number of passengers receiving fare

reductions is not precisely known.

The specifications of the successive

contracts during this period and the

negotiations which preceded their

signing did not sufficiently take into

account the developments that were

however perceptible for several years.

The management of delegation

contracts, notably their preparation and

signing, did not make it possible to opti-

mally apply the rules of competition

either.

At the end, due to lack of motiva-

tion and the absence of evaluation ins-

truments, the CTC did not prepare the

strategic decisions necessary to develop

a system that had been showing signs of

exhaustion for several years.

Clearly define the role of the

transports office in the design and

management of territorial continuity,

both maritime and air, and implement

a true supervision of the establish-

ment ;

Reinforce the controls of the

implementation and execution of the

OSPs by the companies ;

Implement evaluation tools nee-

ded for a global and objective debate

on this topic ;

Favour conditions of competi-

tion through greater anticipation of

the launch of public utility contract

awards.

Recommendations

Annual public report

Executive summaries

Annual public report

Executive summaries

Cour des comptes

Government workers at

the Ministry of

equipment and civil

aviation

Out of the 8,000 govern-

ment workers at the

ministry, 2,200 were

recruited without legal

basis

In 2009, out of 46,300 government

workers on active duty at the Central

Government’s

administrations,

the

Ministry of equipment and civil aviation

employed 8,000 including fleet and

workshop workers (7,200) and civil avia-

tion workers (800).

Close to 5,000 workers are in fact

assigned to equipment fleets and works-

hops, notably for the operation and

maintenance of roads and for the main-

tenance

vehicles

and

aircraft.

Following the 2004 decentralisation

laws, these employees have been, since

2010, transferred to the local communi-

ties, under conditions that reflect a cer-

tain lack of preparedness.

The other 2,200 workers theoreti-

cally assigned to fleets and workshops

were in actuality employed by other

departments under irregular terms.

The roughly 800 workers reporting

to the general directorate of civil avia-

tion are, for their part, divided into 42

occupational families within which they

hold positions that are very diverse

(logistics operator, driver, painter, IT

specialist, warehouse keeper, AC specia-

list, photographer, etc.) which, in the

other public service areas, are for the

most part held by permanent or

contract public employees.

These government wor-

kers enjoy the great

advantage of practically

being civil servants

The advantages of holding a non-

incumbent position within the civil ser-

vice are multiple, in terms of recruit-

ment, promotion and remuneration.

Moreover, these workers are enrolled in

a special retirement plan which provides

them with pensions 30% higher on ave-

rage compared to that paid to perma-

nent public employees holding compa-

rable positions.

The management of these

government workers pre-

sents numerous irregulari-

ties of a serious nature

For several years, promotions have

been awarded in an abusive manner,

without cost control and in breach of

the rules of balance of the pyramid of a

Government workers at the Ministry

of equipment and civil aviation

hierarchical

organisation

structure.

Moreover, for the fleet and workshops

workers, promotions from journeyman

to master journeyman are awarded in

the year prior to retirement, while this

practice is explicitly barred by law.

Practically all the compo-

nents in the remuneration

of civil aviation workers

must be reviewed without

delay

In fact, fictitious overtime is concea-

led in the basic salary of civil aviation

workers, irregularly increasing their total

pay (by up to 400 Euros per year). This

disguised system has cost the Central

Government €3.6m since its implemen-

tation in 2002.

In the civil aviation services, mana-

ging two workers is sufficient to be

named team leader and as a result obtain

a salary increase of 20%, without regu-

latory basis for such increase. The Cour

des comptes also found several irregular

supplemental remuneration compo-

nents granted to those employees, as

well as an overtime rate unduly paid at

35% extra, before any legal increase.

The civil aviation services were una-

ble to report the average salary cost per

pay grade for their workers.

These practices are at the

root of a major financial

abuse

Between 2006 and 2009, the payroll

of the fleet and workshop workers

remained unchanged with the workforce

decreasing by 11% and that of the pay-

roll of the civil aviation workers rose by

29% with the workforce decreasing by

4%.

The human resource management

of these employees is seriously deficient

and benefits are awarded with no

employee evaluation whatsoever and

without seeking any productivity.

Annual public report

Executive summaries

Annual public report

Executive summaries

Government workers at the Ministry

of equipment and civil aviation

Recommendations

Put an end to any recruitment

of government workers in the depart-

ments of the ministry of equipment

and civil aviation ;

Identify, within the HRD of

the ministry, a single department in

charge of the management of the

government workers, regardless of

their posting ;

Review the entire system of

bonuses, allowances, and overtime pay

applicable to this category employees,

on the one hand discontinuing those

that seem exorbitant, and on the other,

giving to those that may be kept a

regular legal basis ;

Discontinue the practice of the

so-called ‘tip of the hat’ (known in

French as coup de chapeau) promo-

tions before retirement given to boost

pension income and redefine the pyra-

mid structure of the various categories

of Government workers, by applica-

tion of promotion quotas negotiated

with the budget department ;

Regularise the situation of the

some 30% of the workers who are not

assigned to a fleet or workshop ;

Reform the IT, management

and pay system of the DGAC to dis-

continue any irregular practice and so

that that department may be in a posi-

tion, as soon as possible, to produce

reliable data in terms of the manage-

ment of its workers ;

Reorganise the management of

human resources of the directorate

general of civil aviation in order to

make it more accurate and put an end

to the practice of secret payments for

fictitious overtime.

Cour des comptes

The “one-quarter fare”

of military servicemen

Military railway travel is at the

source

the

highest

Central

Government contribution to French

National Railways (SNCF) (€192.4m in

2009) which has been experiencing the

most dynamic growth for around ten

years (+34.5%).

The “one-quarter fare”: a

relic from the first railway

concessions

Since the 19th century, a 75% fare

discount, known as “one-quarter fare”

has been given to the military service-

men for their railway business or perso-

nal travel. This fare has been offset by

the Central Government’s budget since

1949, in accordance with the methods

currently set in a framework agreement

and an agreement signed in 2006 and

2007 by and between the Central

Government and SNCF.

Military servicemen are entitled to

this fare discount and to the public

financing of their personal travel as a

benefit that is incidental to their status:

they see it as a compensation for the

special constraints related to military

life, which requires significant mobility

for work and, often, being away from

the family home.

Uncontrolled increase of

expenditures

Whilst the charges approved for

this purpose were rapidly growing, the

Ministry of defence did not find the

means to control their increase or to

efficiently prevent fraud, which was pro-

bably under-valued. Travel passes are

still printed on paper; blank passes sto-

red on the units’ premises are a potential

source of distribution of counterfeit

passes; some military personnel do not

return their passes when leaving the

army.

