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Budget and Accounting Reforms in France: Managerial Aspects and Initial Results

This seminar discusses the implementation of budget and accounting reforms in France, focusing on the managerial aspects and initial results. It explores the new budgeting system, transparency in accounts, and the role of Parliament in the reform process.

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Budget and Accounting Reforms in France: Managerial Aspects and Initial Results

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  1. FAD Seminar on the Implementation of the Budget and Accounting reforms in FranceThe managerial aspects of the reformsFrank MORDACQDirector General for State ModernizationWashington – December 7th 2007

  2. Outline • Overview of the main aspects of the budget and accounting reforms in France • The management of the reforms: a five-year reform process…still in progress • The reform of public management in France • Initial results of the reforms • Next steps: the budget reform as a lever for State modernization

  3. A favorable environment: unprecedented political consensus and Parliament’s involvement The Constitutional Bylaw on Budget Acts (Loi Organique relative aux Lois de Finances, LOLF) of 1 August 2001, replacing the Constitutional Bylaw of 1959 A new government financial constitution

  4. Elected officials French citizens Public employees • Providing increased budgetary legibility and transparency in execution • Influencing resources allocated to public policy • Citizens: understandingthe uses of taxes • Users: public services better adapted to needs • Taxpayers: ensuring that taxes are efficiently used • Given clear objectives • Benefit from greater freedom of action LOLF -- Meeting the expectations of:

  5. Main aspects of the budget and accounting reforms in France Clearer budget, dividing credits into a new topology of 34 missions, 132 programs and 605 actions (Budget Bill 2008) More comprehensive budget, providing a better picture of the budgetary inputs for each public policy (first Euro justification, tax expenditure, cost analysis and presentation of operators/agencies) Performance-based budget, with targets and indicators driving new public management More transparent and accurate accounts, with cash accounting, accrual-based general government accounting and cost analysis accounting, giving managers new tools to “steer” their expenditures New system of budgetary governance and budgetary procedure: increasing parliamentary control; furthering strategic public finance choices

  6. Outline • Overview of the main aspects of the budget and accounting reforms in France • The management of the reforms: a five-year reform process…still in progress • The reform of public management in France • Initial results of the reforms • Next steps: the budget reform as a lever for State modernization

  7. Principal milestones of budget reform: 2001-2007 • A successful roadmap : we have done what we said we would 2001 2002 2003 2004 2005 2006 2007 New management framework Adapted IT systems Lambert/Migaud Report on LOLF Implementation 2006 Budget Act in full LOLF mode & Parliamentary debate 1st Annual performance reports Certification of the accounts by State Audit Office LOLF approved by Parliament Draft Budget Act in LOLF mode Performance objectives / indicators for programs Establishment of the Directorate of Budget Reform 1st milestone: Building the foundations 2nd milestone: Prefiguration 3rd milestone: Implementation

  8. Project execution of budget reform Directorate for Budgetary Reform (DBR) => A mission directorate 2003-2005 Strategic committee Coordination inside the Ministry of Finance (budget directorate, general directorate for public accounts, agency for financial IT systems) Steering Committee of Financial Affairs Directors Interministerial coordination with all the line ministries Regional committees for coordinating & monitoring reform A direct link with the managers on the field to promote the reform, with help of Prefect regional financial controllers • A great role for Parliament in Budget reform • Discussions with parliamentary committees (ex. : performance, draft budget 2005 in LOLF mode) • An annual report presented to Parliament on the implementation of the LOLF • Lambert/Migaud reports on LOLF implementation Planning & reporting The “LOLF roadmap”: an interministerial timetable organized into specific projects

  9. Number of departments having switched over to “LOLF” mode Adoption of LOLF management procedures:the experimental phase 2004 • At least one experimental phase regarding globalized management of resources in each ministry with 150 departments concerned 2005 • 500 departments concerned • 65 programs and €28 billion covering operational budget management issues, performance, the wage bill, commitment authorizations/ cash-limit appropriations

  10. Communications tools during LOLF implementation The publications Experimental results • The budget reform letter • Practical guides on LOLF • The 2004 report on experiments • A film on experiments in DVD and VHS Websites of the reform http://www.minefi.gouv.fr/lolf/ https://www.extralolf.minefi.gouv.fr (rb-lolf) 10,000 public servants participated in regional “road show” (information, experience sharing)

