Annual public report 2013, Observations, summaries part I · The 2013 annual public report produced...

COuRt OF ACCOuntS

Summaries

Part I

ObservationsPublic Finances

Public PoliciesPublic Management

Summaries are intended to facilitate the understandingand use of the report produced by the Court of

Accounts.Solely the original report is legally binding on the Court ofAccounts. The responses of the administrations and other bodiesconcerned are included in the report.

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Annual Public Report2013

Introduction

The 2013 annual public report produced by the Court of Accountscomprises three parts, only the first two of which have correspondingsummaries :

- Part I which comprises two volumes (I-1 and I-2), outlines the obser-vations and recommendations drawn from a selection of audits, surveysand evaluations carried out in 2012 by the Court, regional and territorialcourts of accounts, or the Court in conjunction with regional and territo-rial courts of accounts;

- Part II focuses exclusively on the action taken by authorities, admi-nistrations and other audited bodies following the observations andrecommendations made in previous years;

- Part III provides an overview of the activities of the Court and theregional and territorial courts of accounts over the course of 2012.

The annual report produced by the Court de Discipline Budgétaire etFinancière (French ‘Budget and Finance Disciplinary Court’) is attachedas an appendix to these three parts of the report.

The present instalment comprises a series of summaries of the 27 textsthat make up Part I, ‘Observations’.

These 27 texts are divided into three parts:

- first part: public finances (2):. the overall situation of public finances at the end of January 2013. financial situation and prospects of departments

- second part: public policies (12):. chapter I: health and social cohesion (4). chapter II: research and higher education (2). chapter III: transport and land planning (4). chapter IV: two sectorial assistance plans (2)

- third part: public management (13):. chapter I : State administrations (3);. chapter II : local authorities (4);. chapter III : State operators (1);. chapter IV: state-owned companies (4);. chapter V: a para-governmental foundation (1).

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I - Public Finances1 The overall situation of public finances . . . . . . . . . . . . . . . . . . . . . . . .7

2 The financial situation and prospects of departments . . . . . . . . . . .10

II - Public Policy3 The combat against Alzheimer’s disease: a public health policy

to be consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

4 Hospital restructuring: three illustrations of difficultiesencountered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

5 The attending physician and the coordinated care pathway: an unfulfilled reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

6 The “in activity” RSA : a seldom solicited benefit, limitedimpact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

7 Inserm and the life sciences: new challenges in a strategic sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

8 Graduate business and management schools: a development to be regulated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

9 The Joint Transport union of the Toulouse Agglomeration: a necessary adaptation of network growth . . . . . . . . . . . . . . . . . . . .28

10 The Artois-Gohelle (Pas de Calais) tramway: an inadequately thought out project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

11 Participation of local authorities in financing of the Ligne à Grande Vitesse Est (LGV Est): costly counterparts, one station too many . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

12 Fishing ports in Brittany: regional management to be strengthened . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

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Summaries of Part IObservations

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Table of Contents

Summaries of the Annual Public Report of the Court of Accounts

13 State support of tobacconists: unjustified aid . . . . . . . . . . . . . . . . .37

14 The 2009-2011 printed press assistance plan: a missed opportunity for reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

III - Public Management15 Maintenance purchases for the Ministry of Defense: high potential

for savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

16 Visa issuance and residence permits: modernization to be accelerated and simplification to continue . . . . . . . . . . . . . . . . . . .46

17 General administration of civil aviation: generous and costly social action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

18 Electricity distribution concessions: organization to be simplified, investments to be financed . . . . . . .51

19 Wastewater treatment for the Corbeil-Essones and Évry region : for-getting the general interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

20 Reestablishment of the maritime character of Mont-Saint-Michel: a poorly managed project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

21 Property of local authorities: towards more dynamicmanagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59

22 The National Water and Aquatic Environment Agency: poorly planned transformation, failing management . . . . . . . . . . .62

23 Payments to EDF SA: rapid growth, accumulation of benefits, littlelink with performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

24 SNCF communication expenses: expensive operations, irregular markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68

25 SONACOTRA at Adoma: drift corrected late . . . . . . . . . . . . . . . .71

26 Monnaie de Paris: change moving forward, challenges to overcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74

27 Heritage Foundation: a unique model . . . . . . . . . . . . . . . . . . . . . . . .77


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1the overall situation of publicfinances (at end of January 2013)

the situation in 2012

The public deficit, after reaching anexceptionally high level in 2009 and2010 (7.5% and 7.1% of GDP respecti-vely) fell to 5.2% of GDP in 2011 andthe Government expect a furtherdecline in 2012 to 4.5% of GDP.

The Court’s report in July 2012 onthe situation and outlook for publicfinances had pointed up the risk ofdeviating from this goal, but remedialmeasures were taken during the sum-mer.

By including measures taken fromprevious finance laws, the structuraleffort to reduce the deficit in 2012 wasvery significant (1.4 percentage pointsof GDP). It was particularly based onan increase in compulsory levies (1.1percent of GDP), much less on control-ling expenses (0.3 percent of GDP).

The information available inJanuary 2013 does not lead to questio-ning the deficit target of 4.5% of GDPfor 2012, but the risk of a higher deficitis not negligible, especially since thedeterioration of conditions may haveled to a lower revenue growth thanexpected. The public debt may haveexceeded 90% of GDP by the end ofDecember 2012.

Other European countries havemade similar efforts and the situation inFrance in 2012 would remain lower thanthat of the average for the EuropeanUnion or the Eurozone. Germany inparticular would have been close tobalancing its public accounts.

Outlook for 2013

The Government’s revenue projec-tions for 2013 are probably too favoura-ble, especially since they are based on afragile macroeconomic scenario and agrowth of compulsory levies which,with an unchanged legislation, is toohigh relative to economic activity. Inaddition, the cost of community tax dis-putes is still uncertain and the difficul-ties in estimating numerous new taxmeasures introduce a significant hazard.

The Government’s goal for 2013 isstabilizing the State’s expenses, exclu-ding interest and pensions (scope of thestandard value), relative to the Loi definances initiale (LFI - Initial BudgetAct) for 2012.

Compliance assumes that savingswill be generated to offset the new mea-sures (€1 billion) and the growth trendfor expenses. Due to differing estimatesfor this, for which measurement is partlyconventional, the savings required are

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estimated at €10 billion by theGovernment and €7 billion by theCourt. A significant proportion ofthese savings will result from thedelayed effect of measures taken underthe previous legislature, including theimpact of workforce reductions inclu-ded in the Initial Budget Act for 2012on the 2013 payroll. The new measuresidentified in the LFI for 2013 are quitelimited and compliance with the stan-dard for expenses, if possible, will bedifficult.

Even if the Government’s objectivefor 2013 is met, given that the supple-mentary budget acts for 2012 reducedcredits by €1.2 billion compared to theLFI 2012, the State’s expenses withinthe scope of the standard value wouldincrease by €1.2 billion over in 2013while they fell in 2012. Health insuranceand pension expenses would increase aswell, faster in 2013 than in 2012.

The total growth of primary publicexpenses would nonetheless be almostequal in 2012 and 2013, according to theGovernment. This continued restraintof expenses incurred in 2011 is theresult of assumptions made by theMinistry of Finance in regards to thechanges of expenses least directly underthe State’s control (unemployment insu-rance, local authorities, various centraladministration bodies, etc.). Some ofthese assumptions, including those rela-ting to unemployment benefits, are fra-gile.

Subject to these reservations, thestructural effort planned for 2013 issignificant, nearly 2 percent of GDP,and the reduction of the structural defi-cit, which is at the heart of the newEuropean treaty, will comply with thecommitments of France.

However, achieving the actual defi-cit objective (3% of GDP) could becompromised, both in France and otherEuropean countries, if the economicsituation does not improve quicklyenough. This view, if confirmed, islikely to call for a review at theEuropean level of the respectiveweights given to the actual deficit crite-ria, very hard to achieve in a deteriora-ting situation, and to the structural defi-cit and effort criteria, more easilycontrollable by a government.

the need to control expenses

The absolute priority is now tointensify the effort to control expensesin all government bodies. Indeed, thestructural effort planned for 2013 isunbalanced: it relies less than 25% oncontrolling expenses and over 75% onincreases in compulsory levies. In addi-tion, the expected savings are partly dueto low interest rates, which cannot beregarded as durable, and the impact ofmeasures taken under the previous legis-lature.


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the overall situation of public finances

(at end of January 2013)

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A rebalancing is provided for in theBudget Planning Act, beyond 2013, bet-ween the efforts for revenues andexpenditures, mainly from financing ofthe tax credit for competitiveness andemployment through additional savings.

The necessary measures for theentire government, to move closer tostabilisation in the level of expenditures

from 2014 as it is planned in thePlanning Act, must be taken quickly.Modernisation of public action announ-ced by the Government must explicitlyaim for both restraining expenses andimproving the quality of public services.


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the overall situation of public finances

(at end of January 2013)

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2 the financial situation andprospects of departments

Over the last decade, the financialorganization of departments has beenprofoundly changed. In parallel, theadjustment of revenues to the growthtrend of expenses has become more dif-ficult.

the growing weight of socialand personnel expenses

Since the 2000s, the departmentshave provided payment of theRMI/RSA, the personal autonomy allo-wance (APA) and the disability compen-sation benefit (PCH). The share ofthese social expenses in departmentbudgets rose significantly between 2003and 2011. Intervention expenses,consisting mainly of social benefits,thus rose from 58.7% to 65% of opera-ting expenses.

Over the same period, the payrollincreased 115%. This growth is largelyexplained by the transfer of State staff(about 80,000 jobs), in connection withthe decentralisation of powers followingthe Decentralisation Act II (2004).These transfers do not alone explain theincrease in staff. Excluding the effect ofdecentralisation, workforces increasedby 12% in the period.

A change in revenue structure

The structure of department reve-nues has changed significantly. Transfersof powers to the departments haveessentially been financed through indi-rect tax transfers. Local tax reform hasreversed the relationship between directand indirect taxation in their resourcesand reduced the ability of departmentsto adjust tax rates.

A more difficult to achievebalance between revenue andexpenses

In light of jurisprudence of theConstitutional Council, compensationfor transfers and the extension ofpowers, which is assessed at the timewhen the transfer or extension takesplace, was not done in contravention ofthe provisions of Article 72.2 of theConstitution. However, financially a lagoccurs between the revenues allocatedand the increasing costs borne by thedepartments, especially for the APA,RMI/RSA and PCH. For these threebenefits, the gap between the cost borneand the funding received from the Staterose to €5 billion in 2011.

The pinch effect noted in 2009 dueto the growth in expenses and the fall intransfer duties on real property

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(DMTO) has highlighted the fragility ofdepartments’ financial balance equili-brium. In 2011, the departments wereable to rebuild room to manoeuvre, lar-gely due to high DMTO levels. Theynonetheless severely limited their invest-ments and borrowings.

However, this improvement is cycli-cal while the growth in social expensescontinues in a less favourable economicand social context. Departments’ socialexpenses have risen sharply in recentyears. They increased by an annual ave-rage of 7.1% over the 2005/2011period.

taking the variety of situations into account

Although the infrastructure situa-tion of departments has deteriorated,the response cannot be comprehensiveand uniform. Transfer of a newresource benefits a community in finan-cial difficulty the same as one in relativeease. Similarly, any undifferentiatedincrease in the rates of existingresources only amplifies existing inequa-lities.

In addition, wide disparities existbetween communities. If we comparedepartments that combine both highersocial expenses and lower transferduties, it is possible to identify 11 com-munities that have a potentially fragilebudget structure. Of these, five are alsomarked by a high debt ratio.

Avoiding inappropriate solu-tions

The use of an emergency fund doesnot constitute a sustainable solution toeliminate imbalances of structural ori-gin. A strictly cyclical interventionshould be targeted in its purpose andfollow precise and objective criteria.

Transfer of the RMI/RSA, APAand PCH to the departments madesense given their other powers. Transferto another public administration hardlyseems feasible. It also would not resolvethe question of balance betweenresources allocated and expenses.

In the current context of publicfinance crisis, any reallocation ofresources to the departments would leadde facto to an effect of removingresources available for the other publicadministrations. Under these conditions,transfer by the State of new taxresources to the local authorities wouldnot be preferable.

Generating financial and fiscalleeway

Leeway could be generated throughmanagement efforts. Strengthening ofdepartment responsibility in manage-ment of various solidarity mechanismswhich have been entrusted to themcould promote seeking of managementsavings. Independently of these efforts,incentives at refocusing investments ondepartment priorities could be adopted.

Financial situation and prospects

of departments

For better control of expenses:

–consider strengthening responsi-bilities of departments in managingvarious mechanisms of social inter-vention;

–avoid co-financing of regionaldepartment investments and introducea subsidy ceiling for investment pro-jects undertaken by other communi-ties ;

–limit the ability of departmentsto intervene in addition to the State infinancing of public investments;

For security and better allocationof resources:

–establish a more ambitious equa-lisation by volume (DMTO andCVAE) and with criteria that should beredefined (including by taking theweight of social expenses intoaccount) with the goal of gradually

reducing gaps by 30% compared to thecurrent situation ;

–for the DMTO, establish aperennial mechanism for “smoothing”fluctuations, whose criteria could bemodelled on the “set aside” mecha-nism decided in 2012. A smoothing onthe last five years should avoid econo-mic uncertainties;

–consider reallocation of taxation,neutral for the State, between thedepartments and communal block, inorder to give the departments greaterleeway; to this end, reallocate a portionof the tax on developed land to thedepartments and a portion of DMTOto the communal block, thus allowingin particular increasing the flexibleshare of department taxation and sta-bilising a greater portion of theirresources.