Moreover, the information on the

variables related to the travel passes and

to the Central Government's offsetting

of this charge - number of passes,

actual headcount, amount of expense -

is compartmentalised, and internal

control remains inadequate. The imple-

mentation of monitoring tools relative

to the issuance of travel passes is so

recent that their inventory did not

become reliable until 2009. No systema-

tic comparison between the number of

military personnel in active duty and the

number of travel passes currently valid

is possible. The ministry of defence

does not know the exact number of

military personnel authorised to have a

travel pass; it cannot therefore compare

that number to that of currently valid

passes. Furthermore, the clauses of the

Annual public report

Executive summaries

Annual public report

Executive summaries

agreement authorizing the Central

Government to carry out checks on the

production of the SNCF electronic data

included in the calculation of the charge

to be offset have gone unheeded.

Too many beneficiaries

The field of the “one-quarter fare”

beneficiaries is large as it includes all

military servicemen in active duty as

defined by their statute. This situation

concerns not only the military service-

men holding positions with the ministry

defence

and

the

national

Gendarmerie, but also those assigned to

other government administrations or

public institutions, or even private com-

panies. It also concerns the generals of

the so-called “2nd section” who, having

claimed

their

retirement

benefits,

remain available to the ministry of

defence and, as such receive active duty

pay and are entitled to a travel pass for

life.

One could wonder whether exten-

ding the scope is pertinent: the ministry

of defence finances the business and

personal travel of military servicemen

assigned outside of its departments, in

relation to which results a transfer of

charges that cannot be quantified with

various public or private operators. In

principle, intended to compensate for

the constraints of military life, the “one-

quarter fare” in actuality also benefits

people who are not subjected thereto.

The necessary reform of

the “one-quarter fare"

The ministry of defence, now aware

of the need to reform the system, plans

to modernise the form of the travel pass

(smart card). This would make it possi-

ble to remotely disable the travel passes

of officers that have severed their links

with the army.

Being able to differentiate between

army and personal reasons for travel is

important. This objective could already

be reached if the Home and Defence

ministries issued a preliminary travel

order for any travel of the military ser-

vicemen on army business. The use of a

travel pass being thus, de facto, reserved

for personal travel, it would then be pos-

sible to know the value of the benefit-

in-kind granted. At that point, nothing

would hinder any longer the re-examina-

tion of the basis for the exemption from

social and tax withholding of this bene-

fit-in-kind, whose overriding nature had

been underscored by the Cour des

comptes in 2009.

The “one-quarter fare” is moreover

part of an uncertain environment: The

opening up of international railways to

competition may lead, in the future, to

challenging the legality of its being off-

set by the Central Government.

The “one-quarter fare” of

military servicemen

Annual public report

Executive summaries

Recommendations

Systematically re-examine the

field of beneficiaries of travel passes,

in order to reserve its award to military

servicemen

experiencing

specific

constraints ;

Re-examine the basis of the

default of valuation of the benefit-in-

kind consisting of the “one-quarter

fare” for travel of a personal nature,

together with the ministries of budget

and civil service, with a view to

including it in the basis for social secu-

rity and tax withholdings ;

Continue the modernisation of

travel passes which has already been

started and improve internal control.

Further, the ministry of defence

must examine the pertinence of

preserving the “one-quarter fare”

system.

The “one-quarter fare” of

military servicemen

Annual public report

Executive summaries

Cour des comptes

Particularities of the

remuneration of

military reserves

A difficult-to-justify tax

exemption

Remunerations paid to reservists are

exempt from tax on income. The tax

exemption for military reservists affec-

ted, in 2008, more than 60,000 persons

(including the gendarmerie), for a tax

expenditure of €6.4m. To justify this

exemption, it is no longer possible to

claim the need to compensate the obli-

gation to participate in long compulsory

instruction periods since this obligation

ended with the Law of 22 October

1999. Moreover, the remuneration of

reservists cannot be treated as a pay-

ment for expenses eligible for an

exemption.

Maintaining the salary of

public employee-reservists

Public employees who are absent in

order to participate in activities of the

military reserve still receive their salaries

for up to thirty days per calendar year.

This benefit increases the cost of

the reserve by several million Euros and

certainly explains the overrepresenta-

tion of public employees in the military

reserve.

Revisit this exemption, which

runs counter to the principle of tax

equity between active duty and

military reserve ;

Reconsider

the

advantage

granted to public employees and not

to reservists in private employ.

Recommendations

Annual public report

Executive summaries

Cour des comptes

SOVAFIM: An operator

with no real usefulness

SOVAFIM, a real estate manage-

ment company (société de valorisation

foncière et immobilière) is a société ano-

nyme whose capital is wholly-held by

the State. It was created in 2006 in order

to speed up the sales of the real estate of

Réseau Ferré de France and to generate

from these transactions capital gains

intended to be up-streamed to the

Central Government’s budget in the

form of dividends. SOVAFIM was des-

igned on the basis of a short-term pro-

ject and without clear prospects. Its

foremost mission was to bring to the

Central Government €350m in budget

revenues in 2006 and the same amount

in 2007.

No other transfer of goods from

the RFF having occurred since, the

legislator broadened the field of applica-

tion of SOVAFIM several times, with

the scope to extend its mission to the

valuation of real property belonging to

the Central Government and its public

establishments. However, between 2007

and 2009, the activity of SOVAFIM

resulting from these provisions was

limited to three one-off transactions,

carried out at the Central Government’s

request.

The ambitions of the senior mana-

gers of the company, who had intended

to make it a real estate operator likely to

invest €1bn in five years, have led to

nothing. An autonomous development

project was challenged because of the

lack of recapitalisation by the Central

Government shareholder. The transfers

of real property for SOVAFIM, limited

in number, did not offer it real develop-

ment prospects.

The business of SOVAFIM became

very limited (€4.5m in turnover in 2009)

and therefore not very profitable, return

on equity (1% in 2009) no longer paying

for the risk of the business. Its depen-

dence on the decisions of Central

Government, which determine its level

of activities, limits its leeway de facto it

has become nothing more than a divi-

sion of the administration. Having after

all as its sole customer and contact the

Central Government itself, this com-

pany, whose financial area is too narrow

to enable it to acquire a material portfo-

lio of goods to manage and which sub-

contracts the majority of its sales acti-

vity to brokers, is an intermediary struc-

ture without a customer and without a

long-term project.

Discontinue the existence of this company with no actual usefulness.

recommendation

Annual public report

Executive summaries

Cour des comptes

Paris Habitat’s

new headquarters

Paris Habitat, France’s largest public

housing authority (more than 117,000

housing units) was based in the fifth

arrondissement of Paris (Cardinal

Lemoine Street). But the building being

too small to accommodate all the staff,

several directorates had to be housed in

rented premises.

The board of directors, having

resolved to have all staff members work

on one site, decided to sell this building

in December 2003 to acquire one which

used to be the headquarters of Le

Monde, the French national daily. The

building, also located in the 5th arron-

dissement (Claude Bernard Street) in a

condominium, could however not

house all of IT activities.

Rampant costs and

delayed execution due to

poor project monitoring

The cost of the project rose from

€90m to €139.4m between the initial

plan submitted to the board of directors

in March 2004 and the May 2008 esti-

mate produced one month before Paris

Habitat actually moved into the new

headquarters, which also meant delayed

execution: four and a half years instead

of two years as initially planned.

