Presentation of the French Public Sector Accounting ... · Presentation of the French Public Sector Accounting Standards Council (“CNOCP”) 11th Annual OECD Public Sector Accruals

Presentation of the French Public Sector Accounting Standards Council

(“CNOCP”)

11th Annual OECD Public Sector Accruals Symposium Paris, 3-4 March 2011

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Presenter

• Marie-Pierre CALMEL

• General Secretary of the Public Sector Accounting Standards Council (CNOCP) since the 18th November 2009

• Qualified chartered accountant, auditor and graduate of the “Ecole Supérieure de Commerce de

Paris” business school

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Background (1/4)

• 1946: creation of the Accounting Standards Commission (Superior Accounting Council in 1947), with a mission of proposing a general chart of accounts (“PCG”), and of coordinating the drawing up of professional charts of accounts

• 1957: creation of the National Council For Accounting

(CNC), whose principal mission is to express a prior opinion on all accounting requirements applicable to all kinds of entities that have an obligation to produce accounts

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Background (2/4)

• 1998: law reforming accounting regulation, creating the Accounting Regulation Committee (“CRC”), with the mission of establishing regulations for all those who have an obligation to produce accounts, except for those public corporate entities subject to public accounting rules.

The CRC decides on the basis of the opinion of the CNC, the latter remaining responsible for giving prior opinions on the rules for public sector accounting.

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Background (3/4)

• 2001: Constitutional Bylaw on Budget Acts (LOLF) which requires the Central Government to keep general accounts compliant with standards adopted after considering the opinion of a committee made up of experts from the public and private sectors

• 2002: creation of the Public Sector Accounting Standards Committee by the Budget Act 2002

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Background (4/4)

• 2007: reform of CNC prefiguring the application of the Lepetit Report, recommending the creation of the Authority for Accounting Standards (“ANC”) by merging the “CNC” and the “ CRC”.

• 2008: given that the merger CNC - CRC is based on the

scope of responsibility of the CRC and leads to the creation of an ANC responsible only for private sector accounting, the Prada Report recommends the creation of a Public Sector Accounting Standards Council (CNoCP) to take over the advisory responsibilities of the CNC and of the Standards Committee for public sector accounting

Official Texts (1/2)

• Report on the creation of a Public Sector Accounting Standards Council written by Mr Michel Prada in July 2008

• Supplementary Budget Act for 2008 n° 2008-1443 of the 30th December 2008 – Article 115

A council for public accounting standards is created with the responsibility for

expressing an opinion prior to the adoption of general accounting rules applicable to Central Government and, without prejudice to the responsibilities of the Authority for Accounting Standards (“ANC”), to other public and private parties financed mainly by public funds and in particular by compulsory levies.

This advisory organisation is placed under the responsibility of the minister in charge of the budget. Its president is appointed by the minister in charge of the budget.

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Official Texts (2/2)

• Supplementary Budget Act for 2009 n° 2009-1674 of the 30th December 2009 - Article 108 In the legislative and regulatory texts applicable to the general accounts of the Central

Government and to other public and private parties financed mainly by public funds and in particular by compulsory levies, the references to the Authority for Accounting Standards(“ ANC”) are replaced by a reference to the Public Sector Accounting Standards Council(“ CNOCP”)

• Order of the 29th April 2009 relating to the Public Sector

Accounting Standards Council (Ministry for the Budget, Public Accounts and the Civil Service) Role and responsibilities of the Council Organisation of the different bodies making up the Council

• Order of the 28th July 2009 making appointments in the

Public Sector Accounting Standards Council (“CNOCP”) Appointment of the President of the Council and of the six experts of the

board

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Composition of the Council The Public Sector Accounting Standards Council is composed of: • A board • Three permanent commissions • And an advisory committee for orientation. It has a General Secretarial Department. It has its own by-laws.

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The board

• The board is made up of the president of the Council and 18 members: Nine ex officio members Nine technical experts.

