Central Government’s financial statements
The Central Government’s financial statements and the Cour des comptes’ certification
document are attached to the draft budget review act for the past financial year.
These documents make it possible to ensure there is transparent information on the
Central Government’s financial situation, in order to properly inform the administration
on its management, and Parliament, before it examines the budget review act. This
year they have been submitted two weeks earlier than last year.
They are aimed, more broadly, at citizens, economic actors, and observers of public
finances.
In accordance with article
27
of the
Constitutional
Bylaw
on
Budget
Acts
(LOLF),
since
2006
the
Central
Government
has
kept general accounts of
its
operations,
based
on
rules which are no different
to
those
applicable
to
companies, other than due
to the specifics of the Central
Government’s activity.
The
Central
Government
thus
presents
annual
financial statements in a
document titled «General
Account
of
the
Central
Government»
(Compte
général de l’Etat), which
includes a balance sheet,
an
income
statement,
a
list of its main off-balance
sheet commitments (made
and
received),
and
an
explanatory annex.
As of 31 December, 2019, the above represents:
l
€1,079 billion in assets, almost half of which are
tangible assets, and a quarter are financial holdings;
l
€2,116 billion in debts, €148 billion in provisions
relating, essentially, to economic and social
interventions by the State, and €76 billion in
negative net cash;
l
€4,439 billion in off-balance sheet commitments,
half for civil and military pensions, and a quarter
for guarantees made to third parties;
l
€527 billion in gross expenses and €442 billion
in gross income.
The loss for the year thus amounted to €85 billion,
compared to €52 billion in 2018. Comparing net tax
revenue for the financial year (€304 billion in 2019),
its share stood at 28%, compared with 11% in 2006,
which was the first financial year certified.
Net assets, which were strongly negative, amounted
to - €1,370 billion at the end of 2019, i.e. four and a
half years of tax revenue, against only two at the end
of 2006.
CERTIFICATION OF CENTRAL
GOVERNMENT’S FINANCIAL
STATEMENTS -
Fiscal year 2019
Summary Report
2
The Cour des comptes’ position
Due to the progress the administration made in 2019, the Cour des comptes
is able to lift parts of two qualifications formulated on the 2018 accounts, in
particular for inventories and tangible fixed assets.
Number 5 of LOLF’s article 58 entrusts
the Cour des comptes with certifying
the regularity, sincerity and accuracy
of the State’s accounts.
The
certification
is
a
written
and
reasoned
opinion
that
the
Cour
des
comptes
gives
under
its
own
responsibility. It consists of gathering
the
elements
necessary
to
obtain
reasonable assurance on the accounts’
compliance with the applicable rules
and principles.
Professional
financial
auditing
standards stipulate that an unqualified
opinion
cannot
be
expressed
if
significant diffi
culties are identified and
not resolved after the checks are made.
The
Cour
des
comptes
presents
the results of its checks in the form
of a certification accompanied by
qualifications, each of which groups
together
several
auditing
points,
along with significant issues.
The Cour des comptes certifies that,
with regard to the accounting rules
and principles that apply to it, the
general account of the State for the
financial year ending 31 December,
2019 and closing on 20 April, 2020 is
regular and truthful, and provides a
faithful representation of the State’s
financial and assets situation, with
four qualifications, all substantial,
and which relate to the:
l
general limitations in the scope of due
diligences practices (qualification no. 1);
l
misstatements
with
regards
to
military
inventories
and
tangible
assets (qualification no. 2);
l
misstatements
with
regards
to
financial assets (qualification no. 3);
l
misstatements
with
regards
to
Government expenses and income
(qualification no. 4).
3
The substantial qualifications with regard to
the 2019 accounts
QUALIFICATION No. 1 - General limitations
in the scope of due diligences practices
In order to be able to give a reasoned opinion on
the reliability of the Central Government’s accounts,
the Cour des comptes must collect necessary and
sufficient evidence to that end. It must also assess the
risk of significant errors in the accounts, in particular
by assessing the administration’s ability to prevent
such errors from occurring or, failing this, to detect
their occurrence and to correct their effects.
In a system as vast and complex as the Central
Government, achieving these objectives is largely
based on the existence of an efficient financial
information system and on effective internal control,
which depends on the process of establishing
accounts and the possibility for the administration
to justify them.
At the end of 2019, however, the Cour des comptes
was still encountering significant difficulties in
conducting some of its checks under satisfactory
conditions. It was, in several cases, unable to rule on
the merits and reliability of accounting records, due
to the conditions for keeping general accounts, in
the “Chorus” application, by means of which Central
Government accounts are established, and due
to the organisation and monitoring of ministerial
internal control.
QUALIFICATION No. 2 - Misstatements with
regards to military inventories and tangible
assets
At the end of 2019, the Central Government’s
tangible assets mainly consisted of real estate
stock (€52.2 billion), road infrastructure (€137
billion), infrastructure conceded to third parties,
mainly motorways (€163.7 billion) and hydraulic
structures (€48.4 billion), and military land, air
and sea equipment in service (€39.7 billion) or in
development (€21.3 billion).
