Public Financial Management in Times of Crisis. LSE, London, October 22, 2010

Transcription

1 Public Financial Management in Times of Crisis LSE, London, October 22,

2 Plenary Session III: The Role of Audit and Accountability Systems in Improving Fiscal Performance Patrick LEFAS, Cour des comptes France 2

3 Personal responsibility of public accountants in France Grounds the Court s status as a jurisdiction Imposes financial liability ( fines) to public accountants as well as to any other person involved in the handling of public funds, for any non compliant decision that caused the Central Government or the Local Government to lose public money. But remains focused on formal compliance with state s rules and regulations (procedures) Is not a tool aimed at monitoring public expenditures Is in no way related to performance analysis 3

4 Annual report on budget management Pursuant to 2001 constitutional bylaw (LOLF), the Court is in charge of issuing an annual report on budget management regularity... risks in terms of sustainability performance assessment. This report is sent to the Parliament And appended to the final budget review bill From that point of view, the LOLF has undoubtedly improved Central Government s accountability 4

5 The limits of cash basis accounting Budget management analysis has its limits : Time horizon : annual cash realization is inappropriate to assess public finance sustainability in the medium or long term Lack of stable reporting standards : makes it difficult to compare financial reporting from one year to the other one A few examples: The balances of special accounts : excluded from the annual expenditures monitoring standard (2009 : -8Md ) The scope of measures officially considered as tax expenditures has been reduced by 10 billion euros in

6 An annual assessment of public finance A retrospective and forward-looking examination of the General Government sector accounts (Central, State, Local, Social security funds) according to data based upon ESA95 crossed with the budgetary data and the audit works on accrual accounting which contributes to the budget orientation debate held in Parliament every year just before summer. 6

7 Accounting reform and audit opinion on Central Government financial statements Fully came into force in 2006 Has probably brought the most significant change In the field of financial transparency As well as in terms of accountability 7

8 Two major steps in terms of accountability Explicit standards The accounting rules for the Central Government are the same as those for business, except when differences are warranted by the specific nature of the central government s activity Approved by the Public Sector Accounting Standards Board An independent auditor The Cour des comptes is entrusted with certifying the lawfulness, truthfulness and fairness of the financial statements of the Central Government Audit conducted by reference to the international standards on auditing (ISAs), subject to the obligations incumbent thereon as a financial jurisdiction. 8

9 The audit opinion on Central Government financial statements The Court s audit opinion From the beginning, the combination of multiple discrepancies, uncertainties, and limitations was such that an adverse opinion or a disclaimer would have been both justified By deciding to certify the financial statements for the fiscal years 2006 to 2009 with a high number of qualifications, the Court adopted a constructive hand-holding approach for the gradual implementation of the accounting reform, releasing, in the meantime, full details of the findings of the audit. 9

10 Accounting quality has dramatically improved since 2006 Overview The Administration s efforts have been ongoing and steady since 2006 Through successive steps to reach an unqualified opinion Allowing ten qualifications to be lifted in three years time 10

11 Challenges to come As in other OECD countries Shifting to accrual accounting had limited impact on budget process and management up to now though demand for full financial transparency has never been so strong, Parliament is still not familiar with the thrust of such financial reporting The Administration does not always consider and understand the link between financial statements and day to day management Four issues for the next few months : Adapting and refining accounting standards ; Enriching financial reporting in order to allow better sustainability analysis ; Help managers understand how accrual accounting may meet their needs when conducting public activities. Better transparency for the whole General Government sector. 11

12 Challenges to come Issue # 1 : adapting accounting standards Current debate : standards applicable to the recognition of multi year commitments linked to programme expenditures such as social benefits under review by the standards committee. 2 conceptions : extended (liabilities and provisions) Restricted (due and payables only) This debate is all about the limits that should be assigned to the messages carried out by accrual accounting : to which extent should the financial statements reflect the patrimonial consequences of the Central Government decisions? 12

13 Challenges to come Issue # 2 : better assess sustainability How far can financial information be enriched? Should the notes stick only to data useful for the understanding and interpretation of accounting information or also provide disclosures allowing better assessment of the sustainability of public finances? E.G. : European Commission Green Paper on Audit Policy : Extension of the auditor's mandate (auditors should be assessing forward looking information provided by the company, and provide an economic and financial outlook of the company) 13

14 Challenges to come Issue # 3 : better value the information and its use Explain to which extent accrual accounting can help public managers learn about their operational costs and improve budget management as well as performance of public policies. For instance, it would allow to measure the cost of outsourcing decisions Next step: towards cost based performance management? 14

15 Challenges to come Issue # 4 : better transparency for the whole General Government sector A principle encapsulated within the Constitution (art. 47-2) External audit on the financial statements of: The Whole Central Government: The Court 1 opinion The general regime of the Social Security funds: The Court 9 opinions The other regimes of the Social Security funds: the private sector 35 opinions The State Government : the private sector 87 opinions The public health bodies: in 2013 either the Court or the private sector The Local Government: under scrutiny before the Parliament, at least a report on public debt A necessary reflection on the conceptual framework adapted to the specificities of every sub-sector 15