  11. Guides for instructors Practical guides Training tools during LOLF implementation • A guide to the performance-based approach • A guide for monitoring the wage bill • A guide for personnel expenses • A memorandum for commitment authorization/cash-limit appropriations • A handbook for 2006 budget management • A guide to the performance-based approach • A guide for training leaders • The instructor’s booklet • Major budget reform issues (prerequisites for the Accord LOLF, NDL and India training) • Commitment authorizations and cash-limit appropriations • Operational budget programs • Accounting • Operators • Performance • Personnel expenses and the wage bill • And the budget reform glossary Seven kits by subject • LOLF School • E-learning

  12. Key success factors of reform implementation • High-level support and widespread participation of teams, personnel and their representatives (Technical Labor-Management Committee, or CTP) • Established a Forum for Program Mangers; integration of program managers in the project management system; Increasing the awareness of the reforms among key managers and financial officers • Coordination between the central administration and the administration in the regions; a new distribution of roles between central administration and devolved agencies • Training of public managers; building the capacity of managers, both in central administration and on the ground to operate under the new budgeting framework; the promotion of a culture of accountability • Establishing comprehensive financial information management systems to support the planning and reporting systems

  13. Outline • Overview of the main aspects of the budget and accounting reforms in France • The management of the reforms: a five-year reform process…still in progress • The reform of public management in France • Initial results of the reforms • Next steps: the budget reform as a lever for State modernization

  14. Modernization of public management: a new approach promoted by the budgetary reform Increased accountability of program managers Increased freedom for program managers More information in reporting on performance • Committing to objectives • Reporting on actions • Reporting on results of activity and expenditures • Globalization of appropriations within a given program • Fungibility of appropriations between budget titles and actions, subject to maximum wage bill • A maximum ministerial headcount (FTE basis) • Fewer ex ante compliance controls & development of internal controls, management control, evaluations

  15. Program objectives broken down at the operational level Program performance objectives (Annual Performance Plan) Objectives to which the program manager and his/her minister commit vis-à-vis Parliament If possible If necessary If useful Converted into intermediate objectives Assigned directly (as they stand) Supplementary objectives 4A small number of objectives, indicators and targets are created to suit the context 4 National objectives and indicators are taken as are 4 Their value is adapted to the context 4 National objectives, indicators and targets are adapted to the POB levers for action Program operating budget (POB) performance objectives Objectives to which the program operating budget managers commit vis-à-vis the program manager Key issue: performance management on the ground – 95% of the public service works in regional services of the State

  16. Three main challenges for the modernized public management in France A political challenge: the performance of public policies in the political debate (number of objectives, focus on citizen concerns) • A governance and administrative challenge: • Coherence between the perimeters of programs (132) and the competences of central administrations (~200 directorates) • Objectives and indicators broken down at operational level, to develop a new public management based on accountability; relations between central administrations and regional services of the State. • Relations between actors (Ministry of Finance / line ministries; program managers / operational divisions (financial & HR coordinators); budget managers / financial controllers; budget managers / public accountants). • Incentives to achieve the results and manage programs’ HR dimension (career, wages, bonuses, etc.). A technical challenge: improve the information systems to collect and analyze the data relating to performance; ensure the quality and reliability of data, and reduce the cost of treatment.

  17. Outline • Overview of the main aspects of the budget and accounting reforms in France • The management of the reforms: a five-year reform process…still in progress • The reform of public management in France • Initial results of the reforms • Next steps: the budget reform as a lever for State modernization

  18. Initial results from the new public management system are encouraging • France has met the deadlines it has set, with implementation of all the provisions of the LOLF on 1 January 2006. • Annual performance plans appended to the 2006 Budget Act • The new management system has given meaning back to public service, encouraging departments to redefine their objectives. • By delegating to managers responsibility for managing the departments, by focusing on performance, it encourages them to improve the quality of public service and make better use of public resources. • It has enriched management and social dialogue by encouraging discussion of objectives, the allocation of resources and the possible reuse of resources made available. • 2006, a year of successful transition between two significantly different systems of public management and a year of collective learning. • Perception of the reform in the field according to surveys: positive perceptions but concerns about practical deployment issues

  19. Early 2006: inherent risks associated with a major change in the public management system in the first financial period • A learning phase: the management framework has been significantly modified with a much tighter schedule. • New standards, new tools, new timetable. • Some disappointment from managers concerning the reality of the new room to maneuver provided (budgetary constraints, earmarking of appropriations by central administrations etc.). • A more complex and bigger workload on start-up (requirement to provide more information, expenditure commitment procedures etc.). • Concerns about the availability and accuracy of certain tools, notably management information systems.