Drifting costs and failure to meet

deadlines can be ascribed to poor pro-

ject monitoring which implied many

changes that could have otherwise been

anticipated. In this respect, wavering

implementation in the removal of

asbestos removal from the building pro-

vides a good example.

Unsatisfactory building

performance with respect

to sustainable develop-

ment

After one year in use, despite Paris

Habitat’s ouspoken commitment to the

goals of sustainable development, the

performance of the new building star-

ted causing concern as electricity and

heating costs almost doubled by compa-

rison to the three previous sites.

The results of long-term

total-cost approach

Paris Habitat’s top management

insists that, in view of the expenses

avoided by leaving the former premises,

the “net” cost of the project should

range

between

€29m

and

€34m.

According to the assessment produced

by the chambre régionale des comptes,

which is based on the total cost of the

Paris Habitat’s

new headquarters

new headquarters over 40 years, the

“net” cost amounts to €55m, the equiva-

lent of the cost of 240 council flats.

An estimated imputed rent calcula-

ted on the whole operation, so as to

make comparisons possible with the

actual rents that a real-estate promoter

could charge, has displayed figures

above the highest rents in the 5th arron-

dissement and equalling those of the

most expensive Paris areas for office

building leasing.

For a project of this size, it is regret-

table that such a large organisation,

whose trade is building and administe-

ring housing units did not, from the very

beginning, take up the option based on

long-term total-cost approach. For ins-

tance, several options could have been

assessed and the requirements related to

sustainable development could have

been appropriately met. But as Paris

Habitat concedes, the implementation

of this approach remains crucial to best

monitor and curb expenditures for the

whole period of use of the building.

the

conduct

major

projects, the approach based on

long-term total cost should be taken

from the outset. On the basis of

long-term total-cost approach, the

available options can be assessed and

the

requirements

associated

sustainable

development

can

appropriately met with.

The same approach should be

taken during the whole period of use

of real property to better monitor and

control costs in the interest of both

public money and environment..

Recommendations

Annual public report

Executive summaries

Annual public report

Executive summaries

Cour des comptes

Exemptions of

allowances paid to sports

referees and judges:

An ill-adapted tool

The Law of 23 October 2006 speci-

fied the legal treatment of 196,000

sports referees and judges and defined

the terms of tax and social security

exemption for the allowances that are

paid to them. It stipulates that their allo-

wances are exempt from payroll taxes –

employer and employee – for up to 14.5

% of the annual ceiling of social secu-

rity, i.e. €5,020 in 2010. They are exempt

from tax on income if their annual

amount is below that ceiling.

An unreliable declaration

system

The declaration system selected by

the law presents clear limitations. At the

tax level, referees themselves – and not

the organisations that pay them (sports

clubs, sport federations, competition

organisers) are indeed responsible for

declaring any allowances that exceed the

legal ceiling. In terms of social security

contributions, sports federations and

professional leagues must theoretically

declare the allowances paid: however,

the referees are not required to notify

them until after they have exceeded that

ceiling, and they only submit upon

request the forms on which they have to

list all of the sums received. In practice,

this declaration system depends there-

fore on the quality, the frequency and

completeness of the information sub-

mitted by the referees: the sports federa-

tions and the professional leagues are

not in a position to ensure at any time

the proper application of the exemption

provisions, contrary to their responsibi-

lity which is defined by the law.

In addition, diverging interpreta-

tions appear in the application of these

provisions. Thus, while the tax exemp-

tion should only concern remuneration

amounts below the ceiling, certain fede-

rations - such as the French Football

Federation - interpret in an unorthodox

manner the provisions of the Law of 23

October 2006 by also granting this

exemption to referees whose allowances

are over €5,020 per year.

A poorly monitored

system

Any attempt to quantify the fiscal

and social cost of the system is fraught

with uncertainty, not only because of

the declarative nature of the allowances

received, but also because of the lack of

awareness of the exact number of refe-

Exemptions of allowances paid to

sports referees and judges :

An ill-adapted tool

rees and their status (professional or

volunteer, full time or part time). Under

these circumstances, the assumptions

made by the administration to quantify

these tax and social expenditures are not

uniform. All in all, the overall cost quan-

tification differences for this system –

between €37.5m and €134m according

to the assumptions applied by the

various

departments

and

agencies

concerned – shows defective monito-

ring and the resultant inability of

Central Government to ascertain the

impact of these exemption measures.

And yet, the cost of the exemptions

granted to the referees represents,

according to the assessments, between

15% and 54% of the “Sport” budget

programme

(whose

appropriations

totalled €246.7m in 2010).

No efficacy measurement

It is difficult to establish a direct link

between the change in the number of

referees and these exemption measures.

In fact, while the overall cost of this sys-

tem is high - regardless of the figures

used - the pecuniary benefit it provides

individually to each referee is limited

and could not represent alone sufficient

incitement to explain a notable increase

in the number of people wishing to

become referees. Furthermore, an

important portion of amateur referees

is not affected by these exemption mea-

sures: the volunteer portion which by

design, is not concerned by it, is estima-

ted by the AFCAM at 40% of the body

of referees, i.e. approximately 78,000

referees in 2010.

In the end, the Law of 23 October

2006 clarified the status of the sports

referees and judges. However, the

absence of a clearly defined objective

for these exemption measures is cou-

pled with absence of management and

evaluation of the system by the sports

department.

fact,

the

Central

Government places with the sports

federations the responsibility to manage

the terms of the remuneration of the

referees: the implementation of an

exemption system under the Law of 23

October 2006 was not accompanied by

any analysis of the allowance system of

the referees.

Under these circumstances, the

social security and tax exemption sys-

tems created by the Law of 23 October

2006 are not in a clear and consistent

manner part of the implementation

policy of the Central Government in

the sports area: none of the objectives

set by the “sport” budget make it possi-

ble to consider that a portion of the

allowance of the sports referees and

judges should be financed by the budget

of the Central Government and by the

general social security system.

Annual public report

Executive summaries

Annual public report

Executive summaries

The Cour des comptes unders-

cores the essential role played by the

referees in the teaching and organisa-

tion of sport activities, as well as the

considerable difficulties encountered

in the performance of their duties. It

notes however that the situations with

which they are faced are very dissimi-

lar and should call for different solu-

tions.

Under these circumstances, the

fundamental ill-adaptation of this

generalized exemption system leads

the Cour des comptes, considering the

disproportionate size of its overall

cost compared to the budgetary

appropriations of the “Sport” pro-

gramme, to recommend it be disconti-

nued.

Recommendations

Exemptions of allowances paid to

sports referees and judges:

An ill-adapted tool

Cour des comptes

The national museum of

sport : A poorly

monitored project

The museum of sport, a simple

department of the ministry of sports

since its creation in 1963, was only

transformed into a public administrative

institution in March 2006.

Despite having close to 600,000

objects and documents that form one of

the largest collections in the world on

the history of sports, this museum

remains not very well known and not

often visited. At the completion of its

audit, the Cour des comptes established

three findings which explain this

paradox :

Late and muddled institu-

tionalisation

The transformation of the museum

into a public institution was labour-

intensive. One year was needed for the

new institution to acquire a board of

directors and operational accounting.

