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THE 2015

ANNUAL PUBLIC

REPORT

Observations

Summaries

Summaries are intended to facilitate the understanding

and use of the report produced by the Cour des

comptes. Solely the original report is legally binding on the

Cour des comptes. The responses of administrations and

other bodies concerned are included in the report.

Disclaimer

Summaries of the 2015 Annual Public Report by the Cour des Comptes

INTRODUCTION

Made public for the first time in 1832, the annual report of the Cour des

Comptes is an important means of communicating the work of the Court and of

the regional and territorial courts of accounts, and the lessons to be learned

from it.

The 2015 annual public report

contains two parts :

part I

, which comprises two volumes devoted firstly to public policies and

finances and secondly to public administration, outlines the o

bservations and

recommendations

drawn from a selection of audits and surveys carried out in

2014 by the Court and the regional and territorial courts of accounts ;

part II

presents the organisation and the tasks of the financial jurisdictions as

well as the results of their actions and particularly the

subsequent actions

taken by the administrations, local authorities and other organisations audited

following the observations and recommendations made in previous years.

The annual report produced by the

Cour de Discipline Budgétaire et Financière

(French ‘Budget and Finance Disciplinary Court’) is attached as an appendix to

these two parts of the report.

The present instalment comprises the summaries of the 19 reports that make

up Part I, "Observations".

These 19 texts are grouped by topic :

- first part :

public finances

(1) ;

- second part :

public policies

(8) ;

- third part :

public management

(10).

SSummaries of the 2015 Annual Public Report by the Cour des Comptes

TABLE OF CONTENTS

First part – Public Finances

The overall situation of the public finances (at the end of January 2015)

Second part – Public Policies

Chapter I – Water and energy

The water agencies and water policy : coherence to be recovered

. . . .17

Towards an opened electricity market to competition : an unfinished

journey

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

Chapter II - Transport

Intercités trains : time to end the indecision

. . . . . . . . . . . . . . . . . . . . . . . . .27

Urban transport services : finding a new balance

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

Chapter III - Regional development and urban planning

The future of the ski resorts in the Pyrenees: a necessary turnaround and

inevitable choices

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Public operators in local development in the Île-de-France: a future to be

consolidated

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

Chapter IV - Higher education and sport

The student services network: essential modernisation

. . . . . . . . . . . . . .43

Public policy against doping in sport: giving a new impetus

. . . . . . . . . . .46

Observations

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Third part – Public Management

Chapter I – Administrative organisation

Treasuries to the French embassies: an unjustified survival

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

The reform of the judicial map: a reorganisation to be continued

. . . . . .55

Chapter II – Management of projects

The National Payroll program : a costly failure

. . . . . . . . . . . . . . . . . . . . . . .59

The MuCEM: a lengthy process and an uncertain future

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

Chapter III – Modes of administration

Local authorities' public-private partnerships : managing the risks to be

controlled

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69

The direct management of water and sanitation services: progress to be

reinforced

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72

French management of European structural funds: improve, simplify and

evaluate

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75

Chapter IV – Management of human resources

The additional remuneration of civil servants overseas: over-hauling a new

system

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81

The regional public-service management centres of the Rhône-Alpes and

Puy-de-Dôme : tasks to be refocused in a broader regional context

. . . .84

The free assignment of shares in CDC Entreprises, a subsidiary of the

Caisse des Dépôts et Consignations : the abuses of a public employee

shareholder arrangement

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87

TABLE OF CONTENTS

First part

Public Finances

The overall situation of the public finances

(at the end of January 2015)

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The overall situation of the public

finances

(at the end of January 2015)

In 2014, a deficit that is not narro-

wing and projections revised late

The analysis of the Court is based on

the projected public administrations

account for 2014 and the 2015

Finance Act, which forecasts a deficit

of 4.4 % of GDP for 2014 (i.e. €94 bil-

lion)

(1)

The public deficit is set to increase by

0.3 points of GDP in 2014 compared

to 2013 (4.1% of GDP), whereas it had

continually

dropped

after

the

reaching a maximum in 2009 (7.2 %

of GDP).

According to the projections of the

European Commission in November

2014, besides Croatia, France would

be the only country in the European

Union with a public deficit greater

than 3.0 % of GDP in 2013 and which

would increase in 2014. It would thus

remain

above

average

the

Eurozone and European Union coun-

tries.

This increase in the public deficit in

2014 comes at a time when the amen-

ding Finance Act of 8 August 2014

forecast a reduction by 0.5 points of

GDP. The gap of 0.8 of a point bet-

ween the projection and reality

results mainly from the downward

revision of the projected growth of

GDP, for 0.3 of a point, and downward

revisions of projections for inflation

and the elasticity of compulsory

contributions, for 0.15 points each.

_________

The public administrations account for 2014 will only be published by INSEE at the end of

March 2015.

2) The application of new national accounting standards and the inclusion of new information

have led INSEE to revise the 2013 public deficit from 4.3

2013

2014

The December 2012 Public Finance Programming

- 3.0

- 2.2

Initial Finance Act for 2014

- 4.1

- 3.6

April 2014 Stability Programme

- 4.3

- 3.8

August 2014 Amending Finance Act

- 4.3

- 3.8

December 2014 Amending Finance Act

- 4.1

- 4.4

Source : Cour des comptes

The successive forecasts for the public deficit for 2013-2014 (% of GDP)

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The overall situation of the public finances

(at the end of January 2015)

In 2015, a limited deficit reduction

objective that is not certain to be

met

For 2015, the Finance Bill initially fore-

cast a public deficit of 4.3% of GDP.

After discussions with the European

Commission, the Government made a

correction of €3.6 billion, decided

urgently and essentially relating to an

increase in tax revenue, to bring the

projected deficit to 4.1% of GDP (i.e.

€89 billion.

The public deficit would therefore

diminish by 0.3 points of GDP compa-

red to 2014, whereas the April 2014

Stability Programme forecast a drop

of 0.8 points. This gap of 0.5 of a point

mainly results from the effect on

public revenue of the downward revi-

sion of the growth projection, infla-

tion and the elasticity of compulsory

contributions, which is only partially

compensated by new tax measures

and a revision of the quantification of

other

measures.

However,

the

Government chose to make almost no

modifications to its objective of the

growth of public expenditure by value

and to stick with the savings program

that it announced in April.

Although the objective of a deficit

reduction in 2015 is limited, its achie-

vement is uncertain as the revenue

projections are based on uncertain

assumptions and the objective of a

variation in expenditure by value may

prove difficult to reach.

Regarding revenue, although the drop

in the price of oil since September has

confirmed the growth forecast in

volume of GDP (1.0 %), it weakens the

inflation forecast (0.9 %) and, conse-

quently, the projected variation in

income from tax and social-security

contributions.

Regarding expenditure, the credits of

certain budgetary task groups initia-

ted by the Finance Act could prove

insufficient. The drop in State expen-

diture within the scope of the norm by

value

(3)

is obtained by transferring

expenses to other public administra-

tions.

Furthermore,

meeting

the

national health insurance expenditure

objective will be more difficult than in

previous years.

The savings announced (€21 billion)

correspond to a growth in public

expenditure that is below trend, mea-

ning at unchanged policies, the esti-

mation of which is inevitably hypothe-

tical. This amount has not been modi-

fied since the Stability Programme of

last April, even though the downward

revision of the inflation forecast

should have led to a €2 billion reduc-

tion in the estimate of savings resul-

_________

3) This scope covers expenses of the general budget, excluding interest and contributions to

the financing of pensions, charges against revenue for the benefit of the European Union and

local authorities, and a share of the taxes assigned to state operators.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The overall situation of the public finances

(at the end of January 2015)

ting from the freezing of the point

value of the civil servant index and the

postponement of the revaluation of

pensions.

The quantification of savings caused

by the drop in State financial aid to

local authorities and operators is

based on the optimistic assumption

that they immediately and fully pass

on this drop in the form of a reduction

of their own expenditure. Lastly, the

savings expected in the field of social

expenditure remain imprecise and

uncertain.

If these risks identified by the Court

materialise, leading to a public deficit

greater than 4.1% of GDP in 2015, it

will be even more difficult to return to

below the threshold of 3.0 % of GDP

in 2017. The public debt could

approach 100 % of GDP by this time

and the structural balance of the

public accounts would be pushed

back to beyond 2019.

The sustainable rebalancing of our

public finances is based on strengthe-

ning the growth potential of the

French economy, currently estimated

at just 1.0 % per year. To this end,

alongside other measures, a reduction

in the contributions paid by compa-

nies has been programmed to restore

their competitiveness. Nevertheless,

in order to be sustainable from a bud-

getary point of view, these reductions

must

accompanied

strict

control of public expenditure.

This change is possible, given the level

of public expenditure in France com-

pared to that in other countries. It

must be based on savings that are

clearly identified, shared by all public

administrations and sustainable. It

involves, beyond the uniform mea-

sures of expense reduction implemen-

ted by the Government, making expli-

cit choices to ensure a more efficient

organisation of public action, a redefi-

nition of the tasks of each of the

public administrations and greater

efficiency in economic and social

intervention.

Second part

Public Policies

Chapter I

Water and energy

1 - The water agencies and water policy : coherence to be

recovered

2 - The opening of the electricity market to competition: an

unfinished job

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The water agencies and water

policy : coherence to be recovered

The water agencies are the main

financier of water policy in France:

during the 9th program, between

2007 and 2012, they thus granted

€14.9 billion in aid (€12.9 billion in

subsidies and €2 billion in advances)

in order to support projects intended

to protect water resources. To finance

the aid they grant, the agencies col-

lect taxes, called usage charges, from

water users (individuals, companies,

farmers, fishermen, etc.).

Governance to be improved

While the State bears the responsibi-

lity for water policy, the procedures

for allocating aid paid by the agencies,

and the rate of most of the usage

charges that they receive, are defined

by bodies (catchment area commit-

tee, board of directors) in which the

State is a minority stakeholder and in

which professional users (farmers and

industrialists) are over-represented.

This lack of representation sometimes

leads to the predominance of cate-

gory-related interests in the catch-

ment areas. Indeed, concerning the

usage charges, their rates, which are

not subject to national minimum

rates, are set at a level that is abnor-

mally low in certain catchment areas.

Regarding aid, decisions on allocation

lack transparency and the prevention

of conflicts of interest, whether

concerning members of boards of

directors or agency staff, is insuffi-

cient.

A "polluter pays" principle to be res-

tored

Although the Environmental Code

specifies that the usage charges recei-

ved by water agencies should comply

with the principles of prevention and

reparation of harm caused to the

environment, 87 % of usage charges

received by the agencies are paid by

domestic and similar users, 7 % by

industry and 6 % by farmers. Since the

entry into force of the French Law on

Water and Aquatic Environments

(LEMA), the creation of the usage

charge for diffuse pollution has repre-

sented progress, admittedly limited,

while other usage charges have

moved away from the polluter pays

principle. The same is true of a num-

ber of usage charges paid by farmers

(particularly the usage charge paid by

livestock farmers and the usage

charge for abstraction of water) and

industrialists (usage charge for pollu-

tion of non-domestic origin), thus

weakening the incentive to pollute

less.

Moreover, the agencies still under-use

the resources provided by the LEMA

recover

and

monitor

usage

charges; some retain practices that

are too favourable to those that pay

them. The rules for settlement and

collection are not always complied

with and there are still few controls in

certain agencies.

A return to selectively in the alloca-

tion of aid

The aid granted by agencies remains

insufficiently selective. The abun-

dance of tax resources has not provi-

ded agencies and the supervisory

ministry with an incentive to be more

selective by concentrating on priority

projects identified in the regional ope-

rational action plans (PAOT). Agencies

too often support regulatory stan-

dards compliance without taking into

account the financial capacities of the

contracting authorities and without

making aid subject to a timetable for

standards compliance. The advances

granted to industrialists are not

always associated with sufficient gua-

rantees to cover the risks of non-reim-

bursement. Regarding communica-

tion and international cooperation

aid, it is of limited benefit and uses

resources that should be devoted to

tasks of a higher priority.

Efficiency and evaluation to be deve-

loped

The procedures for allocating aid are

sometimes debatable. The appraisal

of applications for aid is insufficiently

formalised and is too rarely based on

prior economic analyses and compa-

rative analyses of the costs of pro-

jects. The rules for allocating aid

approved by the boards of directors of

agencies are not always complied

with.