• The board adopts opinions, recommendations and proposals:

By the majority of members present Providing at least ten members are present.

• In addition, the board fixes the work plan and approves the annual report.

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Members of the board The ex officio members are: – the first president of the Government Audit Office or a magistrate appointed by the latter; – the president of the local authority finance committee or his representative; – the general secretary of the social security accounting commission or his representative; – the head of the General Inspectorate of Finance or his representative; – the director general of local authorities or his representative; – the director of Social Security or his representative; – the director general of the Treasury and of Economic Policy or his representative; – the director general of Public Finance or his representative; – the director of the Budget or his representative. The technical experts are: – the president of the Authority for Accounting Standards; – two members of the board of the same authority; – three experts in private sector accounting; – three experts in public finance.

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The permanent commissions (1/2)

• Three permanent commissions are responsible for preparing

the decisions of the board:

the commission “Central Government and government-controlled organisations”

the commission “Territorial authorities and local public agencies” the commission “Social security and similar organisations”.

• Each commission is presided by a member of the board,

appointed by the president.

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The permanent commissions (2/2)

• The composition of the commissions is fixed by the

Council’s by-laws. • Each commission comprises:

Ex officio members Technical experts.

• It may not exceed 20 members.

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Composition of the commission for “Central Government and government-controlled organisations”

The commission for “Central Government and government-controlled organisations” comprises, in addition to its president, seventeen members:

A magistrate appointed by the first president of the Government Audit Office A representative of the department for general economic and financial control A representative of the Directorate-General of Public Finance A representative of the Treasury and Economic Policy General Directorate A representative of the Budget Directorate A representative of the Ministry of Defence A representative of the Ministry of Public Works A representative of the Ministry in charge of social security Three representatives of government-controlled organisations appointed by

the President of the Council after consulting the board Two accountants in civil service appointed by the President of the Council

on the basis of proposals made by the Directorate-General of Public Finance Four experts in finance and accounting for Central Government and

government-controlled organisations, appointed by the President of the Council after consulting the board

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Composition of the commission for “Social security and similar organisations”

The commission for “Social security and similar organisations” comprises, in addition to its president, twenty members: A magistrate appointed by the first president of the Government Audit Office A representative of the National Company of Auditors A representative of the social security accounting commission A representative of the General Inspectorate for Social Affairs A representative of the director of Social Security A representative of the Directorate-General of Public Finance A representative of the Budget Directorate A representative of the Ministry for Agriculture Seven representatives of social security agencies proposed by the social

security directorate A representative of the organisation responsible for providing unemployment

benefits Four experts in finance and accounting for social security organisations,

appointed by the President of the Council after consulting the board

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Composition of the commission for “Territorial authorities and local public agencies”

The commission for “Territorial authorities and local public agencies” comprises, in addition to its president, nineteen members: A representative of the local authority finance committee A magistrate appointed by the first president of the Government Audit Office A representative of the Directorate-General of Public Finance A representative of the Treasury and Economic Policy General Directorate A representative of the Budget Directorate Two representatives appointed by the association of mayors of France A representative appointed by the Assembly of French “Départements” A representative appointed by the association of French regions A representative of the ministry in charge of local authorities A representative of the public agencies for inter-communal cooperation appointed by the

President of the Council after consulting the board A representative of the medico-social sector appointed by the President of the Council on

the proposal of the Social Action General Directorate Two representatives of the hospital sector appointed by the President of the Council on

the proposal of the General Directorate for Hospitalisation and the organisation of Medical Care

Two accountants in civil service appointed by the President of the Council on the basis of proposals made by the Directorate-General of Public Finance

Four experts in finance and accounting for local authorities appointed by the President of the Council after consulting the board

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The advisory committee for orientation

• The advisory committee for orientation is presided by the president of the Council.

• It addresses all issues relating to accounting standard-

setting strategy and in particular those relating to the nature and extent of convergence of public sector accounting standards with those applicable to companies.

