slide1 l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
French public accounting reform : Key driver of the State modernization plan By N. MORIN Head of “Fonction Comptable PowerPoint Presentation
Download Presentation
French public accounting reform : Key driver of the State modernization plan By N. MORIN Head of “Fonction Comptable

Loading in 2 Seconds...

play fullscreen
1 / 31

French public accounting reform : Key driver of the State modernization plan By N. MORIN Head of “Fonction Comptable - PowerPoint PPT Presentation


  • 142 Views
  • Uploaded on

French public accounting reform : Key driver of the State modernization plan By N. MORIN Head of “Fonction Comptable de l’État” division DGCP Ministère du budget, des comptes et de la fonction publique. Agenda. Legal and institutionnal framework Revamping central government  accounts

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'French public accounting reform : Key driver of the State modernization plan By N. MORIN Head of “Fonction Comptable' - sherine


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1
French public accounting reform :

Key driver of the State modernization plan

By N. MORINHead of “Fonction Comptable de l’État” division

DGCP

Ministère du budget, des comptes et de la fonction publique

agenda
Agenda
  • Legal and institutionnal framework
  • Revamping central government  accounts
  • Increasing the reliability of central government accounts through internal control
  • The certification of central government accounts : first target met, but a continuing process
legal and institutional framework what does olb change
A major accounting reform in order to use accounting to improve the effectiveness and the transparency of state action :

a reporting medium

a steering tool

A three dimensional accounting system (see chart below):

budgetary accounting = cash-based accounting

general accounting = accrual based accounting

cost efficiency accounting

New principles for general accounting set by the OLB : a declared ambition to bring central government accounts closer to private sector best practices

the rules applicable to central government differ from those available in the private sector only because of the specificity of the State’s actions (article 30)

the central government’s accounts must be regular, sincere and give a true and fair view of its net worth and financial position (article 27)

the court of auditors is entrusted with a mission of certification of the regularity, of the sincerity and of the reliability of the central government’s accounts (article 58)

Legal and institutional framework : what does OLB change?
slide4

Budget execution in compliance with Parliament authority

Budget Accounts (cash-based accounting)

The faithful representation of transactions and events and the presentation of true and fair Government: an exhaustive follow up of Assets, Liabilities and Ownership

Budget and Financial Accounts (cash-based accounting)

LOLF adopted

Financial Accounts (accrual accounting)

Cost accounting system

(Annual Performance Report)

Effective government spending: Measure the cost and the performance of French administration and its public policies

A three dimensional accounting system

legal and institutional framework handicaps and advantages
A challenging reform …

a very tight timetable

a two-fold reform : a budgetary reform and an accounting reform conducted at the same time

no transitional measures

inappropriate IT systems

… made possible however thanks to several advantages

strong political support

a centralized accounting system

a network of specialized accountants

Knowledge in general accrual accounting

an internal control system already in place

Mutual control between authorizing officers and accountants

Internal audit

Legal and institutional framework : handicaps and advantages
legal and institutional framework who does what in french administration
Authorizing officers are responsible for efficiency, conformity of governmental actions and account for the goals they achieved and the means they employed

Accounting officers are required to keep the accounts and to guarantee the integrity of the accounting system

“The public accountants in charge of keeping and producing central government’s accounts ensure the consistency of accounting quality principles and especially the accuracy of accounting records and the respect of the procedures“(article 31)