Lastly, subsequent checks on the use

of aid and evaluation of its effects are

insufficiently developed. Agencies

have a modest monitoring activity,

which is rarely formalised in a genuine

inspection plan. Although certain

agencies have, since the end of the 9th

programme, begun a process of eva-

luating intervention arrangements,

this process remains embryonic in the

others.

The water agencies and water policy :

coherence to be recovered

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The water agencies and water policy :

coherence to be recovered

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Source: IGN BDALTI®, IGN BDCARTO®, A.E.A.P., Water Agency Artois-Picardie france2.mxd -

cbecquet - 01/07/2011

The six water agencies in metropolitan France are national administrative public

institutions created in 1964 and placed under the supervision of the Ministry of

the Environment. The area of competence of each agency extends over one (Loire-

Bretagne, Artois-Picardie, Adour-Garonne, Seine-Normandie) or two (Rhin-Meuse

and Rhône-Méditerranée-Corse) catchment areas.

The six water agencies

Summaries of the 2015 Annual Public Report by the Cour des Comptes

These observations lead the Court to

issue the following recommenda-

tions :

–

establish a system to prevent

conflicts of interest for members of

the governance bodies of the agen-

cies and for their staff ;

–

make decisions on aid alloca-

tion public, together with the list of

its beneficiaries ;

–

set minimum rates for usage

charges and increase the taxation of

agricultural pollution ;

–

increase the selectivity of aid

refocusing

the

regional

operational action plans (PAOT) ;

–

provide the agencies with com-

mon tools and methods for analysing

applications for aid ;

–

increase and prioritise monito-

ring in matters of usage charges and

aid, and more systematically evaluate

intervention arrangements.

Recommendations

The water agencies and water policy :

coherence to be recovered

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Towards an opened electricity

market to competition : an unfi-

nished journey

Electricity market includes produc-

tion, transportation and distribution,

as well as supply of electricity. Former

monopoly by EDF has characterised

French organisation since 1946. It has

been challenged with the opening to

competition, driven since 1996 by the

European Union. The aim is to create a

common, internal market able to

contribute to security of supply, eco-

nomic competitiveness and sustaina-

ble development

Procrastination from Government to

open the electricity market

In France, opening to competition has

been a long process, still incomplete

characterised by legislative instability,

with 10 successive laws in 18 years.

These conditions have not eased

effective competition, nor given sta-

keholders and customers sufficient

clarity.

Consequently, impact on individuals

and small companies, representing

86.3 % of the number of customers,

remains marginal. Mid-2014, only

6.7 % of their consumption was deli-

vered through market offers. On the

contrary, main industrial consumers,

representing only 41,000 sites but

41 % of national consumption, have

widely opted for market offers, which

cover 58.5 % of their consumption.

Benefits of opening still barely per-

ceptible to consumers

Consumers are poorly and badly infor-

med of the possibilities offered by

competition: only 53 % of French peo-

ple are aware that it is possible to

change of supplier. Limited perfor-

mance

the

national

energy

ombudsman and lack of public aware-

ness about its existence contribute to

this result.

Moreover, the electricity bill is not par-

ticularly sensitive to the opening to

competition: in spite of a sharp drop in

gross market price of electricity, the

average bill for final consumers has

increased by more than 3 % every

year since 2012, mainly due to the

increase in the tax contribution to the

public service charges for electricity

(CSPE) and due to a necessary catch-

up in regulated prices, reaching a level

closer to real costs of production.

Lastly, the proximity between the his-

torical supplier EDF and its distribu-

tion subsidiary ERDF maintains a

confusion that is harmful to an effi-

cient competition.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Developments nevertheless allow

progress to be expected :

- the way regulated prices are establi-

shed is currently undergoing reform in

order to reflect effective production

costs and strengthen the sectoral

regulator (the energy regulation com-

mission – CRE)

(4)

. This reform should

encourage unbiased competition with

alternative suppliers ;

- the roll-out of smartmeters (Linky

project run by ERDF) should allow

alternative suppliers to diversify their

offers, introducing new services allo-

wing for a more efficient competition.

Mixed benefits for the functioning of

the market

With the opening to competition, the

use

market

mechanisms

has

become

generalised.

Whether

concerns ensuring supply to custo-

mers or ensuring a constant balance

in the electrical system, market

mechanisms can be used. These

mechanisms are efficient for ensuring

instantaneous balance between sup-

ply and demand.

On the wholesale markets, the use of

market mechanisms in France is dis-

rupted by two phenomena.

On the one hand the production

remains concentrated with EDF, still

representing 75 % of installed produc-

tion capacities in France and obliged

purchaser of renewable electricity

that benefit from a feed-in tariff. On

the other hand a transitory mecha-

nism for regulated access to historical

nuclear electricity (ARENH), has been

set up to facilitate the opening to

competition and to compensate for

the concentration of production. But

its implementation has made alterna-

tive suppliers dependent on the regu-

lated system.

Regulatory developments in the field

of renewable energies and opening

hydroelectric concessions to competi-

tion are two priority areas to improve

competition in the production sector.

The review of the ARENH system,

both concerning its practical proce-

dures for implementation and the

architecture of the mechanism that

will succeed, is also a major issue for

improving the overall efficiency of the

French electricity market.

Regulation that needs to be boosted

sted

Regulation of the energy sector is dri-

ven

two

institutions,

the

Competition Authority and the CRE,

both under the control of the Council

of State, which acts as last resort

regulator, particularly through nume-

rous decisions regarding regulated

prices.

Towards an opened electricity market to

competition : an unfinished journey

_________

4) Since the publication of the ordinance of 30 October 2014 on regulated prices for the sale of

electricity, the provision in the NOME Act, consisting of constructing the price by piling up

costs, has been effective. The implementation of provisions relative to the CRE will not occur

until 31 December 2015.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

owards an opened electricity market to

competition : an unfinished journey

The Competition Authority has not

yet flagged the energy sector as one

of its priorities, devoting only modest

resources to it. It has nevertheless

already taken a position on strategic

aspects of the opening to competition

(regarding

ARENH

regulated

prices). It regularly intervenes, at the

request of alternative suppliers, with

regard to accusations of abuse of

dominant position by EDF or local dis-

tribution companies.

Nevertheless, consultation of the

Competition Authority is not manda-

tory in the course of preparing bills

relating to the electricity sector. In

such cases, it would be better for the

Authority to self-refer, as it can do.

Likewise, improved collaboration bet-

ween the CRE and the Authority is

necessary, as the approaches of both

regulators are complementary: more

proactive for the Authority and more

technical and consensual for the CRE.

Since its creation in 2002, the compe-

tence of the CRE has regularly been

extended and it has acquired genuine

technical legitimacy, in spite of the

four modifications of the rules for the

composition of its collegial direction,

which should now be stabilised.

Through a large number of coopera-

tion and consultation bodies, the CRE

favours the search for consensus with

stakeholders, sometimes inducing

long and complex processes. Also it

hasn’t yet used its penalty powers

given y the legislator, in contrast to

most of its European counterparts,

even though it regularly finds shortco-

mings amongst regulated companies.

***

The Court observes that France is

going backwards in the opening of the

electricity

market

initiated

Community directives, for limited

results. The historical operator EDF

remains largely dominant and entire

sectors of production (nuclear and

hydroelectricity) aren’t opened or do

not operate in a way related to the

market (renewable energies). In a

European energy market that is desta-

bilised by excess capacity, the emer-

gence of renewable energies and

divergent national policies, alternative

suppliers are finding it difficult to find

their place.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Towards an opened electricity market to

competition : an unfinished journey

The Court issues the following

recommendations :

–

stabilise the legal framework

by effectively implementing latest

regulations from the 2010 law entit-

led new organisation of the electri-

city market (particularly the reform

of regulated prices) according to the

planned timetable, in order to give all

market stakeholders the necessary

visibility ;

–

improve the legitimacy of the

CRE by stabilising the composition of

its collegial direction, consolidating

its prerogatives for proposal, consul-

tation and decision, and encouraging

it to fully use its powers to impose

penalties ;

–

refocus and boost public infor-

mation to consumers on opening to

competition ;

–

improve the

separation

regulated activities (distribution) and

activities opened to competition and

significantly increase the manage-

ment independence of ERDF in rela-

tion to the historical operator ;

–

complete the initiatives that

have already begun and which aim to

remove obstacles to opening the pro-

duction sector to competition by

renewing hydroelectric concessions

and changing the support schemes

to renewable energies ;

–

immediately begin discussion

on the future of the ARENH mecha-

nism ;

–

make sure that new arrange-

ments currently being rolled out do

not distort competition (capacity

markets and communicating smart-

meters) and, in the case of the Linky

project, allow all suppliers to develop

targeted commercial offers accor-

ding to consumption profiles.

Recommendations

Chapter II

Transport

1 - Intercités trains: time to end the indecision

2 - Urban transport services: finding anew balance

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Intercités trains: time to end the

indecision

Intercités trains, a residual and hete-

rogeneous category

The

Intercités

(inter-city) trains, or

"regional equilibrium trains" (TET)

depending on their administrative

name, serve 35 passenger train lines,

mainly using Corail equipment. At the

end of 2010, the State became the

organising authority in application of

a three-year operation agreement

signed with SNCF.

Fitting in between the high-speed

trains (TGV) and the regional express

trains (TER), the Intercités trains

group together lines with very diffe-

rent economic profiles: medium and

long-distance connections between

large

towns,

long-distance

night

trains, linear routes of the "home-

work" type servicing the greater Paris

basin, and transverse inter-regional

lines. Finally, they suffer from an ove-

rall low level of passenger use and

complex cross-linking with TER lines.

A lack of strategy

Over the last thirty years, these trains

have been in deficit overall, the result

of management without much ambi-

tion. The network of Intercités trains

has been constantly decreasing, as

passenger use has fallen steadily.

Until 2010, SNCF ensured balance

through internal cross-subsidisation,

until its lines were put under contrac-

tual agreements, which introduced

the principle of a subsidy. In accor-

dance with the SNCF strategy, the

policy of closing loss-making lines was

sometimes tempered by the occasio-

nally strong reactions of the elected

representatives concerned.

In spite of some efforts at commercial

stimulation, these trains suffer from

an outmoded image and a mediocre

quality of service, mainly due to the

age of their rolling stock.

An agreement that has settled

nothing

A 2010 agreement between the State

and SNCF was intended to make the

Intercités trains viable through the

payment of a balancing subsidy.

However, this came to an end at the

end of 2014 without having really

achieved the objectives set. Although

it allowed the State to come to an

understanding of a particularly com-

plex case, it did not lead to any signifi-

cant progress or the definition of a

strategy for these trains. In 2013, the

ageing of the rolling stock required

urgent decisions concerning its rene-

wal, although this subject was expli-

citly excluded from the initial agree-

ment.

Intercités trains: time to end the indecision

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The financing of the operating deficit

of these trains has not been resolved.

Excluding a small road contribution,

via a fraction of the regional develop-

ment tax paid by the motorway com-

panies, the subsidy provided by the

agreement is composed of income

from two taxes paid by SNCF alone.

Ultimately, this amounts to SNCF

paying itself the contribution for

public service charges. SNCF is there-

fore bearing the cost of an increasing

deficit, while its income high-speed

traffic is declining.

This situation weakens the position of

the State, which has no real financial

leverage with regard to the company,

even though, as the organising autho-

rity, it pays the not insignificant cost of

the usage charges for access to the

network of

Intercités

trains.

It is even more worrying that the rene-

wal of the rolling stock was not able to

begin until 2013, under pressure of

urgency, and many uncertainties

remain.

Ageing rolling stock: a huge invest-

ment

There have been many years of under-

investment in rolling stock for the

Intercités

trains. The 2010 operating

agreement excluded any acquisition

of new equipment.

Moreover, this rolling stock is of diffe-

rent types and old: an average of

nearly 35 years old. Some diesel loco-

motives are more than 40 years old

and must be replaced by 2016.

As of 2018, all of the carriages assi-

gned to night trains will have to be

renovated and the Corail carriages will

reach the end of their lives in 2022.

In spite of the measures announced

by the State in 2013, the shortage of

public funding raises major questions

on the resources that can be devoted

to renewing equipment for Intercités

trains.

Ending the indecision to preserve the

Intercités network

Against a backdrop made difficult by

the low financial margin for manoeu-

vre, making the Intercités network via-

ble assumes :

• reducing the operating deficit: this

involves productivity measures by

SNCF and the reduction of certain

services, particularly those with low

passenger traffic and which are conti-

nuously loss-making ;

• a redefinition of the economic

scope: this means offering the pros-

pect of increased profitability by refo-

cusing

Intercités

trains

fast

medium- and long-distance connec-

tions, associated with new quality of

service ;

• clarification on financing: two

options may be envisaged: the main-

tenance of the contractual agreement

covering these lines, which assumes

generating new resources: or abando-

ning the

contractual

agreement,

which would give SNCF back the free-

dom to manage the Intercités net-

work.

