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4.4.4. Annual accounts and reports

The Budget Execution Law (Loi de Règlement). The annual report on budget execution – for revenues and expenditures – is adopted as a law (LOLF, Art. 37). Traditionally, the draft Budget Execution Law was accompanied by the Court of Account’s “declaration of conformity” (see below). As a legal document, the Budget Execution Law:

●ratifies in-year modifications to appropriations made by the government within its legal powers, notably those of advance appropriation (Art. 13);

●increases budget appropriations that were overspent for justifiable reasons beyond the control of government; and

●cancels unspent budget appropriations that are not being carried over.

An annex must specify, for each programme, the reasons for divergences between budget allocations and final outcomes (Art. 54). This includes the special funds, which had previously been a source of abuse (see footnote 8). The Budget Execution Law also formally acknowledges the final outcomes for revenues, expenditures, and financing transactions.

Annual performance reports. The requirement for the government to prepare a set of performance reports is a major innovation of the LOLF. The draft annual budget law must be accompanied by the projected annual performance of each programme (Art. 51). After 12 months, actual budget expenditure outcomes for each programme need to be explained in terms of actual performance, based on reports of ex ante and ex post performance indicators for each programme. Also, since salaries and employment are still centrally controlled, an explanation of why authorised employment levels and costs may be different from those planned is obligatory (Art. 54). Guidelines on performance strategy, objectives and indicators have been issued (MINEFI, 2004b).

4.5. External audit

The external audit body is the Court of Accounts (Cour des comptes), established by law since 1807 and enshrined in the 1958 Constitution. In addition, a Court of Budgetary and Financial Discipline was created by law in 1948, with competencies in areas not covered by the Court of Accounts. In France and some other continental countries, such courts are considered part of a three-part overall control system: administrative controls (those exercised by bodies internal to the executive); political or parliamentary control (exercised by the legislature); and jurisdictional control (those exercised by a judicial body). The laws specifying the competencies of the Court of Accounts, its regional chambers, and the Court of Budgetary and Financial Discipline have been codified in the Financial Jurisdictions Code.

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4.5.1. Managerial, financial and operational independence

The Court of Accounts is a public authority whose existence pre-dates Parliament.36 The Constitution only refers to the Court assisting both branches of government in their control of the execution of State budget laws and the implementation of social security financing laws (the latter role not being specified until the 1996 constitutional amendment) (Art. 47 and 47-1). Neither the Constitution nor the laws pertaining to the Court of Accounts refer explicitly to its independence. Nonetheless, the independence of the Court is asserted by the fact that its members have a legal position of magistrates and as such are fully independent from both the executive and legislative branches. This position has been upheld by the Constitutional Council on various occasions.

For day-to-day operations, including the extent of delegation of work to the 22 regional audit chambers,37 the Court of Accounts is independent. The law establishes that the Court has full rights to fulfil its duties (Financial Jurisdictions Code, L111-9). Consequently, the Court of Accounts approves its rolling three-year work plan on the basis of propositions from its seven chambers.38 In view of its independence as a judicial body, the Constitutional Council declared as unconstitutional the proposed obligation that the Court of Accounts present its draft annual work programme to Parliament.39 In the absence of formal processes for co-ordinating its work programme with Parliament, difficulties in incorporating investigations requested by parliamentary committees have been experienced (Poncelet, 1997, p. 128). However, the LOLF (Art. 58) obliges the Court of Accounts to respond to requests for assistance coming from parliamentary budget committees.

The Court of Accounts is not independent of the executive for personnel appointments and promotions. First, the president and the chairs of the seven chambers of the Court are appointed for life by decree of the Council of Ministers. Parliament does not participate in such decisions. This is in sharp contrast to all other European Courts of Accounts (including those of Austria, Belgium, Germany, Italy, Netherlands, Portugal, and Spain). Also, the law does not contain any provisions for the removal of presidents or chairs of the Court of Accounts (e.g. for gross negligence). Second, the legal frame workplaces strict limitations on the ability of the president of the Court to recruit and promote staff. In particular, there are rigid quotas that require that most staff be recruited from the National School of Public Administration. Promotions must be based largely on seniority and age (Financial Jurisdictions Code, L121-122 and R121). With these restrictions, it would be difficult to recruit, for example, auditors with private sector audit experience for mid-career positions. But such new entrants may be needed for implementing the new certification requirements contained in the LOLF.

