FAD Seminar on the Implementation of the
Budget and Accounting reforms in France
The managerial aspects of
the reforms
Frank MORDACQ
Director General for State Modernization
Washington – December 7th 2007
1
Outline
2
1.
Overview of the main aspects of the budget and
accounting reforms in France
2.
The management of the reforms: a five-year reform
process…still in progress
3.
The reform of public management in France
4.
Initial results of the reforms
5.
Next steps: the budget reform as a lever for State
modernization
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
3
LOLF -- Meeting the expectations of:
Elected officials


4
Providing
increased
budgetary
legibility and
transparency in
execution
Influencing
resources
allocated to
public policy
French citizens

Citizens:
understanding
the uses of taxes

Users: public
services better
adapted to needs

Taxpayers:
ensuring that taxes
are efficiently used
Public employees

Given clear
objectives

Benefit from
greater freedom of
action
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
5
Outline
6
1.
Overview of the main aspects of the budget and
accounting reforms in France
2.
The management of the reforms: a five-year reform
process…still in progress
3.
The reform of public management in France
4.
Initial results of the reforms
5.
Next steps: the budget reform as a lever for State
modernization
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
LOLF
approved
by
Parliament
Establishment Draft Budget Act
in LOLF mode
of the
Directorate of
Performance
Budget
objectives /
Reform
indicators for
programs
1st milestone:
Building the foundations
7
2nd milestone:
Prefiguration
Lambert/Migaud
Report on LOLF
Implementation
1st Annual
performance
reports
2006 Budget Act Certification of
in full LOLF mode the accounts
& Parliamentary by State Audit
debate
Office
3rd milestone:
Implementation
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
Planning &
reporting
The “LOLF roadmap”:
an interministerial timetable
organized into specific
projects
8
•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
Adoption of LOLF management procedures:
the experimental phase



9
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
Number of departments
having switched over to
“LOLF” mode
Communications tools during LOLF implementation
The publications
● The budget reform
letter
● Practical guides on
LOLF
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)
10
Experimental results
● The 2004 report on experiments
● A film on experiments in DVD and
VHS
Training tools during LOLF implementation
● A guide to the
performance-based
approach
● A guide to the
performancebased approach
● The instructor’s
booklet
● A guide for
monitoring the wage bill
● Major budget reform issues (prerequisites for
the Accord LOLF, NDL and India training)
● A guide for personnel
expenses
● Commitment authorizations and cash-limit
appropriations
● A memorandum for
commitment
authorization/cash-limit
appropriations
● Operational budget programs
● A handbook for 2006
budget management
● Performance
● Accounting
● Operators
● LOLF School
●E-learning
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● A guide for training
leaders
● Personnel expenses and the wage bill
● And the budget reform glossary
Key success factors of reform implementation
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
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
Outline
13
1.
Overview of the main aspects of the budget and
accounting reforms in France
2.
The management of the reforms: a five-year reform
process…still in progress
3.
The reform of public management in France
4.
Initial results of the reforms
5.
Next steps: the budget reform as a lever for State
modernization
Modernization of public management: a new
approach promoted by the budgetary reform
Increased
accountability of
program
managers
Increased freedom
for program
managers
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More information in
reporting on performance

Globalization of appropriations
within a given program

Fungibility of appropriations
between budget titles and actions,
subject to maximum wage bill

Committing to objectives

Reporting on actions

A maximum ministerial headcount
(FTE basis)

Reporting on results of
activity and expenditures

Fewer ex ante compliance controls
& development of internal controls,
management control, evaluations
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
Assigned directly
(as they stand)
If necessary
Converted into
intermediate
objectives
If useful
Supplementary
objectives
4 National objectives and
4 National objectives,
4 A small number of
indicators are taken as are
indicators and targets are
adapted to the POB levers for
action
objectives, indicators and
targets are created to suit
the context
4 Their value is adapted
to the context
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
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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.
16
Outline
17
1.
Overview of the main aspects of the budget and
accounting reforms in France
2.
The management of the reforms: a five-year reform
process…still in progress
3.
The reform of public management in France
4.
Initial results of the reforms
5.
Next steps: the budget reform as a lever for State
modernization
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
18

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
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.
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
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.
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)
20
Outline
21
1.
Overview of the main aspects of the budget and
accounting reforms in France
2.
The management of the reforms: a five-year reform
process…still in progress
3.
The reform of public management in France
4.
Initial results of the reforms
5.
Next steps: the budget reform as a lever for State
modernization
Principal milestones of budget reform: 2007-2012
2007
2009
General elections:
new President and
new government
Decisions of
General Review of
Public Policies
Announcement of
General Review of
Public Policies
included in a
pluriannual budget
framework 20092011
Certification of
the Accounts
by the State
Audit Office
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2008
2010
2011
New financial
IT-systems
(ERP)
Central &
regional
~30.000 users
2012
Projected
balanced
budget
Public debt
less than
60% of
GDP
(target)
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:
—
—
—
—
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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
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
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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 ?
6. Who should cover the
costs ?
7. How should we go about
change ?
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5. How can we do this
better and for less
money?
The General Review of Public Policies
Calendar
Council of the
Modernisation of
Public Policies
July-August 2007
Launch/
Framing
September –December 2007
Steering Committee 1st review
(Analysis and initial scenarios)
Council of the
Modernisation of
Public Policies
January - May 2008
Steering Committee 2nd review
(Definitive Scenarios)
2008-2012
Transformation
Actions
Pluriannual Budget
(09-11)
4 interministerial projects
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
•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
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
26
The General Review of Public Policies building on
modernization initiatives
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
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