Intercités trains: time to end the indecision

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The Court issues the following

recommendation:

–

in order to prevent the decline

of the Intercités trains and define the

conditions for their viability, include

them in a national plan for passenger

transport services, specifying the

connections with other forms of rail

transport and granting them stable

and sustainable funding.

Recommendation

Source : Ministry of Ecology, sustainable development and energy

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Urban transport services :

finding a new balance

The 287 urban passenger transport

networks (excluding the Île-de-France

region) are a major policy issue in

terms or employment ( more than a

million people), spending (€9 billion in

2012, including €2.5 billion in invest-

ment), customers (27 million) , jour-

neys (800 million km travelled per

year), and passengers (+ 25 % bet-

ween 2000 to 2010).

This activity is now under severe

financial restrictions, that require the

definition of a new service equili-

brium.

Severe financial restrictions

The report highlights the financial

constraints facing the public service,

the operating costs of which are gro-

wing rapidly due to the extension of

urban transport to the suburban

areas, the lack of competition in this

sector and the cost of personnel. In

addition, the income derived from the

transport tax and the contribution of

the organising authorities stand little

chance of increasing and State fun-

ding for the Grenelle Environment

Forum investmentsis not secured.

Reaching a new equilibrium

Re-establishing sustainable financial

equilibrium in urban transport net-

works requires streamlining mea-

sures, enhanced productivity and gro-

wing sales income.

Streamlining transport services

In the city centres, this involves simpli-

fying lines and densifying networks,

while avoiding duplicating lines and

adjusting timetables to passenger

traffic. In the suburban areas, this can

go as far as replacing low-traffic lines

by less expensive alternatives: on-

demand transport, park-and-ride ser-

vices, cycle paths, self-service cars or

bikes, car sharing, etc. Increased

cooperation among authorities in

charge of urban transport, and the

use of new tools, such as electronic

ticketing, have played a key role in fos-

tering these initiatives.

Besides, the choice of a means of

transport mode must be related to

the demand side, otherwise facing the

risk of significant excess costs and low

profitability. This awareness explains

the popularity of buses with high

levels of service (50 % of investments

programmed as part of a second call

for projects carried out under the

Grenelle Environment Forum), versus

trams and especially the Metro.

Fillint the productivity gaps

Bringing

operating

costs

under

control will come from controlling the

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Urban transport services : finding a new

balance

payroll, which amounts to 54 % of

operating costs. However, expressed

in kilometres per staff member, the

productivity of personnel dropped by

2.5 %

between

2002

and

2012.

Working time should therefore be bet-

ter organised depending on the acti-

vity, absenteeism should be reduced

and salary increases above inflation

should be linked to productivity gains.

Likewise, standardising equipment

(rolling stock or on-board) will contri-

bute to cost control, through both

purchased quantity and maintenance

expenses.

Ultimately, the productivity of the net-

works depends on optimising produc-

tion factors measured by the opera-

ting speed. For the same number of

travellers, faster operating speed

results in fewer vehicles, lower driving

hours and reduced fuel consumption,

allowing operating costs to be spread

more efficiently.

Increasing income from sales

Both frequency and pricing need to be

adapted to increase income from

sales.

For users, the attractiveness of public

transport depends mainly on punc-

tuality and frequency. Yet these two

parameters are dependent upon the

fluidity of traffic and consequently an

allocation of roads more in favour of

public transport, thanks to the use of

reserved lanes. This assumes the

implementation of a parking policy

that would discourage the use of cars

in town centres.

At the same time, as variations in pas-

senger traffic are more sensitive to

service quality than to price, the prices

for "all clients" should be at least

indexed on inflation. Likewise, while

today more than half of journeys are

made with tickets subject to commer-

cial or social reductions, and 13 % are

free of charge, the reductions granted

could be correlated to levels of

income rather than to the individual

status (elderly people, unemployed,

etc.).

Lastly, the fight against fraud should

be intensified to reduce income loss,

the average rate of which has been

assessed at 5 % to 20 % of sales

income.

***

The sustainable re-establishment of a

balanced urban passenger transport

service is subject to the quick imple-

mentation of measures moving in

three directions :

- incentives to use public transport,

which involves both a quantitative

and qualitative improvement of sup-

ply and actions aiming to rebalance

the benefi/disadvantage ratio bet-

ween cars, public transport and "alter-

native" modes ;

- the control of expenditure for opera-

tion and investment, with improve-

ment of personnel productivity, sha-

ring the costs of acquiring and main-

taining equipment and optimising the

allocation of production factors ;

- an increase in the users’ financing of

the service, which should mainly

result from improved the attractive-

ness of public transport through more

favourable

road-sharing

(volume

effect), price increases (price effect)

and enhanced fight against fraud.

The Cour des Comptes recommends

that the organising authorities and

urban transport operators :

–

acquire tools for analysing the

performance of their networks to

improve business efficiency (urban

transport organisation authority –

AOTU ;

–

scale up investments to the

needs of the areas served (AOTU) ;

–

open discussions with staff

representatives to better adjust wor-

king time to activity and make pro-

ductivity gains (operators) ;

–

share investment and mainte-

nance costs while favouring innova-

tion and technical progress, particu-

larly with regard to electronic ticke-

ting (AOTU and operators) ;

–

transfer to the AOTU's authori-

sing officer (AOTU) all powers regar-

ding to parking and related enforce-

ment powers ;

–

implement pricing policy to

gradually

align

individual

user’s

financing of the public transport ser-

vice

with

corporate

financing

(AOTU) ;

–

more systematically include

combating

fraud

and

insecurity

clauses in contracts signed between

the AOTU and the operators, setting

targets to the number of control

conducted and to the rate of fraud

reduction (AOTU and operators).

Recommendations

Urban transport services : finding a new

balance

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Chapter III

Regional development and urban planning

1 - The future of the ski resorts in the Pyrenees :

a necessary turnaround and inevitable choices

2 - Public operators in local development in the

Île-de-France: a future to be consolidated

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The future of the ski resorts in

the Pyrenees : a necessary tur-

naround and inevitable choices

The Languedoc-Roussillon and Midi-

Pyrénées regional courts of accounts

have inspected some twenty entities

managing ski resorts in the Pyrenees.

A mature market in a restricted envi-

ronment

Skiing in the Pyrenees is a sector

experiencing an underlying crisis. It is

characterised in particular by a high

number of resorts of modest size and

an essentially local clientele. It is a

mature market: attendance at resorts

(in number of skier-days) is falling and

prospects for growth are low.

The ski resorts have already recently

been confronted with a number of dif-

ficult seasons. Climate changes, mar-

ked by increasingly unpredictable

snow, temperature rises and wind phe-

nomena,

represent

threat.

Environmental issues now make town-

planning projects and extension of

the skiable area more complicated.

Economic and financial balance to be

restored

Although they are contrasting, and

independently of the modes of mana-

gement used, the budgetary and

financial situations of the organisa-

tions managing the Pyrenees ski

resorts are under pressure overall and

require the contribution of local

authorities and the regular interven-

tion of financial jurisdictions. The

management difficulties encountered

(operating losses, poor or non-exis-

tent self-financing ability, high levels

of debt), to which accounting shortco-

mings are added, are of a structural

nature.

When the managing organisations

cannot bring balance to the operation,

the local authorities to which they

belong may have to either pay a direct

subsidy or not invoice for all of the ser-

vices they provide to the resort. This

funding is not without consequences

for the level of local taxation. In spite

of this support from local authorities,

resorts regularly find it impossible to

finance basic investments, which in

the medium term risks harming their

competitiveness in a highly competi-

tive market.

Given the more global nature of the

issues involved, the question of the

economic balance of ski resorts is not

solely related to the financial equili-

brium of the organisation operating

the ski resort.

The future of the ski resorts in the Pyrenees : a

necessary turnaround and inevitable choices

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The Cour des Comptes issues the fol-

lowing recommendations :

To the State :

–

ask the prefects to take into

account the "basis for future deve-

lopment" character of winter sports

resorts in inter-municipality coopera-

tion plans.

To the regions and departments :

–

contribute to preparing a regio-

nal project with all stakeholders ;

–

choose the investment pro-

jects according to the regional

project and customer requirements.

To the managing local authorities :

–

ensure that the operation is in

balance or, failing this, consider stop-

ping the activity in the case of struc-

tural difficulties that are too great ;

–

develop pooling between the

different operators, particularly in

the area of procurement and com-

mercial policy.

Recommendations

Essential strategic choices

The business generated by ski resorts

has economic benefits (tax revenue,

services, etc.) and creates jobs in

mountainous zones, which can justify

public intervention. However, this can-

not be done without conditions in a

context of controlled public spending.

This argues in favour of a recovery

involving choices, includingconside-

ring the closure of a resort when

necessary.

Several difficulties to be taken into

consideration have been identified:

low altitude, lack of ability to forecast

opening, insufficient dimensions or

average ski pass prices that are too

low.

The conditions for recovery include

appropriate dimensioning of invest-

ments and the professionalisation of

management. Sharing resources bet-

ween resorts and defining a common

commercial policy would probably

also contribute to helping resorts be

competitive. Lastly, the definition of a

regional project based on clarified

sharing of competencies and funding

appears necessary.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Public operators in local deve-

lopment in the Île-de-France :

a future to be consolidated

Implementing a local housing policy,

building collective facilities, hosting

and supporting the expansion of eco-

nomic activities and fighting against

substandard housing: urban develop-

ment operations contribute to the

development of the Île-de-France

region. Municipalities and their public

institutions for inter-municipal coope-

ration (EPCI) play a major role, but

urban planning and construction

policy also rely on specialised organi-

sations.

In the region, urban development is

the main activity of 64 local public

enterprises (semi-public companies,

local public development companies

and local public companies). They

constitute a particularly dense net-

work of operators. There are 39 deve-

lopment enterprises within the scope

of the future Greater Paris metropolis,

representing one for every three

municipalities.

Increasing the critical size of opera-

tors

Availability of a large number of ope-

rators on the one hand and financing

through sales of developed land on

the other hand: the regional interven-

tion model has long been based on

these two principles, which are now

called into question. In the inner

suburbs especially, development ope-

rations now aim, above all, to increase

density.

They require ever more advanced

urban engineering and the disposal

cost of land for urban renewal opera-

tions is much higher than for exten-

sive development operations. Only

significant public funding can bring

them into balance

In Île-de-France as a whole, the gro-

wing size of operations and the exten-

sion of duration increase risks, notably

the financial ones. The merger of local

public operators in the region now is a

requirement in order to increase their

expertise. Such a process would also

contribute to

consolidating their

equity capital at a time when local

public finances face challenges to

balance their accounts.

Improving the assumption of finan-

cial risks

At the operational level, the worse-

ning of the economic environment

has resulted in a reduction in the crea-

tion of joint development zones

(ZAC). Subject to drastic financial res-

trictions, local authorities tend to

reduce

their

exposure

loans

contracted, with their guarantees, by

development operators. They must

Public operators in local development in the

Île-de-France : a future to be consolidated

ummaries of the 2015 Annual Public Report by the Cour des Comptes

sometimes even delay the disburse-

ment of their financial contributions

to operations.

Under such circumstances, most local

public development enterprises diver-

sified their activities in order to adapt.

They have undertaken construction or

property management operations,

taking the risk of being less competi-

tive than the existing companies. In

addition, they have been looking for

solutions to reduce the cost of car-

rying land – the use of public land-

management institutions (EPF) to

constitute land reserves, pre-marke-

ting land charges, sharing income –

but these solutions cannot be consi-

dered for operations of very uncertain

or very low profitability.

Improving the prevention of legal

risks

The stagnation of urban development

in the Île-de-France and its corollary in

terms of the construction of new hou-

sing units also results from the insta-

bility of the legal framework. Planning

regulations, both local and national,

are constantly changing while those

of European Union have, over the last

few years, imposed an onerous proce-

dure for advertising and open compe-

tition when awarding development

concessions.

To avoid this, some local authorities

have been using the concept of local

public companies since 2010. In this

type of company, however, develop-

ment professionals (such as the

Caisse des dépôts et consignations)

are no longer present and solely the

local-authority shareholders bear the

financial risks.