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Financial independence is not explicitly assured by law. The annual budget of the Court of Accounts has never been a separate budgetary title. Traditionally, it has been obscured within the annual budget of the MINEFI. The Court’s negotiations with the MINEFI on the “appropriate” level of financing for its own annual budget are not made public. A logical consequence of the 2001 LOLF is the separation of the mission and programmes of the Court of Accounts from those of the MINEFI. However, in implementing the LOLF, it is planned to place the Court under the mission “Management and Control of Public Finances”. The programme manager of “Financial Jurisdictions” will be the president of the Court of Accounts, who will be only one voice in determining the overall mission of managing and controlling public finances.

4.5.2. Institutional coverage of audits

The Court of Accounts has very broad audit responsibilities, covering not just the State but the entire public sector. Audit coverage is obligatory for the State budget, national public establishments, public enterprises (since 1976) and social security organisations (since 1950) (Financial Jurisdictions Code, L111-1 to 6). In addition, it may audit some entities established under private law, notably those that receive financial assistance from the State or from the European Union (L111-7). Some of these entities are named specifically in law (L111-8). The Court of Accounts only has jurisdiction over public accountants. Ever since the 1807 Law was adopted, the Court does not have jurisdiction over government ministers as ordonnateurs (L131-2) – they escape control of any court (they are exempt from the jurisdiction of the Court of Budgetary and Financial Discipline). In contrast, activities of senior civil servants that lead to gross mismanagement or acts of financial malfeasance come under the jurisdiction of the latter Court (L321-1, 2) in cases not protected by an order from a minister.

4.5.3. Types of audit

The law emphasises traditional financial compliance audits. As a judicial body, the Court of Accounts judges the accounts of public accountants (L111-1), whose submission delays are established by decree (L131-1). The Court is obliged to verify, on the basis of documents and field visits, the regularity of accounts of revenues and expenditures and the good use of public funds (L111-3). Since each principal public accountant’s accounts must be aggregated, the Court also audits the general accounts of the State and issues a “declaration of conformity”, which is annexed to the draft Budget Execution Law (LO132-1). This declaration signifies that the financial accounts are internally consistent.

The 2001 LOLF, which requires the Court of Accounts to certify accrualbased accounts, will induce major changes in the Court’s methods (Joxe, 2001; Cieutat, 2001). To date, the Financial Jurisdictions Code has not been changed

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to reflect the new performance orientation of budgeting, accounting, and auditing. This may not even be necessary as, in practice, considerable portions of the audit activity of the Court and of its regional chambers are directed towards performance audit. This is one important component of the legal requirement for “good use of public funds” (which is made even more explicit in some other OECD countries, by specifying the three Es – economy, efficiency, and effectiveness).

For public enterprises, the Court of Accounts is required to conduct financial and management audits (L111-4). For the social security organisations, annual verifications are required (L111-5). The Law does not explicitly require a performance audit, such as whether the social security organisations achieved their stated objectives for the year under examination. However, in practice, such audits are completed.

4.5.4. Powers of investigation

The Court of Accounts is authorised to procure all necessary information for its enquiries (L140-1). Professional secrecy cannot be used by audited bodies as a reason for not providing information (L140-4). Failure to provide information is subject to fines, established in nominal currency terms in law (L140-1). For technical investigations, the Court may use outside experts (L140-3), although in practice this does not happen often.

4.5.5. Reporting obligations and publication

The Financial Jurisdictions Code requires three important annual reports. First, the annual report on the activities of the Court of Accounts is addressed to the President of the Republic and submitted to Parliament (L136-1). This report, which contains the responses of ministers and other State agents to the Court’s recommendations made in unpublished detailed reports, is required by law to be published (L136-5). Second, an annual report on the draft Budget Execution Law is submitted to Parliament as soon as it is finalised by the Court of Accounts (LO132-1). The LOLF (Art. 58) requires this report to accompany the pre-budget debate (débat d’orientation budgétaire). Third, an annual report on the execution of the social security financing laws, together with an analysis of the accounts of the social security organisations and responses to the Court’s observations, is also submitted to Parliament as soon as it is prepared (LO132-3).

These public reports represent the “cream” of the Court’s reports. Over one thousand communications are prepared annually (Magnet, 1997), mainly directed at specific financial management activities of ministries, local governments, and other government bodies. The law does not require publication of these reports, although in recent years, some major reports have been