• It expresses an opinion on the annual work plan and the

annual report of the Council.

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Composition of the advisory committee for orientation

• The committee includes twenty one members:

Six from the advisory committee of the Authority for Accounting

Standards (“ANC”) Six are proposed by the Superior Council of Chartered Accountants

(“CSOEC”) and the National Company of Auditors Three represent universities Six are experts in public finance

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The General Secretarial Department

• The General Secretarial Department is under the responsibility of the President of the Council.

• The organisation of the General Secretarial Department is

determined by the by-laws.

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Set of accounting standards and regulations (1/5)

The models in France

• Two models:

- The regulation model: law, decree, order, instructions, circulars > governance by public authority

- The standard model: conceptual framework, standards, interpretations > standard setting organisation

• Mixed situations

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Central Government: Accounting standards for Central Government • A conceptual framework • 15 standards:

• STANDARD 1: FINANCIAL STATEMENTS

• STANDARD 2: EXPENSES

• STANDARD 3: SOVEREIGN REVENUES

• STANDARD 4: OPERATING REVENUES, INTERVENTION REVENUES AND FINANCIAL REVENUES

• STANDARD 5: INTANGIBLE ASSETS

• STANDARD 6: TANGIBLE ASSETS

• STANDARD 7: FINANCIAL ASSETS

• STANDARD 8: INVENTORIES

• STANDARD 9: CLAIMS RELATED TO CURRENT ASSETS

• STANDARD 10: CENTRAL GOVERNMENT CASH POSITION COMPONENTS

• STANDARD 11: FINANCIAL DEBTS AND DERIVATIVE FINANCIAL INSTRUMENTS

• STANDARD 12: PROVISIONS FOR RISKS AND LIABILITIES, NON-FINANCIAL LIABILITIES AND OTHER LIABILITIES

• STANDARD 13: COMMITMENTS TO BE DISCLOSED IN THE NOTES TO THE FINANCIAL STATEMENTS

• STANDARD 14: ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRRORS

• STANDARD 15: EVENTS AFTER THE BALANCE SHEET DATE

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Standards applicable to the public sector

Standards applicable to the private sector

French GAAP (PCG and CRC)

CNC

IFRS IASB

IPSAS IPSAS Board

Central Government Accounting Standards

Transactions specific to Central Government

International Standards

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French GAAP (PCG and CRC)

ANC

IFRS IASB

IPSAS IPSAS Board

Central Government Accounting Standards CNOCP

Convergence

Reference to

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• Public Agencies and Local Authorities

• Budgetary and accounting instructions based on the general chart of accounts.

• Social security organisations • A single chart of accounts for social security organisations

(“PCUOSS”), which stipulates the specific requirements as compared to the general chart of accounts.

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Opinions expressed by the Council in 2010 (1/2)

• Opinion n° 2010-01 of the 9th February 2010 relating to the funding of accumulated social security deficits by the “CADES”, the organisation responsible for amortizing France’s social security debt.

• Opinion n° 2010-02 of the 30th June 2010 relating to changes in accounting policy, changes in accounting estimates and the correction of errors in national public agencies subject to budgetary, financial and accounting instructions M 9-1 and M 9-3

• Opinion n° 2010-03 of the 30th June 2010 relating to the accounting rules for making provisions applicable to the Additional retirement scheme institution for the civil service (ERAFP)

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Opinions expressed by the Council in 2010 (2/2)

• Opinion n° 2010-004 of the 17th November 2010 relating to improvements to standard 6 on tangible assets of the Central Government Accounting Standards.

• Opinion n° 2010-005 of the 17th November 2010 relating to improvements to four standards of the Central Government Accounting Standards.