Building on the process initiated by

the creation of the Greater Paris

metropolis

On January 1, 2016, the institutional

framework under which the public

development operators operate in the

Île-de-France will experience a major

reshuffling. However, the creation of

the Greater Paris metropolis must not

increase

uncertainty.

The

Prefiguration Mission must ensure

that the actual slowdown in develop-

ment projects does not deteriorate

further during the transition phase.

***

To break the deadlock, it is important

that risks and restrictions of all kinds

are shared, limited and anticipated. In

order to better spread their assump-

tion and accentuate the merger of

operators, the Court therefore puts

forward several recommendations. .

First they aim at overcoming the deve-

lopment crisis in the Île-de-France

region by solving the cost of land issue

and alleviating the excessive uncer-

tainties to which local public enter-

prises are exposed.

Public operators in local development in the

Île-de-France : a future to be consolidated

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The Court issues the following

recommendations :

To share the assumption of risk and

allow operators to reach a critical size

so as to be able to deal with investors

at a regional scale, to smooth their

level of activity and consolidate the

professionalism of their teams :

–

continue

the

process

concentration of local public enter-

prises in the inner and outer suburbs

in order for them to reach a critical

size ;

–

increase the process of sharing

procedures among local public enter-

prises.

To better assess and limit risks and, in

particular, remediate the cost of land

issue :

–

give the regional land monito-

ring centre the task of monitoring

land prices in the Île-de-France ;

–

generalise the practices of pre-

marketing, income sharing and the

creation of land-carrying subsidia-

ries.

To better anticipate the financial and

legal risks in local public enterprises :

–

improve the knowledge of ope-

rations and risk analysis: creation of

approval committees responsible for

monitoring changes to the portfolio

of operations; presentation of an in-

depth risk analysis to the board of

directors before any decision on ope-

rations financed for own account;

presentation

the

individual

accounts for local public enterprises

allowing the accounts to be read per

activity (development, assistance to

contracting authority, etc.).

Recommendations

Chapter IV

Higher education and sport

1 - The student services network : essential

modernisation

2 - Public policy against doping in sport: giving a new impetus

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The student services network :

essential modernisation

Government action in favour of stu-

dent life is mainly driven by the natio-

nal

centre

for

student

services

(CNOUS) and the 28 regional centres

for student services (CROUS), natio-

nal public institutions placed under

the supervision of the Ministry of

Higher Education. The difficulties

encountered by the network, in spite

of the increasing financial commit-

ment of the State, have led the Court

to carry out an enquiry with the

CNOUS and all of the CROUS.

Historical State operators in matters

of student life

The CROUS grew out of the student

mutual-aid movements which develo-

ped following the First World War.

They intervene in the assignment of

scholarships, manage restaurants and

university residences and carry out

actions in the field of social aid and

culture.

Their

budget

stood

€1.33 billion

2013.

With

€478.30 million subsidy from the

State, they also have substantial own

resources and employ 11,936 mem-

bers of staff.

The structure of the network is not

devoid of ambiguities: the CROUS

come under the Ministry of Higher

Education, but they are managed by

another

public

institution,

the

CNOUS, which plays the role of net-

work head in dealing with indepen-

dent institutions not under its supervi-

sion. Other players have also entered

the field of student life, starting with

the universities and local authorities.

The numerous organisations and

arrangements do not allow an overall

strategy for student life to be establi-

shed.

Scholarships based on social crite-

ria : checks on regular attendance to

be improved

The obligation of regular attendance,

which is the counterpart of scholar-

ships, is written into the decree of

16 April 1951 on the payment of scho-

larships for higher education. The

CROUS are identified by students as

their reference contacts, but they are

just one of numerous players in this

procedure, which mainly involves

higher education institutions. The

definition of "regular attendance" is

variable, with particularly uneven in

universities. Numerous universities

only check attendance at examina-

tions and the very definition of "atten-

dance at examinations" fluctuates.

This situation introduces unequal

treatment for those who have recei-

ved scholarships. Several avenues for

reform are now possible : make sure

that all universities check attenda nce

at classes, tutorials and practical

work, or reform the definition of

"regular attendance check" by limi-

The student services network : essential

modernisation

Summaries of the 2015 Annual Public Report by the Cour des Comptes

ting it to attendance at examinations

or replacing it by a minimum check on

results.

An insufficient and poorly distribu-

ted supply of student accommoda-

tion

The

network's

property

estate

contains 162,547 places. Since the

1960s, there has been a gradual mis-

match between the supply of housing

offered by the CROUS and the change

in the student population, which has

grown eightfold

(5)

. To remedy the

shortage of housing units and the

dilapidated state of certain resi-

dences, a government plan presented

in 2004 set two objectives for the

CROUS: build 5,000 new housing

units per year and renovate 7,000

places per year over ten years. In

2012, a new government plan set an

objective of creating 8,000 places per

year, representing 40,000 student

housing units over five years, for all of

the approved operators.

The development of the estate has

not followed the rate announced.

Between 2004 and 2013, 26,400

places were created, representing an

annual average of 2,640 places, even

though construction and renovation

of housing units has accelerated since

2007.

There are also very great regional ine-

qualities between the local education

authorities where the supply of hou-

sing is sufficient, and those suffering

great shortages such as Paris, Créteil,

Lyon and Lille. Successive investment

plans have not corrected these ine-

qualities: in 2013, the Paris CROUS

had a supply of housing close to that

of the Rouen CROUS, which receives

one sixth as many students.

Lastly, the CROUS are finding it diffi-

cult to balance the management of

their residences. The university year

has been shortened and the CROUS

are coping with a drop in occupation

rates on certain sites. Over the last

few years, work placement and study

abroad courses have been developing,

and students are increasingly mobile

during the year. In addition, each ins-

pection by the Court has identified

several residences that are deeply in

deficit, particularly in average-sized

towns.

University catering: an increasing

deficit

University catering is the main cause

of the financial difficulties encounte-

red by the CROUS as student atten-

dance has been regularly dropping:

the number of student meal-equiva-

lents went from 52.9 million in 2008-

2009 to 45.9 million in 2013-2014.

This is primarily due to a growing pre-

ference for fast food, as well as the

modification of university course

hours. With the establishment of the

"degree – master's degree – doctorate"

system and studies taking place over

_________

5) In 1960, France had 310,000 students. In 2013, it had 2.4 million, 12 % of whom were inter-

national students.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

half-yearly periods, the CROUS make

70 % of their turnover between

September

and

February,

while

employing full-time staff.

To stimulate attendance, the CROUS

are seeking to diversify their services

and find new customers by develo-

ping cafeterias, automatic distribution

and catering activities, which bring

them into the field of private competi-

tion. In spite of the efforts made to

win back student customers, certain

traditional restaurants remain oversi-

zed and not all can be reconfigured.

Faced with an increasingly cyclical

activity,

the

framework

for

the

employment of manual workers is too

inflexible, which is leading the CROUS

to develop insecure jobs. The number

of staff on temporary contracts

increased

from

1,239

Full

Time

Equivalent in 2008 to 1,482 FTE in

2013.

A necessary reorganisation

The unequal access to CROUS accom-

modation for the most underprivile-

ged students has worsened and the

framework for university catering

appears obsolete. The requirements

of students and the university envi-

ronment have changed, while the

organisation and modes of manage-

ment of the network have remained

unchanged. Over the long term, only

better involvement of the higher edu-

cation institutions and their associa-

tions can lead to the preparation of an

overall design for services provided to

students in the same region. The defi-

cit in catering and the unstable

balance of accommodation neverthe-

less require structural reforms in the

short term.

The Court issues the following

recommendations :

–

reform

the

definition

and

implementation of the regular atten-

dance check for scholarship stu-

dents ;

–

cconcentrate the construction

of new university residences in areas

where they are lacking ;

–

review contractual relations-

hips with social landlords to ensure

that the estate is maintained ;

–

close the accommodation and

catering facilities where attendance

is too low ;

–

make the framework for mana-

ging manual workers more flexible ;

–

merge the CROUS in the Île-

de-France.

Recommendations

The student services network : essential

modernisation

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Public policy against doping in

sport : giving a new impetus

France has been historically very

active in fighting doping in sport.

Since 1965, six successive laws have

created a body of rules in the sporting

code

that

combine

prevention,

control, penalties and repression of

drug trafficking, and coordinate the

respective roles of the State (Ministry

of Sport, Ministry of the Interior and

Ministry of Finance), the French Anti-

doping Agency (AFLD) – an indepen-

dent public authority –, and the sports

organisations ing movement (French

national Olympic and sporting com-

mittee – CNOSF, and sporting federa-

tions). This public policy is carried out

within an international framework

(the International Drug Code and the

International

Convention

against

Doping in Sport) which is becoming

increasingly demanding. With a cost

of more than €14 million for the State,

including the €6 million devoted to

statutory medical supervision, the

anti-doping policy in the strict sense

includes control actions (€7 million)

and

prevention

actions

(€1.27 million).

Adjusting the control policy

The fight against doping is primarily

aimed at elite sport, and specially two

targets: firstly 20,700 elite athletes

(or former athletes); and secondly, a

group known as the "target group",

constituted each year by the Agency

from several hundred athletes chosen

from within the first group.

Nevertheless,

and

particularly

France, it is also aimed at 17 million

members of sports clubs, and more

broadly

addresses

public

health

concerns.

The Agency must endeavour to adapt

its control strategy to each of these

three targets for efficiency and cost

reasons. As such, the recent of "biolo-

gical profile" control of athletes in the

target group and of information col-

lection should contribute to a better

control rather than more control.

Involving the network of inter-regio-

nal anti-doping advisers, and faster

streamlining the network of samplers,

would also consolidate the control

policy of the AFLD.

Developing commercial policy

Unlike other agencies, the AFLD has

its own analysis laboratory, located at

Châtenay-Malabry, which enjoys an

appropriate level of operational inde-

pendence. It has adequate trained

staff to cope with activity, particularly

blood tests.

The Agency should develop its ser-

vices offering for international federa-

tions, which request few analyses

from its laboratory, in order to

increase its resources which are cur-

Public policy against doping in sport :

giving a new impetus

Summaries of the 2015 Annual Public Report by the Cour des Comptes

rently limited to €1 million. To this

end, the Agency must strive to better

define the pricing of its services and

help both departments, control and

analysis, to better anticipate their res-

pective workloads.

Dynamising the research

Since 2009, the Ministry focus was on

sport-health research and the

Agency took the lead in research on

the fight against doping, supporting

research projects selected by its scien-

tific steering committee fon the basis

of calls for projects

Its

analysis

laboratory,

which

conducts research activities notably

for its accreditation by the World Anti-

Doping Agency, presents modest

scientific results compared to some

European laboratories; it must make

progress in its research, particularly

by strengthening its internal exper-

tise, defining a long-term programme

and setting up partnerships with the

most qualified public research teams.

Re-launching a currently neglected

prevention policy

The policy on the prevention of

doping is the responsibility of the

Ministry of Sport with the support of

the sporting movement. Yet a recent

survey carried out in sports shows

that there is a real degree of tolerance

or acceptance of doping among the

majority of them. The Ministry of

Sport should therefore adjust the

messages

the

targets.

Furthermore, the very low activity

registered by the two main tools for

prevention put in place following the

cases of doping in the 1998 Tour de

France, the freephone number and

the medical units (AMPD), raises the

question as to whether they should be

maintained.

For its part, the sporting world should

be more involved and committed as a

partner: although French federations

are in contact with athletes, they are

very unequally involved and some

even consider that they are not

concerned. The anti-doping compo-

nent of the agreements on objectives

which bind the federations and the

State should be tsubject to an annual

review in order to, eventually, revised

the resources granted by the State to

the federations (overall €87.5 million

of subsidies and 1,680 technical

sports advisers in 2013).

The Ministry of Sport is also invited to

implement, in liaison with the Ministry

of Health and the Ministry of National

Education, an overall approach to

sport for all which encompasses the

drug issue.

Intensifying the fight against drug

trafficking

Within an international framework,

the fight against trafficking in doping

products is the responsibility of the

Ministry of Finance and the Ministry of

the Interior. Measuring effectiveness

is a complex task as doping products

are mainly detected in the broader

fight against the illicit sale of medi-

cines.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The Court issues the following

recommendations :

Concerning the French Anti-doping

Agency :

–

establish

selective

control strategies, based on more

accurate criteria according to the

audience ;

–

increase the research actions

the

anti-doping

laboratory

through

new

partnerships

with

research organisations or universi-

ties ;

–

develop the Agency's own

resources, particularly through more

sustained commercial action by the

laboratory, supported by improved

analysis of costs and prices.