Legal and institutional framework : Who does what in French administration ?
agenda7
Agenda
  • Legal and institutionnal framework
  • Revamping central government  statements
  • Increasing the reliability of central government accounts through internal control
  • The certification of central government accounts : first target met, but a continuing process
revamping central government accounts establishing new accounting standards
Revamping central government accounts : establishing new accounting standards
  • A special independent body in charge of drawing up the new standards : the committee for public accounting standards
    • made up of experts and academic specialists in both public and private sectors
  • Taking into account international & private sector standards where appropriate
    • french general accounting chart and decisions form the French accounting regulation committee
    • international standards (IFRS)
    • standards from the IFAC (IPSAS)
  • but taking into account public sector specificities where necessary
    • by adapting some standards (eg. Financial statements)
    • by developing new standards (eg. Tax receivable)
enhancing the central government s accounts initializing the opening balance sheet
Enhancing the central government ’s accounts : initializing the opening balance sheet
  • A significant operation
    • reconstituting central government ’s accounts within three years
    • an operation requiring the involvment of thousands of financial managers (authorizing officers) based throughout the country
  • A realistic approach
    • focused on financial and managerial stakes for the 2006 opening balance sheet
      • state real estate ;
      • provisions for risks and contingencies ;
      • charging revenues and charges to the correct fiscal year…
    • targeting the objective to gradually widen its scope (2006/2009)
      • intangible assets
enhancing the central government s accounts impact of the reform
Enhancing the central government’s accounts : Impact of the reform
  • Changes introduced by the accounting reform have improved the government’s net worth by + 161 € billion (opening balance sheet) in 2006 due to a large amount of State assets that were not recorded in the previous accounting framework.
  • Comparison of State assets and liabilities 31.12.2005 and 01.01.2006 (opening balance sheet):

(1) Assets : excluding transitory accounts (2) Liabilities : exluding financial debt, other liabilities, transitory accounts

comparison of assets on state balance sheet 2005 and 2006
Main impact of methodological changes :

valuation of fixed assets (roads, military ) and financial assets (government investments)

Comparison of assets on State balance sheet 2005 and 2006

+ 21 € billion

+ 154 € billion

+ 26 € billion

impact of accrual accounting on the state assets liabilities and net worth
Impact of accrual accounting on the State assets, liabilities and net worth
  • New elements have been integrated into the balance sheet:

CGAF CGE

31.12.2005 01.01.2006

€ Billion € Billion

  • Intangible assets026
    • Military developments, software
  • Tangible assets in progress027
    • Roads in progress, military equipment in progress
  • Inventories0 32
    • ammunitions, or vaccines,…
  • Provisions047
    • Valuation of State risks
agenda13
Agenda
  • Legal and institutionnal framework
  • Revamping the central government accounts
  • Increasing the reliability of central government accounts through internal control
    • a framework in line with COSO objectives and key concepts
    • the keys to a successful implementation
  • The certification of central government accounts : first target met, but a continuing process
general move towards strengthening of internal control
General move towards strengthening of internal control

A widely accepted response to increased regulatory requirements

FINANCIAL STATEMENTS

OPERATIONS

COMPLIANCE

Monitoring

Activity 2

Information & communication

Activity 1

Unit B

Unit A

Control activities

Risk assessment

Control environment

SOX

FSL(SOX French equivalent)

CRBF 97-02(French banks)

Confidence, transparency & performance

FMA(SEC French equivalent)

European directives

(Bâle 2, Solvency 2)

LOLF

  • One internal control framework has emerged as predominant : COSO
    • French central government’s internal control system is inspired by COSO
french internal control a framework in line with coso objectives and key concepts
French internal control : a framework in line with COSO objectives and key concepts
  • Definition : an integrated process carried out by the managers and the staff of an organization and designed in order to manage the organization ’s risks and to provide reasonable assurance that the organization ’s goals and objectives will be pursued through :
    • effectiveness and efficiency of operations
    • reliability of financial reporting
    • safeguarding of assets
    • avoidance of risk of error or fraud
    • compliance with applicable laws and regulations
french internal control the coso five key concepts
French internal control : The COSO five key concepts
  • 1. Control environment
    • internal control standards defining shared principles :
      • common principles, rules and language
      • a process-oriented approach based on a cartography of 74 accounting processes
    • IT systems designed to meet the requirements of accrual accounting as well as security and traceability requirements
french internal control the coso five key concepts17
French internal control : The COSO five key concepts
  • 2. Risk monitoring system
    • identifying and assessing the risks :
      • a cartography of the risks identifies and ranks the risks for each process
      • an action plan defines the relevant measures to cover up uncontrolled risks
    • Bodies dedicated to risk-management
      • a steering committee chaired by the general director decides the internal control policy and monitors its implementation
french internal control the coso five key concepts18
French internal control : The COSO five key concepts
  • 3. Documentation of risks and procedures
    • Documentation on risks : standard risk-assessment tools :
      • potential risks of each process are described and measures to manage them are proposed
      • these risk-assessment tools are designed specifically for the managers so that they can evaluate the reliability of the processes they are responsible for
    • Online procedure guidelines
      • tools designed specifically for operative staff in order to enable them to perform their duty securely
      • IT tools that each staff can connect to from his computer desk
french internal control the coso five key concepts19
French internal control : The COSO five key concepts