Recommendations

A greater ability to adjust revenuesto expenses could be given to depart-ments by transferring a share of taxeson developed land in return for a shareof DMTO. This rearrangement shouldbe complemented by the strengtheningof equalisation and establishment of aperennial “smoothing” mechanism overfive years of DMTO proceeds.


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Financial situation and prospects

of departments

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Court of Accounts

3 the fight against Alzheimer’sdisease: a public health policy to beconsolidated

INSERM estimates that860,000 people are currently afflictedwith Alzheimer’s disease or a relateddisease. This condition, which developsover several years and for which there isno cure, affects 13% of men and 20.5%of women beyond 75 years of age. It isa major public health issue which hasbeen the subject of three successiveplans prepared and implemented bet-ween 2001 and 2012. the Court has exa-mined contributions in terms of medi-cal management of this pathology.

Continuity in the implementedpolicy and increasingly streng-thened direction

Since 2001, the first Alzheimer’splan defined the main objectives of thisfight against the disease which then wastaken up and deepened in a consistentmanner in the subsequent plans. Thesecond plan (2004-2007) especiallyenabled 100% support by health insu-rance. The third (2008-2012 plan) hasfocused in particular on research and onorganisation of the continuity of medi-cal care through innovative mechanismsintended to strengthen involvement ofmunicipal doctors and strengthen thepossibilities of specialised care facilities.

The first two plans were very poorlystructured in terms of management andtracking. However, for the third, thedirect management mission placeddirectly under the President of theRepublic allows all players to be mobili-sed and avoided any disintegration ofthe plan’s implementation.

A hard to measure financialeffort

This is especially true for the firsttwo plans, for lack of budget estimatesand accurate assessment. The projectedbudget for the third plan (€1.6 billionover five years including €226 millionfor the health component), presented asfinanced by medical deductions thencreated, proved to be approximate and aclose monitoring of expenses actuallydisbursed was not possible. The esti-mate made shows however an underper-formance of the forecast financial enve-lope, with the rate of overall achieve-ment only being 31.54% by the end of2011. This result is explained by theslow deployment of new mechanisms,delays in their design and underestima-ted implementation: in September 2012the various measures of the plan wereon average implemented at 83% of thefinal objective.


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Gradual organisation of a carepathway that is still unfinished

A diagnosis offer that is now acces-sible throughout the territory. It is basedon 469 local memory consultations arti-culated with 28 memory resource andresearch centres, with practices that arevery heterogeneous, however. A natio-nal Alzheimer’s Bank was created in2009 to enable epidemiological monito-ring of the disease, but all the memoryconsultations do not supply it.

Home medical monitoring is still inthe process of being organized. Specificconsultations by the GP for the patientand the caregiver, experiments with newmethods of remunerations of healthprofessionals and creation of Alzheimerspecialist staff grouping several healthprofessions have however begun toreposition the treating physician to thecentre of patient care for the disease.However, only 273 Alzheimer places outof 500 planned were operational byJune 2012.

Deployment of dedicated hospitalscreated by the third plan has had delays:only 55 reinforced accommodationunits (out of 109 planned) and 77 cog-nitive-behavioural units (out of 120planned) were actually opened byDecember 2012.

An essential assessment of drugmanagement and the researchstrategy

Initiatives have been undertaken tobest monitor the undesirable effects ofdrugs used by Alzheimer’s patients andto reduce the inappropriate use of neu-roleptics. However, the downward reas-sessment by the High Health Authorityin October 2011 of the medical servicerendered by four drugs used calls for aquick performance of a strict medico-economic assessment of the contribu-tion of these products in terms of theircosts for the community (about€380 million in 2012).

The third plan has driven a realdynamic for research by devoting€192 million and by creating a specialistoperator: the Alzheimer’s ScientificCooperation Foundation. The results,especially in terms of developing newtools for diagnosis as well as preventiveand curative treatments should be care-fully assessed according to a calendar tobe determined.

the fight against Alzheimer’s disease

–proceed with methodical assess-ment of new mechanisms for carebefore planning their renewal and sus-tainability;

–make a rigorous medico-econo-mic assessment of drugs used for trea-ting Alzheimer’s disease;

–strictly enforce for all memoryconsultations the obligation to docu-ment the national Alzheimer’s Bank;

–if a new Alzheimer’s plan is laun-ched, organise accurate financial moni-toring using a methodology that iscommon to all the various administra-tions concerned.

Recommendations


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the fight against Alzheimer’s disease

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4 Hospital restructuring: three illustrations of difficulties encountered

The reconstruction of the hospitallandscape undertaken over fifteen yearsremains unfinished today and onlyimperfectly meets the needs of thepopulation, as already noted by theCourt in its annual report on applicationof the laws for financing social securityfor 2008.

the Court and Regional Chambersof Accounts examined, in 2012, threeexamples of restructuring: thePerpignan hospitals in the EasternPyrenees (1,151 beds), the Nord-Deux-Sèvres in Deux-Sèvres (316 beds) andthe Albertville-Moutiers in Savoie(544 beds).

Long project lead times

In spite of uneven financial chal-lenges, the three projects have each hada lot of trouble to get underway: it tookbetween ten and twenty years to makethe necessary decisions.

In Perpignan, reconstruction of theold hospital, the decision of which wasmade in 1993, was completed in 2012,but with completion of only two sec-tions out of the originally planned four.

The Nord-Deux-Sevres hospital hasnot yet seen concrete completion, des-pite three successive projects.

In the Tarentaise Valley, after thedifficult agreement on merging only two

entities (Albertville and Moutiers) out ofthe originally planned three (withBourg-Saint-Maurice), and after fivesuccessive projects, the new health carefacility is still not built.

Ambiguous roles of administra-tive supervision

At Perpignan, several projects forreconstruction of the old hospital weresuccessively rejected by the regionalhospital board then by the regionalhealth board without a global reflectionbeing carried out on the new hospital’sactivity.

The Nord-Deux-Sèvres hospital,resulting from the merger of three hos-pitals, experienced a deteriorating situa-tion, especially due to the lack of admi-nistrative supervision on the selection ofthe type of organisation to be establi-shed and the level of financing to planfor.

In Tarentaise, the Ministry ofHealth and the regional health board haslong insisted on the urgency of a mer-ger, but the various players, institution,medical community, elected representa-tives and ministry, have not succeeded inagreeing on an efficient and economicalgrouping.

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Hospital restructuring

Financially damaging delays

Successive projects for reconstruc-tion of the Perpignan hospital haveincurred, since 1993, numerous uselessexpenses and the financial scope of theproject has increase by 63% in constantEuros, with the consequence of mort-gaging the hospital’s financial situationfor a long time.

Similarly, for the Nord-Deux-Sèvreshospital, the sustainability of the newproject, valued at €106 million, remainsuncertain.

The financing plan for theAlbertville-Moutiers hospital (CHAM)also seems to be unrealistic in terms ofits activity and ability to ensure thebalance of the resulting operations.

A still inadequate health care offer

At Perpignan, the new hospital wasbuilt on its former site, which does notallow for an extension. The architecturalchoice is unsatisfactory and completionof two additional sections plannedseems very hypothetical.

For the two other projects studied,but not yet finally decided or financed,these only very imperfectly meet theneeds of the population.

Consequently, the Court believesthat there is still time to reconsider themand credibly define future activity of theinstitutions within the framework of aconsistent and global approach to provi-ding local health care.

The Court persists in its 2008recommendations to revive andstreamline the restructuring plans. Itinsists on the need for State services todefine national hospital restructuringgoals, strengthen the means for actionby regional health boards to supporttheir decisions, in an increasingly diffi-cult context of fighting social deficits.

Regarding projects that do not cur-rently appear satisfactory from thepoint of view of the medical organisa-tion in the territory concerned, theCourt and the regional court of

accounts make the following recom-mendations:

–redefine projects by integratingthem in a rigorous and consistentapproach taking into account the ove-rall local supply and demand for care;

–ensure that hospital restructuringprojects actually achieve all the opera-ting savings for which they offer theopportunity.

Recommendations

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5the attending physician and coordinated care: an unachieved reform

Since the law of August 13, 2004,regarding health insurance, everysocially insured person over 16 years oldis encouraged to designate an attendingphysician. the Court sought to assess theactual contribution of this innovation,presented as a major structural reformof health organisation.

An ambitious mechanism, redu-ced to a complex rate pathwayfor insured persons

The 2004 reform systematized thepractice of family physician by provi-ding that any patient declares a doctorof their choice, called attending physi-cians, and then aside from exceptions(psychiatrists, gynaecologists, ophthal-mologists), only consults other doctors,called corresponding physicians, uponreferral by the attending physician. Topreserve patient freedom of choice, des-ignation of an attending physician, whocould be a general practitioner or a spe-cialist, is not compulsory. If the insuredperson abstains or directly consults ano-ther practitioner without referral fromtheir attending physician and therebydoes not respect the coordinated carepathway, they are penalised by a signifi-cant increase in the share not covered byhealth insurance (70% instead of 30%),

without the possibility of supplemen-tary insurance covering the increase.

In this way, and despite variousadministrative obstacles, the proportionof insured persons who declared anattending physician (95% being a GP),already at 80% in May 2006, reached90% by December 2011, the date onwhich medical consultations conductedunder the care pathway represented91% of the total (other than emergen-cies and other excluded actions).

The reform thus instituted a France-style gatekeeper loosely based on theBritish scheme where going through ageneral practitioner is compulsory.Unlike the British system where eve-ryone is required to register with a gene-ral practitioner, who is paid on the basisof the number of his patients, whotreats freely and directs patients ifnecessary to a specialist or a hospital,the French system preserves the funda-mentals of liberal medicine such as freechoice of doctor by the patient and fee-for-service.

Establishment of the attending phy-sician primarily means for the insuredperson a rate pathway that is considera-bly complex, with its main objectivelimiting the costs of health insurancereimbursements. Indeed, concernsabout this and of liberal physiciansunions, to which operational implemen-

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the attending physician and the coordinated care pathway

tation of the mechanism has been dele-gated, have largely taken over from themedical content.

A determining factor for diversi-fication of physicians remuneration

In a context marked by the persis-tence of high deficits and a desire forfinancial recovery, health insurance wasbased on establishment of the attendingphysician to favour targeted increases,according to the different methods bet-ween general practitioners and specia-lists. The financial effort (€600 millionper year) has been paradoxically morefavourable to the specialists than gene-ralists, who are supposed to be the keys-tone of the mechanism.

As a consequence of the legal rela-tionship established between the atten-ding physician and the insured person,by a reciprocal and formal designation,any general physician now sees himselfattached to a clearly defined populationof patients. Health insurance thus hasfound the necessary tool for establish-ment of progressive positive incentivesto control medical health expenses, bycomplementing fee-for-service, whichremains primary, with a modulated per-formance remuneration based on rea-ching quantified objectives and plans

intended to respond to certain particularmissions.

In regard of these proven additionalcosts, the savings expected from optimi-sation of health care has never given riseto assessment.

Reform still unattained

Eight years after creating the atten-ding physician, the aging population,development of chronic pathologiesand changes in the medical demographymakes the need to generalise the “medi-cal pathway” even more acute.Experiments aimed at supportingpatients being linked and coordinatedbetween the various players of the caresystem have certainly increased but inthe greatest disorder and doing little tocall on the attending physician.

The lack of formal relations bet-ween attending and corresponding phy-sicians, coupled with delays in personalhealth record, has contributed to remo-ving any medical content from the coor-dinated care pathway idea, each playertending to want coordination to be exer-cised from their own sphere of respon-sibility. The result is a landscape blurredat the expense of efficient patient sup-port.

–clearly reaffirm the attendingphysician as the care coordinator forhis patients in relation to all otherhealth system players;

–promptly make available to himthe needed tools for his mission andrelationship with other care systemstakeholders, including:

- secure messaging;- a personal health record for each

patient, fully including their operatio-nal concerns and incorporating theannual summary component providedfor by the Convention ofJuly 26, 2011;

–putting in place a mechanism forrigorous assessment of additionalcompensation to be provided to physi-cians and make any new changesrelying on documented evidence ofefficiency gains for the care systemand savings for health insurance;

–facilitate the administrative-tariffpathway for the insured person, inclu-ding:

- by removing the obligation toagain declare the attending physician ifchanging regime;

- by studying removal of “authori-sed overruns” billable by a specialist atconventional fees (sector 1) to apatient outside the coordinated carepathway;

- by ensuring that any patient canbe offered a coordinated care pathwaywith binding tariffs.

Recommendations


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the attending physician and the coordinated care pathway

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Court of Accounts

6 the “in activity” RSA: a little sought benefit, limited impact

The “in activity” RSA is an integralpart of a unique benefit, broader inscope, the Revenu de solidarite active(RSA - earned income supplement)whose main feature is to both ensure aguaranteed minimum income to unem-ployed persons and to provide anincome supplement to those who work.

The “in activity” component of theRSA is an ambitious and innovative pro-jects: to make, regardless of the dura-tion of work, employment always morerewarding than inactivity and thereby tocontribute to combating employmentpoverty.

Implemented despite the economiccrisis upsetting the labour market, thisbenefit is struggling to meet the objec-tives set for it by law.

two thirds of eligible house-holds have not applied for the“in activity” RSA.

Non-use of the “in activity” RSA,considered too complex and stigmati-sing by the public likely to benefit, is twotimes higher than for other social bene-fits: although the eligible populationswas estimated at about 1.7 million hou-seholds, the number of beneficiaries hasbeen stagnant for two years at about500,000.

This situation is the source of over-funding of the measure and the use forother purposes of extrabudgetary fundsallocated to the Fonds national des soli-darités active (FNSA - National earnedincome funds).

the “in activity” RSA suffersfrom several major structuraldefects

The “in activity” RSA pursues seve-ral objectives that are hardly compatiblewith each other, resulting in an unsatis-factory compromise between anemployment incentive measure, whichshould be more individual, and a highlyfamily oriented measure aiming to sup-plement household earnings.