Concerning the ministries :

–

improve inter-ministerial coor-

dination in matters of doping preven-

tion by identifying joint objectives

among the ministries concerned ;

–

include preventive actions in

agreements on objectives with the

federations, evaluate them and apply

penalties in case of shortcomings if

required ;

–

effectively organise the new

regional commissions for fighting

trafficking in doping methods or

substances in to improve the infor-

mation relayed to the Agency.

Recommendations

Despite partnerships between the

AFLD and the administrations of

these two ministries, cooperation is

not particularly active. As such, the

proper functioning of the regional

commissions for the fight against traf-

ficking in doping methods or subs-

tances is essential to collecting and

exploiting information.

Public policy against doping in sport :

giving a new impetus

Third part

Public Management

Chapter I

Administrative organisation

1 - Treasuries to the French embassies : an unjustified

survival

2 - The reform of the judicial map : a reorganisation

to be continued

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Treasuries to the French

embassies : an unjustified sur-

vival

The Ministry of Finance and Public

Accounts has a network of 16 treasu-

ries abroad, primarily located in Africa,

several European capitals, the United

States and China. Alongside this net-

work, most of the State's expenditure

abroad is covered by 193 cash books,

placed directly with the embassies

Unsupported justifications for main-

taining treasuries with the French

embassies

The Ministry justifies this duality by

the handling of specific transactions

such as the payment of operating

expenses for permanent military

bases in Africa or payments for arma-

ments contracts with the United

States, amounting to a total of

€275 million

2013.

However,

expenses of the same nature take

other circuits which operate from

France.

The second justification relates to the

administration and payment of pen-

sions for those under pension regimes

for French citizens residing abroad

(€125 million in 2013). But although

eight treasuries in Africa are responsi-

ble for managing and paying pensions

for foreign veterans who have served

in the French army ("revalued" pen-

sions), in eleven other countries, this

task is performed by the diplomatic

cash books or foreign administrations.

The existence of alternative payment

circuits, either on-site via the diploma-

tic cash books or from France via the

general overseas treasury, removes

the justification for maintaining a par-

ticularly costly specific accounting

network.

A network with particularly high ope-

rating costs

The cost of operation of this network

amounts to €23 million for 16 esta-

blishments, representing an average

cost per establishment 2.2 times grea-

ter than the already high cost of the

economic services of the Directorate

General of the Treasury. This excess

cost mainly results from the very high

proportion of expatriate staff (80 % of

a total workforce of 208). 78 % of

these carry out actual expenditure

tasks or intermediate supervision,

whereas these functions are mainly

ensured by officials under local law in

other State services abroad.

Furthermore, the management of this

network demonstrates an inappro-

priate human resources policy based

on the selection of staff solely by

seniority, notably providing officials of

the Directorate General of Public

Finance with career outlets abroad.

The Court issues the following

recommendation :

–

close all of the treasuries to the

French embassies in the near future.

Recommendation

Treasuries to the French embassies : an unjus-

tified survival

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The reform of the judicial map:

a reorganisation to be conti-

nued

long-awaited

and

successful

reform

The reform of the judicial map has

been proposed on numerous occa-

sions, but was always postponed.

Undertaken in 2007, it enabled the eli-

mination of nearly one court in four

(863 on 1 January 2011, compared to

1,190 in 2007): it is the most impor-

tant administrative reform since 1958.

The criteria used by the "judicial map

project", placed under the responsibi-

lity of the Secretary General of the

Ministry of Justice, were essentially

based on levels of activity : 1,550 civil

cases (excluding emergency appeals

to a judge) and/or 2,500 criminal

cases that may be tried in a district

court ; 615 civil cases for a sub-district

court. The reform was prepared to a

very short deadline, giving the impres-

sion of a lack of consultation and

giving rise to numerous debates, with

the notable exception of the commer-

cial courts and employment tribunals,

which were reorganised consensually.

However, it is no longer called into

question today.

The personnel of the Ministry of

Justice have also benefited from a

significant support plan of nearly

€15 million, equitably divided.

Controlled budgetary expenditure

The cost of implementing the reform

of the judicial map remained within

the limits set : initially evaluated at

€457 million, it amounts to €413 mil-

lion, including €329 million for the

property component, €27 million for

operating expenses related to the

reorganisation, €15 million for social

support expenses and €5 million for

lawyers practising at bars which were

eliminated. The property component

was also financed at a constant bud-

get level using ordinary credits from

the Ministry.

The implementation of the reform led

to 452 property transactions dili-

gently implemented by the Ministry of

Justice, enabling 65 of them to begin

as of 2008 and leading to a quicker

than usual improvement in the quality

of the property estate, and without

much waste. Although this was not

the aim of the reform, the rationalisa-

tion of floor space has also led to ope-

rating savings of €9 million at an

annual rate.

Likewise, although the reform of the

judicial map was not primarily inten-

ded to reduce staffing levels in the

judicial services, savings have never-

theless been made in administration,

which have enabled a more consistent

The reform of the judicial map : a reorgani-

sation to be continued

Summaries of the 2015 Annual Public Report by the Cour des Comptes

distribution of magistrates and chief

clerks, particularly in the district

courts, and reduced the isolation of

certain magistrates in small courts.

The gradual improvement of the

functioning of the courts

The grouped district courts have grea-

ter productivity than the others. But

the reform has not curtailed the gene-

ral deterioration of deadlines obser-

ved in all of the district courts, which

results in particular from the increase

in activity produced by the reform in

legal guardianship of adults and dis-

putes concerning excessive indebted-

ness.

The reform has strengthened the col-

legiality

of the

courts.

Progress

remains to be made in the commercial

courts and employment tribunals to

increase the rate of the individual acti-

vity of judges.

The reform has been criticised for

creating "judicial deserts", leading to

the exclusion of the most vulnerable

groups. This assertion is unsupported:

the areas with the least facilities also

correspond to the least populated

areas, the drops in activity recorded

are greater in jurisdictions which have

not been affected by the reform, and

legal aid in favour of individuals on

low incomes subject to trial has conti-

nued to grow at a sustained rate.

However, the concepts designed to

replace the eliminated courts ("new

generation" law centres and single-

point of contact court registries) have

not proven effective.

The Court issues the following

recommendations :

–

review the map of courts of

appeal, at least bringing it into line

with the map of administrative

regions or with the inter-regional

map already used by the other net-

works of the Ministry of Justice and

by the judicial services for budgetary

and accounts administration ;

–

further reform the map of

commercial courts in areas with

several courts where at least one is

not of the critical size ;

–

adapt the functioning of the

new-generation law centres to the

reform objectives assigned to these

organisations.

Recommendations

Chapter II

Management of projects

1 - The National Payroll program : a costly failure

2 - The MuCEM : a lengthy process and an uncertain future

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The National Payroll program :

a costly failure

On 4 March 2014, the government

decided to renounce the National

Payroll program, one of the most

ambitious and costly IT projects

(€346 million) undertaken by the

French administration in recent times.

The National Payroll program was

aimed to redesign the payroll circuit

for States civil servants so that their

remuneration would be automatically

established using a new computer sys-

tem, "SI-Paye", directly fed with input

data from the human resources infor-

mation systems (HRIS) that the minis-

tries were planning to implement. By

completely computerizing the thou-

sands of payroll rules used by civil ser-

vice payroll managers, le National

Payroll program was expected to

improve the service provided to civil

servants

and

payroll

managers,

increase the reliability of the payroll

processes, provide a better control of

staff expenses and reduce the state

workforce by 3,800 jobs

Designed as of 2005 and launched in

May 2007, the National Payroll pro-

gram encountered difficulties that

became increasingly obvious over

time. In 2010, the detailed design

(blueprint) of the SI-Paye system was

delayed. Subsequently, the Ministry of

National Education, the Ministry of

the

Environment

and

then

the

Ministry of the Interior announced

that they would no longer be pilot

ministries for connecting their HRIS to

the SI-Paye. Between 2012 and 2013,

the Ministry of Agriculture, the last

pilot involved in the process, failed to

connect its own HRIS to the SI-Paye.

In July 2013, the Prime Minister orde-

red the Interministerial Director for

Information

and

Communications

Systems (DISIC) to redesign the

National Payroll program. Due to eco-

nomic, budgetary, timetable and tech-

nical reasons, the DISIC recommen-

ded that the implementation of the

SI-Paye system should be cancelled

and that the existing applications,

named “PAY” and “ETR”, should be

retained, in spite of their outdated

state.

The failure of the National Payroll pro-

gram is firstly due to its excessively

ambitious design, and secondly to its

defective

governance.

Its

conse-

quences are serious.

An excessively ambitious design

The designers of the National Payroll

program pursued too many objectives

and set excessively high requirements.

Replacing the entire existing payroll

chain carried risks: complex transition

operations from one system to ano-

ther, project management, coordina-

tion with ministerial project teams in

charge of HRIS and synchronization of

Summaries of the 2015 Annual Public Report by the Cour des Comptes

the master data structuring the dia-

logue between all information sys-

tems. The technical architecture cho-

sen had not proven feasible given the

specifics of the payroll of civil ser-

vants, the number of HRIS in question

and

the

technical

requirements

concerning the maintenance of the

system as a whole. The program sche-

dule lacked intermediate completion

milestones and its implementation

timetable was clearly too optimistic.

The organisational and technical risks

of the design of the National Payroll

program were significantly underesti-

mated, notably due to a lack of signifi-

cant experience by the person in

charge of its preliminary design, a lack

prior

strategic

consideration

concerning the simplification of pay-

roll rules and a lack of external techni-

cal auditing.

Defective governance

From the outset, the program was

jointly assigned to a specific depart-

ment the National Payroll Agency –

Opérateur national de paie (ONP) –

and to the ministerial HRIS project

managers. As these project managers

were not pursuing a common objec-

tive, they did not coordinate with one

another, leading to delays and the

subsequent failure in connecting of

the ministerial HRIS to the SI-Paye

even though the final validation of SI-

Paye, i.e. the final check of its correct

operation, was carried out.

In spite of assistance provided to its

project

management

teams,

the

National Payroll Agency encountered

numerous difficulties for example in

recruitment, job turnover and metho-

dology.

The ministerial project teams in

charge of HRIS were also weak, parti-

cularly in terms of organisation, data

management, and financing.

The National Payroll Agency's strate-

gic committee did not play a steering

and coordination role in relation to

the various project management

teams involved. It did not slow down

the rate at which the technical specifi-

cations published by the National

Payroll Agency were updated. It did

not manage properly the ministerial

project teams’ planning nor the risks

related to connecting HRIS systems to

the “SI-Paye” system.

The National Payroll Agency was atta-

ched to the General Directorate for

Public Administration and the Civil

Service (DGAFP) and the Public

finances general directorate (DGFiP).

These directorates barely influenced

the activity of the agency due to the

culture of autonomy demonstrated by

its management, but also due to the

ambiguity of their positions. While

supporting the program, the DGAFP

did not review its priorities according

to its requirements. The support recei-

ved from the DGFiP was insufficient,

under circumstances in which the Tax

General Directorate (DGI) and General

Directorate

for

Public

Accounts

(DGCP) merged, monopolizing most

of the attention of theirs managers.

As they were not very attentive, the

Budget Directorate (DB) and the

various budget managers involved did

not fulfil their oversight role. In parti-

The National Payroll program : a costly failure

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The National Payroll program : a costly

failure

cular, the monitoring of ministerial

expenses relating to the National

Payroll program was insufficient.

In spite of the various warnings sent,

the government reacted too late.

A costly failure with serious conse-

quences

Between 2008 and 2013, €346 million

were spent during the course of the

National Payroll program. A large part

of the expenses financed the acquisi-

tion of software which is now useless

as the French State will not activate it,

following the decision made in March

2014. The progress seen at the public

administration level (finalising master

data systems, creating validation

tools) and at the organisational level

(reform of organisations and reduc-

tions in staffing levels) do not com-

pensate for the resources consumed.

The failure of the National Payroll pro-

gram generates risks for the future.

The completion of several ministerial

HRIS projects remains uncertain. The

“PAY” and “ETR” applications, which

the SI-Paye system was intended to

replace, will have to be overwritten to

extend their lifespans and ensure that

they can be upgraded. In the years to

come, the payroll circuit for State civil

servants will have to evolve to take

into new standards for social security

reporting - déclaration sociale nomi-

native (DSN) -, to strengthen internal

control and to prepare for the dema-

terialization of the payroll circuit.