4. Control of activities : the public accountant network has implemented a new architecture following a 2-fold logic :

Local and national levels to mirror the largely decentralized structure of State services and ensure consistency and homogeneity of the overall system

3 levels of control to produce intermediate reportings and ensure the monitoring on the internal control system

  • The “Mission de Vérification des Comptes de Gestion (MVCG)”, reporting to FCE, centralizes the reportings and produce a synthesis at national level

National level

3rd level control : MVCG

Local level (TG)

  • A special function (CQC) ensures the quality of the 1st level of control

2nd level control : CQC

Controls by supervisors

1st level control

  • Operations undertaken by the accountants

Mutual controls

self-controls

french internal control the coso five key concepts20
French internal control : The COSO five key concepts
  • 5. Continuous monitoring by audit
    • A major component of the internal control system :
      • the audit must evaluate the effectiveness and the relevance of the internal control system
      • the auditors make recommandations to improve the whole system and make it more reliable
    • Implementation of a financial and accounting audit
      • an audit of the whole process, from the accrual basis to the outcome, which encompasses the authorizing officers ’activities as well as the accoutants ’ activies
      • joint audits between public accountant general directorate audit body and line ministries’ audit bodies
summary journey towards a continuous progress

Phases

Summary : journey towards a continuous progress

The internal control process is implemented in a iterative and continuously improved manner

Deliverables

General target of accounting quality and performance indicators

Risk mapping

Risk analysis : identification, assessment and ranking of risks

Audit

Action plans

Action plans

Reporting

Accounting internal control framework

Internal control plan

Internal control frameworks

Procedure guides

agenda22
Agenda
  • Legal and institutionnal framework
  • Revamping central government accounts
  • Strengthening the reliability of central government  accounts through internal control
    • a framework in line with COSO objectives and key concepts
    • the keys to successful implementation
  • The certification of central government accounts : first target met, but a continuing process
the keys to successful implementation
The keys to successful implementation
  • A necessary interdepartmental approach
    • the accounting function is shared between authorizing officers and accountants
    • the quality of the accounts depends on the overall quality of processes
  • the constraints associated with this interdepartmental approach
    • line ministries unaware of the part they have to play in accounting quality
    • a general misundertanding of the meaning of internal control
    • teams very busy implementing the budgetary reform
the keys to successful implementation24
The keys to successful implementation
  • An approach focused on accounting risks
    • process analysis covering financial and accounting risks
    • an option given to line ministries to encompass budget and decision-making risks
  • an approach based an incentive
    • the desire to make managers aware of their own responsabilities
    • the belief that sound and effective implementation cannot take place without genuine support
  • a pragmatic approach
    • a system adapted to existing internal control and adjusted to needs
agenda25
Agenda
  • Legal and institutionnal framework
  • Revamping central government accounts
  • Increasing the reliability of central government accounts through internal control
    • a framework in line with COSO objectives and key concepts
    • the keys to a successful implementation
  • The certification of central government accounts : first target met, but a continuing process
the certification of central government accounts an achieved target
The certification of central government accounts : an achieved target
  • The Court of auditors recognizes the acknowledgesconsiderable efforts made to prepare for the implementation of central government accounting reform
  • However, central government accounts contain some anomalies and consequently the Court gave a qualified opinion on 2006 accounts
  • France ranks among the few State whose accounts have been certified :
    • only two States’ accounts have received an unqualified opinion : Canada and New-Zealand
    • four States’ accounts have received a qualified opinion : Australia, Great-Britain, the EU, France
the certification of central government s accounts an achieved target
The certification of central government’s accounts : an achieved target
  • The 13 qualifications of the Court of auditors may be classified in four categories :
    • general observations :
      • limits of the existing IT systems, as far as the audit trail is concerned
      • inadequacies of internal control and/or internal audit within some line ministries
    • ambiguities of the accounting standards : the public accounting standards committee has been summoned to clarify the standards
    • disagreements between the certification authority and the ministry of the budget, public accounts and civil service
    • specific items that can only be adressed within a multi year action plan :
      • military assets, roads
      • intangible assets
conclusion the benefits of internal control
Conclusion- The benefits of internal control
  • Enhanced accounting quality
    • Both decision makers and accountants are more accountable
  • Risk management is required by the certification body
    • The certification body relies on the quality of the internal control system to adjust the nature and scope of its tests
    • The internal control related tasks is the core topic in exchanges with the certification body
  • A cultural change in line Ministers reflects the increased awareness of the stakes linked to internal control
    • An improved monitoring thanks to better control of risks
    • Originally perceived as a constraint, internal control is increasingly considered as an opportunity to improve the performance of public action
conclusion next steps
Conclusion- Next steps

