Alternative Systems of Financial Scrutiny in EuropeIn particular ‐ FranceLa Cour des Comptes
Eve Bosak Director Governance Asia Pty Ltd
PhD student ‐ University of Sydney February 2008
AgendaAlternative systems currently operating in the European Union
Highlight characteristicsCase study on evolution of French system
HistoryCultureCatalysts for changeProcess
Working session on pros and cons of your own systems vis a vis characteristics of Cour des Comptes/other European systems
Europe – an Ancient Culture
Types of StructureThe European example
Judicial – “Napoleonic” ‐ France Belgium Portugal Spain Italy Greece
Collegiate – no judicial function – Netherlands, Germany, Slovakia, Czech Republic, Luxembourg and European Court of Auditors
Types of StructureThe European example (2)
Audit Office headed by Auditor General or President , oversight by PAC – “Westminster” ‐ Hungary Malta, Poland, Cyprus, UK, Republic of Ireland, Latvia Lithuania, Sweden, Finland, Denmark and EstoniaDistinct model headed by a President and auditing at central, regional and local levels – Austria and Slovenia
European NationsPopulation and Geographic Spread
Population varies from 400K‐ 82mLuxembourg Malta 400KBelgium Czech Portugal Hungary around 10mUK France 59‐62mGermany 82m
Geographic size varies from 316‐544K sq kmsMalta, Luxembourg 316, 2600 sq kmsSpain, France – 506K, 544K sq kms
EconomiesMixedIndustrialised – Belgium Estonia France Poland and SloveniaAgricultural – Greece and PortugalGrowing Service Sector – UK Ireland Netherlands and Poland
Government StructureUnitary
Czech Republic Estonia Portugal UK Greece Republic of Ireland
FederalBelgium and Germany
Public Service delivery devolved to municipalitiesDenmark Finland and Sweden
Democratic Parliamentary SystemsAll have a lower chamber12 have upper chamber as well Smaller populations generally have lower chamber onlyLarge majority based on proportional representation
Linked and yet uniqueLinked by membership of the EUShared commitment to democracyVarying democratic systems and processesDistinct parliamentary constitutional, administrative and financial systemsRetention of separation of identity in terms of culture, language and history
Supreme Audit InstitutionsFour main types
Judicial (Cour des Comptes)Collegiate (no judicial)Audit office independent of Government headed by AG or president (Westminster)Distinct model headed by President and auditing at central regional and local levels)
StatusConstitutional or StatutoryAccountability
Ministry of Finance/Treasury or the Parliament (directly or through a PAC)
Status of LeadershipJudge, Officer of the Parliament, Cabinet membership
Decision Making AG/President or Collective
Appointment of the Auditor General
Mixed approaches Cannot be affiliated to political party, political background permitted but appointment non political, deliberate affiliation across major parties, judges – no political affiliation
Safeguards for independenceMethods of appointmentTenure – length and security
Varying Resources and RemitAllocation of resources varies (some still from MOF)Number and skills of members and staffRole and Scope
Financial, compliance, performance, economy efficiency and effectivenessCentral, regional, local, state and public enterprises, municipalities other
Type of AuditA priori, ex post, judicial, financial, performance
Follow Up and OversightDirect response and follow up from Government or MinistersConsideration by Parliamentary CommitteeReport by PAC on important recommendations and follow up required by GovernmentJoint consideration by PAC and Government (Council of Ministers)SAI recommendations tracked and action/lack thereof reported – Audit Impact Report
La France
La FrancePopulation 61.7 m 544 sq kmsLeading Industrial and Manufacturing Economy
Food, transport equipment, chemical, machinery, metals and metal products
Rich Culture and History
1792‐1804 First Republic1804‐1815 First Empire1815‐1830 Restored Monarchy1830‐1848 Liberal Monarchy1848‐1852 Second Republic1852‐1870 Second Empire1870‐1940 Third Republic1940‐1958 Fourth Republic1958‐Present Fifth Republic
Head of StatePresident of the Republic ‐ Nicolas Sarkozy
Since 1972 elected by universal suffrage for seven year period (now five year period)Combines formal with ceremonial responsibilitiesAppoints Prime Minister (Francois Fillon) and other Ministers upon PM’s nominationPromulgates laws passed by Parliament (has the power to refer back but seldom used)Head of the armed forces and prominent international role
ExecutiveLed by PM – Constitutionally responsible for determining and pursuing the policy of the nation. Has authority over members of the GovernmentGovernment responsible to National Assembly (lower house).Must resign if loses vote of confidence (not always accepted by the President)Members of the Government cannot be members of the Parliament (resign in favour of a Deputy)40‐50 Members of the Government; 20 ministries
