«THE FRENCH SYSTEM OF REGIONAL PUBLIC SECTOR AUDIT _ General legal framework A recent creation Until 1982, under a legal system whose most recent ...»
THE FRENCH SYSTEM OF REGIONAL PUBLIC
General legal framework
A recent creation
Until 1982, under a legal system whose most recent elements dated back to 1934-1935,
the auditing of all accounts prepared by public accountants within the territorial
authorities and their public bodies was entrusted, directly or indirectly, to a single
superior audit institution, the Court of Audit, created in 1807.
This was the sole “judge” of all public accounts, beginning with those of the State, financial accounting carried out by the Ministry of Finance, management accounting kept by the spending ministries, and as a secondary activity, the accounts of the territorial authorities, with only the most significant of these being examined directly by the Court. As far as the other accounts of territorial authorities is concerned, the local Ministry of Finance departments were responsible for the administrative auditing and verifying of accounts, while the Court of Audit retained sole jurisdiction in respect of those elements which might eventually call into question the actions of the accountant or the authorising official concerned.
The creation of the 26 regional and territorial chambers of audit1 (chambres régionales des comptes, CRCs) formed part of a general movement towards decentralisation initiated by the Act of 2 March 1982 relating to the rights and freedoms of municipalities, departments (départements) and regions which are territorial authorities in their own right.
By applying the principle that “municipalities, departments and regions are free to administer themselves via elected councils”, this law put an end to the administrative and financial supervision previously exercised over these authorities by State representatives. In practice this was expressed in the form of a very extensive a priori audit, which in fact corresponded to a real right of veto on their actions.
The administrative supervision has been replaced by a simple legality audit carried out by the local State representative: his power is limited to referring to the administrative court any actions which he considers irregular, or negotiating adjustments to the actions in question.
The financial supervision has been replaced by a budgetary and financial control instigated by the administrative authority, but after the mandatory intervention of the
1 The regional audit chamber for the French Antilles consists, in legal terms, of 3 chambers: Guadeloupe, Guyana, and Martinique, grouped together for functional purposes into one institution based at Pointe-àPitre (Guadeloupe).
1/21 local financial judicial authority, the regional audit chamber, an audit office with judicial status.
With the exception of cases where this budgetary control intervenes, the operations of local authorities are subject to a posteriori financial control, after the accounts have been submitted. This audit which, as we shall see later, has a judicial nature, is the main duty of regional audit chambers.
The regional audit chambers were created based on the organizational approach and investigation and judgement methods used by the Court of Audit.
The legislators wanted the budgetary, financial and accounting controls exercised over local authorities and public bodies with increased powers to be entrusted to independent institutions made up of skilled magistrates, geographically close to the authorities and bodies concerned.
Thus, 28 chambers of audit were set up, one in each of the 22 metropolitan regions and four overseas chambers: three for the three departments of the Antilles, with a single head office in Guadeloupe, and one in Saint-Denis (Réunion). The Referendum Law of November 1988 created a territorial audit chamber in New Caledonia, and since 2000, French Polynesia has been home to a second territorial audit chamber. In 2007, as part of sweeping reforms to the applicable law overseas, new territorial audit chambers were created for Saint-Pierre-et-Miquelon, Mayotte, Saint-Barthélémy and Saint-Martin.
Several laws and decrees have subsequently determined their powers and their methods of operation as well as the status of their members. All regional (and territorial) chambers of audit in France have more or less the same structure.
The existence of a regional audit chamber for each region (i.e. 22 regional audit chambers for 22 metropolitan regions) was called into question during the reform process that followed Law 2011-1862 of 13 December 2011 on the distribution of litigation and on reducing the burden of certain judicial procedures. As a result of Decree 2012-255 of 23 February 2012 on the location and jurisdiction of regional audit chambers, seven small chambers were ultimately merged with larger chambers. As of 2 April 2012, the metropolitan territory has 15 regional audit chambers including the territorial locations of the merged chambers.
Context Before describing the organization, functioning and powers of regional audit chambers, it is necessary to bear in mind the general rules which govern the administration of public revenue and expenditure for both the State and the territorial authorities.
In France, public accounting is based on two main principles: the institutional separation of authorising officials and accountants on the one hand, and the personal and financial liability of accountants, on the other.
The authorising officials are the heads of the executives of the various public bodies:
ministers or heads of state departments, local authority chairmen or mayors, chairmen or directors of national or local public organisations.
The authorising officials are the only ones with the power to commit the funds or assets of the authorities they administer. They then issue execution orders for the revenue and expenditure of the bodies they direct. The authority officials are responsible for the accounting of these bodies, but cannot themselves make or receive payments provided for in the budgets. They are obliged to act via a civil servant (usually working for the State), the public accountant.
The French system is therefore characterised by the existence of a national network of State public accountants working on behalf of the territorial authorities. Public accountants are the only ones with the power to handle public monies, in other words, to recover debts and pay out expenditure. They conduct and maintain an accounting system which encompasses all their actions. Public accountants are personally responsible for the funds within their control and for the regularity of the underlying operations. Thus they can be made to pay back any sums paid in error or not recovered.