The uniformity of treatment reser-ved for different populations withregard to their level of integration inemployment is a significant factor fornon-use of the benefit.

Finally, the methods for calculatingthe benefit limit is impact on the reve-nue of poor workers:

- the scale and method of calcula-tion do not always allow recipient hou-seholds to get out of poverty;

- the rules for taking family allo-wances into account for calculation ofthe allowance leads to excluding coupleswith several children, for which the


2121

employment premium (PPE) is moreattractive and easier to collect.

the lack of coordination withother aid undermines its effectiveness.

The structure is still inadequate withcertain social benefits (including hou-sing benefits) and with the social aidmechanisms set up by local authorities,which can lead to significantly reducinggains from returning to work.

In addition, the maintaining of ameasure of incentive allowing the com-bination during the first three monthsearnings revenue with the “base” RSA,resulting in a reduction in revenue for

the beneficiary upon payment of the “inactivity” RSA.

Finally, coexistence with otherincentive measures and specifically withthe employment premium (PPE) whoseautomatic receipt is much easier, worksagainst the “in activity” RSA.

With these faults, it seems that anupturn of the labour market and betterinformation to the eligible public wouldnot be sufficient to significantly improvethe benefits performance if was notaccompanied by a system of workincentives and organization around the“in activity” RSA and the PPE.

the “in activity” RSA Summariesof the Annual Public Report by the Court of Accounts

2222

–immediately undertake a studyon the structure between the “in acti-vity” RSA and the PPE, with theobjective of organizing the comple-mentarity between a social benefit (theRSA) encouraging inactive persons totake up or retake an activity and taxmeasure (the PPE) benefiting lowincome workers with modest revenuesto encourage them to continueemployment;

– eliminate the period of fullaccumulation between the “base” RSAand activity revenues;

– make sure to avoid thresholdeffects and situations of revenue lossduring the recovery of activity bystructuring more social benefits and

incentive mechanisms and by conti-nuing the reform of related rights;

–replace the social and professio-nal support at the centre of themechanism and for this undertake areform of aide personnalisée de retourà l’emploi (APRE - personalizedreturn to work assistance) on the basisof the evaluation that must be under-taken from 2013;

–complete the study required bythe Law of December 1, 2008, on thepossible replacement of the allocationde solidarité spécifique (ASS - specificsolidarity allowance) by the RSA ;

–return to a more rigorous mana-gement of the Fonds national des soli-darités active (FNSA - National earnedincome funds).

Recommendations

the “in activity” RSA


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Court of Accounts

7 Inserm and the life sciences: new challenges in a strategicsector

Research in the life sciences, the pri-mary research sector in France, is thefirst priority under the stratégie natio-nale de recherche et d’innovation (SNRI- National Research and InnovationStrategy) for the 2009-2012 period.

As a result of the Planning Act ofApril 18, 2006, for research, the histori-cal role of players has evolved and neworganizations dedicated to strategy,planning, financing and assessment havebeen created.

Declaration of Inserm’s place

Thanks to its staff ’s success, Insermhas benefited from the growth in finan-cing of research by calls for projects: itsrevenues have increased by 35% since2006 and the share of external resourcesrepresents close to 32% in 2011, compa-red to 22% in 2006.

In parallel, the number of Insermpublications and their share in Frenchpublications has increased. The functionof valuation, entrusted to the Transfertsubsidiary of Inserm, has had encoura-ging results.

Faced with the complexity of thelife sciences research organization (crea-tion of new instruments for scientificcooperation and autonomous fundingagencies), a role of steering and coordi-nation was entrusted to Inserm in 2007.

The institute has played a major role increation of the Alliance pour lesSciences de la vie et la Santé (AVIESAN- Alliance for Life Sciences and Health)in 2009. This constitutes a frameworkfor coordination of the main publicplayers.

Difficulties related to recentreforms

Inserm’s dynamism in obtaining cre-dits on projects has resulted in a signifi-cant increase in staff recruited underresearch contracts. These fixed termcontracts (CDD) create a social, legaland financial risk, since 515 of thesecontractors would be eligible for tenure.

The valuation borne by InsermTransfert risks being affected by theestablishment of companies for accele-ration of technology transfer (SATT),financed by the future investments pro-gram.

The division of roles betweenAVIESAN and the other players (State,research operators, National ResearchAgency (ANR)) is not sufficiently clearconcerning the definition of strategicpriorities, the consistency of financinggranted with these priorities, the plan-ning of calls for projects or the opera-tional coordination of different players.


2424

Structural problems persist des-pite reforms

Steering joint research units, associa-ting several institutions, has not signifi-cantly progressed.

The diversity of public fundingsources and the absence of a consolida-ted vision of credits always weigh downthe sectors abilities for strategic andbudget direction.

Finally, the increase in the budgetfor the life sciences remains relativecompared to the United States, theUnited Kingdom and Germany.

Inserm and the life sciences:


2525

–clarify the procedures involvingthe different players for life scienceand health research (ministries,alliance, national research agency,research operators) to ensure:

- definition of strategic researchpriorities;

- planning calls for projects and theconsistency of financing granted withthe strategic priorities;

- operational coordination of dif-ferent players in research;

–maintaining the positive dyna-mics of valuation of biomedicalresearch supported by InsermTransfert;

– providing the State with a globalvision of public resources dedicated toresearch in the life sciences;

–defining and implementing thecommon administrative managementprocesses and tools for joint units andcreating the indicators that permitmonitoring of human and financialresources of units;

–re-examining the rules attachedto recruitment and management ofstaff financed by research contracts.

Recommendations

Court of Accounts

26


8 Graduate business and management schools: a development to be regulated

Graduate business and managementschools (ESCG - écoles supérieures decommerce et de gestion), examined bythe Court and the regional court ofaccounts, are training institutionsdependent on a chamber of commerceand industry, recognized by the Stateand authorized to issue a master’sdegree under the Ministry of HigherEducation and Research.

These schools play an importantrole alongside universities in theFrancophone landscape of highermanagement education: numbering 29,in 2011 they trained over 135,000 stu-dents and represented one third of stu-dent bodies in management at bachelorslevels +4 and +5.

A change made necessary byglobalization

To confront international competi-tion, recruitment of high-level profes-sors in these schools and buildingforeign networks became necessary.However, this policy increases the bur-den on schools at a time when publicfinancial resources are becoming scarce.The resulting pinch effect led theESCGs to increase their student enrol-ments and tuition fees while reducingthe cost of their investments.

An enviable international posi-tion

In a market for management trai-ning dominated by Anglo-Saxon institu-tions, French schools have been able tooccupy an enviable international posi-tion that has emerged over the last20 years. The international performanceof the French model of leading busi-ness schools is confirmed by the 2012Financial Times ranking of the bestMasters in Management worldwide : outof the first one hundred training institu-tions, nineteen ESCG schools ranked inthese including three among the firstfive.

Some schools at the crossroads

The critical size of schools andadaptation of their organizationsremains a serious challenge for thefuture of each school and in additionfor French consular higher education,since they determine access to the mar-ket for international education. TheESCGs must make strategic choices forcloser ties with other schools if theywish to compete in the elite or refocuson their regional and national markets.

27


necessary regulation

Unlike the universities placed underthe sole authority of the Ministry ofHigher Education and Research(MESR), the ESCGs are under the dualsupervision of the Ministry of Industry,for financial aspects through theChambers of Commerce and Industryand through the MESR for awarding ofdegrees.

The Court regrets that theChambers of Commerce and Industryhave not sought to analyse and havemore control over the relevance of thefit between their schools, apparently lea-ving it to the market to arbitrate in theabsence of regulatory mechanisms.

In 2012, to improve and consolidatethe role of ESCGs in higher manage-ment education, some choices that arethe State’s responsibility must be made.

Graduate business and management schools:

–undertake a reflection on the sta-tus of ESCGs and the place of theChambers of Commerce and Industryand the State in the mechanism, tohave the financial means to carry outsuitable strategies, while giving moreautonomy to the schools in theirgovernance;

–ensure that the large increase intuition fees is offset by systems ofscholarships, loans or apprenticeship,allowing each student to follow thesetraining programs based on their indi-vidual merits, regardless of theirincome or those of their family;

–have better control of costs andconsistency of choices made regarding

making studies more academic and theinternationalization of curricula withthe size and positioning of schools inthe supply of management training ;

–strengthen the audit activities ofthe commission d’évaluation des for-mations et diplômes de gestion[National Commission for theEvaluation of Training andQualifications in Management] on thequality of ESCG degrees, whetherissued in France or abroad, and onschools’ obligations on informing stu-dents on the name of diplomas.

Recommendations

Court of Accounts

28


9 the joint transport syndicateof Greater toulouse: a necessary adaptation to network growth

Greater Toulouse has seen popula-tion growth of over 20,000 inhabitantsper year on average and has over1.2 million inhabitants. Saturation of theroad network and the constant increasein public transport ridership makes theissue of urban transport a major chal-lenge.

The central player in urban trans-port policy is the Greater ToulouseSyndicat Mixte des Transports enCommun (SMTC - Joint publicTransport Commission), controlled bythe Midi-Pyrénées regional court ofaccounts.

An inadequate institutional organization

Institutional rules, including that ofunanimity, which govern the JointCommission sometimes causeblockages in the decision-making pro-cess. Adopting an urban mobility planhas required nearly ten years of negotia-tions. Finally, some structural projectsare delayed and coordination of urbanplanning and transport policies remainsvery imperfect.

An operation more financed bytaxpayers than users

The method of financing transportoperation is now showing its limits.Although until now transport faresensured a steady growth in revenues,this source of financing has tended tostabilize since 2009. However, financingof the Toulouse network is marked bypricing that leaves ample room for freetravel since more than one third of tra-vellers do not pay for their ticket. In2010, free travel and the new “youth”fare have therefore resulted in a cost ofclose to €22 million per year for theoperator.

Financing of operations thereforerests mainly on taxpayers, through pay-ment for transport and participation ofcommunities in the Joint Commission,including the Urban Community ofGreater Toulouse.

Yet despite the increase in thecontribution by Greater Toulouse,which doubled its participation to€80 million, financial equilibriumremains precarious. The JointCommission even had to use an accoun-

29


ting device, by neutralizing its deprecia-tion, to balance its operating section.

This budgetary practice constitutesa solution that is both precarious andunorthodox. It reveals the lack of ove-rall financial strategy of the JointCommission and member communities.

the issue of financing invest-ment

Already heavily indebted by its pre-vious investments, the JointCommission today has limited financing

capacity. However, to meet growingdemand, it has set investment objectivesthat are very ambitious but which, inview of its financial constraints, seemoversized, amounting to €30 million peryear.

It is therefore imperative for theJoint Commission to redefine its finan-cial pact and also to review the rule ofunanimity, to envisage an urban trans-port policy which can be built over thelong term.

For the Joint Commission and alllocal authorities concerned:

–formalize the partnerships bet-ween local urban planning partici-pants, taking into account the develop-ment of potential demand for trans-port, including during the launch ofthe urban expansion project;

– re-examine the conditions forfree access to the service which cur-rently greatly hinders the growth ofcommercial revenues and does notgenerate sufficient self-financing;

–finance the investments, by pre-ferring unhindered self-financing, par-

ticipation by member communitiesand third party subsidies, taking intoaccount the current level of debt,which has reached a critical threshold;

–reconsider the rule of unanimityto improve efficiency of theCommission’s internal decision-making process ;

–define a new financial pact bet-ween all the municipalities concernedand as applicable with theDepartement de la Haute-Garonne, inview of providing the Commissionwith sustainable financial perspectives.

Recommendations

the Greater toulouse Joint urban

transport Commission

Court of Accounts

10 the Artois Gohelle (Pas-de-Calais)tramway project: an insufficientlythought out project

The Artois Gohelle Transport JointCommission decided in 2008 to createpublic transport on dedicated corridor,at a cost estimated in 2009 at €657 mil-lion, excluding taxes. This projectinvolves the simultaneous constructionof two lines with no connection bet-ween them over 37 kilometres, alongtwo axes: Liévin - Lens- Hénin-Beaumont for one, and Beuvry -Béthune- Bruay-la-Buissière - Houdainfor the other.

An ambiguous project

The public transport project alsoincludes a renovation and urban renewalcomponent.

This dual ambition feeds ambiguityresulting from a lack of prior thoughtand the absence of consensus on theproject’s consistency. The UrbanMobility Plan adopted in 2006 onlycovers the territory of the foundingcommunities, those of Lens-Liévin andHénin-Carvin. It does not incorporatethe Greater Artois community and themunicipal communities of Noeux andEnvirons, which became members ofthe Joint Commission in 2006.

As for the urban developmentdimension, it is completely outside the

jurisdiction of the Commission, whichis limited to transport.

Definition of the project is difficult.The need to choose a technical option,single track or double track, appearedlate. The route Line Nº 1 was only fro-zen in April 2011; but at the same timeit was challenged by the possibility thatthe project would be abandoned due tolack of consensus.

uncertain funding

Based on initial summary studies,the assessment of expenses appeared tobe underestimated.

The accumulation of delays com-promised the State subsidy of €57.6 mil-lion obtained under the “GrenelleEnvironment Forum”. Financing of theproject is also based on an increase inthe transport contribution, which wasincreased in July 2010 to 1.80% . If thework does not begin before July 1, 2013,this rate will be reduced to 1.05% . Thisbusiness tax is strictly reserved forurban passenger transport. It cannotfinance, even partially, urban develop-ment. However, the project’s financingplan does not distinguish between finan-cing of these developments and doesnot provide for any participation of thecommunities concerned in this regard.


3030

the Artois Gohelle tramway Project

(Pas-de-Calais)

Incompetent project management

Insufficiently staffed with personnelskilled in urban transport, theCommission delegated project manage-ment by entrusting project performanceto an agent, under the conditions provi-ded in the Law of July 12, 1985, relatingto public project management.