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Prior opinions of the Council on regulations

• 7th December 2009: draft decree relating to the financial

requirements applicable to health institutions

• 9th April 2010: draft decree relating to charges made by institutions accommodating elderly dependent people and to the financial and budgetary regulations of social and medical care institutions

• 30th June 2010: combined accounts of territorial hospital

communities

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The replies of the Council to the consultations of the IPSAS Board

• 29th June 2009 - Exposure Draft “ED 36 – Agriculture”, • 29th June 2009 - Exposure Draft “ED 41 – Entity combinations from

exchange transactions”, • 30th June 2009 – Exposure Drafts “ED 37, 38, 39 – Financial

Instruments: Presentation, Recognition and Measurement, Disclosures”, • 1st July 2009 – Exposure Draft “ED 40 – Intangible Assets”, • 29th October 2009 – Exposure Draft “ED 42 – Improvements to

IPSASs”, • 11th June 2010 – Consultation Paper “Reporting on the Long-Term

Sustainability of Public Finances”, • 30th June 2010 – Exposure Draft “ED 43 – Service concessions

arrangements: Grantor”, • 30th June 2010 – Exposure Draft “ED 44 – Improvements to IPSASs”.

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The Work Plan of the Council in 2010 - 2011 (1/5)

• Work common to the three commissions Intervention expenses and liabilities: determination of a conceptual

framework Definition of obligating event and treatment of qualifying conditions Determination of an accounting model based either on an identifiable

right arising on the emergence of a new beneficiary of a service, or on the existence of unconditional obligations towards the public organisation

Determination of the accounting treatment of intervention expenses and liabilities, and of social liabilities in the accounting standards manual for Central Government: definition and characteristics of accrued expenditure, provisions and off-balance sheet commitments

Disclosures in the Notes

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The Work Plan of the Council in 2010 – 2011 (2/5)

• Commission for “Central Government and government-controlled organisations” (1/2)

Working group on “Intangible and tangible assets”

Recognition and measurement of specialized property: measurement methods, treatment of subsequent expenditure Accounting for heritage assets (works of art) Accounting for intangible assets: accounting for a licence for

operating public property and nature of the asset Harmonisation of accounting standards:

∗ Central Government / Public agencies ∗ Central Government / Local authorities

Working group on “Service Concessions and Public-Private

Partnerships” Accounting treatment of “Service Concessions and Public-Private

Partnerships” (Central Government and territorial authorities)

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• Commission for “Central Government and government-controlled organisations” (2/2)

Working group “Central Government and public agencies” Link budget – accounts

∗ Link between the results in general and budgetary accounts Harmonisation of the standards

∗ Analysis of differences between the requirements of budgetary and accounting instructions M9 and those of the accounting standards manual of Central Government

∗ Necessity or not to define specific treatment according to the nature of the activity of each agencies

∗ Consolidation or combination aspects Public agencies and operators

∗ Qualification of expenses and link with budget expense categories ∗ Grants received: triggering event for grants received and related accounting

Recognition and measurement of assets ∗ Conditions for determining the existence of control ∗ Measurement methods ∗ Accounting by components

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• Commission for “Social security and similar organisations”

Working group on the “Assessment of the single chart of accounts

for social security organisations (PCUOSS)” Identification of subjects for which an adaptation of the accounting

rules is required Analysis of the convergence with Central Government accounting

standards

Working group on “Recognition of technical income” Accrual accounting Recognition of allocated taxes Recognition of adjustments and undue amounts repayable

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• Commission for “Territorial authorities and local public agencies”

Working group on “Grants”

Recognition of grants received: recognition in the balance sheet and in the income statement, possible deferral.

Recognition of grants paid: recognition in the balance sheet and in the income statement, possible deferral.

Working group on “Financial Instruments”

Recognition and measurement of “structured” loans with a risk component

Recognition in the balance sheet Hedge accounting Accounting for unrealised income

Presentation of the French Public Sector Accounting ... · Presentation of the French Public Sector Accounting Standards Council (“CNOCP”) 11th Annual OECD Public Sector Accruals

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