During that time, the manager of the

museum turned to a private company,

with which he had signed an agreement

in March 2005, to organise travelling

exhibitions and recruit representatives,

while it did not have the signature

authority to do so.

The departments of the ministry of

sport did not exercise their oversight

responsibility in an adequate manner.

While a general audit report showed

irregularities as early as October 2006,

the agreement was not terminated until

August 2007, at the request, not of the

ministerial departments, but of the

financial auditor.

No permanent site

The national museum of sport

never had a permanent site. In 1979, this

“virtual museum” was housed, tempora-

rily, within Parc des Princes, but not

until 1988 were “national galleries” of

the museum inaugurated, which made it

possible to have a permanent exhibition

open

the

public

until

1997.

Nevertheless, the preparation for the

Football World Cup in 1998 had as a

consequence a squeezing of the pre-

mises of the museum and the closure of

its exhibit halls. Several museum site

projects were then envisaged.

An unclear strategy for

the collections

As a result, since July 2008, the

museum has only been able to display

350 objects on the premises, named

"showcases", located on the ground

floor of a building rented by the minis-

try. This presentation only attracts a

limited audience (on average, less than

50 visitors per day). Numerous difficul-

ties and notable surcharges affected this

site.

Annual public report

Executive summaries

Annual public report

Executive summaries

While it should have been comple-

ted in early 2006, the “showcase” was

not ready until June 2008.

The initial

budget (€3.5m) was considerably excee-

ded (by €4.4m). At the end, the presen-

tation of each of the 350 objects on dis-

play cost more than 12,000 Euros.

The future use of the “showcase”

remains uncertain. The ministry has

mentioned a project of a museum site in

Nice, within the “Cité nationale des

sports”. A memorandum of understan-

ding was signed in May 2010 with the

city of Nice, but that memorandum

does not address the question of the

cost of the “showcase” whose financing

was supported by the ministry for what

was to be a temporary use.

One last difficulty concerns the col-

lections of the museum. They indeed

represent the history of all the sport dis-

ciplines, shown through competitions,

leisure practices and the place of the

sport phenomena in society. This direc-

tion explains the presence of objects

that are sometimes unique, such as an

advertising Tour de France truck, or

repetitive, such as numerous jerseys and

accessories signed by champions. The

extent of these collections requires the

definition of an acquisition strategy.

First steps forward

Many years were needed however

for the museum to start defining a cultu-

ral and scientific project, which was not

approved by the board of directors until

November 2010.

The current management of the

national museum of sport is now trying

to overcome the deficiencies of the past

decade.

The performance agreement

signed in February 2010 with the minis-

try of sport, the memorandum of

understanding signed in relation to the

site at Nice or the preparation of a

scientific and cultural project all testify

to this. All of these steps have neverthe-

less yet to materialise: failing that, calling

into question the future of this museum

will be inevitable.

The national museum of sport :

A poorly monitored project

Find the appropriate solution

to reduce the very high costs that the

ministry of sport has committed in the

“showcase”

which

represents

casual installation that has lost its

purpose considering the prospect

museum

site

Nice

;

The failure of the announced

advances to materialise immediately

calls into question the future of the

museum..

Recommendations

Implementation of the

recommendations of the

financial courts

Executive summaries

of volume 2

_______________________________

(1)Office national de l’eau et des milieux aquatiques – National office of water and aquatic

environment

Cour des comptes

Public water and sanita-

tion services:

Encouraging

developments

In its thematic report of 2003 dedi-

cated to the management of public

water and sanitation, the Cour des

comptes had recommended an inter-

communal management, in order to

strengthen the economies of scale,

financial transparency and the manage-

ment of these services. Seven years

later, despite the noted progress, impor-

tant streamlining efforts remain to be

accomplished.

Implementation of the

recommendations of the

Cour des comptes: the

advances initiated by

Central Government and

Parliament

Among these advances, the Decree

of 14 March 2005 has standardised the

presentation and the content of the

annual

operating

income

account

(compte annuel de résultat de l'exploita-

tion or CARE). The law of 30

December 2006 on water and the aqua-

tic environment for its part has made

budget planning and management

easier. The obligations of the assignee

were also strengthened, notably in rela-

tion to the renewal of facilities. Finally,

the law created a system of information

about the public water and sanitation

services (système d’information sur les

services publics d’eau et d’assainisse-

ment or SISPEA).

The efforts of the territo-

rial communities

The efforts engaged to improve the

management of water and sanitation

services can be seen in the development

of expert capacities. They make possible

a greater transparency in the choice of

the management method, a decrease in

the length of delegation contracts, faster

return to competition as well as inclu-

sion of contractual clauses allowing real

control over the performance condi-

tions.

Advances yet to be made:

excessive number of ser-

vices

Deficiency remains, notably in

terms of costs, due to the excessively

high number of water and sanitation

Annual public report

Executive summaries

Public water and sanitation services

: Encouraging developments

Annual public report

Executive summaries

services. According to ONEMA (1);

France totals 35,000 of these services, a

number unmatched in Europe. The laws

adopted since 2003 to favour their com-

bination did not modify the territorial

grid pattern. This excess creates difficul-

ties for funding SISPEA, its reliability

and completeness criteria being rather

incompatible with the current fragmen-

tation of structures.

A necessary rebalancing

of the relationships bet-

ween local authorities and

the assignees

Due to the poor knowledge of the

networks, the local authorities do not

have true control over the renegotiation

of contracts, which explain the low rate

of operator changes.

Likewise, the financial reports of

the assignee, often short and incom-

plete, do not allow for a comparison

between actual and estimated results.

The water and sanitation syndicates and

smaller authorities were traditionally

supported by the Central Government

services in terms of public engineering,

but these services are slated for com-

plete discontinuation by 2011.

In conclusion, only a drastic reduc-

tion in the number of structures and the

pooling of resources and skills will

make it possible to improve manage-

ment and rebalance the relationship bet-

ween the local authorities and the public

service assignees.

Make the opening of their own

cash accounts mandatory for all public

service contract holders(délégation de

service public or DSP) ;

Authorise the investment of

surpluses by applying the provisions of

Article L.2224-11-1 of the CGCT ;

Implement efficiently the new

accounting standards from instruction

M49 applicable to water and sanitation

services ;

Determine by regulatory means

the content and presentation of the

CARE contractor, to render it compa-

rable to the estimated operating

account appended to the contract ;

Postpone until 30 September

the presentation of the annual report

on the price and quality of the service,

in order to enable the organising

authority to prepare an expert opinion

based on the information provided by

the contract holder ;

In order to have a database on

water pertinent for the entire territory

of France, improve the operations of

the information system for the public

services of water and sanitation by

establishing a requirement to submit

all the performance indicators for the

public services with the greatest

weight nationally.