At the end of a selection process,the methods of which appear to bequestionable with regards to the princi-ples of transparency and equality thatgovern public procurement, the choicewas made for a regional Société d’Éco-

nomie Mixte (SEM - Semi-PublicCompany), a specialist in developmentand construction operations but incom-petent in public transport.

Therefore, it has contracted a sub-contractor specializing in this field,under irregular conditions under the lawrespecting public contracting. Theimprecise definition of the subcontrac-ted services had the effect of establishdual control of the operation, causingconfusion.

To date, this operation seems to beat an impasse and could be totally orpartially called into question.


3131

the Artois Gohelle tramway Project

(Pas-de-Calais)

32


–adapt the technical, administra-tive and financial powers of theCommission to the design and monito-ring of a resulting project;

–prepare, as soon as possible, anurban transport plan covering theentire scope of urban transport rela-ting to the Commission.

–insert the public transport pro-ject definition on dedicated corridor,including the route of tramway lines, ina common reflection that includes thevarious surrounding transport authori-ties including the region and depart-ment, so as to ensure consistency andcomplementarity of urban and interur-ban transport modes;

–ensure use of the transport pay-ment product in accordance with itslegal purpose which induces particu-larly the mobilization of community orintercommunity finances for the workin excess of the strict domain of urbantransport.

–In addition, it would be desirableto set out the conditions for implemen-ting the increase in the transport taxrate authorized by the provisions ofArticle L. 2333-67 of the CGCT, whenthe population of the municipality orpublic cooperation institution is grea-ter than 100 000 inhabitants and theurban transport authority has decidedto build a public transport infrastruc-ture with a road or tracked mode.

Indeed, the insufficient maturity ofthe project could lead to premature oruseless mobilization of this supple-mentary tax resource.

Recommendations

33


Court of Accounts

11Participation of local authoritiesin financing of the Ligne à GrandeVitesse Est (LGV Est): costly coun-terparts, one station too many

The high speed line East (LGV Est),inaugurated in June 2007, will link Paristo Strasbourg over 406 km upon com-pletion in March 2016, and will continueto Germany. Trains from the Germancompany Deutsche Bahn are runningalready, as are those of the SNCF.Although passenger traffic is higherthan expected - 13 million in 2011 - theeconomic impact for local authoritieshas yet to be measured.

A complex financing

Financing of the LGV Estconstruction work, divided into twophases so as to avoid delaying openingof the line, presents a novel character:the State, as the primary financier, isassociated with the local authorities, thesecond source of funding, and with theRéseau Ferré de France (RFF - FrenchRail Network), as well as the EuropeanUnion and the Grand Duchy ofLuxembourg.

The financing plan has been slow todevelop because of the significant num-ber of communities concerned, sixteenin the Champagne-Ardenne, Lorraineand Alsace, plus the Île-de-Franceregion.

The search for co-financing andcompetition between the communitiesfor access to the TGV has weakened theproject’s direction.

Questionable choices of invest-ment

The choice of location of theLorraine TGV station has been the sub-ject of difficult negotiations. Originally,it was planned to be located betweenNancy and Metz. The Cheminot-Louvigny site has been selected.However the station located there hasnot interconnection with the Nancy-Metz TER line. Despite this choice, theproject to locate another station atVandières, better served, has not beenabandoned; financing is however not yetdefined. If the full project is completed,it would lead to construction of twoTGV stations, located at least 20 kmapart, for a total cost of €156 million.

Operating deficits at the com-munities’ expense

The demand for regular direct ser-vice by the TGV, from stations not loca-ted on the high speed line has also ledthe communities involved to finance the

Participation of local authorities in financing theHigh Speed East line (LGV Est)

34


For the State and RFF:

–ensure, by seeking co-financingfrom the local authorities for majortransport infrastructures, to preservethe project’s course, optimizing thehigh speed line’s route and the equili-brium of its future operation;

–suspend performance of workon the Vandières station up to the timewhen traffic evolution ensures theproject’s socio-economic profitability;

For the local authorities:

–limit, in case of co-financing, thenumber of participating communities;promote and assign the role of leaderto the region;

–inform the financial participa-tion of communities by prior assess-ments of the choices of the lines

routes and service lines, complemen-ting the overall assessments done byRFF;

For the State, RFF, and localauthorities:

–exclude the location of TGVstations in open country without inter-connection to the regional transportnetwork;

For the SNCF and RFF:

–provide better information tothe local authorities on the results oftraffic, possibly with a confidentialityclause.

Recommendations

corresponding operating deficits, whilethe sustainability of some of them isstill not assured.

uncertainty about economic benefits

The economic benefits for the localauthorities concerned still seem to beuncertain. Some communities havenonetheless proceeded, at stations ser-ved by the TGV, with major urban deve-

lopments, particularly by building officebuildings or shops. Projects which theyhave co-financed, whether the highspeed line or service lines, have not beenthe subject of a priori evaluations orretrospective assessments. These assess-ments are also hampered by the reti-cence of the SNCF to supply precisedata on traffic, for reasons of commer-cial confidentiality.

35


Court of Accounts

12 Management of Brittanyfishing ports: regional steering to bestrengthened

Although it represents 46% of thevalue of seafood products marketed inthe seafood markets in France in 2011,Breton fishing declined significantlyincluding the disappearance of half theships and fishermen in the last 20 years.

Operation of fishing ports adap-ted to a context of crisis

Faced with an acute crisis, the opera-tors have developed new services suchas online sales which expands thedemand or transportation assistance tosupply certain seafood markets with fishunloaded at other ports. Human andtechnical resources have sometimesbeen pooled. However, the port supplynow seems excessive in some coastalareas.

The fishing port facilities fee(REPP - redevance d’équipement desports de pêche) is the main operatingrevenue for concession holders.Regulation governing it is subject tointerpretation, generating tensions bet-ween the ports. Thus, the REPP prima-rily benefits unloading ports and notthose with seafood markets where thelarge part of services borne by opera-tors are concentrated.

Investments financed largely bypublic aid

Some ports, particularly on thenorth coast of Brittany, have conductedextension work to improve the condi-tions for management of vessels andallow additional boats to be received.Other ports have conducted majorhealth and environmental standardiza-tion work to sustain activity, especially inSouth Brittany.

Financing these investments is onlyprovided through major subsidies,which can represent up to 80% of thecost of equipment.

Inadequate concession holder contracts

Concession holder contracts, oftenold, are neither suitable nor fully respec-ted. Concession holders are responsiblefor the choice and project managementof investments while they only partiallyfinance them. When renewing existingcontracts, the concession holders couldretain responsibility for project manage-ment of infrastructure investments.

Management of Brittany fishing ports:

36


Relationships between localauthorities to be reviewed

The powers of different levels oflocal authorities should be clarified.Three of the Breton fishing portshaving a seafood market belong to theregion (Saint-Malo, Lorient and Brest),the others are the property of depart-

ments. This sharing of powers betweenthese two levels of authorities does notalways favour consistency and relevancyof regional port investments.

For management of Brittanyfishing ports:

–pursue the efforts to streamlinethe supply of ports, particularly inCornouaille;

–sharing good practices for allports;

–applying a uniform policy ofroyalties;

–better defining accounting proce-dures for closing concessions to securecurrent concession holder manage-ment;

–define the respective roles ofdelegators and delegatees better, forcarrying out investments, by favouringon tenancy for the next public servicedelegations;

–strengthening the role of theBrittany region in the choice of port

infrastructure by providing for esta-blishment of a regional fishing portequipment plan contracted betweenthe departments and the region, whichwould set the list and location ofinvestments to be made;

For the State and the nationalfishing port management policy:

–review the regulations on thefishing port equipment fee to take intoaccount new practices of ship-owners;

–harmonize taxation applicable tofishing ports;

–examine the possibility of modi-fying the division of powers relating tofishing port management betweenlocal authorities, by strengthening thesteering role of the region;

Recommendations

37


Court of Accounts

13 the State’s support of tobacconists: unjustified aid

The State’s financial support oftobacconists is old. Establishment offuture contracts beginning in 2004 signi-ficantly strengthened it. These grants,designed to support a profession whichit was felt was weakened by the rise intobacco prices, proved unjustified andcostly. Under the guise of breaking, thecurrent future contract (2012-2016) per-petuates this situation. A rapid and com-plete reconsideration of this mechanismis therefore imperative.

Assistance to the profession:“future contracts” were addedto traditional assistance

The State’s financial support oftobacconists is old. It funds up to twothirds of their supplementary pensionscheme established in 1963, and has par-ticularly subsidised securing their pre-mises since 1995.

Future contracts signed between theState and tobacconists were added tothese traditional assistances beginning in2004. The first contract (2004-2007) wasprimarily intended to compensate forthe losses in revenue that were presu-med to have resulted from lower pur-chases on the regulated market, as aresult of price increases decided by thegovernment for public health purposes.

The total amount of support for theprofession amounts to €2.6 billion bet-ween January 1, 2004, and the end of2011 (€1.4 billion for the period corres-ponding to the first contract and€1.2 billion for the second), in average alittle more than €300 million per year.

unjustified aid, causing massive windfall effects

Contrary to the initially pessimisticexpectations, the rise in tobacco pricesbetween 2002 and 2003 contributed toincreasing, for tobacconists, the averagesales turnover related to tobacco.Indeed, although the volume of salesdropped 30%, from 90,000 tons peryear at the beginning of the 2000s to65,000 tons per year from 2004, sales,including taxes, grew by more than 20%between 2002 and 2011, from €14.7 bil-lion to €17.8 billion.

The average earnings of tobacco-nists rose sharply, amplified by thedecline, formerly, of the number oftobacconists. Excluding direct State aid,earnings grew by 53.9% between 2002and 2011, rising from €29,070 to€44,725. With this assistance, growthwas 67.1% (€29,070 to €48,564).

38


Except for certain tobacconistslocated in certain border areas who areconfronted with tough competition dueto tobacco prices in France, generallyhigher than foreign prices, most tobac-conists have received assistancealthough their sales turnover related totobacco had not fallen.

This situation is explained by thelack of targeting mechanism establishedby the administration which has favou-red universal assistance, that is, benefi-ting all tobacconists regardless of chan-ging circumstances rather than assis-tance granted temporarily only to tobac-conists with a sharp fall in their activityfollowing the increase in tobacco prices.

the current contract: a more apparent than real failure

The current contract (2012-2016)provides for a better targeting of sup-port and a considerable decrease in bud-getary assistance, including the phasingout of the additional discount.However, alongside these measures, the

increase in the rate of net remittance,which grew from 6.5% to 6.9% and willgenerate a cumulative gain for tobacco-nists of about €260 million, is expectedto fully offset the decline in budget sub-sidies.

The failure seen is therefore moreapparent than real. Indeed, if the effortmade by the community in favour oftobacconists spends less in the future inpayment of budgetary assistance, it willremain overall in the same range as inthe previous contracts. It will actuallyaffect public finances since agreeing onan increase in net remittance, supportedby the manufacturers, with a marginunchanged by them the State has depri-ved itself of the possibility to collectadditional tax revenues. In addition, themechanism is still less targeted thanbefore: given the proportional characterof the net remittance compared to thesales turnover, this measure will increa-singly benefit wealthy tobacconists.

the State’s financial support of tobacconists

the State’s financial support of tobacconists


3939

Recommendations

–undertake a rapid and completereconsideration of the measures cho-sen in early 2012 as “2012-2016 futurecontract”;

–leave only the structural sup-ports (end of activity allowance, secu-rity subsidy, public service premium)intended to modernize the networkand strengthen tobacconists’ safety;

–maintain, for the next four years,the net remittance rate at the level rea-ched on January 1st, 2012;

–establish, after consultation withthe profession, a declining balancemechanism for the net remittance,based on the sales turnover level.

40


Court of Accounts

14 the aid plan for the printedpress 2009-2011: a missedopportunity for reform

Following the Estates-General onthe Printed Press in 2008, the Presidentof the Republic announced a very signi-ficant assistance plan for the 2009-2011period: €450 million in supplementarybudgetary expenses over three years,€5 billion taking into account the cumu-lative cost of direct budgetary assistanceand fiscal measures over the sameperiod.

The government has however laun-ched this plan without a prior diagnosiswhich would have identified the mosteffective support.

the predominance of emer-gency measures to the detri-ment of structural measures

Adoption of a moratorium on pos-tal rates, for which the budgetary cost isestimated at €32 million for 2013, hascontributed to delaying the develop-ment of delivery of the daily press, sup-ported by the State in respect of struc-tural measures.

Furthermore, the high increase inassistance for distribution of the natio-nal daily press for political and generalinformation (€74 million in assistancefrom 2009 to 2011) and the exceptionalmeasures in favour of press distributors

(€62.6 million over the same period) hasnot improved the economic situation ofthe two main players in press distribu-tion: the Presstalis press courier and thepoints of sale.

Modernization assistance has beenprovided to printers while developmentof the Internet should have been a pre-ferred strategic component. Assistancewith social modernization of the presshas proved particularly costly, with anaverage cost of over €150,000 per bene-ficiary of the “Print” plan.

Ministerial direction strengthe-ned too late

The procedures and structures thatthe Ministry of Culture andCommunication has provided for moreeffectively leading its press assistancepolicy was only implemented after com-pletion of the assistance plan. The mea-sures provided by the decree ofApril 13, 2012, are going in the rightdirection but their methods of imple-mentation are not yet set.

The approach of multi-yearcontracting undertaken with the mediacompanies will depend on setting pre-cise objectives for financial support


4141

from the State as well as effective moni-toring of agreements.

Regarding, budgetary information,progress has been made. But transpa-rency now provides more completeinformation on the amount of assis-tance granted to publishers and pressowners.