It also includes inventories, with a net value of
€28.3 billion (gross value of €37.6 billion), almost
exclusively with the Armed Forces Ministry, around
half of which are spare parts necessary for keeping
military equipment in operational condition, and the
rest being munitions and consumables necessary
for their operation.
As of 31 December, 2019, significant difficulties
remain, which also relate to the justification of
the inventory, and to the valuation of the Central
Government’s military stocks and equipment as
well as to the valuation of a significant part of its
civil and military infrastructure.
QUALIFICATION No. 3 - Misstatements
with regards to financial assets
The net value of the Central Government’s financial
fixed assets amounts to €359 billion. They include:
l
1,764 financial holdings, with a net value of
€290 billion;
l
receivables from these investments, to a net
amount of €38 billion, and loans and advances
to a net worth of €18 billion;
l
funds without legal personality, which carry
assets on behalf of the Central Government,
to a net value of €11 billion, and other fixed
assets to a net value of €2 billion.
In equity interests, the net worth of the 689 entities
controlled by the Central Government amounted to
€167 billion, representing one sixth of its total assets.
At the end of 2019, the Cour des comptes
is unable to rule with reasonable assurance
on the valuation of a significant part of the
Central Government’s financial assets, due to
uncertainties or disagreements over the value of
said assets.
QUALIFICATION No. 4 - Misstatements with
regards to Government expenses and income
The Central Government’s gross expenses amounted
to €527 billion, a quarter being remuneration
of public officials, and a third being transfers for
economic and social matters (grants, subsidies,
etc.). Over the same period, the Central Government
recorded €442 billion in gross revenues, two thirds
of which came from five sources of taxation (value
added tax, income tax, company tax, registration
and stamp fees, and internal consumption tax on
energy products).
At the end of 2019, shortcomings still affect the
accounting control and recording of data relating
to personnel expenses, intervention expenses, and
sovereign income.
For personnel and intervention expenses, internal
control does not yet allow a reliable assessment of
the amounts to be accounted over the financial year.
For sovereign income, valuation of receivables from
taxpayers, and the accounting treatment of certain
tax transactions do not give a true picture of the
State’s rights and obligations.
4
The progress of the Cour des comptes’s checks
The process of certifying the accounts
mainly involves:
l
examination of audited accounts on the basis
of audit criteria, the non-compliance of which
constitutes an anomaly;
l
assessment of the risk of errors in the accounts,
and in the carrying out of appropriate checks;
l
at
all
stages,
taking
into
account
the
significant nature of the findings, the exercise
of professional judgment, and critical thinking.
It is based in particular on:
l
respect and implementation of professional
standards which cover all the phases and
aspects of an audit of financial statements;
l
collection of evidence, that is, all information
(supporting documents, accounting documents,
work by third parties under certain conditions,
April and May
Review of the financial information
Formalisation of conclusions
Discrepancies and adoption of
the certification document
1
2
3
Assessment of
the risk of errors
Carrying out checks
on the accounts
Discussions with the
administration on the
anomalies identified
to march
J
une
to December
Planning of checks
Review of
management processes
that have a significant
financial impact
Examination of the
effectiveness of
internal control
January
Perspectives
The 2019 audit of the Central Government’s
financial statements, and the findings to which
this led are in line with those of previous years.
Sustained discussions between the Directorate
General of Public Finance, and the Cour des
comptes, in an approach to support the producer of
the accounts, continued throughout 2019 and in the
beginning of 2020. They notably took the form of an
action plan aimed at simplifying the production of
financial statements, and developing the uses of
general Central Government accounting.
Work was completed according to methods adapted
at the end of the year, to bring them to completion
despite the context created by the health crisis.
The
checks
carried
out
on
the
Central
Government’s
financial
statements
for
the
2019 financial year confirm and clarify the main
observations made previously:
l
pursuit, by the administration, of improvement
of the conditions for establishing the accounts
contributes overall to reinforcing their reliability
and their conformity to the accounting standards
in force;
l
the methods for using the financial information
systems required in Central Government’s financial
statements still pose a significant risk to the
reliability of accounting records. The controls put in
place are not enough to compensate for that;
l
internal control continues to improve. However,
its degree of maturity remains insuffi
cient to
prevent any significant anomaly in the related
processes, and to guarantee control of certain
risks likely to have an impact on the Central
Government’s financial statements.
Even if progress is still expected, general accounting
data should already be used more to assess the
Central Government’s financial situation, to know
its costs, and to better assess its results.
Certification elsewhere in the world
Within the eurozone, France is
one of the countries that certifies
its
Central
Government’s
financial
statements
using
accrual accounting.
The Whole-of-Government’s financial statements
of the United Kingdom are certified with four
qualifications (qualified opinion).
T
he consolidated fi
nancial statements of the United
States Federal Government are unable to be certifi
ed
(disclaimer of opinion).
I
n addition to Central Government financial
statements, the law entrusts the Cour des
comptes with the task of certifying the ac-
counts of the general social security system.
At their request, the Cour des comptes cer-
tifies the accounts of the National Assembly
and the Senate.
It also has several audit mandates for the ac-
counts of international organisations.
etc.) necessary to decide on the reliability of the
accounts examined and the documentation of
the work carried out.