«THE FRENCH SYSTEM OF REGIONAL PUBLIC SECTOR AUDIT _ General legal framework A recent creation Until 1982, under a legal system whose most recent ...»
The first act invoking liability may no longer be performed beyond 31 December of the fifth8 year following the year during which the accountant presented his accounts to the accounting judge or, if he is not bound by this obligation, the year during which he presented the justifications of his operations. If no provisional or definitive charge against him is notified in this time period, the accountant is relieved of his management responsibilities for the financial year concerned. In the event that the accountant left his post during this financial year, and if no definitive charge against him exists or continues within this same time period for the entirety of his management period, he is considered to have been granted full discharge for his management.9 In other words, the discharge and the final full discharge are automatically granted to the accountant after the limitation period has expired, without this having been ascertained by the judge. This change to the system of liability, introduced by legislators in 2004, simplifies the personal situation of the accountant and authorises him, solely by the passage of time and without having to wait for a judicial decision, to release the securities established upon his coming into office.
3. Regional audit chambers give an opinion, if the above-mentioned prescription period still runs, on the accounts submitted to them in this way, and discharge the public accountants or make them liable to the extent of any deficiencies found.
The auditors’ reports at the end of judgement are communicated to the public prosecutor
for financial matters. The opinion of the public prosecutor is decisive:
• If he concludes that there is no charge, the accountant may be discharged from his management by a simple order delivered by the president of the formation of the court (the audit office) or his deputy;
• If, on the contrary, the public prosecutor concludes that charges do exist, he files a prosecution case, which is communicated to the accountant concerned so that he knows what he is accused of and can prepare his defence before any judgement. Following this step, the procedure becomes contentious and adversarial: the proceedings are based on written exchanges and, if he so requests, oral exchanges with the accountant. The audit office only issues a judgement after these adversarial proceedings, once the reporting officer has
7 One of the changes introduced by a Decree of 19 December 2008 (Official Journal of 26 December
2008) is the change of name of the government commissioners. From now on, the representatives of the public prosecutor in the audit chambers are described as “public prosecutors for financial matters”.
8 The limitation period fixed at six years by Law 2004-1485 of 30 December 2004, modifying the system of liability of public accountants, was reduced to five years by the Law of 28 October 2008. This reduction offers better judicial security to public accountants and prevents delayed complaints.
drafted a report at the end of the judgement and in view of the public prosecutor’s conclusions.
The judgement, issued after a public hearing, may grant discharge to the accountant for his financial management, if he has completed his control and payment duties correctly or if the determined negligence did not lead to any loss (discharge and final full discharge if he has left the post), or may make him liable, i.e. order him to pay to the authority from his own funds the amounts which he has failed to collect or has paid incorrectly.
In addition, the accounting judge now has the power to assess the consecutive circumstances of force majeure that constitute grounds for exoneration from responsibility.
Two types of appeal are possible against judicial decisions of regional audit chambers:
a) Rehearing the case
This review may be requested by:
- the accountant who, for example, has found the missing evidence
- the chamber itself
- the public prosecutor for financial matters who may act either at his own request or at the request of the Prefect or the local authority concerned A review is not subject to any time limit.
b) External appeal The Court of Audit acts as appeal judge for judgements and orders delivered by regional audit chambers.
The following persons may appeal:
- the accountant or his authorised representatives
- the legal representative of the authority concerned
- a taxpayer to that authority duly authorised by the administrative court
- the public prosecutor for financial matters attached to the regional audit chamber
- the Public Prosecutor at the Court of Audit.
The appeal must be lodged within two months of notification of the judgement or discharge order. A significant innovation of the reform that took place in 2008 results from the principle according to which appeals to judgements that pronounce a debit or a fine have suspensive effect. This is the first time that such a principle has been established in relation to an administrative judicial body. This should result in significant simplification of these procedures.
The Court delivers one or more rulings on the admissibility of the appeal and, if appropriate, on the merits of the case. An appeal on points of law may be submitted to the Conseil d'Etat.
Management or performance audit Even if the members of the financial judicial authorities mainly perform a non-judicial function – examining the regularity and the performance of the local public management – their capacity as magistrate allows them to perform this function completely independently. It has, in fact, become the principal function of the regional audit chambers.
1. Nature of the investigations
The law states that the chambers shall “audit the management” of the territorial authorities. The Law of 21 December 2001 defined management audit as follows: “The audit of management or performance relates to the regularity of administrative actions, the economy of the funds applied, and the evaluation of the results achieved in relation to the objectives set by the deliberating assembly or body. The appropriateness of these objectives is not a matter for comment.” In concrete terms, chambers must check the overall regularity of revenue and expenditure as well as the probity of public actions. However, the performance audit deals not only with questions of regularity concerning the management of authorising officials or directors, but also with issues of economy, efficiency and effectiveness of this management, the only exception being the appropriateness of objectives. It is a general “regularity audit” which goes beyond the financial and accounting aspects of the judicial audit and extends to become an audit of “sound management”.