Legislature577 Seat National Assembly directly elected for five year term – subject to dissolution by the President321 Senators – one third elected by electoral college every three years to serve nine year termSenate comprises members of National Assembly and delegates from all tiers of Government – cannot be dissolved
Administration22 Administrative regions for national development, planning and budgetary policy96 Departments within the regionsPlus four overseas regional departments (Guiana, Guadeloupe, Martinique and Reunion); and five territoriesPrefets represent central Government in Regions and Departments – appointed by Presidential decree under authority of the Minister of the Interior
Administration (cont)1982 Act of decentralisation transferred administrative and financial power from Prefets to locally elected Conseils Generaux Prefets can refer acts in contradiction of laws to the administrative courts and budgetary issues to the regional Chambres des Comptes1992 Roles of Central and Local Government redefined –local Government strengthened2004 Second Act of Decentralisation – Departments: social aid, education and roads; Regional Authorities: economic development, vocational training, railways and secondary education
Policy and PerformanceQuantitative Performance Indicators for each policyTransparent Public Service GoalsVoting Unit in Parliament becomes a Mission
Consistent set of ProgrammesMPs reallocate appropriations between programmes to accomplish Mission2006 Budget Projection presented in accordance with Constitutional By Law
Central Government SupervisionLong history of professional public administrationGeneral Directorate for Administration and Public Service (2.5 m public servants)
Reports to PMCivil Service Human Resource IssuesTrusteeship of Ecole Nationale d’Administration
Budget Directorate of the Ministry of FinanceNetwork of financial controllers in each ministerial departmentEstablishes spending priorities and allocates resources
Public Accounting SystemConstitution requires Parliament to authorise all public spending – strict controls on complianceAnnual budget law authorises revenue (tax collections)2001 – LOLF breaks traditional expenditure oriented budget by introducing programme budgetMissions – public policies
ProgrammesActions ‐ Allocations to sub programmes
Audit and Oversight by Cour des Comptes
Cour Des Comptes14th Century Royal Chamber of Accounts (100 years war, black death – lawlessness and economic instability)1790 Royal Chamber abolished – French Revolution1807 Cour des Comptes created ‐ Napoleonic empire Western and Central Europe1976 Audit of social security, public enterprises and nationalised industries merged into Cour1996 Constitution modified; Introduction of Financial Courts Code2005 Budgetary autonomy new mission “Counselling and Control of the State” Cour financed through PM’s budget with special authorisation by Parliament.
Fresco Bernar Venet La Cour des Comptes Paris
Established under the Constitutionsupported by laws
Fifth Republic (1958) increased power of the executive over the legislature in order to promote strong and stable GovernmentUltimate sovereignty rests with citizens of the StateStrong centralised controlConstitution provides for two types of Court: Administrative and JudicialRecent flurry of new laws laws – 1967, 1976, 1995/6, 2001 (LOLF)
Recent Catalysts for Change
1970s ‐80s Socialists ‐ nationalisation banking insurance and heavy industries – external audit bodies merged into the Cour
1986‐1993 Privatisationrevenue raising to offset budget deficits
1993 European Union (Maastricht Treaty)Three pillars – community, foreign and security policy, justice and home affairs ‐ strengthened European Court of Auditors
1999 Treaty of Amsterdam EC explicit remit in fight against fraud ‐ further strengthened European Court of Auditors
Accountability for Financial Control
Authorising Officer (ordonnateur)Administrative authority over defined limits/parts of the budget
Financial Controller (controleur financier)MOF official in each Ministry approves and audits acts of financial commitment; oversees expenditure within limits
Public Accountant (comptable)MOF official – Final clearance for payment. Ensures financial equilibrium and control through integrity, regularity and quality. Fully and personally accountable (bond on property)
State Accounting Systems and Processes
General Inspectorate of FinanceInternal audit of each ministry; reports to the Minister (100 senior inspectors)Prestigious (Grand Corps de l’Etat), wide access
State Account2005 State and Local budgets comply with IPSAS – regularity, true and fair, accruals – transparent – private sector oriented. New accounting system – still centralised (single local accountant for all Departments and overseen by State Departmental accountants). Departmental accounts aggregated to State account.