The reform is now well advanced. It will continue to be implemented as a multi-year plan :

  • The approach of internal control strengthening has had a very positive impact on the State’s financial statements. Efforts will continue in coming years :
    • Finalization of the action plans at Ministerial level
    • Regular updating and monitoring of the framework to integrate the internal control approach fully as a perennial process
  • The State has also pledged in the medium term to modernize its information systems, including the roll-out of an ERP (Chorus project).
  • The State has undertaken a survey of the 1st LOLF closing statement in order to further improve the closing statement process and streamline the production of financial statements.
  • The State has committed itself to providing to Parliament with enriched, reliable and transparent accounting information, which in turn will help the Parliament to assess the possible manoeuverability as for as budgetary & fiscal medium term policy is concerned.
slide30

Legal Framework (LOLF)

Institutional

Framework

Reform

Implementation

Public 

Expenditure Management:

Conformity

Performance

Transparency

Accountability

Public Accounts:

Faithful

Lawful

True and fair view

A budgeting reform:

New budget framework public management performance-oriented

A new accounting framework

Reform process: prerequisites and important issues

A new public financial management framework:

-a strong internal controlsystem

-a systemic approach

A New IT architecture

An accounting reform: from a cash-based accounting to an accrual-based accounting system

New organisational arrangements of financial management system:

-authorizing officers, accountants roles and responsibilities

-central government accounting Unit

-reinforcement of financial internal auditing

-Specific monitoring Boards

Goals achieved:

-an improved vision of State assets and liabilities

-a more comprehensive financial reporting

Control and Auditing reform:

-accountants linsure public accounts quality and compliance

-certification of State accounts by the Court of Accounts

SAI opinion on State accounts for 2006: a qualified opinion

Cost accounting system: public policies efficiency’ assessment

Relations with SAI: continuous dialogue 

Future challenges

Change conduct

Overview of the Government Accounting Reform process

key players roles and responsibilities

Authorizing Officers

Accounting Officers

Organise and put in place:

- Organisational structures

- Delegations

- Internal management and control procedures in accordance line with laws and regulation

Manage: budget appropriations and are committed to their goals and accountable for their management actions via results indicators

Authorize expenditures; approve contracts and place orders; certify that goods have been received and that services have been provided as specified; authorize payment

Responsible for keeping accounting commitments, budgetary accounting and cost accounting systems

Are accountable and report to the Minister and Parliament in an annual performance report.

Handle and collect receipt orders passed on to them by the authorizing officers

Pay expenditures

Carry out cash transfers, that is movements of funds that are neither receipts nor payments;

Keep financial records that describe these operations

In charge of inventory records in cooperation with authorizing officer staff

Lay down the accounting rules on methods and the chart of accounts

Are required to keep the accounts and prepare the annual accounts for the Parliament

Are responsible for maintaining the quality of ministerial accounts

Internal audit capabilities:

Based on ministerial unit audit or ministerial Inspectorate General

Internal audit capabilities: based on Treasury offices internal audit unit

Key Players roles and responsibilities