In the framework of the State modernization, the organic legislature has wanted, in 2001, that the French State sets up tools allowing the evaluation of its financial situation as well as of its patrimony, to know its real costs and to better appraise its actions in the aim, first of all, to enhance the budgetary steering.
The accounts of public administrations are regular and sincere. They give a fair image of the result of their management, their patrimony and their financial situation
This is reflected in article 47-2 of the French constitution and by article 58 of the organic law related to Finance Acts.
Article 47-2 of the French constitution, following the constitutional reform of 22 July 2008, has been completed with the insertion of this paragraph: “the accounts of public administrations are regular and sincere. They give a fair image of the result of their management, their patrimony and their financial situation.”
Article 58 of the organic law related to Finance Acts entrust to the French Court of Auditors (“Cour des Comptes”) the permanent mandate to certify the sincerity and fairness of its accounts and to detail the controls made within the framework of this certification. This mandate provides assistance to the Parliament and Government in the execution control of the Finance Acts, as set out by the article 47-2 of the French Constitution.
In this context, the State governance shall follow the best practice not less restrictive than those in force within private companies. The State accounts certification, copied on the process in place in the main majority of private companies, was one of them. All generally accepted audit principles are applicable to the State Account certification, provided their adaptation to the role of the State.
Certification is defined as the opinion, written and justified, expressed by an independent organism and under its own responsibility, on the accounts of an entity. This consists to gather all information required to obtain a reasonable level of insurance on compliance of the financial statements, in all their materials aspects, with a set of rules and principles – known and acknowledged – among which appear, first of all, the regularity, the sincerity and the fidelity of accounts.
Pursuant article 30 of the organic law related to Finance Acts, the general account of the State is established on the same bases than those applicable to companies, provided to respect the specificities related to State action. The keeping of State accounts is the responsibility of public accountants who have to supervise the accounting registrations sincerity as well as the respect of procedures. This requirement assumes the setting-up of processes of internal audit and control excluding any substantial anomaly. This one includes the choice and application of relevant accounting principles and rules as well as the determination of reasonable accounting estimation.
The purpose of this certification process aimed to rationalize the interventionism of French State in a liberal environment but constraining (e.g. financial ratios imposed by the European Union, especially concerning debt and deficit levels) as well as to ensure the signature quality of the French State in the frame of debt issuance, more and more necessary to cover the chronic deficit of the French budget.
The first recipient of this certification is the Parliament, in charge of accounts approbation according to article 37 III of the organic law related to Finance Acts, like in the USA with the role played in the public life by the U.S. Government Accountability Office.
By certifying the State accounts for the fiscal years 2006 and 2007 with respectively 13 and 12 reserves, the Court of Auditors has pointed out that it wished use a constructive approach on the subjects that it considers as difficult to resolve in short term due to the complexity of the State accounts. Inversely, the Court of Accounts has pointed out and wishes to punish any reaction absence in the other domains that it considers as able to be resolved in a short term.
On last 25 May, the French Court of Auditors (“Cour des Comptes”) has released its report on the accounts of the French State for the fiscal year 2008.
In this context, the State governance shall follow the best practice not less restrictive than those in force within private companies
The 2008 annual accounts of the French State relate also to public agencies, institutions or administration without any legal autonomous capacity, including the both chambers of the Parliament and, for the first time, the Republic Presidency and the Constitutional Council. These accounts integrate public entities with legal capacity only up to a value representative of the rights hold by the State (by equivalence).
Despite real enhancements, the Court of Accounts has plotted that the State accounts are unfortunately non entirely compliant with the applicable rules whereas the aforesaid Organic law related to Finance Acts is applicable for over eight (8) years.
Like private companies, State accounts include now mandatory a balance sheet, a profit and loss, a cash flows prevision, an appendix providing all information required to the correct understanding and interpretation of such accounts and an evaluation of off balance commitments. All these documents shall allow everybody, and especially the government and Parliament, apprehending correctly the engagements as well as the patrimony of the State.
The Court of Auditors said having devoted a particular attention to the transcription of the operations made in 2008 in the frame of the financial crisis.
In its report dated of 25th May 2009, the Court of Auditors has certified that, in respect with the accounting rules and principles applicable to, the general account of the French State ended on 31st December 2008 are regular and sincere and give a fair image of the financial situation as well as the patrimony of the French State, subject to twelve (12) reserves, whose nine (9) of them are considered as substantial.