Recommendations

Cour des comptes

Agencies receiving

charitable funding

The mission entrusted

with the Cour des

comptes by the legislator

The legislator wanted, in 1991, for

the Cour des comptes to be able to

“audit the account of uses of funds

received from the public as part of cam-

paigns conducted on a national scale [...]

in order to check the compliance of

expenditures [...] with the objectives

pursued in the charitable funding recei-

ved.”

From its initial inquiries, the Cour

des comptes did not stop at the simple

accounting audit of the account of

sources and uses of funds. It considered

that examining the actions conducted

and their management and the proce-

dures implemented and management

methods used was part of its mission.

Checking the compliance of expendi-

tures incurred with the objectives pur-

sued by the campaigns presumes, in fact,

checking, from the initial phases, the

information provided to potential

donors on the use that will be made of

the funds collected, and, in the final

stages, of the nature, performance

methods and results of the actions

financed.

The Cour des comptes was also

determined to report on its audit to the

donors by systematically publishing the

findings of its investigations.

Recommendations with

widely successful conse-

quences

Since 2004, the Cour des comptes

has conducted various types of inquiries

to monitor the implementation of its

recommendations:

1. New comprehensive controls

(three cases): two out of the three

reports published between 2004 and

2007 noted considerable changes or

material improvements ;

2. Targeted follow-up inquiries (five

cases): the reports published in June and

September 2009 showed that the asso-

ciations audited had largely taken into

account the recommendations of the

Cour des comptes, with the notable

exception of the Animal protection

society (Société protectrice des animaux

or SPA). The official receiver of the

SPA, appointed as a result of the audit,

reports on the work conducted in this

report ;

3. An audit of the uses of the remai-

ning balance of the funds collected allo-

cated to the victims of the tsunami of

26 December 2004: out of the 29 agen-

cies that were reviewed again in 2009, 19

had their 2006-2008 “tsunami” expendi-

Annual public report

Executive summaries

Annual public report

Executive summaries

tures declared compliant with the pur-

pose of the collection, without qualifi-

cations

The Cour des comptes has thus

found that the implementation of its

recommendation has been largely suc-

cessful.

It also used its latest publication to

issue a reminder that, in the event of an

allocated collectio : :

- All donations received must, until

exhausted, be treated in the books as

dedicated funds ;

- they must be used in accordance

with what was announced to the poten-

tial donor, therefore – unless expressly

otherwise stated in the call for funds-

exclusively for the social mission ;

- if the funds are kept for a suffi-

ciently long time by the agency so that

their investment could generate interest

income, such income must benefit the

actions, under the same conditions as

the donations originating from the

collection.

Broadening the purview of

the Cour des comptes

Article 20 of the Supplementary

Budget Act of 30 December 2009 pro-

vided for two innovations :

1. It broadened the purview of the

Cour des comptes to include auditing

the compliance with the objectives of

the organisations receiving charitable

funding entitling them to a tax benefit

and the expenses financed by such

donations, when the annual amount of

the latter exceeds €153,000 ;

It introduced the possibility to

impose a sanction: when it receives

from the Cour des compte a declaration

of non-compliance, the minister for the

budget may now “suspend any tax bene-

fit for donations, bequests and pay-

ments made in favour of the agency

referred to in the declaration”.

In terms of charitable donations,

the Cour des comptes has always had as

an objective to audit the respect of the

wishes of the donor, and it has conside-

red the donor – or potential donor – as

the foremost intended recipient of the

works of the Court. It will continue to

have this same concern in the perfor-

mance of its broadened mission that the

law has recently entrusted therewith

with respect to agencies receiving dona-

tions entitling them to a tax benefit.

Agencies receiving charitable

funding

The “decrystallisation”

of pensions of nationals

of territories previously

under French sovereign

rule

Pensions whose amount

has remained unchanged

In 2010 the Cour des comptes had

found that the pensions paid to veterans

from the territories formerly under

French sovereign control had remained

unchanged, both in terms of amount

and in terms of legal form, as at the date

of these territories becoming indepen-

dent. This de facto situation, overriding

the ordinary law applicable to pensions,

was at the source of persistent inequa-

lity of treatment, between French natio-

nals and foreigners on the one hand

and, on the other hand, between the

various nationalities concerned. As a

result, the Cour des comptes had

recommended an overall alignment of

the “crystallized” treatment regardless

of whether it affected disability pen-

sions or civil or military service retire-

ment pensions with the French ordinary

law treatment.

Alignment with ordinary

law

Following the decision of the

Constitutional Council of 28 May 2010

on the first priority question of the

constitutionality that was raised before it

and the adoption of Article 211 of the

Budget Act for 2011, followed by

Decree 2010-1961 of 30 December

2010, this recommendation was taken

into account.

As from 1 January 2011, all military

disability pensions, civil and military ser-

vice retirement pensions and veteran

retirement pensions paid to nationals of

countries or territories that were once

part of the French Union or of the

Community or placed under the protec-

torate or oversight of France, are calcu-

lated based on the ordinary law treat-

ment.

The Cour des comptes will ensure

the proper implementation of the new

law, notably by informing the potential

beneficiaries of the steps they have to

take in order to have the index used in

the calculation of their pensions revi-

sed.

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

Financial regulatory

authorities

The Cour des comptes audited, star-

ting in July 2006, the three main finan-

cial control and regulatory authorities

namely the Commission bancaire, the

Autorité de contrôle des assurances et

des mutuelles (ACAM) and the Autorité

des marchés financiers (AMF).

In its Annual Public Report of

February 2009, the Cour de comptes

carried out a comparative assessment of

these three authorities. The global ban-

king crisis that has emerged since

autumn 2008 highlighted the crucial role

that was to be played by a responsible

and appropriate financial regulation sys-

tem and the responses of the French

authorities as part of the principles of

action generated internationally, are in

line with the recommendations that the

Cour des comptes had issued in the

course of its inquiries.

Thus, order 2010-76 of 21 January

2010 simplified the control and regula-

tory structures as the Cour des comptes

saw fit and arranged new oversight obli-

gations for the protection of savers,

which had been a topic upon which the

Cour des comptes had focused its

examination.

The banking and financial regulation

law of 22 October 2010 has, for its part,

completed the substantial progress

made in relation to the oversight of sys-

temic risks and the strengthening of the

powers of the authorities, whose

concrete terms generally satisfy the

recommendations of the Cour des

comptes.

Cour des comptes

Central services in

charge of Overseas

France

In 2006, the Cour des comptes had

noted that the two services of the over-

seas ministry, the political, administra-

tive and financial affairs directorate

(direction des affaires politiques, admi-

nistratives et financières or DAPAF) and

the economic, social and cultural affairs

directorate (direction des affaires écono-

miques,

sociales

culturelles

DAESC) were providing poor inter-

ministerial coordination, while they

were managing appropriations represen-

ting only a minor portion of those dedi-

cated to Overseas France.