Given that the SI-Paye will not be

implemented, existing irregular pay-

roll practices may continue. Due to a

lack of tools for monitoring and

controlling the payroll and staff

expenses, the State’s budgetary tra-

jectory keeps being subject to risks.

The Court issues the following

recommendations :

–

overwrite the “PAY” application

to ensure its viability by preserving

all of its functionalities, then prepare

for the inclusion of new standards for

social-security reporting (DSN), the

shutdown of the “ETR” application

and the dematerialization of payroll

processes (DGFiP) ;

–

make

sure

the

General

Directorate for Public Administration

and the Civil Service (DGAFP) and

the Budget Directorate (DB) are pro-

vided with a tool for monitoring and

simulating the State staff expenses

(CISIRH) ;

–

create and implement tools

and procedures for automatically

detecting, then systematically elimi-

nating,

irregular

pay

practices

(CISIRH, DGAFP).

Recommendations

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The MuCEM : a lengthy pro-

cess and an uncertain future

A chaotic decision-making process

Launched in May 2000, the construc-

tion of the MuCEM has been many

times called into question during its

lengthy preparatory process (2000-

2013). Although the architecture

competition was launched in 2003,

the work –which project owner was

the operator for heritage and culture-

related property projects (OPPIC) –

only began at the Port de la Joliette in

2009, the project being at a standstill

until Marseilles was designated as

European Capital of Culture in 2008.

In addition to political procrastinating,

the completion of the museum has

been hindered by the challenge of

matching of a collection that was

essentially French, focused on prein-

dustrial France, with a new scientific

and cultural project focused on the

civilisations

Europe

and

the

Mediterranean.

A questionable preliminary work

The management of this project also

suffered

from

the

inappropriate

governance set up for its preliminary

work. In 2005, when the MNATP was

closed to the public, the agency with

national authority (SCN) responsible

for managing this establishment was

assigned the responsibility of creating

the MuCEM. Faced with serious short-

comings in this agency, the Ministry of

Culture had to create a prefiguring

One of the latest landmarks initiated

by the

Ministry

Culture

and

Communication,

the

Museum

European

and

Mediterranean

Civilisations (MuCEM) was inaugura-

ted on 7 June 2013 as part of the

"Marseilles

European

Capital

Culture" operation. Resulting from the

relocation of collections from the

National Museum of Popular Arts and

Traditions (MNATP), a Parisian institu-

tion suffering from lack of public inte-

rest, this project is the only example of

a transfer, outside Paris, of an entire

national collection.

Source : Cour des comptes

The MuCEM : a lengthy process

and an uncertain future

Summaries of the 2015 Annual Public Report by the Cour des Comptes

association in September 2009. The

personnel of this association (58 staff

members in 2013) were combined

with the several hundred SCN officials

who were largely under-employed in a

museum which had no exhibitions nor

visitors, until they could be rede-

ployed, at the beginning of 2011 only.

A complex and costly operation

A 40,000 m² complex of three buil-

dings on two separate sites – the "J4"

building assigned to the architect

Rudy Ricciotti and the Fort Saint-Jean

at the Port de la Joliette and the

Resource Conservation Centre (CCR)

housing the museum reserves in the

Belle-de-mai area – the MuCEM is a

complex operation for which the

Ministry

Culture

and

Communication concluded a 25 year

public-private

partnership

(PPP)

which entrusted a private partner

with the financing, construction,

maintenance and management of the

CCR

(6)

t in return for a rent.

The total public funding allocated to

the

MuCEM

has

been

least

€350 million.

For the calculation, the Court aggre-

gated

all

costs

studies

and

construction

for

the

buildings

(€233.37 million)

(7)

, SCN operating

expenses and the prefiguring associa-

tion (€58.24 million), processing and

transfer to Marseilles of the million

items from the MNATP (€22.80 mil-

lion) and management -maintenance

of the CCR according to the PPP

signed by the State (€35.60 mil-

lion)

(8)

While an integral part of the MuCEM's

project, the future of the MNATP's

Paris building, has not been anticipa-

ted by the Ministry of Culture. Almost

dilapidated, its refurbishment will also

require significant investments, parti-

cularly due to the presence of asbes-

tos on the premises.

_________

6) As part of this PPP, the State has undertaken to pay an annual rent for which the combined

amount over 25 years (until 2037) will cover the total cost of the PPP (€92.2 million), which

breaks down as follows : the investment cost (€29.9 million) and the financial carry (€21.86 mil-

lion); the estimated operation-maintenance cost (€35.6 million) and the provision for debit

(€4.7 million).

7) This amount includes all of the costs relative to the property transaction for the MuCEM: the

costs of studies and work carried out in the Fort Saint-Jean and in the Ricciotti building

(€169.01 million); the cost of the required relocation of the department of sub-aquatic and sub-

marine archaeological research (DRASSM) from Fort Saint-Jean, necessary to the installation

of the MuCEM (€6.2 million); the purchase of the land for the CCR (€1.7 million) and the com-

bined amount over 25 years of the rent for the PPP serving to cover the initial investment and

the financial carry for the CCR (€56.46 million).

8) This amount corresponds to the projected amount of operation-maintenance rent that will

be paid by the State over 25 years. The operation-maintenance rent is revised annually accor-

ding to assumptions on price changes.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Outstanding issues

Although the MuCEM has enjoyed a

real public success since its opening

(3.4 million visitors from June 2013 to

September 2014), the economic equi-

librium and the museum content of

the institution remain questionable.

The maintenance and managing costs

of the museum have not been pro-

perly forecasted: beyond the under

estimated cost of the technical inno-

vations of the Ricciotti building (main-

tenance of the ultra-high-perfor-

mance

fibre-reinforced

cement,

pumps installed in the moat below sea

level), some elements have proved to

be fragile and unprepared to te large

museum attendance (wooden ter-

races). The imprecision of operating

costs, combined with the modest

prospects for own resources (26 % of

total resources in 2014) raise ques-

tions about the financial sustainability

of the institution's budget.

The MuCEM must also meet a dual

challenge with regard to its museum

content: firstly, defining an attractive

programme in spite of a restricted

budget (less than 20 % of the Museum

operating costs are assigned to the

programme) and the wide and persis-

tent gap between its scientific project

and its collections (out of the 250,000

3D objects maintained, 20 % only do

not originate from France, and 8 %

only

those

come

from

the

Mediterranean); secondly, continuing

to exhibit and circulate the MNATP's

collections so as it was not in vain

that this vast collection of items has

been moved from Paris to Marseilles.

The MuCEM : a lengthy process

and an uncertain future

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Le MuCEM : a lengthy process

and an uncertain future

The Court issues the following recom-

mendations :

the

Ministry

Culture

and

Communication :

–

strengthen the management of

museums administered under the sta-

tus of agencies with national authority

(SCN), particularly concerning human

resources, so as not to repeat the mis-

takes of the MuCEM SCN ;

–

quickly reassign or transfer the

MuCEM's Paris building.

To the MuCEM public institution :

–

define a strategy for acquiring

and valuing collections that can reduce

the

gap

between

the

MuCEM's

museum programme and the collec-

tions inherited from MNATP ;

–

increase the institution's own

resources by developing sponsorship,

renting spaces, granting concessions,

and , getting local authorities involved

in the funding of the artistic program-

ming.

To the MuCEM and the OPPIC :

–

estimate the cost of servicing

and maintenance of the Ricciotti buil-

ding, particularly with regard to the

materials

used

(ultra-high-perfor-

mance fibre-reinforced concrete, stain-

less steel and glazed walls).

To the MuCEM and the Ministry of

Culture and Communication :

–

finalise a performance contract

that includes precise objectives for visi-

tor numbers and own resources ;

–

establish the MuCEM as the lea-

ding museum for cultural heritage,

particularly by promoting the travel-

ling of the collections inherited from

the MNATP.

Recommendations

Chapter III

Modes of administration

1 - Local authorities' public-private partnerships :

managing the risks to be controlled

2 - The direct management of water and sanitation services :

progress to be reinforced

3 - French management of European structural funds :

improve, simplify and evaluate

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Local authorities' public-private

partnerships: managing the

risks to be controlled

Ten years after their creation by the

ordinance of 17 June 2004, the Court

wished to make an appraisal of public-

private partnerships, as nearly 150

partnership

contracts

have

been

signed by local authorities, for a total

investment of €4.07 billion.

The Court considers that the lack of

monitoring of this new instrument can

lead to risks which require a streng-

thened supervision.

The partnership contract: an innova-

tive legal tool used for various pur-

poses

An innovative concept

After a sharp increase from 2008 to

2012, the number of partnership

contracts signed by local authorities

has stabilised.

The partnership contract is a global

contract authorising a public entity to

assign to a private partner not only

the funding and construction, but also

the servicing, maintenance and mana-

gement of structures or tangible or

intangible assets in order to provide a

public service.

Very diverse uses

The 29 contracts examined in the

investigation carried out by the Court

and

the

regional

courts

accounts reflect the variety of opera-

tions at the national level, with two

specific sub-groups: firstly, public ligh-

ting (one third of contracts) and

secondly, the large stadiums (such as

that of Marseilles), which amount to

several hundred million euros.

A financial stake that is still limited

If the investment of local public admi-

nistrations can be valued at about

€70 billion per year, three quarters of

which comes from local authorities,

i.e. nearly €55 billion per year, the

investments made under partnership

contracts (€4.07 billion) still represent

a small share of local public orders.

However, this amount does not take

into account the costs of funding,

maintenance and operation, which

may be very high, as experienced with

the large stadiums.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Insufficient analysis and competition

in the selection and assignment of

partnership contracts

The prior evaluation must primarily

ensure that the project meets one of

three alternative criteria for eligibility

(complexity, urgency and economic

efficiency).

The prior evaluation must also explain

the economic, financial, legal and

administrative reasons justifying the

comparative advantage of a partner-

ship compared to other solutions.

However, the Court has noticed seve-

ral shortcomings in the implementa-

tion of these criteria, comparative

analyses being often based on ques-

tionable assumptions favourable to

the partnership contract.

The Court notes that the procedure

for assigning contracts does not

always comply with the principles of

equal treatment between applicants

and transparency of procedures, with

the sometimes questionable interven-

tion of the project management assis-

tance.

A risk of disruption in the long term

equilibrium of the contract and

insufficient monitoring

An imbalance to the detriment of local

authorities

In particular, the Court made note of

mandatory clauses that were missing

in the contracts, unbalanced clauses,

and sharing of execution risks that

was usually unfavourable to local

authorities.

Insufficient control by local authorities

and difficulty in evaluating efficiency

Local authorities do not equip them-

selves with the necessary technical

and human resources to monitor

contracts which are by nature com-

plex, while the efficiency and costs of

partnership contracts are difficult to

establish due to lack of reliable tools

to compare projects carried out under

a partnership contract and a conven-

tional procedure.

Financial deviations may also be at

the origin of disputes which may give

rise to early terminations that are

costly for local authorities.

Nevertheless, partnership contracts

may have positive results in terms of

performance, as in public lighting for

example,

compliance

with

construction deadlines, with struc-

tures also handed over in a good state

of operation at the end of the contract

period.

A significant impact on the financial

situation of local authorities in the

medium and long term

These contracts tend to increase the

debt and limit the self-financing capa-

city of local authorities, which causes

a "crowding-out" effect on other

expenditure over the long term.

Furthermore, the obligation to main-

tain structures, although positive for

the service provided, generates a sys-

tematically higher cost for local

authorities.

***

Local authorities' public-private partnerships :

managing the risks to be controlled

Summaries of the 2015 Annual Public Report by the Cour des Comptes

In conclusion, the Court considers

that the use of a partnership contract

is justified only if it complies, beyond

existing regulations, with a certain

number of conditions, including a pro-

ven budgetary sustainability, a genui-

nely balanced sharing of risks bet-

ween the local authority and the

contract holder, and the ability of the

local authority to negotiate and moni-

tor the contract over its duration.

The Court issues the following

recommendations :

To local authorities :

–

include the annual report on

actual expenditure for the partner-

ship contract in the budgetary policy

debate, describing and explaining its

subsequent development and its real

costs in relation to the contractual

document ;

–

avoid using the same contrac-

tual partner as an assistant to the

contracting authority during the dif-

ferent phases of the project, particu-

larly during prior evaluation and help

with awarding the contract ;

–

avoid opting for the partner-

ship-contract concept if there is

insufficient expertise and resources

to monitor it properly.