Whilst the chamber may compel the accountant, through its judgement, to bear personally the financial consequences of any irregularity, it has no power over the authorising official. It brings to his attention comments about his management, which will become public at the definitive stage, after having been presented to the deliberating assembly of the institution concerned. Under the Law of 21 December 2001, final reports from regional audit chambers must be accompanied by written responses from the directors and former directors concerned and received within one month of notification of the provisional observations.
Besides the management of territorial authorities, chambers also examine the performance of hospitals and educational establishments.
This enables audit chambers to assess not the appropriateness of political choices made by the deliberating assemblies of the bodies under their jurisdiction, but the reliability of the accounts, the financial balance of operations and management actions, the economic application of resources, the results achieved in relation to those resources employed, and the effects of the actions taken: their area of authority thus includes the quality of management, and may lead them to express an opinion on local public policies, albeit within the limits of their powers.
2. Auditing certain bodies not subject to the public accounting rules
The chambers, on their own initiative, may call in for audit private bodies such as those subsidised by local public authorities or establishments (associations), or companies (semi-public companies), whose capital is held in its entirety or in its majority by those authorities, or local public establishments whose governing bodies are composed mainly of representatives of public authorities.
The audit covers the accounts and management, but the accounts are not “judged”, since they are not kept by a public accountant. This audit takes place mainly on site.
Since 1995, chambers may also audit the accounts which must be produced by the public service concession holder (for example; the company which holds the concession or leasing for a local public service consisting of supply of water, sewage treatment, disposal of household waste, etc.) to the delegating authority. These accounts record the operations carried out to execute the service which has been contracted out.
The resulting observations are brought to the attention of the body being audited, the authority (and its deliberating assembly) or public establishment concerned, and the State representative (Prefect). If necessary, they may be passed on to the relevant administrations or judicial authorities.
The significance of general interest activities, namely public service duties entrusted to subsidised associations, and of operations entrusted to semi-public companies – notably for the implementation of areas of economic activity, public housing or facilities, the operation of industrial and commercial services and service provision –, leads an increasing part of the audit activity carried out by chambers to be performed on these private organisations.
These audits of private bodies may also be carried out at the “justified request” of the State representative in the region, department or territorial authority (eg. the mayor in the case of a municipality).
The general legal rules about hearing both sides and about access apply to the audits carried out and to their consequences.
Relationships with other audit institutions Regional audit chambers are unique institutions: institutions of the State, decentralised but independent, whose members have the status of magistrates. Along with the Court of Audit, they constitute the financial judicial authorities i.e. audit offices with judicial status. Subject to appeal procedures (these latter only in what refers to judicial activities), each chamber is free to govern the conditions under which it carries out its audit activities within its area of authority. The management of staff and resources allocated to the financial judicial authorities is ensured within an institutional system which closely links the Court of Audit and the regional audit chambers.
Thus, the presidents or chairmen of regional chambers come from the Court of Audit or, if they come from the chambers themselves, become members (magistrates) of the Court of Audit by virtue of their position. Similarly, in each regional audit chamber one or more public prosecutors for financial matters, chosen from amongst the chamber’s magistrates, carry out prosecution duties: they are in contact with the Public Prosecutor at the Court of Audit (in other words, they represent the State within the chamber).
Their duties include, in particular, promoting the uniformity of case law.
The relationships between the regional chambers and the Court of Audit are institutionalised through the High Council of the Regional Audit Chambers, chaired by the First President of the Court. The Council rules on all aspects relating to the careers of the magistrates and the operation of the chambers.
The Public Prosecutor at the Court of Audit provides guidance and co-ordinates the actions of the public prosecutors for financial matters attached to the regional audit chambers.
Regular meetings bring together the President of the Court of Audit and all the chairmen of the chambers. Cooperation amongst regional audit chambers and between the chambers and the Court takes the form, in particular, of “horizontal” inquiries which involve several regional chambers and, in some cases, one or more departments (chambers) of the Court. A liaison office and a methods committee co-ordinate inquiries and methods which are common to the Court and the regional chambers.
The definition of areas of authority does not prevent the provision of reciprocal services to serve the interests of the respective duties of the regional chambers and the Court of Audit. This applies in particular to documentation and training.
Audit procedures In broad outline, the working methods of the institution are as follows: first of all, the regional audit chamber acts independently to decide on its annual programme.
To carry out this programme, the president gives each magistrate a certain number of cases. The magistrate investigates these cases, either alone or as part of a team, with the help of one or more audit assistants, in other words, he examines the accounts of the body concerned, goes to the site, and brings together the elements which he considers necessary, making use of the investigative powers at his disposal.
Within the framework of the general directives to the financial judicial authorities, or directives specific to the bench to which he belongs, the reporting officer (rapporteur) has full responsibility for conducting the investigation. At the end of it, he submits his report. This shows the reporting officer’s findings and recommendations for consultation of the college of the chamber: on a certain point, charging the public accountant with paying back sums paid incorrectly; on another point, writing to the mayor, or even placing the matter before the prosecutors at the criminal courts, if he believes there are grounds to suspect a criminal offence, etc.