  20. Areas for further progress and current challenges • While the LOLF framework is now in place, practices need to evolve. This movement is currently underway; over time, it will produce results (long term process). • Pursue certain projects: • Promote the adoption of a managerial culture via the new drivers of the process (program and POB managers); professionalize management and shift management decisions further to the field. • Human resource management: increased flexibility, increased mobility, statutory status of employees • Improved control systems: less a priori controls; enhanced internal controls, and development of management control; increased internal audit • The reengineering of budgeting and accounting processes and the deployment of a new financial information system (ERP) for central & regional State services (~30.000 users)

  21. Outline • Overview of the main aspects of the budget and accounting reforms in France • The management of the reforms: a five-year reform process…still in progress • The reform of public management in France • Initial results of the reforms • Next steps: the budget reform as a lever for State modernization

  22. Principal milestones of budget reform: 2007-2012 2007 2008 2009 2010 2011 2012 New financial IT-systems (ERP) Central & regional ~30.000 users General elections: new President and new government Announcement of General Review of Public Policies Decisions of General Review of Public Policies included in a pluriannual budget framework 2009-2011 Projected balanced budget Public debt less than 60% of GDP (target) Certification of the Accounts by the State Audit Office

  23. 2007: New political context • Nicolas Sarkozy elected President of the Republic, May 2007; UMP majority in legislative elections, June 2007 (high turnout in 2nd round of presidential elections 84%) • A new departmental structure with 15 ministries in coherence with public policies for greater transparency including : • Division of the Ministry of Finances into : • a Ministry of the Economy, Finance and Employment (Christine Lagarde) • a Ministry of the Budget, Public Accounts and the Civil Service (Eric Woerth) • Among the priorities of the government: • Controlling public expenditures (balanced budget by 2012) • Pension reform • Fiscal reforms (« fiscal bundle ») • Replacing only one of each two public servants that retire over the next five years

  24. The General Review of Public Policies • Launched in July 2007, in order to identify actions for State modernisation in the five years to come. • Rethinking the public service sector to better suit citizens’ need. • The review will seek to identify reforms to help cut public spending while at the same time increasing the efficiency of public policies. • A new approach • Political leadership at the highest level • An exhaustive review of the public policies • A review of the legitimacy and the objectives of State action

  25. The General Review of Public Policies - State expenditure will be closely examined against a simple set of questions 1. What do we do? 2. What are the collective needs and expectations? 3. Do we need to continue to do it ? 4. Who should do it ? 5. How can we do this better and for less money? 6. Who should cover the costs ? 7. How should we go about change ?

  26. The General Review of Public PoliciesCalendar Council of the Modernisation of Public Policies Council of the Modernisation of Public Policies July-August 2007 September –December 2007 January - May 2008 2008-2012 Launch/ Framing Steering Committee 1st review (Analysis and initial scenarios) Steering Committee 2nd review (Definitive Scenarios) Transformation Actions Pluriannual Budget (09-11) • 4 interministerial projects • Relations between central government and local level of government • Organization of central State at the local level • Human resources management • Simplification of the public management regulations 15 audit teams « departmental » : productive infrastructure (1 team chief, members of the inspection corps, consultants) 6 audit teams on the major intervention policies Specific method, working in parallel with the audit teams • Four sectoral work streams were also launched on June 20, 2007: • the fusion of the General Directorate of Taxation and the General Directorate of Public Accounting; • the fusion of the Intelligence Services; • the judiciary network (“la carte judiciaire”); • the reduction of administrative burden on businesses and local authorities

  27. The General Review of Public Policies building on modernization initiatives • Clarify and simplify mangement procedures • Reformed public procurement: France Achats • Centralized HR national pay system • Reformed management of real property: France Domaine • E-Government • Legislative simplification and deregulation • Reduction of administrative burden

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