To the State :

–

extend, to local authorities, the

clauses

the

decree

27 September 2012 supplementing

the clauses relative to awarding cer-

tain public contracts applicable to

the State, its public institutions and

public health institutions, and require

a budgetary sustainability study at

the prior evaluation stage ;

–

modify the accounting stan-

dards to make it mandatory to record

the resulting off-balance-sheet finan-

cial commitments when a local

authority has assigned to a third

party (SEM, EPCC, etc.) the running

execution

partnership

contract

that

has

previously

concluded ;

–

modify the accounting stan-

dards in order to show, as off-

balance-sheet

commitments,

all

costs (financing, maintenance and

operation) beyond the sole invest-

ment costs ;

–

withdraw from the MAPPP its

task

promoting

partnership

contracts and strengthen its function

of providing independent experti se

in support of local authorities.

Recommendations

Local authorities' public-private partnerships :

managing the risks to be controlled

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The direct management of

water and sanitation services :

progress to be reinforced

The direct management of water and

sanitation services is the most wides-

pread management mode, particu-

larly amongst small and medium-

sized towns. An alternative to delega-

ted management, it is once again

arousing interest from local authori-

ties and their consortiums, even

though few changes in the manage-

ment mode have actually been seen.

The 70 inspections carried out by the

regional courts of accounts on ser-

vices of varying sizes located throu-

ghout

metropolitan

France

and

concerning more than 10 million inha-

bitants show that although indisputa-

ble progress has been made, there is

still considerable room for improve-

ment, particularly with regard to

knowledge of the estate, approach to

the real service cost, and adjustment

of prices to present and future fun-

ding requirements.

Performance to be improved

The measurement of the performance

of the water and sanitation services,

put in place following the recommen-

dations of the Cour des Comptes in its

1997 and 2003 reports, is an innova-

tive process, but weakened by the

incomplete transmission of data to

the national database for the compu-

ter system on water and sanitation

services.

There is still room for improvement

regarding control of the service and

knowledge of the estate.

The budgetary guidelines and analysis

of the activity of the directly-managed

services

have

been

insufficiently

debated by advisory assemblies. Only

the largest local authorities set objec-

tives and evaluate the performance of

their directly-managed services, as

the smaller ones do not yet make suf-

ficient use of a performance-oriented

approach.

It is also essential to control the ser-

vice well in advance as the complex

and risky phase of moving to direct

management can lead to initially ill-

understood charges.

At the assets level, the water and sani-

tation services are composed of infra-

structure for which construction and

maintenance represents a significant

financial cost. Only accurate know-

ledge can ensure the functioning of

equipment and its renewal. However,

the majority of directly-managed ser-

vices are not able, due to a lack of in-

depth knowledge of the state of the

network, to reduce losses, the rate of

Summaries of the 2015 Annual Public Report by the Cour des Comptes

which is nearly 20%, representing

about one billion m3 of water at natio-

nal level

(9)

Still too few mergers

Nearly 60 % of drinking water and col-

lective

sanitation

services

cover

regions of less than 1,000 inhabitants.

This dissipation does not make it pos-

sible to optimise the management of

the service and ensure a sufficient

financial capacity and technical exper-

tise to maintain the existing facilities

in perfect condition and create new

facilities that prove to be essential.

Certain local authorities have found it

beneficial to join together to form

departmental or inter-departmental

directly-managed services, attached

to public-private entities, as soon as

their networks have to be connected

in order to secure supply, but this

approach remains limited.

Some instances of service pooling

have begun, particularly through the

creation of local public water compa-

nies, but without calling into question

or totally rationalising the pre-existing

local organisation.

Financial equilibrium often in appea-

rance only

Characterised by great local dispari-

ties related to the availability and qua-

lity of the resource, the average price

applied by the directly-managed ser-

vices (€3.52 per m3) is lower than the

national average. However, in certain

cases, it does not take into account all

of the charges.

The reliability of the accounts is often

compromised by a lack of rigour in

applying accounting rules. Thus, the

assignment of administrative and per-

sonnel charges is not always justified

by reliable cost accounting. The lack

of provisions for bad debts and the

partial application of depreciation

rules also significantly affect the equi-

librium price.

Insufficient consideration of invest-

ment needs

All water and sanitation services are

confronted with a reduction in sales of

water at the same time as an increase

in operating costs, which are essen-

tially fixed charges. Another factor

causing tension for the directly-mana-

ged services is the deterioration of

recovery rates.

Against this rather unfavourable back-

drop, some services have set up long-

term investment plans with a strategy

to renew facilities and have equipped

themselves with tools for modelling

changes in the price of water including

requirements for future investment.

However, most do not have any policy

on funding their investments over the

long term.

_________

9) One out of five litres of water put into the distribution network does not reach the consumer

and returns to the natural environment.

The direct management of water and sanitation

services : progress to be reinforced

ummaries of the 2015 Annual Public Report by the Cour des Comptes

Pooling services can strengthen gains

in productivity. Other than the effi-

ciency savings this allows in the

medium term with the increased

rationalisation of the employment of

skills and personnel, it also provides a

sufficient financial basis to make the

unavoidable investments to renew or

increase capacity.

The Court issues the following

recommendations :

–

introduce, into the departmen-

tal plans for inter-municipal coopera-

tion, a section calling for the merging

of water and sanitation services ;

–

authorise, in the law, price

variations during mergers and a

period of convergence ;

–

all

organising

authorities

should prepare a strategic document

that includes the long-term invest-

ment plan, funding requirements and

changes to the equilibrium price of

water ;

–

make it mandatory to transmit

data to the public water and sanita-

tion services information system

(SISPEA) for the most significant ser-

vices and supplement this database

with reference systems on financial

performance ;

–

specify, in forthcoming and

current agreements on public-ser-

vice delegation the status of the

assets assigned to the contractor,

and those that are essential to the

continuity of public service, particu-

larly information systems.

Recommendations

The direct management of water and sanitation

services : progress to be reinforced

Summaries of the 2015 Annual Public Report by the Cour des Comptes

French management of

European structural funds :

improve, simplify and evaluate

Between 2007 and 2013, France recei-

ved €14.3 billion from the European

Social Fund (ESF) and the European

Regional Development Fund (ERDF).

Once added to national co-funding, a

total of €28.2 billion was thus mobili-

sed. The Court has examined the

management of all of ESF funding

and majority of that from the ERDF.

The Member States are responsible

for managing the European funding

allocated to them and must therefore

organise themselves. For the ESF, bet-

ween 2007 and 2013, France appoin-

ted the Ministry of Employment as the

managing authority for the "regional

competitiveness and employment"

programme, which it manages directly

for 15% of the funding and 85% of

which it delegates to the prefects of

the metropolitan regions

(10)

. For the

ERDF, over the same period, funding

was directly managed by the regional

prefects, with the exception of Alsace,

where the managing authority for the

operational

programme

was

the

regional council.

Entre 2007 et 2013, des modalités de

Between 2007 and 2013, procedures

for managing funding have been

unfavourable to implementation

ESF funding is dispersed over too

many actions and beneficiaries

The high number of priorities chosen

(five areas of intervention and 31

measures in total) harms the effecti-

veness and visibility of European fun-

ding. Dispersion is found in the num-

ber of managers (at the end of the

period, more than 200 "intermediary"

organisations

(11)

redistribute funding

to organisations running projects) and

in the number of beneficiaries (around

12,000, half of which for less than

€50,000).

Processing delays are long

More than 16 months may elapse bet-

ween applying for ESF funding and

the payment of the funds, putting

numerous small beneficiaries into dif-

ficulty.

_________

10) Overseas, the regional prefects are the direct managing authorities.

11) The intermediary organisation is responsible for managing the funding assigned to it

through a global grant and can use them either to fund its own actions or to co-fund the

actions of other organisations. It exercises the responsibilities of the managing authority, in

particular in the field of controlling the service provided.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Administration costs are high

The average administration cost per

project, which

highly variable

depending on the service, sometimes

approaches the amount of the aid

granted. For the ESF, the cost calcula-

ted by the Court varies between

€1,450 and €15,756, representing one

to ten percent (half of the beneficia-

ries

having

received

less

than

€50,000, including co-funding), and,

for the ERDF, from €3,500 to €8,000

(depending on the regions, for trans-

actions for which the unitary amount

may vary within a given region bet-

ween €2,000 and €6.9 million). For

certain ERDF cases, the administra-

tion cost exceeds the aid granted.

The impact of actions is poorly evalua-

ted

There are too many indicators for eva-

luating funded actions (24 for the ESF

and more than 40 for the ERDF) and

they are not always appropriate. The

managing authorities therefore can-

not control performance.

Delays in the detection of errors and

the management of ERDF action plans

are costly

Controls, which are sometimes redun-

dant because a single transaction can

be checked up to seven times, have

identified numerous errors in the

management of funding. France suf-

fered two interruptions in the pay-

ment of funds, one of six months in

2012 and the second of three months

in 2013, for having exceeded the 2 %

error limit fixed by the European

Union.

The errors detected were corrected

late and the implementation of action

plans was uncoordinated. The sharing

responsibilities

between

the

players (DATAR, the ministries and the

Inter-ministerial Committee for the

Coordination of Controls) was not

clearly

established. The financial

consequences

were

heavy :

the

amounts unduly paid and therefore

the amount of corrections to pay

totalled €30 million on 31 December

2013 and €67 million of funds paid

were still considered as "at risk" at the

end of 2014.

Conditions not yet met for success of

the 2014-2020 programme

The law of 27 January 2014 provides

for the decentralisation of the mana-

gement of funding: total decentralisa-

tion for the ERDF and partial decen-

tralisation for the ESF, with funding

managed at 65% by the State and

35% by the regions

(12)

. This organisa-

tion entails the risk of the juxtaposi-

tion of competing strategies on sub-

jects where competencies are shared

between the State and the regions.

The procedures for decentralisation

remain to be specified regarding the

French management of European structural

funds : improve, simplify and evaluate

_________

12) A national operational programme known as "employment-inclusion" coexists with 27 joint

ERDF-ESF regional operational programmes known as "investment for growth and jobs.

ummaries of the 2015 Annual Public Report by the Cour des Comptes

French management of European structural

funds : improve, simplify and evaluate

transfer of personnel and the initia-

tion of an action against a local autho-

rity

managing

European funding

which may be sentenced to repay-

ment by the European Union.

European regulations strengthen the

requirements for evaluation and pro-

vide for a large number of indicators.

Each managing authority must equip

itself with the resources to monitor

costs and take into account the results

obtained in relation to the objectives

in order to develop the programming

if necessary. The current transition

towards the new information system

(SYNERGIE) must receive particular

attention to avoid the loss of data

The Court issues the following

recommendations :

–

concentrate actions on a smal-

ler number of priorities ;

–

clarify the respective roles of

the managers – national and local – of

the various operational programmes

for the implementation of action

plans ;

–

evaluate the costs of adminis-

tration overall and per programme

manager ;

–

reduce the number of interme-

diate organizations ;

–

improve training and legal sup-

port for management staff, as well as

beneficiaries, in order to reduce the

risk of error ;

–

reduce the number of results

indicators and implement proce-

dures allowing them to be used

effectively to control actions.

Recommendations

Chapter IV

Management of human resources

1 - The additional remuneration of civil servants

overseas : over-hauling a new system

2 - The regional public-service management centres of

Rhône-Alpes and Puy-de-Dôme: tasks to be refocused

in a broader regional context

3 - The free assignment of shares in CDC Entreprises, a

subsidiary of the Caisse des Dépôts et Consignations :

the abuses of a public employee shareholder arrangement

ummaries of the 2015 Annual Public Report by the Cour des Comptes

The additional remuneration of

civil servants overseas: over-

hauling a new system

An inextricable legal framework

Civil servants assigned overseas bene-

fit from additional remuneration,

which breaks down into increased

wages, at variable rates according to

the regions, and various associated

compensations.

Around 91,000 civil servants, repre-

senting 4.2 % of the total workforce,

are currently concerned, nearly two

thirds of which come under the

Ministry of Education and 10 % under

the "security" budgetary mission. The

budgetary cost of additional remune-

ration was €1.18 billion in 2012.

There are currently 2 laws, 13 decrees

and 11 ministerial orders which

constitute the foundations of the

"additional remuneration", represen-

ting an inextricable legislative and

regulatory tangle.

Legal weaknesses have been revealed:

for example, the lack of a regulatory

basis for the correction index applica-

ble to Reunion Island (which represen-

ted nearly €86 million in 2012).