Annual Audit by Cour des Comptes
Cour des ComptesStructure and Organisation
Headed by Premier President, appointed in Minister’s Council by decree from the President of the Republic. Philippe Seguin
Retirement age of 68 (can be an ex Minister)Seven Chambers each with President de Chambre (retirement age 65) – chosen by Government from list put forward by Premier President of the CourParquet General headed by Procurer General appointed by Government – legal adviser/intermediary with state services
ChambresWork divided between Chambres in accordance with instructions from the Premier PresidentEach Chambre has set of teams headed by Conseiller Maitre – each put forward proposed annual and medium term work program to the PP for audit of comptables, financial management, performance audit and investigationsPP decides on annual program for the Cour des Comptes after discussion with annual Public Report and Program Committee
Combined Approach to Audit and Oversight
Balance between judicial and performance audit decide by each Chambre Compliance very high – Cour now focussing more on performance although now required to certify accountsAudit approach determined by Magistrates
Assume individual responsibility for their own work before presenting to college of Conseillers Maitres
Recruitment, remuneration and qualifications
650 people210 magistrates appointed for life by decree
105 Conseillers Maitres; 85 Conseillers Referendaires; 20 Auditors
180 audit and 260 administrative support staff seconded from the Civil Service
Majority of Magistrates “home grown” but 25%‐35% selected from Civil Service (mostly MOF) on merit
Recruitment, remuneration and qualifications (2)
Minimum entry is graduation from Ecole Nationale d’Administration
Public law, Finance and EconomicsLife Appointment ‐ highly selective
Trained and mentored by more senior gradesGranted work experience in other parts of the Civil Service after auditor stageHighly respected for experience and expertiseMagistrates in demand in other sectors of Civil Service – e.g. Heads of department, teachers at E.N.d’A. or managers of GBEs
Scope Role and Access RightsAssist Parliament and the Government in supervising the implementation of the State Budget and Social Security lawsDischarge of ComptablesAudit Government Accounts Full access to all documents – at all levels of Government and GBEs
Regional Chambers audit local authorities
Audit ProcessNot all accounts audited every year – several years at a time provides economies of scaleComptable’s accounts must be “discharged”Comptable judgedMagistrate decides whether to examine certain areas in depthRelates to legality of transactions
IllegalitiesFindings presented to College of ChambreProvisional Judgement – offence and sums involvedComptable responds in writingChambre considers response and makes legally binding judgement including amounts to be repaidJudgements communicated to Minister
ReportingThree Annual Reports
Budget & Social Security Law, Financial Management and Performance to National Assembly and SenateAnnual Public Report to President and legislatureCertification of Accounts – regularity, sincerity, true and fair view (annual certification audit from 2007
Other Special Reports
CharacteristicsIndependent, powerful, feared, highly respectedWell fundedEmployees top graduates (legal) ‐ appointed for life –auditors, conseillers and conseillers maitresAbility to make judgements and take actionCentralised control – albeit decentralisation of Government activities and audit to regional chambres – C des C court of appealRegional and central work coordinated
Characteristics (2)Oversight combined with auditMOF central role in day to day accounting processes and internal auditDirect personal accountability of ComptablesMinisters “informed” of judgementsComplete discretion on focus of investigations and reportingAssists Legislature and Government
How does the Cour compare with your own system of Financial Scrutiny?
What do you see as positive characteristics of the Cour des Comptes?What do you see as negative characteristics?Could this system work in your nation state?Why/ why not?