Creation of the general

overseas delegation (délé-

gation générale à l’outre-

mer or DéGéOM)

DAPAF and DAESC were placed in

May 2007 under the authority of the

minister of home affairs, overseas and

local authorities, the secretary of State

for overseas having final power of deci-

sion, as needed. Then, in September

2008

they

were

replaced

with

DéGéOM.The set up of DéGéOM was

labour-intensive: tight deadlines, late

designation of the prefiguration, insuffi-

cient support to the personnel, difficulty

filling the positions. At the end of 2008,

the workforce was significantly smaller

than planned; half of it comprising new

employees and the approval of applica-

tions was at times problematic.

Shrinking of the organiza-

tion

Pursuant to the recommendations

of the Cour des comptes, a single cen-

tral administration department was set

up and structured around three func-

tions: coordination of public policies,

legal and institutional functions, assess-

ment and outlook.

The majority of the “support func-

tions” was transferred to the competent

departments at the ministry of home

affairs, with the corresponding posi-

tions, which makes it possible to achieve

economies of scale. The link between

DéGéOM and the other departments of

the ministry is now operating properly.

An inter-ministerial role to

be asserted

DéGéOM keeps the management of

the “overseas” budget mission, manages

numerous subsidies and makes deci-

sions on the civil-status department of

Overseas France and on the appropriate

military service staff. However, its inter-

ministerial drive and coordination func-

tion remains fragile: no meetings of the

inter-ministerial commission for the

Annual public report

Executive summaries

Annual public report

Executive summaries

coordination of public investments;

inter-ministerial secretariat of Overseas

France provided by the secretary general

of the government; not very clear link

with DATAR for the contractual policy.

In addition, serious productivity

constraints have been imposed on the

delegation, reduced by 83 positions, of

which only 46 correspond to the trans-

fer of the support functions, while the

relative portion of the higher grade

positions did not increase. Neither the

number nor the profile of positions

made available by other ministries is

specified and the inter-ministerial nature

of recruitments did not increase. Over

these first two years, DéGéOM was

faced with the crisis in the West Indies

and had to provide complex follow-up

of the LODEOM project. Three gene-

ral delegates succeeded each other and

the minister of home affairs and the

Secretary of State for Overseas France

were replaced. The DéGéOM depart-

ments were not included in the consul-

tative phase of the organisation of the

“Overseas Convention”. The cabinet of

the minister for Overseas France com-

prises some sixty employees, including

some ten management level employees,

compared to the DéGéOM whose

workforce has decreased. Inter-ministe-

rial meetings are rarely held in the pre-

sence of the delegate general. The rela-

tions with several ministries are difficult,

the information circulates poorly and

certain ministries do not follow the rules

and timeframes for reporting matters

set by the Prime Minister; others have

yet to appoint a correspondent.

Central services in charge of

Overseas France

Meet the conditions for the

DéGéOM to be able to carry out its

mission as best as possible :

- Facilitate the recruitment of

employees from other ministries ;

- Support its actions by informal

disciplinary actions with respect to the

rules of referring matters and systema-

tic appointment of correspondents ;

- Long-term stability in time for its

management team.

Recommendations

Cour des comptes

Geology and mining research

office (Bureau des recherches

géologiques et minières or

BRGM)

The Cour des comptes examined on

several occasions the accounts and

management of the Geology and

mining research office (Bureau des

recherches géologiques et minières or

BRGM), an industrial and commercial

public institution.

Criticised management

The previous audit, covering fiscal

years 1999 to 2002, during which

BRGM exercised mining operator acti-

vities, had led the Cour des comptes to

address to the appropriate ministers a

summary proceedings on three points:

- The need to define the new mis-

sions of the BRGM and to ensure its

future financial balance ;

- More rigorous management, nota-

bly by putting an end to accounting mal-

functions related to the difficult roll-out

of a software package;

- Financial consequences of the

commitment in the building of a nickel

processing plant in New Caledonia.

Significant improvements

The latest audit, for fiscal years 2003

to 2008, showed that the recommenda-

tions of the Cour des comptes were lar-

gely followed.

The Decree of 20 September 2004

defined the new missions of the

BRGM, around three lines: research in

the field of geosciences, expert opinions

for the public authorities in the same

field and international activities. Four-

year contracts define the objectives of

the BRGM under its new missions. This

new strategy has made it possible for the

institution to improve its accounts: its

operating income has become positive

since 2004 and reached €10.6m in 2008.

In addition, the BRGM has impro-

ved its management and its accounting

software packages now operate pro-

perly.

With respect to the risks that the

BRGM stood to incur because of its

involvement in a nickel plant project in

New Caledonia, the institution sold its

ownership interest in this project to

société de participation minière du sud,

a company on which it now holds a

claim to the amount of €67.4m, hedged

with a provision of €10m. This provi-

Annual public report

Executive summaries

Annual public report

Executive summaries

Reform the organization of

BRGM to create a fully functional

financial department and modify the

functions of the production depart-

ment ;

In terms of financial matters,

improve the internal control and audit

procedures.

Recommandations

Geology and mining research office

(Bureau des recherches géologiques

et minières or BRGM)

sion was found inadequate by the audi-

tors. A residual risk remains therefore in

this area.

However, the creation, during the

audited period, of a school for applied

geosciences seems of extremely limited

interest.

Air navigation

personnel

The Cour des comptes examined on

several occasions the management of

the human resources of the general

directorate of civil aviation (DGAC): In

2002 (public thematic report), in 2006,

and then in 2010. In its annual public

report of 2010, the Cour des comptes

made a harsh appraisal, notably with

regard to the lack of transparency of

the organisation of the work which was

raising productivity and security issues.

One year after the publication of

that report, DGAC ended its most

controversial practices and corrected the

remuneration system applicable to its

employees.

Since June 2010, a verification sys-

tem shows the control hours actually

worked by each employee.

This put an

end to a system of unofficial absences

(known as “clearances”) implemented

by the air traffic controllers, in favour of

an opaque organization of the work.

Difficulties were experienced locally, but

they have remained limited, despite the

emotions generated by the implementa-

tion of these controls.

These measures constitute a major

step forward. Nevertheless, the Cour

des comptes had found that the same

opacity had prevented the aviation

safety department from having the

necessary procedures to ascertain the

controllers’ aptitude to exercise their

profession. One year later, the informa-

tion available to the safety department is

still incomplete.

Annual public report

Executive summaries

Cour des comptes

Annual public report

Executive summaries

Cour des comptes

The CNRS in the new

landscape of research

In its 2007 public report, the Cour

des comptes had found that the Centre

National de Recherche Scientifique

(CNRS) had not managed to redefine its

positioning in the rapidly changing land-

scape of research. In 2010, the Cour des

comptes verified the implementation of

its recommendations.

Reformed governance

The decree of 29 October 2009

entrusted the president of CNRS with

the general management of the institu-

tion. Pursuant to its provisions, a Chief

Executive Officer was appointed on 20

January 2010.

The performance contract signed

with the Central Government on 19

October 2009 was followed rapidly by

action notably with the creation of ten

discipline-specific institutes, in early

2010, in the stead and place of the old

scientific departments. It however lacks

any quantitative financial representa-

tions.