Questionable appropriateness and

effectiveness

The

justifications

for

"additional

remuneration" are based on three pil-

lars: compensation for the extra cost

of living, consideration of specific

constraints,

and

attractiveness.

However, these elements have gra-

dually become mixed, to the point

where it is now difficult to know which

objectives are met by each layer of the

"additional

remuneration".

Furthermore, this ”additional remune-

ration” does more than compensate

for price differences compared with

metropolitan France, while living

conditions overseas have considerably

developed, particularly from the point

of view of the accessibility of the

regions. The legitimacy of the whole

system, the foundations of which were

laid in 1950, is thus affected.

In addition, as it was extended to

regional civil servants, even though

they do not suffer the constraints

related to distance from metropolitan

France, the "additional remuneration"

negatively affects the budgets of local

authorities and reduces their ability to

invest.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

Furthermore, as contract agents do

not benefit from this, it gives overseas

local authorities an incentive to make

more frequent use of these staff than

in metropolitan France (37 % of non-

established public employees in the

overseas departments compared to

19 % in metropolitan France), creating

the risk of a "two-speed" civil service.

Consequently, over the last 20 years,

numerous administrative and parlia-

mentary reports have dealt with this

subject critically and have called for a

change in the system.

Necessary changes

The objectives of the “additional

remuneration” need to be clarified,

which would lead to a complete over-

haul of the system. Three layers may

be used: a first aiming to compensate

for extra cost of living, a second to

cover specific moving expenses, and a

third to compensate for the distance

and hardship of assignments to cer-

tain geographical zones that may be

qualified as less attractive.

By reducing wage increases to a level

that represents the cost of living diffe-

rential, savings of around €850 million

could be generated.

Additional savings would be genera-

ted if the benefit of the third layer

were effectively limited to the least

attractive zones; the current compen-

sation stands at more than €140 mil-

lion per year.

However, due to the sensitive nature

of the subject and the economic

impact of such measures, the desira-

ble reforms should be carried out gra-

dually.

Furthermore, support arrangements

should also be made. The savings

generated would create sufficient

margin for manoeuvre, where applica-

ble, to be used to fund other projects

in the overseas territories. In addition,

non-financial incentives could be used

to preserve the attractiveness of

these positions through units provi-

ding professional support to spouses,

consideration of the school calendar

when planning transfers, or a prefe-

rential choice of assignment or posi-

tion when returning to metropolitan

France.

The additional remuneration of civil servants

overseas : over-hauling a new system

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The additional remuneration of civil servants

overseas : over-hauling

a new system

The Court issues the following

recommendations :

–

simplify the additional pay

regime by redesigning it on a new

regulatory architecture organised

around a single decree and ministe-

rial orders ;

–

reserve specific indemnities to

compensate for moving expenses

and assignments to difficult geogra-

phical zones ;

–

supplement

the

financial

incentives to the assignment of civil

servants overseas with non-financial

incentives and coordinate local job

offers ;

–

gradually substitute the rates

in force since 1981 with rates that

correspond to the cost of living diffe-

rential in each territory.

Recommendations

The regional public-service

management centres of Rhône-

Alpes and Puy-de-Dôme : tasks

to be refocused in a broader

regional context

The regional public-service manage-

ment centres are local public institu-

tions of an administrative character

governed

the

law

26 January 1984 applying various sta-

tutory provisions relative to the regio-

nal civil service. These institutions

assist local authorities in managing

the statuses of regional civil servants,

which

represent

workforce

1.9 million officials. In the context of

municipal

dissipation

specific

France, the management centres are

primarily the point of contact for local

authorities and public institutions

employing fewer than 350 civil ser-

vants, for which affiliation is obliga-

tory. Beyond this threshold, affiliation

is optional.

Based on inspections carried out by

the regional courts of accounts of

Auvergne, Rhône-Alpes in nine mana-

gement centres, the Court finds that

the management centres are disper-

sed in the exercise of their duties, that

their funding leads to the creation of

surpluses, and that their regional

scope has become too narrow. It

recommends refocusing them on

their purpose as a means of unifying

the regional civil service by redefining

their framework of intervention if so

required.

The management centres are disper-

sed in the exercise of their duties

The management centres are expe-

riencing difficulties in the exercise of

their mandatory duties. Although they

organise the regional conference on

employment each year, they do not all

conduct the assessment of public

employment in their departments.

Furthermore, the various work carried

out plays a modest role in the projec-

ted management of workforces.

The organisation of competitive and

ordinary examinations, which is an

essential task of the management

centres, is affected by phenomena of

"reçus-collés" (those who have passed

competitive exams but who have not

yet been recruited) and absenteeism

amongst candidates, which increase

their cost.

At the same time, the management

centres have developed an extensive

interpretation of their optional tasks,

particularly through the provision of

contract employees.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The regional public-service management centres

of Rhône-Alpes and Puy-de-Dôme : tasks to be

refocused in a broader regional context

They also offer services that do not

come within their field of compe-

tence, such as assistance to municipal

archiving, legal advice and IT advice,

which other public or private players

could supply.

Financial surpluses

The principle of directed funding of

the tasks laid down by the law is not

always respected due to shortco-

mings in cost accounting.

Most of the regional public-service

management

centres

have

large

financial surpluses related in particu-

lar to the method for calculating

contributions, which is based on pay-

roll and generally set at the maximum

rate.

In the very restricted context of public

finances, the rates of contribution

should at least be adjusted to require-

ments.

A regional scope that has become

too narrow

Lastly, the regional scope within which

the management centres operate

appears to need readjustment.

The law of 19 February 2007 initiated

the regionalisation of certain tasks,

which was strengthened by the dema-

terialised management of careers, the

employment exchange and registra-

tion for competitive examinations on

inter-regional platforms.

Although the management centres

have been able to provide a solution

to municipal dispersal, the territorial

reform in progress could justify their

adaptation. The increase in the popu-

lation threshold for inter-municipali-

ties could mean that affiliation is no

longer mandatory for many and the

new inter-municipalities could reach a

critical size allowing them to take on

certain aspects of staff management

for their member municipalities.

In these circumstances, based on the

examples of the regional public-ser-

vice management centres of Rhône-

Alpes and Puy-de-Dôme, the Court

recommends that their tasks be re-

focused on the career management of

regional civil servants and that their

funding be strictly adjusted to the

actual requirements arising from this.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The regional public-service management centres

of Rhône-Alpes and Puy-de-Dôme: tasks to be

refocused in a broader regional context

The Court issues the following

recommendations :

To the State :

–

clarify the wording of article 25

of the law of 26 January 1984 in

order to better define the optional

tasks that the management centres

may exercise.

To the management centres :

–

adjust income to actual requi-

rements for funding, notably by

adjusting contribution rates.

Recommendations

Summaries of the 2015 Annual Public Report by the Cour des Comptes

The free assignment of shares

in CDC Entreprises, a subsi-

diary of the Caisse des Dépôts

et Consignations : the abuses

of a public employee sharehol-

der arrangement

A bonus share plan (PAGA) was put in

place at the end of 2007 for the bene-

fit of the employees of a wholly-

owned subsidiary of the Caisse des

Dépôts

Consignations,

CDC

Entreprises. This led to the issuance of

28,952 free preference shares

(13)

bet-

ween December 2007 and November

2010. On 31 December 2012, the pre-

ference

concerned

employees of CDC Entreprises, who

held 5.26

% of the capital.

The design of the bonus share plan

(PAGA): poorly defined objectives

and a binding arrangement

The reasons justifying the establish-

ment of a bonus share plan for the

benefit of the employees of CDC

Entreprises remain unconvincing.

LThe establishment of the bonus

share plan resembles the transposi-

tion, to a subsidiary that is 100 %

public and that manages funds of

mainly public origin, of a carried inte-

rest mechanism usually applied in pri-

vate equity companies in the competi-

tive

sector.

The

carried

interest

mechanism also implies personal

financial investment by employees,

which was not the case of the benefi-

ciaries of the bonus share plan.

The preference shares freely assigned

by CDC Entreprises to its employees

gave an entitlement to a priority

dividend equal to 20 % of the distribu-

table profit. Disguised as employee

shareholding, a form of additional

remuneration was thus established

for employees of CDC Entreprises.

The terms of this arrangement have

proved very favourable to employees

_________

13) The capital of a company may be composed of ordinary and/or preference shares. A prefe-

rence share is a share with or without voting rights, to which specific rights are attached, per-

manently or temporarily. In the case of CDC Entreprises, the preference shares were priority-

dividend shares, without voting rights.

Summaries of the 2015 Annual Public Report by the Cour des Comptes

and restrictive for the company and

its parent company. When the bonus

share plan was put in place, the risks

for the company and its parent com-

pany were not sufficiently appraised

and their effects were not anticipated.

Implementation of the bonus share

plan: poorly-anticipated develop-

ments and uncorrected abuses

The profound changes to the activity

of CDC Entreprises, characterised by

significant growth in the assets assi-

gned to it for management, particu-

larly as of 2009 following the Financial

Crisis, with the creation of Fonds stra-

tégique

d’investissement

(the

Strategic Investment Fund) (FSI), then

the Programme des investissements

d’avenir (Program on Investment for

the Future) (PIA) automatically led to

a sharp increase in the dividends dis-

tributed. The dividends paid to the

beneficiaries of free shares for the

2009 financial year (€3.30 million)

were thus 80 % higher than the esti-

mate made in 2007 (€1.80 million).

This change was not taken into

account by CDC Entreprises and the

Caisse des Dépôts et Consignations.

No mechanism was put in place to try

to correct the non-anticipated effects

of the arrangement.

The first dividend, paid to employees

in 2010 for an overall amount of

€3.30 million, was calculated based on

the 2009 distributable profit of CDC

Entreprises, which was composed of

the balance of 2006 retained ear-

nings, allocations to reserves for 2007

and 2008, and the 2009 result. The

inclusion of allocations to reserves for

2006 to 2008 is questionable in its

principle. In fact, it aimed to give the

bonus share plan a retroactive charac-

ter, thus bypassing the link between

possession of a share and entitlement

to the dividend. As it was not a legal

undertaking, it would have been possi-

ble to distribute the results of the

2007 and 2008 financial years to the

Caisse des dépôts et consignations,

against the background in 2008 of the

first losses in the history of the Caisse.

This

finding

shows

that

CDC

Entreprises has demonstrated insuffi-

cient transparency with regard to its

parent company. This should have

been all the more necessary as the

employees and corporate officers of

the company were beneficiaries of

this bonus share plan. More generally,

it highlights failures in the internal

governance of the Caisse des Dépôts

et Consignations and in its ability to

identify and manage remuneration in

its subsidiaries. Lastly, it illustrates the

risks of governance without external

control, insofar as the governing

bodies of CDC Entreprises were com-

posed only of representatives of the

Caisse

and

managers

CDC

Entreprises.

Unwinding the arrangement: costly

redemption for the Caisse and a

windfall effect for employees

The mechanism assigning free shares

in CDC Entreprises was abolished as

part of the creation of Bpifrance (or

Public Investment Bank – BPI). The

Caisse bought back the free shares

still held by employees before the

The free assignment of shares in CDC

Entreprises, a subsidiary of the Caisse des

Dépôts et Consignations

The free assignment of shares in CDC

Entreprises, a subsidiary of the Caisse des

Dépôts et Consignations

Summaries of the 2015 Annual Public Report by the Cour des Comptes

transfer of CDC Entreprises assets to

Bpifrance.

Most of the free shares held by

employees were purchased at the

transfer value to BPI, i.e. a price per

share of €318.50. This high price, par-

ticularly with regard to the initial "pro-

fit sharing" purpose of the bonus

share plan, constitutes a windfall

effect related to the creation of the

BPI. Furthermore, it arises from a

transfer of a public entity, CDC

Entreprises, to another public entity,

the BPI, and concerns public sector

employees, most of whom have joined

the new group.

The

Caisse

des

Dépôts

Consignations did not try to reduce

the windfall effect of the changes in

circumstances, which have provided

de facto benefits to those concerned.

The Court issues the following

recommendations to the CEO of the

Caisse des Dépôts et Consignations :

–

provide the group's human-

resources department with improved

means of controlling the remunera-

tion policy for subsidiaries of the

Caisse ;

–

prepare a remuneration refe-

rence system for the entire group

that is consistent with the general-

interest purpose of the Caisse ;

–

set up a system for comprehen-

sively listing the remuneration of the

executive officers within the Caisse

des dépôts group.

Recommendations