It has become urgent to finalize themethodological and operational frame-work of control and assessment mecha-nisms.

too timid reduction in the costof assistance

Credits open in 2012 in respect ofpress assistance have diminished by10% compared to 2011, but inflexibilityis delaying the return to the level ofpublic expenditure found before theimplementation of the 2009-2011 trien-nial plan.

The 2013-2015 triennial programprovides for a reduction of about 13%of budgetary credits allocated to theprinted press, without relying on areform of mechanisms, the only way togenerate real leeway.

A strategy for State interventionto be rebuilt

A more selective approach and astronger concentration of resources onthe key objectives of the assistancepolicy to the press are now imperative.

Development of distribution mustlead to consistency among the manyexisting mechanisms and prepare toolsfor overall steering by 2015, the datewhen the agreements on postal assis-tance expire.

Preservation of pluralism involves areflection on the scope of application ofpreferential postal rates and the VATrate “super reduced” to 2.1%, in orderto better take into account the specificsituation of each press family in relationto this objective.

Finally, for modernization of theprinted press sector, the intervention ofthe strategic funds created in 2012 mustbe oriented to innovative projects andthe political and general informationpress.

the aid plan for the printed press 2009-2011

the aid plan for the printed press 2009-2011

Recommendations

Concerning governance and mana-gement of assistance:

– effectively implement contrac-ting with companies receiving subsi-dies;

–publish the annual amount ofassistance granted to each press title;

–systematize the procedures forassessment and control and improveconsistency of the mechanism;

Concerning the State’s interventionstrategy:

–accompany the scheduled reduc-tion of public assistance with an overallreflection aimed at:

- ensure consistency between thedifferent assistances to be distributedby 2015;

- accentuate their targeting infavour of press families presentingchallenges in terms of pluralism;

- refocus assistance with moderni-zation on innovative projects.


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15 Maintenance purchases bythe Ministry of Defence: a high potential for savings

The Ministry of Defence is the pri-mary buyer of the State. Every year itbrings about €13 billion to merchantbusinesses to purchase everyday goodsand services and especially militaryequipment and maintenance services forits military equipment.

Purchases relating to equipmentmaintenance, constantly increasing,represent about €3 billion in paymentcredits each year. Performance of ser-vices responsible for these purchases istherefore essential so that the armieshave a good level of maintenance oftheir equipment at the best possiblecost.

A buyer under constraints

Three joint army services purchase,on behalf of the armies, equipmentmaintenance services; the AircraftMaintenance Services (SIMMAD), Fleetsupport service (SSF) and the groundequipment maintenance service(SIMMT). In 2011, they consumed€1.95 billion, €630 million and€460 million credits respectively.

In these services, the contracts withthe greatest financial and technicalstakes are granted to a limited numberof companies without competitive bid-ding, these being exclusive suppliers ormonopolies. In addition, the State’s

position is sometimes ambiguous -often present in the capital of thesecompanies as a minority or majority sha-reholder, it cannot ignore the impact interms of industries or jobs of its pur-chasing decisions.

Insufficient professional buyers

Although the Ministry of Defencedeclares its willingness to obtain signifi-cant savings in this domain where costsvary while budgetary constraint isincreasing, it does not draw on theconsequences in terms of organizationand procedures which would allow it toimprove its performance.

The number and qualification ofprofessional buyers are insufficient, inparticular for aircraft maintenance ser-vice, the SIMMAD, where the very lownumber of professional buyers is inap-propriate for the financial and operatio-nal procurement issues. The Ministryof Defence does not devote morebuyers for these crucial purchases interms of consumption of budgetaryresources (over €2 billion per year) andof operational consequences, than foreveryday purchases (security, mainte-nance, fluids) of a defence base, whichonly represents a few million Euros.

Court of Accounts

Limited implementation ofinvestigative powers

The State makes insufficient use ofthe provisions of the PublicProcurement Code which allows it,when there is little or no competition, toinvestigate the costs and margins of itssuppliers.

This power is entrusted to a costinvestigation division placed under thecentral purchasing authority of theMinistry of Defence general armamentdirectorate. The role that it should playto improve negotiation conditions bet-ween the Ministry of Defence and itsmonopoly suppliers is altered by the factthat it does not decide its investigationprogram and that the maintenance ser-vices, which depend on the general staff,cannot use them directly.

In comparison to the UnitedKingdom and Germany, this investiga-tion service has little staff. Its powers ofinvestigation are limited to the phases ofcompleted tenders and it is not alwaysable to meet their obligations of trans-parency to supplier companies. Finally,the results of investigations are used atthe discretion of purchasing services.Therefore, negotiations are not underta-ken in good conditions.

Delayed negotiation for mainte-nance of new programs

When the Ministry of Defenceacquires new military equipment it esti-mates the cost of ownership over its

entire life, including maintenance. Since2010 this estimation has been automatic,which is a significant improvement overpast practices. However, maintenancecontracts remain shared between thoseunder the initial commissioning phasenegotiated by the DGA and the mainte-nance contracts negotiated by the main-tenance services. This second negotia-tion comes when all components of theequipment contract have been alreadydefined, frequently without competitivebidding. The supplier companies provi-ding maintenance are then in a positionof strength to obtain the highest pricespossible.

The Ministry of Defence shouldinvolve the maintenance services wellupstream with specifying equipmentand with negotiations with the compa-nies and seek to obtain commitmentsfrom the industry on the future cost ofmaintenance while providing someflexibility to take into account changesin these costs and effective use ofequipment.

Maintenance purchases by the Ministry of Defence:


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Recommendations

–strengthen and professionalizebuyer workforces for armed servicesresponsible for priority service withinaviation equipment maintenance(SIMMAD);

–strengthen the powers of inves-tigators of the cost investigation divi-sion of the DGA, by modifying theregulatory provisions that limit theirpowers of investigation a priori, so theState buyers can appreciate the reaso-nable character of margins ofcontracts concluded with monopolysuppliers;

–reattach the cost investigationdivision directly to the armamentDelegate General;

–increase, within the Ministry, thecontrol or second opinion mecha-nisms on buyer service practices toavoid an excessive concentration offunctions;

–give scope to the maintenanceservices in the definition of estimatedcosts of ownership to all stages ofdevelopment of an armament pro-gram;

–anticipate, from the acquisitionof military equipment, a part of thenegotiation on future estimated main-tenance costs, with the industrial sup-pliers.

On the basis of examination of asample of cost investigations, theCourt estimates that savings in theorder of 10% of the total of annualmaintenance service purchases, or€300 million, should be able to beachieved for future maintenancecontracts of the Ministry of Defenceif these measures are implemented.

Maintenance purchases by the Ministry of Defence:

16 Visa issuance and residencepermits modernization tobe accelerated and simplifications to pursue

A complex legal framework

Since 1945, the laws relating to entryand stay of foreigners have been amen-ded thirty six times. Community law hasevolved, and the majority of short termvisas are now “Schengen” type. There isa variety of permits: one year stay cards,ten year resident cards, «skills andtalents” cards, etc. In 2009, a major sim-plification was introduced with the crea-tion of the long stay visa.

Increased resources for overallstable activity

The issuance of these permitsmakes use of resources of the Ministryof the Interior, Foreign Affairs and theFrench Office for Immigration andIntegration (OFII).

For 60% of visas granted, consu-lates call upon external service provi-ders, totalling some 700 persons, for ser-vices paid for by the applicants. Despitethis outsourcing, consulate humanresources have held practically steady.Those of prefectures have increased,while the volumes processed have notchanged much: visa applications rosefrom 2,411,000 in 2005 to 2,431,000 in

2011 (+1%), visas issued from2,053,000 to 2,153,000 (+5%); perma-nent residence permits issued by theprefectures remained nearly constant:from 846,000 in 2006 to 849,000 in2010, with a temporary jump in 2011(935,000).

The total cost of visa issuance wasabout €54.3 million in 2011 (including€42 million for staffing), or €22 per visaissued. Revenues collected by the Stateamounted to €116 million, or €54 pervisa issued.

The total cost of permanent andtemporary residence permit issuancewas about €121.5 million in 2011 (inclu-ding €82 million for staffing), or €120per permit issued. It was covered by thefees paid by applicants.

unification of management stillyields few results

The General Secretariat ofImmigration and Integration (SGII),created in 2007 and today placed underthe authority of the Ministry of theInterior, is both a source of orders, afacilitator and a coordinator of prefec-tures and consulates in order in particu-lar to increase exchanges of experience.


46

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4747

Visa issuance and residence permits

But all the expected beneficial effectshave not yet been obtained from thisreorganization.

Thus, the former computerizedapplications from Ministries of theInterior and Foreign Affairs do notalways allow for sharing of data.Existing appointment services are noteffective. Collection of statistical data isunreliable. The Ministry of the Interior’sproject is delayed by over two years andthat of the Ministry of Foreign Affairsis not included in the 2013-2015 trien-nial budget.

The combat against documentaryfraud is still inadequately coordinatedand the services are unevenly active.Clarification of powers completed in2012 at the central administration remai-ned partial.

Two fraud prevention mechanisms -the «return control” in the country oforigin and the requirement imposed onemployers to check the validity of cer-tain work permits - should especially beassessed.

Hard road for the residence per-mit applicant

In the most sought for prefectures,long queues lead to tensions, sometimesto parallel systems for changing placesfor consideration. The prefectures issueon average 1.4 million temporary docu-ments per year. This large number helps

to clog the wickets and testifies to orga-nizational defects that raise questionsabout the equality of treatment for dif-ferent users.

The statement and issuance are, insome cases, scattered, especially bet-ween prefecture and sub-prefectures.Several town halls and police stationsstill gather applications or issue permits.

To reduce the risks of unequal treat-ment, in 2011 the central administrationissued a receptionist’s guide whichbrought together the previously scatte-red texts and encouraged modernizationand simplification of services andreception of the public.

“Best practices” are not automati-cally disseminated. Some websites areincomplete; several prefectures do notsell the necessary tax stamps, withoutnotice to applicants.

Simplifications must be continued.For example, family reunification appli-cations are to be sent to the single OFIIbut the excessive number of instructionplayers, which lengthens delays, have notbeen reduces.

In conclusion, in the 2006-2011period, the resources have generallyincreased while the number of applica-tions have changed little. New avenuesfor simplification of procedures mustbe explored.

The coordination and exchange ofinformation between the prefectures,

consular posts, the OFII and the policeand gendarmerie have progressed butthe SGII does not fully perform its roleof direction, in particular for moderni-

zation of information systems and thecombat against documentary fraud.


48

Visa issuance and residence permits

48

–ensure compliance with the law:- correct certain differences in

interpretation of tax law;- remind prefectures to comply

with the requirement of physicalappearance when prescribed by theCode of Entry and Residence ofAliens and the right to Asylum;

- eliminate certificates of depositnot provided for by this code;

–facilitate the administration’swork and the user’s pathway:

- limit the number of instructorservices for a single application;

- develop paperless operation,remote procedures and electronicupdating of permits;

- assess the effectiveness of the«return control» and the requirement

for employers to check the situation offoreign employees;

–coordinate the networks better;- modernize computer systems by

facilitating data exchange and statisticscollection;

- designate a single interdepart-mental correspondent responsible forcombating documentary fraud;

- develop best practices exchangewithin and between networks.

Recommendations


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Court of Accounts

17 the General Directorate ofCivil Aviation: generous andcostly social action

Social action in the public service,enshrined in the Law of July 13, 1983, on the rights and obligations of civilservants, consists of all specific serviceswhich the State grants to its active andretired employees in the fields of food,housing, childcare and leisure.

Within the Ministry of Ecology,Sustainable Development and Energy, itapplies in a specific manner to staff ofthe General Directorate of CivilAviation (DGAC) and for historical rea-sons to those of Meteo-France.

The mechanism gradually lost sightof its mission of solidarity and nowonly seeks to provide services to the lar-gest possible number of agents.

Abundant structures for redundant actions

Social action is implementedthrough a tangle of over 120 national,regional and local associations. Thepooling policy performed is not up tothe challenge. In general, the administra-tion does not perform the duties ofmanagement and direction that fall to it.

Management of this costly mecha-nism (€1,300 per agent per year) lacksclear vision. Its effectiveness and therigor of its management have been

seriously affected by the dilution ofskills between its different bodies (admi-nistration, social action committee).

A generous mechanism

The cost of a very generous policy(more than €15 million annually) provesto be higher than the appropriationsvoted and allocated by Parliament(€9.2 million in 2010).

In terms of investment, the “re-use”technique, without a regulatory basis,leads the return to social action of theproceeds of real estate transfers whichshould be dedicated to debt repaymentof the air operations Control andOperations budget.

In addition, a “rule” without anyother legal basis than the protocol(2007-2009) negotiated with the socialpartners provides that in any construc-tion at least 2% of the amount of theinvestment must be devoted to socio-cultural equipment.

Weak management by theadministration

The control that the administrationmust exercise over the associations thatit subsidizes is, in practice, very inade-quate. It would be even facilitated by

collecting and exploiting the informa-tion available and improving its controland evaluation tools. Truly objectivecontracts should be entered into withthe associations concerned.

Two examples illustrate the Court’sfindings: the “Bataillet” family vacationhome (Hautes-Pyrénées), where workwas done under questionable conditionsis well maintained despite having nowlost its attractiveness, and the Maison

des associations du Raizet(Guadeloupe), completed in 2010, wasstill not in use at the end of 2012.

Finally, the staff made available toassociations was not always underconditions consistent with the regula-tions. Leaves of absence granted are notsystematically recorded in the accounts.

Recommendations–refocus social action on solida-

rity, by supporting the administration’smodernization;

–significantly reduce the numberof associations supported, by favou-ring attachment to a local social actioncommittee according to a principle ofservice;

–ensure that the administrationexercises its role of defining andimplementing social action;

–finance social action by appro-priations registered for this purpose inthe related budget;

–develop scoreboards for effec-tive management of social action;

–enter into objective contractswith associations receiving subsidiesof over €23,000 and periodically eva-luate their activities;

–define and plan all measuresrelating to the closing of the Batailletvacation center.


