Alternative Systems of Financial Scrutiny in Europe In particular France La Cour des Comptes Eve Bosak Director Governance Asia Pty Ltd PhD student University of Sydney February 2008
Agenda Alternative systems currently operating in the European Union Highlight characteristics Case study on evolution of French system History Culture Catalysts for change Process 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 Structure The 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 Structure The 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 Estonia Distinct model headed by a President and auditing at central, regional and local levels Austria and Slovenia
European Nations Population and Geographic Spread Population varies from 400K 82m Luxembourg Malta 400K Belgium Czech Portugal Hungary around 10m UK France 59 62m Germany 82m Geographic size varies from 316 544K sq kms Malta, Luxembourg 316, 2600 sq kms Spain, France 506K, 544K sq kms
Economies Mixed Industrialised Belgium Estonia France Poland and Slovenia Agricultural Greece and Portugal Growing Service Sector UK Ireland Netherlands and Poland
Government Structure Unitary Czech Republic Estonia Portugal UK Greece Republic of Ireland Federal Belgium and Germany Public Service delivery devolved to municipalities Denmark Finland and Sweden
Democratic Parliamentary Systems All have a lower chamber 12 have upper chamber as well Smaller populations generally have lower chamber only Large majority based on proportional representation
Linked and yet unique Linked by membership of the EU Shared commitment to democracy Varying democratic systems and processes Distinct parliamentary constitutional, administrative and financial systems Retention of separation of identity in terms of culture, language and history
Supreme Audit Institutions Four 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)
Status Constitutional or Statutory Accountability Ministry of Finance/Treasury or the Parliament (directly or through a PAC) Status of Leadership Judge, 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 independence Methods of appointment Tenure length and security
Varying Resources and Remit Allocation of resources varies (some still from MOF) Number and skills of members and staff Role and Scope Financial, compliance, performance, economy efficiency and effectiveness Central, regional, local, state and public enterprises, municipalities other Type of Audit A priori, ex post, judicial, financial, performance
Follow Up and Oversight Direct response and follow up from Government or Ministers Consideration by Parliamentary Committee Report by PAC on important recommendations and follow up required by Government Joint consideration by PAC and Government (Council of Ministers) SAI recommendations tracked and action/lack thereof reported Audit Impact Report
La France
La France Population 61.7 m 544 sq kms Leading Industrial and Manufacturing Economy Food, transport equipment, chemical, machinery, metals and metal products
Rich Culture and History 1792 1804 First Republic 1804 1815 First Empire 1815 1830 Restored Monarchy 1830 1848 Liberal Monarchy 1848 1852 Second Republic 1852 1870 Second Empire 1870 1940 Third Republic 1940 1958 Fourth Republic 1958 Present Fifth Republic
Head of State President of the Republic Nicolas Sarkozy Since 1972 elected by universal suffrage for seven year period (now five year period) Combines formal with ceremonial responsibilities Appoints Prime Minister (Francois Fillon) and other Ministers upon PM s nomination Promulgates laws passed by Parliament (has the power to refer back but seldom used) Head of the armed forces and prominent international role
Executive Led by PM Constitutionally responsible for determining and pursuing the policy of the nation. Has authority over members of the Government Government 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
Legislature 577 Seat National Assembly directly elected for five year term subject to dissolution by the President 321 Senators one third elected by electoral college every three years to serve nine year term Senate comprises members of National Assembly and delegates from all tiers of Government cannot be dissolved
Administration 22 Administrative regions for national development, planning and budgetary policy 96 Departments within the regions Plus four overseas regional departments (Guiana, Guadeloupe, Martinique and Reunion); and five territories Prefets 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 Comptes 1992 Roles of Central and Local Government redefined local Government strengthened 2004 Second Act of Decentralisation Departments: social aid, education and roads; Regional Authorities: economic development, vocational training, railways and secondary education
Policy and Performance Quantitative Performance Indicators for each policy Transparent Public Service Goals Voting Unit in Parliament becomes a Mission Consistent set of Programmes MPs reallocate appropriations between programmes to accomplish Mission 2006 Budget Projection presented in accordance with Constitutional By Law
Central Government Supervision Long history of professional public administration General Directorate for Administration and Public Service (2.5 m public servants) Reports to PM Civil Service Human Resource Issues Trusteeship of Ecole Nationale d Administration Budget Directorate of the Ministry of Finance Network of financial controllers in each ministerial department Establishes spending priorities and allocates resources
Public Accounting System Constitution requires Parliament to authorise all public spending strict controls on compliance Annual budget law authorises revenue (tax collections) 2001 LOLF breaks traditional expenditure oriented budget by introducing programme budget Missions public policies Programmes Actions Allocations to sub programmes Audit and Oversight by Cour des Comptes
Cour Des Comptes 14 th Century Royal Chamber of Accounts (100 years war, black death lawlessness and economic instability) 1790 Royal Chamber abolished French Revolution 1807 Cour des Comptes created Napoleonic empire Western and Central Europe 1976 Audit of social security, public enterprises and nationalised industries merged into Cour 1996 Constitution modified; Introduction of Financial Courts Code 2005 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 Constitution supported by laws Fifth Republic (1958) increased power of the executive over the legislature in order to promote strong and stable Government Ultimate sovereignty rests with citizens of the State Strong centralised control Constitution provides for two types of Court: Administrative and Judicial Recent 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 Privatisation revenue 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 Finance Internal audit of each ministry; reports to the Minister (100 senior inspectors) Prestigious (Grand Corps de l Etat), wide access State Account 2005 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 Comptes Structure 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 Cour Parquet General headed by Procurer General appointed by Government legal adviser/intermediary with state services
Chambres Work divided between Chambres in accordance with instructions from the Premier President Each 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 investigations PP 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 accounts Audit approach determined by Magistrates Assume individual responsibility for their own work before presenting to college of Conseillers Maitres
Recruitment, remuneration and qualifications 650 people 210 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 Economics Life Appointment highly selective Trained and mentored by more senior grades Granted work experience in other parts of the Civil Service after auditor stage Highly respected for experience and expertise Magistrates 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 Rights Assist Parliament and the Government in supervising the implementation of the State Budget and Social Security laws Discharge of Comptables Audit Government Accounts Full access to all documents at all levels of Government and GBEs Regional Chambers audit local authorities
Audit Process Not all accounts audited every year several years at a time provides economies of scale Comptable s accounts must be discharged Comptable judged Magistrate decides whether to examine certain areas in depth Relates to legality of transactions
Illegalities Findings presented to College of Chambre Provisional Judgement offence and sums involved Comptable responds in writing Chambre considers response and makes legally binding judgement including amounts to be repaid Judgements communicated to Minister
Reporting Three Annual Reports Budget & Social Security Law, Financial Management and Performance to National Assembly and Senate Annual Public Report to President and legislature Certification of Accounts regularity, sincerity, true and fair view (annual certification audit from 2007 Other Special Reports
Characteristics Independent, powerful, feared, highly respected Well funded Employees top graduates (legal) appointed for life auditors, conseillers and conseillers maitres Ability to make judgements and take action Centralised control albeit decentralisation of Government activities and audit to regional chambres C des C court of appeal Regional and central work coordinated
Characteristics (2) Oversight combined with audit MOF central role in day to day accounting processes and internal audit Direct personal accountability of Comptables Ministers informed of judgements Complete discretion on focus of investigations and reporting Assists 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?