Advances to be pursued

To implement the renewed and

balanced partnerships by university site,

the functions that will remain within the

CNRS must be specified; the CNRS

must also acquire the use of up-to-date

management methods and tools.

While the accounting modernisation

is on the way to completion, considering

that the CNRS accounts which have

been certified with qualifications since

2008, the budget modernisation has yet

to concretize. Only after 2010 were

renewed procedures put in place which

should have accompanied the imple-

mentation of the Constitutional Bylaw

on Budget Acts (Loi organique relative

aux lois de finance or LOLF). Two

questions remain to be solved: the level

of the reports and the allocation of

appropriations to the research units.

Partial adaptation of

management tools

The assessment systems were har-

monised. Interfaces between informa-

tion systems of CNRS partners in its

mixed research units, i.e. 90% of the

1,000 units that make up the Centre,

must be created. Finally, the CNRS has

a consultative scientific director at the

major university sites.

Certain

mechanisms

creating

bridges between research and teaching

activities were set up, but at this stage

they concern only limited personnel. At

the same time, the integration of secon-

ded teaching researchers did not evolve

and the results in terms of recruiting

teachers/researchers by the CNRS are

worrisome.

The CNRS in the new landscape

of research

Management of research

units: a reform to be

conducted urgently

In the mixed units, i.e. in 90% of

laboratories, the CNRS only gets a

consolidated vision of its human and

financial capital once every four years.

Despite a clearly stated priority, the

achievements to date are particularly

limited. This presumes that the question

of personnel assigned to tasks at CNRS

be solved. The new system will also have

to enable the institutions to ensure the

financial steering of their management.

Annual public report

Executive summaries

Active participation in the

emergence of university clusters of

excellence ;

Develop bridges between the

researching and teaching functions by

setting ambitious and measurable tar-

gets ;

Urgently reform the financial

management of mixed research units ;

Settle in the next budgets the

issue of the carry-over and allocation

of appropriations to the research

units.

Recommendations

Annual public report

Executive summaries

Cour des comptes

Preparation and monito-

ring of the execution of

the Central

Government’s budget

In the reports it draws up every year

on the results and budget management

of the Central Government as well as in

the assessment of movements of credits

decided by decree, the Cour des

comptes expresses recommendations

relative to the preparation and monito-

ring of the execution of the Central

Government’s budget. The monitoring

of seventeen of them shows a gradual

but still too limited development of

good practices.

Several recommendations intended

to specify the framework for the execu-

tion of the budget of the Central

Government, to reinforce the monito-

ring of the expenditures of the opera-

tors and to reclassify certain revenues of

the Central Government were for the

most part implemented. They contri-

bute to clarifying the budgetary infor-

mation and to improving the manage-

ment of its execution.

Other recommendations were par-

tially implemented. They referred nota-

bly to the insufficiencies of budget

authority under the initial Budget Act

compared to the foreseeable needs, the

recognition and payment of expendi-

tures due during the fiscal year, or the

structuring of the standard used to limit

the increase of Central Government’s

expenditures. At the same degree of

implementation are the recommenda-

tions related to the monitoring and

assessment of tax expenditures and to

budget management. The complemen-

tary period that makes it possible to

extend beyond the end of the year the

execution of expenditures that become

payable has been reduced; the annual

performance reports are prepared soo-

ner after the end of the year and the

budgetisation of expenditures in autho-

rised commitments was extended. The

progress noted must be improved.

Certain recommendations have not

yet been successful, notably those that

pertain to the recognition of all the legal

obligations created during the fiscal

year, to informing Parliament on the

development of indebtedness over the

short term or also to the matching of

special accounts contributing to the

implementation of public policy to the

corresponding missions of the master

budget.

The delay in implementing several

of these main recommendations made

by the Cour des comptes does not

result, for the majority of cases, from a

technical difficulty and they should be

able to quickly come to fruition in order

to improve the quality of budget infor-

mation and to favour a better financial

management of public policies.

The effects of the

certification of the

financial statements of

the Central Government

Every year, since 2006 the Cour des

comptes is entrusted with certifying the

lawfulness, truthfulness and fairness of

the financial statements of the Central

Government with respect to the repor-

ting framework set out in the Central

Government’s accounting standards on

an accrual basis.

Expressing a certification opinion is

an essential aspect of the reform deci-

ded by the constitutional legislator

under the LOLF. It must guarantee the

reliability of information provided to

Parliament, the authorities and the citi-

zens. The economic and financial crisis

simply increased the need for a com-

plete transparency of the accounts.

By deciding to certify the financial

statements for the 200-, 2007 and 2008

fiscal years with a high number of reser-

vations, the Cour des comptes wanted

to underscore its desire to adopt a

constructive hand-holding approach for

the gradual implementation of the

accounting reform while, at the same

time, providing Parliament with detailed

information on the limitations of the

Central Government’s financial state-

ments.

Fiscal year 2009 : a year

of progress

In its certification opinion published

on 25 May 2010, the Cour des comptes

decided to remove three of the qualifi-

cations expressed on the financial state-

ments for the prior fiscal year. Overall

10 reservations were removed over

three years (1).

Despite these improvements, nine

reservations, eight of which are substan-

tial, have been renewed. All of the

aggregates of the financial statements

continue to be affected by uncertainties,

differences of opinion with the preparer

of the financial statements and limita-

tions on the scope of the audits. Two

reservations are of a structural nature.

They result from the maladjustment of

the financial and accounting informa-

tion

systems

the

Central

Government and the insufficient effi-

cacy of its internal control mechanisms.

Two qualifications concerning long-

term investments refer to the accoun-

ting treatment of the social debt

redemption fund and uncertainties

regarding the valuation of Central

Government operators under its assets.

Cour des comptes

Annual public report

Executive summaries

____________________________________

(1)Furthermore, new reservations were formulated during the same period.

The effects of the certification of the

financial statements of the Central

Government

Annual public report

Executive summaries

Three other reservations pertain to the

assets of the ministry of defence, the

valuation of the real estate holdings of

the Central Government and the fixed

assets and inventories of the civil minis-

tries.

Management of the ser-

vices of the Central

Government remaining for

the most part rooted in

the budget-based

approach

Supplementing the monitoring of

budget operations, i.e. the sole inflows

and outflows for the fiscal year, with

asset-related information remains mar-

ginal. Thus, the information derived

from a better accounting awareness of

the real estate holdings, the improve-

ment from the inventory of contingent

liabilities, the cost of holding and main-

taining the equipment necessary for

conducting the activities of the Central

Government is not used to support the

decision-making process.

However, regardless of the remai-

ning limits, accrual-basis accounting

may provide the administrations with

information as yet not in their posses-

sion, which may prove useful for the

steering of their management. These

data must now be used.

Legislative measures

concerning Social

Security and retirement

As in previous years, the Cour des

comptes examined to what extent the

provisions of the Law for the Financing

of Social Security (loi de financement de

la sécurité sociale or LFSS), as well as

those, just prior to that, of the Law on

the reform of retirement, reflected in

the Court’s previous audit and recom-

mendations.