50

the General Directorate of Civil Aviation:

50

18 Electricity distribution concessions: organization tobe simplified, investmentsto be financed

Electricity distribution includes rou-ting it from the high voltage network’soutput to user’s meters.

An atypical and potentiallyconflicting organization

Electricity distribution is managedin the form of very specific public ser-vice concessions on nearly the entirenational territory. Municipalities andtheir groups are required to entrust elec-tricity distribution to ERDF, a 100%subsidiary of the EDF group, under thelaw.

This organization compared toother public service concessions is aty-pical and potentially conflicting.

The atypical character is reflectedfirst of all by a distribution rate setnationally through a cross-subsidizationthat allows all consumers to pay thesame amount for electricity, unlike waterfor example.

It is also reflected in the lack ofchoice by granting authorities to des-ignate their distributor, ERDF having alegal monopoly on virtually the entireterritory.

Conversely, the granting authoritieshave a power that they do not have forthe other public service concessions:

that of providing contract oversight forcertain projects in rural areas and the-reby benefiting from financing paid bythe distributor.

The uncertainty over long termmaintenance of the ERDF monopolycomplicates relationships between thedistributor and some of the grantingauthorities and could jeopardize thisbalance from the post-war period.

Rising investment needs

However, in this already tensecontext, the need for investments on thedistribution network is increasing:ERDF currently invests €3 billion peryear on the network but this amountcould reach €5 billion by 2020. For theirpart, the granting authorities investabout €1 billion per year on the net-work.

The current increase in investments(from €1.5 billion at the beginning ofthe 2000s to about €3 billion in 2011 forERDF) is explained primarily by theneed for renovation of the networkwhich is aging and more sensitive to cli-matic uncertainties. The average electri-city outage time has tended to increasein France since the beginning of the2000s, even though this deterioration

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remains limited (50 minutes of outagein 2000, 85 minutes in 2010, a level lessthan many comparable European coun-tries; however, Germany has a loweraverage outage time).

In addition, the rise of new decen-tralized and intermittent energy sources,such as wind power or photovoltaicsinvolves building intelligent networks,for which a primary element will be thefuture Linky communicating meter. Thecost for deployment of this meter aloneis estimated at €4 billion.

A need to streamline expenses

Electricity distribution in Francecould evolve towards two differentmodels: optimisation of expenses bynational management of investments,becoming all the more necessary withmore interconnected and interdepen-dent electrical networks, or otherwiseincreasing the autonomy of local autho-rities, in a context of less centralizedelectricity production and limits tomonopolies.

In the absence of choice betweenthese two opposing models, the Courtrecommends better regulation of invest-ments under the current electricity dis-tribution system and a streamlining ofexpenses before increasing rates, whichassumes that:

- the ERDF distributor controls itsexpenses such as staffing costs or pur-chases;

- the ERDF shareholder, EDF andindirectly the State, limits raising divi-

dends with the need for investments onthe network;

- the granting authorities, of whichthere are still too many (736) accelerateconsolidation. In addition, funding allo-cated to them should be simplified andreoriented towards work that improvesthe quality of the electricity;

- finally, to deal with these needs forinvestment, the current electricity distri-bution organization should be impro-ved: coordination between ERDFinvestments and granting authorities inthe form of local planning which couldbe eventually consolidated nationally, todirect efforts towards priority challengessuch as the medium voltage networkwhich currently is the source of mostoutages.

Only after these improvements cana rate increase be potentially consideredif there remain investments to be cove-red.


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Electricity distribution concessions

52

–accelerate consolidation of gran-ting authorities to complete depart-mentalization;

–conclude a public servicescontract between the State and ERDF;

–establish a local program ofinvestments between ERDF and gran-ting authorities, aimed at directedthem to priority issues in terms ofelectricity quality, especially themedium voltage network. These localprograms should eventually be conso-lidated nationally;

– simplify the system for finan-cing of granting authorities’ invest-ments by refocusing on priority invest-ments for electricity quality;

–review the position of EDF andthe State with respect of rises inERDF dividends, in the light of futureinvestments to be agreed for the net-work;

– increase ERDF’s productivityefforts to develop its capacity for self-financing of investments in the nexttariff framework;

–review longer term develop-ments on the electricity distributionmodel.

Recommendations


53

Electricity distribution concessions

53

54

Court of AccountsSummariesof the Annual Public Report by the Court of Accounts

19 Wastewater treatment inthe Corbeil-Essonnes-Évryregion: overlooking thegeneral interest

Wastewater treatment in theCorbeil-Essonnes-Évry region, in theeastern central section of the Essonnedepartment, has the distinction of beingprovided by two adjacent stations, loca-ted on the banks of the Seine River, onthe territory of the Évry municipality.This situation originates from the rivalrybetween the towns of Corbeil-Essonnesand Évry, since creation of the new cityof Évry, since the end of the 1960s totoday.

Failure of cooperative renovation of the stations

Renovation of the stations wasnecessary both to increase treatmentcapacity and to comply with emissionstandards required by the EuropeanDirective of May 21, 1991, on wastewa-ter.

A comprehensive and consistentwastewater treatment policy was firstsought. A joint commission for watertreatment (SYMETRIE), including bothinter-municipal contracting authorities,was created and in 2004 proposed seve-ral scenarios.

In the scenario based on the coope-ration of contracting authorities and

seeking optimal use of both sets ofequipment, the overall estimated cost ofwork and operation were clearly lessthan those of the scenario opting forrenovation of both plants indepen-dently of each other.

Yet the latter, overall less effectiveand more expensive, was the one thatprevailed.

Cost overruns resulting from thedisagreement

The cost of renovation work of theSIARCE station, the intercommunitycommission of whose main municipa-lity is Corbeil-Essonnes, increased by54% in four years, rising from€20.08 million in August 2006 to€30.89 million in April 2010, after sixchanges. The change relating to thecreation of a sludge composting unit,which lead to an increase in the amountof the initial contract of about 40%,was a reflection of the failure of thesolution of joint treatment of sludge bya single station.

Meanwhile, the Greater Évry com-munity undertook the renovation of itsplant, whose work is not yet completedand for which the cost amount to about€43.5 million.

The work of extending and bringingthe two plants into compliance withstandards can thus be estimated overall,at the end of 2012, to be about €80 mil-lion. The updated cost at the same date,of coordinated renovation, wouldamount to about €70 million.

The cost overrun due to the lack ofcooperation can therefore be assessed atabout ten million Euros without consi-dering the overall operational expensesassessed at €1.11 million per year.

Overlooking the general interest

None of the many stakeholdershave been able to uphold the generalinterest.

The contracting authorities havebeen unable to overcome their oldoppositions and act in a concerted man-ner.

The public funders, the Seine-Normandy Water Board and theDepartment of Essonne in particularcertainly preferred joint action tomodernize equipment but they were notable to oppose the choice of contractingauthorities.

It was the responsibility of theState’s representative to uphold thegeneral interest. However, the State’sservices were primarily aimed at com-pleting as quickly as possible the workfor bringing wastewater treatment plantsup to standards following the condem-nation of France in 2004 for failure tocomply with the obligations prescribedby the European Directive of 1991.Urgency therefore prevailed to the detri-ment of the most economical solutionfor public funds.


55

Wastewater treatment for the

Corbeil-Essonnes-Évry region

55

Recommendations

For the two communities concer-ned:

–act from now on in a joint man-ner, preferring the most sensibleapproach for management of theirequipment, in terms of investmentand operating costs.

For State services:–ensure that the general interest is

upheld in the exercise of their respon-sibilities.

20 Restoration of the maritime character ofMont-Saint-Michel: a poorly managed project

Restoration of the maritime charac-ter of Mont-Saint-Michel is a vast pro-ject whose current managementmethods have not promoted a compre-hensive consideration of all aspects ofthe project.

A project whose effectivenesscan only be measured in thelong term

The current project, initiated in1969 and assessed in March 2011 at€185 million, consists mainly ofconstruction of a new dam whoseobject is to restore to the Couesnon theneeded hydraulic power. Combined withthe force of the sea and new facilitiesgiving way to the free flow of wateraround the Mont, it is expected to drivesediments away.

The actual effectiveness of thesemethods may however be unable to beconfirmed for many years (by 2025) andwill permit restoring the insular charac-ter of the Mont for several hours peryear during outstanding tidal conditions.

Ambiguous dual managementwhich did not facilitate overall consideration of thisproject

Initiated by the State in 1990, thecurrent project is managed by the localauthorities through a joint commission.

However, being aware of the diffi-culty of disengaging from such a projectwhich evidently goes well beyond a sim-ple regional context, if only due to regis-tration by UNESCO of the site as aWorld Heritage, the State established,along with the joint commission, amanagement commission, which consti-tutes the primary joint decision-makingbody.

The result is an ambiguous dualmanagement, this committee legally nothaving the real decision-making or ope-rational role, penalizing joint reflectionon the future of this remarkable site.

In addition, the current arrange-ments for funding this commissioninvolve some common members butnot all, and an associated communitywhich cannot legally take part in thedecisions, representing so many poten-


56

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5757

tial sources of conflicts in the event ofdiscrepancies.

Faulty operational execution

The conduct, management and ope-rational execution of this project by theBaie du Mont-Saint-Michel JointCommission reveals deficiencies, espe-cially in overall management and direc-tion of this project.

Thus, construction and operation offacilities and public reception services,entrusted by the joint commission to theVeolia Transport company by a publicservice delegation contract agreed for a13 year duration, reflects a lack ofcontrol and vigilance.

The Commission noted that thisdelegate would not be able to providerolling stock on the planned date ofstart-up (April 2012). In addition, ini-tially designed transport equipment willneed to be broadly reviewed. This situa-tion could lead to questioning the termsof the delegation.

Future operating conditions onhold

According to the project’s schedule,all planned improvements and construc-tion to restore the maritime character ofMont-Saint-Michel will be completed bythe end of 2015.

However, the financial contributionsof commission members were definedin 2006, largely to finance the invest-ments needed for the project’s operatio-nal achievement. Nothing to date hasbeen planned for future contributionsfor operation, once the work is comple-ted.

Similarly, the protocol signed withthe State only determined contributionsto the cost of the work in the broadsense, without addressing the conditionsfor financing operating expenses in asustainable perspective which integratesthe cultural, touristic and environmentaldimensions of this world renowned sitewhich is visited by many foreign visitors.

Restoration of the maritime character

of Mont-Saint-Michel

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RecommendationsFor the State:

–initiate a new reflection ongovernance and operational manage-ment of the projects, by integratingthe cultural, touristic and environmen-tal dimensions of the site, particularlyin such a way as to include the com-mission of the municipalities that arefinancing the project;

–effectively exercise financialcontrol of the joint commission, sinceit is the maritime public agent of theState;

–encourage the local authoritiesconcerned to precisely specify the dis-tribution of funding for the site’s ope-ration, from 2015, the year when workis planned to be completed;

For the Baie du Mont-Saint-Michel Joint Commission:

–prepare a real depreciation sche-dule from a regularly updated assetinventory and accurately assess futureoperational changes;

–implement control of the dele-gate, including management of recep-tion structures;

–make financial monitoring ofthe project reliable.

Restoration of the maritime character

of Mont-Saint-Michel

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Court of Accounts

21 Property of local authorities: towards more dynamic management

The real estate assets of local autho-rities and their groups are increasing anddiversifying with the extension of theirareas of operation and new needs ofinhabitants. It represents a very impor-tant asset which also generates costs forits operation.

Today, while local public authoritiesare called upon to contribute to theeffort to restore public finances and,with respect to pressure on local bud-gets, exercising more effective propertymanagement is required.

Preparing a policy of assess-ment of public property of local authorities

The current real estate situationoften results in a succession of ad hocdecisions based on needs, opportunitiesand constraints over real estate transac-tions. However, defining a real estatestrategy can provide a clear overview inthe medium and long term, making theconnection between the various policiesthat affect real estate assets.

However, real estate transactionsthat translate this overall vision rarelyresult in decisions made after review byassemblies deliberating on various

potential scenarios and the steps takenso that they can make a real choice arenot accomplished.

Knowing the property

A physical inventory, allowing acomplete census of properties and theirmonitoring, are sometimes non-exis-tent. It is often partial, succinct, presen-ted in the form of a simple list, withinsufficient information.

Management of real assets alsoinvolves accurately identifying the legalsystems that affect occupancy condi-tions and the obligations related to theproperty owned and/or occupied. Inthis area there are gaps, especially duringtransfers related to decentralization orintercommunity development, and alsowith respect to private real assets.

Finally, real asset accounting mana-gement allows for traceability of trans-actions and verification of their subs-tantiation. Improvement of the qualityof information produced is thereforeimportant for managers. In most cases,the statements and writings related toreal estate transactions only imperfectlymeet the rules for accounting quality.

Property of local authorities

60


Optimizing the costs for investment and operation

For office real estate only, thereappears to be inadequacies, correctionof which would bring significant impro-vements.

Real estate management operationsmobilize legal, technical, accounting andbudgetary powers of various depart-ments but are not integrated into a dedi-cated unit. This segmentation is notconducive to mobilization of skills andcontrol of costs and risks. To meet theirneeds, communities can choose theirasset management tools but the possibi-lities available are not always used, oreven poorly or underused, and theinformation produced is incomplete or

poorly shared, which is detrimental tomore overall management of the pro-perty.

In conclusion, the observationsmade by the regional chambers indicatethat management of real estate assets isnot yet a major concern for most localauthorities. The practices of localauthorities who have implemented moredynamic management show, however,that although the costs of activitiesundertaken remain modest the benefitsin terms of economy, efficiency andeffectiveness are significant.