In accordance with the principle of separation of authorising officials – who are administrators with authority over parts of the budget within defined spending limits – and accountants, the financial and personal liability of accountants cannot be called upon by those responsible for the bodies whose accounts they keep. There is one exception, however, within the finance departments (senior accountants and the Minister of Finance may, in accordance with their hierarchical powers, bring into play the financial and personal liability of accountants when those accountants – as is very often the case – are officials of the financial authorities). It is therefore an independent audit institution whose members have the required skills and which is, under the title of “accounting judge”, authorised to rule on the regularity of financial operations and the resulting liability for the accountant within a quasi-judicial procedure.
The accounting judge (the regional audit chamber) thus has the traditional task of judicial examination of all the accounts prepared by public accountants working for the territorial authorities and local public bodies (public bodies for inter-municipal cooperation, secondary education establishments, public low-cost housing offices2, etc.), as well as the accounts of those persons who have been declared de facto accountants by the chambers (“de facto” accountant means a person who manages public funds without being entitled to do so).
But this is not the only power of an audit chamber: it puts its main emphasis in investigating the management or performance of local administrators and reviews the accounts and the management of the organisations, companies, associations and bodies to which the territorial authorities provide financial assistance in excess of a certain threshold laid down by law.
Finally, an audit chamber also intervenes by giving advice during the monitoring accompanying of the budgetary activities of territorial authorities.
Main reference texts The organization and rules of procedure of regional audit chambers are laid down in various legislative and regulatory texts.
Since 1994 the legislative provisions, arising mainly from the Laws of 2 March and 10 July 1982, have been collected together within the Code governing financial judicial authorities i.e. audit offices with judicial status (Code des juridictions financières).
The regulatory provisions were codified there by virtue of a Decree dated 14 April 2000.
Scope of the audit activity Jurisdiction Subject to certain exceptions or additions, regional audit chambers cover all legal entities under public law other than the State and its public bodies. This, therefore, includes the territorial authorities (municipalities, departments, regions), inter-authority cooperation organisations3, health bodies, medico-social establishments (retirement homes), and secondary education establishments (“collèges” and “lycées”). However, an administrative audit and verifying of the accounts by the senior accountants of the public finance office in the department or local receivers of funds is carried out for small and low-budget authorities, in other words, municipalities with fewer than 5,000 inhabitants and whose ordinary operating revenue does not exceed three million euros, and public bodies for inter-municipal cooperation with fewer than 10,000 inhabitants and whose ordinary operating revenue does not exceed two million euros. For these small authorities, public accountants render their accounts to the senior accountants of the public finance office, who are above them in the hierarchy. If the latter find any irregularities in the accounts, they may call on the liability of their subordinates before the regional audit chamber.
Whilst the jurisdiction of regional audit chambers over territorial authorities and their public bodies is mandatory and general, the same does not apply to other bodies within the public sphere of activity, arising most often under private law but dependent (financially or administratively) on the first group (semi-public companies, associations subsidised or supervised by territorial authorities, notably in the fields of culture, environment, sport, social action, tourism etc.). For these bodies, regional audit chambers have a discretionary power of audit, either on their own initiative or at the request of the relevant public authorities.
3 Semi-public associations, intermunicipal associations, urban associations, associations of towns and other associations of local authorities.
4/21 The jurisdiction of regional audit chambers is limited to local public bodies. Therefore, in principle they cannot audit national public bodies, even if these carry out their activities within the region and receive grants and subsidies from the local authorities.
However, the First President of the Court of Audit may, by order, delegate to the regional chambers the task of judging the accounts and assessing the performance of institutions which would normally be audited by the Court of Audit. This procedure is used in particular for hospitals and organisations representing business and social partners (chambers of commerce and industry, chambers of handicrafts). These duties are delegated for a fixed time period (usually five years). The Court of Audit has the power to call, by order, for accounts on which the regional audit chamber has not given a definitive ruling.
Powers The law grants regional audit chambers the broadest powers of investigation based on documents and on-site, and states that they must take all measures to ensure the confidentiality of their procedures and the secrecy of the information collected.
- The right of access This is very broad and covers all documents relating to the territorial authorities and other bodies subject to audit. The magistrates of regional audit chambers have the same powers in this respect as the officials responsible for the administration of taxes.
- The power to hear the parties This allows auditors to question all representatives, administrators, civil servants, and members of the inspection or audit departments, as deemed necessary. These people must respond when summoned by the chamber, and are released from the requirements of professional secrecy in this connection.
- The power of inquiry For its inquiries, the chamber may call on experts appointed by its president.
These powers may be used indiscriminately for all duties allocated to regional audit chambers.
Regional chambers have the power to impose sanctions, either directly in the form of capped fines for accountants who submit their accounts late, or by placing matters before the criminal courts when people try to prevent them from exercising their rights and carrying out their investigations (“impediment to duties” offence).