Several recommendations repeated

by the Cour des comptes, which

concern structural questions, were the

object of provisions in the 2011 LFSS.

This was in particular the case of the

financing of deficits, since a debt takeo-

ver is planned by the Social Debt

Redemption Fund (caisse d’amortisse-

ment de la dette sociale or CADES), for

the monitoring of the national objective

for sickness insurance expenditures

(objectif national des dépenses d’assu-

rance maladie or ONDAM), made more

rigorous as recommended by the Cour

des comptes.

The Cour des comptes notes howe-

ver that these measures remain, in parti-

cular for the decrease of “social niches”

(exemptions of contribution payments),

below its recommendations and that

they did not have a sufficient effect on

the decrease of deficits, which consti-

tutes for the Cour des comptes an

genuine necessity. Several provisions of

the Law on the reform of retirement

correspond also to recommendations,

sometimes old, by the Cour des

comptes. In two cases, the Law

announces supplementary studies in

order to go in the direction of the

recommendations of the Cour des

comptes, on the one hand for a greater

harmonisation of the rules and limits

between invalidity and disability, on the

other hand for reform of demographic

compensations in the retirement branch.

The LFSS stipulates, in turn, the discon-

tinuation of the sickness demographic

compensation: this also corresponds to

a recommendation of the Cour des

comptes.

Several provisions further allow

greater convergence between the rules

for the private sector and those applica-

ble to public servants: The decrease in

the minimum time needed to be eligible

for retirement in public service, the

removal of the option - offered to

parents of three or more children - to

retire after 15 years in public service or

also the downward revision of the insu-

rance time bonus, provided to certain

grades of civil servants.

Cour des comptes

Annual public report

Executive summaries

Annual public report

Executive summaries

Cour des comptes

Coface

In an inquiry carried out in 2008 at

the request of the finance commission

of the Senate, the Cour des comptes

audited Coface which manages on

behalf and with the guarantee of the

Central Government, the export risk

insurance translations of French com-

panies that cannot be reinsured com-

mercially.

A strengthening of the

demand for support of

companies

The economic crisis largely explains

this. In 2008, the Cour des comptes had

found a trend toward a decrease in the

applications by companies for Coface’s

public bidding process, principally with

respect to credit insurance. The cove-

rage taken out under credit insurance

has in fact tripled from €7.5bn in 2008

to more than €20bn in 2009.

The Cour

des comptes recommends transferring

this process, at least partially, to a ban-

king operator whose management costs

remain high.

Improved management

performance

The recommendations that the

Cour des comptes had made for the

improvement of the management of

the public bidding process were follo-

wed overall, both with respect to

streamlining the organisation of Coface

for examining the applications of com-

panies and for a better identification of

the workforce assigned to managing the

government backing.

Better risk assessment

The recommendations relative to

the understanding of the risks incurred

by the Central Government expressed

in 2008 have taken on a new sensitivity.

In fact, the risks taken in aeronautics,

which represent 20% of commitments

underwritten, are not properly provisio-

ned. The Cour des comptes continues

above all to regret that all the conclu-

sions have not been drawn, by the cen-

tral Government, from the calculation

made to determine the capital needed to

deal with risks related to credit insu-

rance. It reiterates in consequence its

recommendation aimed at defining the

level

risks

that

the

Central

Government wishes to cover with

equity from the public bidding account

of Coface in order to deduct from it the

annual withholding that it may operate

on the cash in the account.

Reorganisation of the

collection of

apprenticeship tax in the

fields of transport and

logistics

Following the audit of the agencies

that collect the apprenticeship tax (orga-

nismes collecteurs de la taxe d’appren-

tissage or OCTA) in the transport and

logistics sector the Cour des comptes

had found major malfunctions, which it

reported, by summary proceedings of

23 July 2008, to the ministers of trans-

port, employment, national education

and budget, who oversee these associa-

tions. The Cour des comptes had

underscored the opacity of the collec-

tion system and noted the establishment

of self-controlled “de facto groups”

carrying out activities that are some-

times very remote from any public ser-

vice mission, without such deviations

having generated any reaction on the

part of the administrations concerned.

Therefore the Cour des comptes had

recommended an immediate and far-

reaching reorganisation.

The collection organisation

has changed since 2008

The AFT, a vocational training asso-

ciation in the transport sector (associa-

tion pour la formation professionnelle

dans les transports) is now the only

agency that collects the apprenticeship

tax, the other associations having lost

their authority to do so in 2009.

The

organisation of this group has itself

been simplified: the 27 real estate com-

panies that were part of it have been

merged into a single one and the various

associations operating in the field of

continuing education have been combi-

ned into a single organisation.

An incomplete develop-

ment

The setting of the remuneration of

senior managers continues to escape the

control of the oversight of AFT while

there is room for improvement in the

financial transparency of the group due

to the lack to date of consolidated

accounts certified by an auditor.

The distinction between collection

activities and those pertaining to the

area of competition (training) remains

unclear. The situation of the OCTA

would profit from collaborating with of

equal representation organisations col-

lecting funds from the continuing occu-

pational education (OPCA), for which

collection is the essential mission,

except for any activity concerning the

provision of occupational training.

Annual public report

Executive summaries

Cour des comptes

Réorganisation of the collection

apprenticeship tax in the fields of

transport and logistics

Annual public report

Executive summaries

The exercise of oversight

remains marked by major

weaknesses

After a mobilisation consecutive to

the summary proceedings by the Cour

des comptes, the responsible ministries

did little to change their practices. In

particular, they did not set up a “com-

mitment and monitoring committee”,

tasked with approving the distribution

of tax resources allocated to AFT, while

they had made the commitment to do so

following the summary proceedings of

2008, thus depriving themselves of a

management tool for that operator.

The Cour des comptes underscores

the need of reinforced vigilance of the

public authorities so that the changes

started in 2009 may be completed.

GIP Housing and social

actions for marginally

homeless and homeless

persons

In a previous audit included with the

annual public report of 1999, the Cour

des comptes had prepared a critical

report of the exercise of its re-housing

missions by the housing and social

actions badly housed and homeless per-

sons public interest group “groupement

d’intérêt public (GIP) habitat et inter-

ventions sociales pour les mal-logés et

les sans abri”.

It had raised the question of the

continuity of this entity.

Ultimately renewed in 2003, the GIP

experienced strong growth which resul-

ted in 2007 in a doubling of the Central

Government’s subsidy. Its activity was

refocused and its missions further res-

tricted.

The Cour des comptes notes that

the existence of this entity which seems

justified for Ile-de-France to ensure

emergency re-housing, and that the

oversight authorities are satisfied with

its actions. The risk to have it entrusted

with missions that have no direct rela-

tion with its purpose remains however

quite real. The Cour des comptes calls

the attention to the consequences from

the increase in the use of sliding scale

leases until 2009.

It recommends imple-

menting a securitisation of GIP claw-

backs and maintaining the means for

controlling this entity. The internal

management of the GIP must be fur-

ther improved.

Cour des comptes

Annual public report

Executive summaries