Recommendations

For the State:

–clearly distinguish in the inven-tories of local authorities between theproperties relating to their public andprivate domains and mention the mainlegal information principles related tothe source and characteristics of theirproperty;

–generalize in the large localauthorities establishment of a masterplan for land and property assets,

coordinated with their multi-yearinvestment plan;

–strengthen the obligation ofinformation to deliberative assemblieson the one hand, on decision-makingcriteria relating to real estate transac-tions, and on the other hand, on theirclosing balance sheets;

–for major real estate transactionsrequire production for deliberativeassemblies of overall investment and

61


operating costs with an assessment ofpotential alternative solutions.

For the State and local authorities:

–finish as soon as possible, alongwith streamlining of the map of inter-community cooperation public institu-tions, steps for unbundling of pro-perty, both for property transferred bythe State under decentralization lawsand for those allocated to the jointmunicipalities or returned to munici-palities;

–ensure, through strengthenedcollaboration of authorising officersand accountants, compliance of thelocal authorities’ balance sheets withthe reality of their real estate assets.

For the local authorities:

–establish, when needed, the sin-gle and complete physical inventoryprovided by regulation and ensurewhen a property is recorded that itreceives only a single inventory num-ber, common to all departments of theauthority and communicated withoutdelay to the public accountant;

–strengthen sharing of commu-nity services in the joint municipalityframework and coordination of theirrespective real estate policies;

–identify a “real estate” functionin the communities’ organizations andimplement management tools usingthe real estate data available in theinformation systems;

–list real estate made available tothird parties and consolidate all agree-ments and information relating to eachproperty concerned in a single file;

–define a policy for coverage ofrisks related to a property and regularlyaudit insurance contracts to alwayshave coverage at the best cost of insu-red properties.

the real property of local authorities

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the national Office forWater and AquaticEnvironments (OnEMA):poorly prepared transfor-mation, poor management

The National Office for Water andAquatic Environments (ONEMA) is apublic administrative institution createdin 2007. Under the supervision of theMinistry of the Environment, itemploys some 900 people and has anannual budget of around €110 million,mainly financed by a levy on water feepaid by users and collected by the waterboards.

The scope and growth of tasksentrusted to the ONEMA, in an envi-ronment that is changing, complex andsubject to the pressure of Communitydeadlines, has not been supported byprovision of resources that meet thechallenges. The result is numerous defi-ciencies and irregularities in administra-tive and financial management whichhave harmed the effectiveness of activi-ties by the new public institution.

An accumulation of poorly insu-red duties

ONEMA has not emphasized, inthe early years of its existence, the qua-lity of management essential to econo-mically and effectively conduct theduties of the institution which commitsFrance in terms of water policy.Recommendations had yet made by the

Court on this subject from the point ofview of creating the institutions fromthe Higher Fishing Council.

Projects relating to the water infor-mation system (SIE), needed to achievethe priority objective of water know-ledge and to report to the EuropeanCommission on the results obtain onwater quality, were delayed.

The police task was improved afterthe recommendations previously madeby the Court. Tools and guidelines havebeen deployed. However, coordinationof the States’ relevant departmentsremains mainly incomplete for lack of ashared tool for monitoring of policeactions. The effectiveness of these acti-vities is still difficult to assess in theabsence of appropriate indicators. Thepressure of controls requested to com-bat water pollution by nitrates is tooweak in view of the challenges.

ONEMA provides financial supportto water sanitation policies, includingwastewater for France to comply withits Community obligations. For Corsica,the financial mechanism itself is ques-tionable. For the DOM-TOMs, financialmonitoring is unsatisfactory.


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national Water and Aquatic Environment

Agency (OnEMA)

Deficiencies in organization andmanagement

The resources have not been suita-ble for the objectives and thereforeduties have been performed imperfectly.The public institution has been slow totake corrective measures. In this respect,confusion of the roles of the chairmanof the board of directors and supervi-sion has not allowed the process to beexpedited.

Accounting and financial manage-ment have presented serious shortco-mings. The accounts have proved to beunreliable and the procedure for addres-sing spending deficient up to 2010.ONEMA’s contractual practices havenot allowed financial control to be fullyexercised. Management control remainsinadequate due to lack of scoreboards.

Until 2011, multiple and costlymanagement errors were committed,ONEMA often exempting themselvesfrom the rules of the public procure-ment code. They are the source ofdelays in project performance, essentialfor the exercise of duties of the publicinstitutions and compliance with thecommitments of France.

The weakness of personnel mana-gement organizations, the inadequacy ofstatutes and the legal inefficiencies

noted have confronted ONEMA withrecruitment problems which even todayexpose it to the risk of a loss of skills.Financially, although strengtheningmanagement largely explains theincrease in payroll (+27% in 4 years),several measures related to compensa-tion or vacations, disputable or evenirregular, have accentuated growth ofexpenses. Finally, the organization oflocal services and the pace of work bysome agents (4 days per week) are not inline with the institution’s duties. Whilethe 2015 deadline is approaching for the2000 water framework directive, toachieve “good condition” of watersand, at a time when the 2012 FinancesLaw has increased the annual ceiling onthe water charges paid to ONEMAfrom €108 million to €150 million from2013, it is imperative to provide rigo-rous management to the institutions bycontinuing activities recently underta-ken.

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national Water and Aquatic Environment

Agency (OnEMA)

Recommendations–separate the functions of super-

vision and presidency of the board ofdirectors;

–make accounts reliable and assoon as possible put in place formalinternal audit procedures;

– establish rigorous direction andmonitoring of computer projects,including those related to the waterinformation system;

–reorganize the territorial mecha-nism;

–review the conditions for humanresources management including theconditions for allocation of the mobi-lity allowance, monitoring work timeand the adequacy of the four day workweek with the duties of the ONEMA;

–continue activities undertakenfor water police by redefining themonitoring indicators and significantlyincreasing the pressure for control onthemes or areas at issue.


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Court of Accounts

23 Remuneration to EDF SA:rapid growth, accumulationof benefits, little connec-tion with performance

The audit period coincided withmajor changes in the enterprise: listingon the stock market for a portion ofcapital, spin-off of network and distri-bution networks, end of the monopoly,globalization of activities. In parallel,the 65,931 employees of EDF SA at theend of 2011 remained for 94% gover-ned by the statute of electrical and gasindustries, whose foundations were laidby the law of April 8, 1946. Exemptedfrom the common labour law, this sta-tute sets the rules for pay and refers tosectorial agreements, then to companyagreements for the application andimprovement of conditions foremployees.

A generous pay policy

Unlike employees of the private sec-tor, within the EDF Group, the deve-lopment of the average net salary perhead has represented more than 3% peryear. In addition, salaries at EDF arehigher at hiring (16% more than the sta-tutory minimum wage for a young per-son with no degree, 26% for a holder ofa technical school certificate), and havean automatic growth guarantee. At the

end of their career, the seniority remu-neration can constitute as much as 22%of the set remuneration. Additionalremunerations can represent over 50%of the total remuneration for someemployees, five years after hiring.

Decided at the company level, andin addition to the above increases, indi-vidual measures are also more favoura-ble than in the private sector and morewidespread: 67% of agents receivedthem in 2010.

The EDF group initiated in 2008-2009 a merit pay system with variablemechanisms for remuneration, as domany public and private enterprises. Itsuniqueness is however to allocate to agreater proportion of employeesamounts that are still low (less than 4%of primary remuneration).

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EDF SA remuneration

Remuneration of executivesincreasing strongly until recently

From 2005 to 2010, the overall remu-neration of the CEO of EDF SA mul-tiplied, in constant Euros, by 2.35,under the effect of two cumulativemovements: regular and significantincreases of the fixed annual portion(€1 million in 2010) and fixing of avariable portion whose criteria werereached in the period at the upper partof the range (between 75 and 100%).This remuneration, expressly approvedby the Minister of the Economy, rea-ched about €1.5 million in 2011. Sincethe Decree of July 26, 2012, it was cap-ped at € 450,000. The remuneration ofother corporate officers followed asimilar trend, and their bonus ratesachieved high amounts, above 75%.

The State shareholder is only awareof the policy for remuneration of EDFSA executives through items infre-quently communicated to the remunera-tion committee, issued by the board ofdirectors of which it is a part. It isunfortunate that from 2004 it ceased toperform the annual survey on remune-ration.

During the period audited the num-ber of executives increased by 32.5%and their fixed salary at close to 4% peryear, as for all employees. Added to this,

however, is a higher variable share (witha maximum of 26 to 37% of the fixedsalary). No executive achieved less than90% of the objectives set in 2010. Thebonus therefore appears more like anadditional remuneration than a variableincentive.

Many employment benefits

Supply of electricity at a preferen-tial rate

Like all electricity and gas industryemployees, those of EDF SA benefitfrom an “agent’s fee”, which representsa cost to the company estimated at€222 million in 2010.

This benefit is exorbitant for severalreasons: subscription is free and thesupply of energy at the preferential rateis open without consumption limits,regardless of household composition,to employed and retired agents, for theprimary and secondary residence, andeven for occasional vacation homes.

It is also taxed under conditions andon a favourable scale, and in additionundervalued for social contributions.

A wide range of additional benefits

Employees of EDF SA may benefit,under certain conditions, from staffhousing, or a monthly allowance inten-ded to share housing costs (cost to EDFSA in 2011: €263.7 million). They col-lect or have collected profit shares, free


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EDF SA remuneration

shares, and benefit from collectivesavings schemes matched by the com-pany under favourable conditions, com-pared to the private sector. EDF SA canalso provide them with loans forconsumption.

In May 2011, the Court issued com-ments on the organization of the healthinsurance scheme for electricity and gascompanies which guarantees higher ser-vices that the common law, furtherenhanced by additional and supplemen-tary coverage.

The level of family and retirementbenefits and guarantees to EDFemployees is also considerably higherthan in the average branches of the eco-nomy: many family advantages in theform of paid holidays and specific allo-wances, even combining these twobenefits for a single reason, such as mar-riage for example; retirement calculatedon the bases of the last six months,combined with supporting arrange-ments.

RecommendationsFor the company and government:

–continue differentiation ofremuneration by remunerating perfor-mance rather than statutory position;

–set objectives for the variablepart sufficiently ambitious to justifythe concept itself of the variable part;

–restore the annual survey of exe-cutive remuneration of public compa-nies, including the EDF group in it;

–study the impact on the hierar-chy of the provision for capping ofexecutive remuneration that wasrecently introduced;

–end provisions for exemptionsfrom common tax and social law thatare currently related to the agent tariff;set a consumption ceiling for the

energy subject to this tariff and indexit to the real price of electricity;

–redefine the housing policy sothat the housing benefit and/or hou-sing allowance are granted to agentswho need it due to the constraints oftheir duties;

–review the family policy in rela-tion to its cost and changes in thefamily structure.


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Court of Accounts

24 Communications expensesof SnCF: expensive transac-tions, irregular contracts

The Court has audited the regularity,efficiency and effectiveness of externaland internal communications expensesof the public institution between 2000and 2011.

the slow formulation of the“SnCF” single brand strategy

Over the last decade, the SNCFundertook an active policy of “group”communication which covers the scopeof the industrial and commercial publicinstitutions (EPIC SNCF) and its subsi-diaries. At the end of a slow develop-ment, the SNCF opted in July 2010 forthe “SNCF” single brand strategy, appli-cable to the entire group.

Difficult assessment of the costof communication

The SNCF has not done analyticalmonitoring of its communicationexpenses (commercial, institutional orinternal communication) and the overallcost of the activity is difficult to quan-tify. For EPIC alone, it is estimated at€153 million of average annual expensesbetween 2007 and 2011, to whichshould be added on average €55 million

payroll per year, for a total of close to€210 million per year. This amountequals about 13% of EPIC investmentswhich amounted to €1.6 billion in 2010.

Insufficient control and monitoring of expenses

Controlling and monitoringexpenses suffer from weak budgetaryplanning, budget gaps in the audit trail,inadequate anticipation of operationsand the non-existence of annual balancesheets. Consequently, there are manysignificant budget overruns. Committedin 2009 to a policy of reducing its struc-tural costs from 2% to 4% per year, theSNCF planned, on the basis of an exter-nal audit, a reduction of communicationexpenses of €1.5 million from 2010,€6.5 million in 2011 and €8.3 million in2012; it did not happen.


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the SnCF’s communication expenses

69

Purchasing practices non-compliant with the rules inforce

The excessive recourse to negotiatedcontracts, without competitive bidding,is the greatest concern. These practicesrelate to 71% of the 41 largest contractsconcluded since 2007 and audited by theCourt. They show non-compliance withthe broad principles of public procure-ment defined by the Order ofJune 6, 2005, and its implementingDecree, to which is subjected the SNCFcommunication expenses and showsthat the institution is also non-com-pliant with its internal procedures in thisfield.

The invocation of extreme urgencyor technical specificity, to escape therequirement for competitive bidding,was not the subject of justification inaccordance with the regulations in forceor SNCF internal rules. The reference toa “request by the president” shown instrengthening justification of theseexceptional procurement procedurescannot justify their use and does not

figure among the cases provided by theregulation in force.

A periodic overall survey shows thatthe SNCF suffers from a poor imagewith the public, however the effective-ness of the SNCF communication acti-vities remains poorly evaluated. Testswere carried out occasionally to measurethe effectiveness of advertising cam-paigns and other marketing activities.However, the achievement of theseobjectives of the SNCF in terms ofcommunications was not evaluated forany of the operations studied.Significant sums were thus spent in theabsence of any evaluation or feedback.SNCF is committed to implement,according to a precise timetable and inthe short term, the necessary measuresto stop such practices. It presented itsboard of directors onDecember 20, 2012, with the main linesof its communication strategy and themeasures decided as a result of theCourt’s audit.

the SnCF’s communication expenses

70


Recommendations

–formalize the multi-year com-munication strategy, detail it in actionplans with the objective of managingcosts and presenting it to the board ofdirectors;

–anticipate and evaluate annualneeds in order to improve the qualityof forecasts;

–formalize a project managementapproach for each operation includingbudgetary aspects;

– make a financial assessment ofeach major projects and establish aperformance review of the annualbudget;

–provide annual information onexpenses by major strategic lines bypresenting reliable financial informa-tion, consolidated for EPIC and thegroup;

–ensure strict application of pro-cedures required by Order 2005-649of June 6, 2005, and strengthen theinternal control mechanisms to ensurelegal security of exceptional proce-dures.

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25

Court of Accounts

From Sonacotra to Adoma:drift corrected late

The Adoma semi-public limitedcompany, formerly SONACOTRA,manages over 500 hostels for migrantworkers or social residences, housing70,000 people and representing 60% ofhostels for migrant workers and socialresidences.

In its special public report on “wel-coming and integration of immigrantpopulations”, the Court had referred inpositive terms to activities by SONA-COTRA while underlining the com-pany’s difficulties, urged to move fromthe status of “immigrant landlord” to“landlord of the poorest”.

A fluctuating strategy at theexpense of the renovation ofhomes

The State holds 57% of Adoma.From the end of the 1990s, its prioritywas to renovate the hostels of migrantworkers. Adoma did its part in theeffort. However, in 2012, half of therooms offered by the company to itscustomers continued to have an area of9 square meters or less, and only one infive has self-contained comfort ele-ments, integrating individual sanitaryand kitchen corners.

These mixed results are largelyexplained by the instability and the dis-persal of objectives set for the company.

Thus the 2005-2010 objectives contractinvited Adoma to diversify its activity tosocial housing for families in difficultyas well as to housing for young people,especially students.

The company is also involved inreception of asylum seekers and provi-ding emergency shelter, for which itsown funds, provided by the State, havebeen used to finance construction onlands granted at-will, sometimes foronly 5 years. Early redemption of suchtransactions contributed to much of theaccounting loss of €26 million recordedin 2010.

Serious management failures

For housing young people and fami-lies, rather than accelerating the trans-formation of hostels into social resi-dences, it was decided to create additio-nal capacity. Operations conducted inthe emergency led, especially in thesouth-east of France, to acquisitions athigher prices than the field estimates orwithout prior technical study, which ledto cost overruns for work and difficul-ties in using certain buildings.

To carry out this investment policy,Adoma is indebted within the limitsprovided in the objectives contract. It


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From Sonacotra to Adoma

72

has however agreed, in a risky fashion,to speculative contracts with the banks,which have already led to a certain lossof €7 million and created a latent unrea-lized loss estimated at €57 million inoutstanding debt.

In day to day management, the com-pany’s procurement policy as experien-ced drifts, curbed only since 2011. Acertain laxity has long tainted humanresources management, local manage-ment being too dispersed and the bene-fits provided in terms of housing notalways justified by service constraints.Finally, a profit-sharing agreement wasestablished so while the regulations didnot permit it; denounced late, this agree-ment continues to pose a legal andfinancial risk.

A late recovery

New governance was established in2010, operational control of the com-pany being entrusted to a minority sha-reholder, the SNI, subsidiary of theCaisse des dépôts et consignations. This

has highlighted the strategic refocusingthat began in 2009 and established gui-delines that go in the direction of reco-very.

Adoma thus disengaged itself fromnon-priority sectors. It implemented asavings plan and workforce reductionthat allowed it to make a profit in 2011.The State must now set clear ultimateobjectives to provide this operator witha stable shareholder structure, sufficientcapital and transparent governance.


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From Sonacotra to Adoma

73

Recommendations

The Court recommends that theState shareholder:

–specifies public service dutiesthat it assigns to the Adoma company;

–encourages the necessary syner-gies with the national property com-pany, to provide Adoma with a stableshareholding structure, sufficient capi-tal and transparent governance;

–strengthen inter-departmentalcoordination and ensure that specificduties entrusted to Adoma benefitfrom balanced funding and allow forsustainable achievements;

–determine strategic prioritiesover a sufficiently long period toobtain robust results, and make up fordelays in rehabilitation of hostels,

especially in the elimination of smallrooms and completing the transfor-mation of homes into social resi-dences.

The Court recommends theAdoma company to:

–continue streamlining its mana-gement and securing its loans.

Court of Accounts

26 the Monnaie de Paris: a fully committed change,challenges to overcome

Management of coins and medalswas transformed into a public industrialand commercial institution called “LaMonnaie de Paris” by the 2007 FinanceAct.

With 500 agents today, the Monnaiede Paris must carry out several dutiesprovided by law, some as a monopoly(minting common and collector legalcoinage, punches) and other competitiveitems (decorations, medals, commonforeign coinage).

The company faces two main chal-lenges: to provide its economic balanceby sufficiently developing its commer-cial activities to compensate for anunprofitable sovereign activity, and suc-ceed in the new duty entrusted to it ofincreasing its Paris real estate assets.

A change of status source of a positive dynamic

Before the change of status, thecompany’s economic situation wasgreatly deteriorated. Structural handi-caps, in particular related to the largepayroll, were aggravated by the difficul-ties to be related to the transition toEuro (very large orders followed by asharp drop in activity).

The social climate was very tensewithin the company, in a context ofuncertainty on the sustainability of acti-

vities. In 2006, despite a significantdecline in workforce that began in 2002,the financial situation of coinage andmedallion management remained criti-cal.

In 2007, new governance wasrapidly established and a strategic planwas defined and validated by the boardof directors in less than one year.

A system of voluntary departureshelped accelerate the workforce reduc-tion, while simultaneously engaging in arenewal of personnel on targeted func-tions.

Five years after the change of status,the results are encouraging. The staffare now better suited to the company’stransformation, and the social climate isbetter.

Turnover has increased by over 50%in five years. The payroll has stabilisedand now represents 20% of turnover.

These results allowed for the firsttime in 2009 payment of a dividend of€8.3 million to the State. The dynamicwas confirmed in 2010, with a paymentof €12.2 million and €9 million in 2011.


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the economic model of theMonnaie de Paris remains fragile.

The company’s fixed costs are stilltoo high. The effects of reducing theworkforce have in reality been compen-sated by certain hirings focused on highlevels of responsibility, and thereforepay. The level of salaries and the averageage of staff consequently remain high(€3,600 monthly gross on average, and49.6 years of age).

Similarly, efforts at reorganizationhave not been sufficiently extensive.Support functions are still very highcompared to operational functions.

Finally, the company remains struc-turally with overcapacity in the produc-tion of coinage. At the time of changingover to the Euro, the need for 1 Euroand 50 cent coins were greatly overesti-mated, which led Treasury managementto destroy 310 million coins, For theState, the overall cost of overproductionof Euro coins may be valued at€41.5 million, or a net cost of €20.5 mil-lion if the sale of the metal is taken intoaccount, which should bring in close to€21 million.

Orders from the State (about850 million coins) are now permanentlylower than production capacities(1.5 billion coins).

To increase profitability of produc-tion tools, the activity of mintingforeign common coinage must be deve-

loped. This market is however verycompetitive and this activity remains forthe moment at a deficit for the com-pany.

Ultimately, the current improvementin the economic situation of theMonnaie de Paris is mainly related to thesuccess of face value collector coins(“gold or silver Euros”). However, it isbased on a “novelty effect” and a “wind-fall effect” which may disappear.

Other commercial activities of theinstitution are being rethought and theMonnaie de Paris should consider stop-ping some.

A new mission of enhancing assets with uncertain impact

Since it was created, the public insti-tution has been entrusted by the lawwith a mission of enhancing the Hôtelde la Monnaie, from which theMetalmorphosis project arose.

All the Paris property was howeverdeprived of the Year IV Plot, two yearsafter the change in status, while it wasuseful for operating the company, beingoccupied by workshops that were diffi-cult to move. Its transfer to the Institutde France to build an auditorium wasdecided by the State without studyingthe impact and without taking intoaccount the consequences for theMonnaie de Paris.

The loss for the institution is€3.6 million on the accounting level, butit has also suffered major indirect costs


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La Monnaie de Paris

75

related to the work resulting frommoving the machinery.

In addition, transferring the plotforced the institution to modify theMetalmorphosis project, although theprime contract work had already beencompleted.

The institution’s management drawnon the fact that the decision to transferfrom the Year IV Plot was imposed forbroad leeway in project implementation.

Estimates of economic benefits arevery optimistic; the project must there-fore have constant attention from thesponsor (State holdings agency) and theboard of directors.

Finally, with regard of the duty ofpresenting its historical collections, theMonnaie de Paris must strive, with thesupport of its leadership, to build part-nerships to develop its assets better.

With regards to the productionactivity:

–provide an alternative scenariointended to deal with the possibility ofa slowdown of the “face value collec-tion coinage” activity;

–undertake, in connection withthe sponsor, an accurate and completestudy to evaluate the relevance of eachcommercial activity and consider theeconomic and organizational conse-quences of their potential shutdown.

With regards to the company’sexpenses:

–better manage changes in pay;

–continue the effort to streamlinesupport functions;

–limit the use of external serviceproviders by reclaiming strategicmanagement.

With regards to the task of enhan-cing asset value:

–review and update theMetalmorphosis project business plan;

–develop partnerships, especiallywith the Cité de l’économie et de lamonnaie, to better present historicalcollections.

Recommendations


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La Monnaie de Paris

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Court of Accounts

27 the Heritage Foundation: a unique model

Instituted by the Law ofJuly 2, 1996, and recognized as of publicutility by the Decree of April 18, 1997,the Heritage Foundation received thepublic service mission to contribute tothe conservation and enhancement ofunprotected national heritage. This heri-tage, whose elements do not benefitfrom a system of classification or regis-tration as historical monuments,consists of several hundred thousandmovable and immovable assets that pre-sent an architectural, memorial or land-scape interest (traditional housing, washhouses, halls, bread ovens, ruralchurches, etc.).

A beneficiary foundation ofmajor public supports

Fifteen large companies participatedinitially in constituting the capital of theHeritage Foundation. They are still allrepresented on its board of directorswhere they hold a majority of votes.The Foundation today has about€32 million of annual resources, inclu-ding public financial supports whichrepresent, depending on the years, bet-ween 35 and 50% of its budget. For the2000-2011 period, the Heritage

Foundation assisted over 18,000 pro-jects of varying sizes (14,000 amongthem under private heritage and close to4,000 of public heritage).

After a slow and difficult start, theFoundation has experienced growthfrom the year 2000 when it was authori-zed by the tax authorities to grant the“Heritage Foundation” label. The year2004 marked a new step thanks to thedecision to allocate it a share of theState’s property revenues from eschea-ted estates. During the 2006-2010period which brought the Court’s audit,the Foundation was rapidly expanding.In just four years, its revenues increasedby 80%.

The Heritage Foundation is aunique organization, irreducible to anyknown legal category: a private organi-zation directly allocating tax rulings, afoundation benefiting from the State’sproperty revenues, a foundation whosemission and operation was not establi-shed by its founders but by law, a foun-dation with a status exempted from thefoundation law.

For the legislator, the Foundation’soriginal objective was to boost privateinitiatives and funding in favour of non-protected heritage so they would com-plement the rather feeble public actionand credits in this area. For this purpose,


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the Foundation has been granted someunusual rights for a private institution ofthis type, such as the ability to trigger, byaward of the “Heritage Foundation”label, tax reductions or even by way ofwaiver from the status of recognizedpublic utility foundations, the possibilityoffered to individuals or legal entities ofdirect membership.

Despite such a unique and privile-ged situation, it is clear that the HeritageFoundation has not been able to raisesignificant funding from companies.Yet, to accomplish its mission in favourof non-protected heritage, it has takenadvantage of many powers and skilfullycombines public funding, tax incentivesand initiatives by individuals.

However it is a result of the legalsystem in which the Foundation ope-rates that the public expenditure asso-ciated with its various actions remainspoorly understood in its amount anddifficult to read in its signs. What is evenmore questionable, considering that thisbudgetary and fiscal effort is much moresignificant than originally envisaged bythe legislator at the beginning: propertyrevenues allocated, annual subsidiesfrom local authorities, tax expendituresrelated to the “Heritage Foundation”label and gifts.

Broad support for volunteering

The Foundation’s activity is nowbased on significant support of publicgrants, not originally planned. In addi-tion, the Heritage Foundation’s develop-ment has been at the expense of a reo-rientation of its activities compared tothe perspectives outlined by the legisla-tor. It does not rely on a vast network ofindividual members or on major natio-nal partnerships, it draws little on corpo-rate sponsorship, it does not manageany renovation projects as contractingauthority.

The Foundation managed howeverto find other avenues for developing itsactions, in particular through a commu-nity of very active volunteers and laun-ching of local public subscriptions tofinance its largest projects.

The Heritage Foundation has there-fore met the objectives of its mission,within the extent of its resources, accor-ding to its original conditions for actionand within satisfactory managementconditions.


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the Heritage Foundation

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For the Ministry of Culture andthe Ministry of the Budget:

–annually inform Parliament ofthe amount of revenues allocated tothe Foundation and its use;

–institute a mechanism cappingthis revenue;

–begin a dialog with the HeritageFoundation on its objectives andactions to integrate with the nationalheritage policy;

–strengthen the consistency bet-ween the general heritage protectionpolicy and the tool that the representsthe label.

For the Heritage Foundation:

–strengthen headquarters’ controlon regional delegations in financialmatters;

–develop further private resourcesthat are less used to date: corporatesponsorship, relaunch of the member-ship arrangement;

–apply all obligations relating toappealing on public generosity, in theframework of “popular patronage”subscriptions.

Recommendations


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the Heritage Foundation

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