Certification of Accounts for the General Social Security System Financial Year 2010

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C

OUR DES

C

OMPTES

Certification of Accounts

for the General Social

Security System

Financial Year 2010

June 2011

T

his summary is designed to aid the understanding and use of the Cour des Comptes report.

Only the report is legally binding on the Cour des Comptes.

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General Social Security System . . . .5

Certification: Mission and Stakes . . . .7

Production of Accounts . . . .7

Collections Activity . . . .10

Health Division . . . .13

The AT MP Division . . . .15

The Family Division . . . .17

The Retirement Division . . . .19

A Glossary is provided on page 23

Summary of ce rtif ica tion of th e accou nts of th e ge ne ra l s ocia l s ecu rity s ys tem

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Contents

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Cour des comptes

The General Social

Security System

The four service divisions of the general system are managed by three networks of local offices and three national public funds:

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The CPAM network and its national fund, the CNAMTS, manage health cov-erage;

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The CARSAT network and its national fund, the CNAVTS, manage old age coverage;

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The CAF network and its national fund, the CNAF, manage family coverage;

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The CARSAT network also manages work-related health and accident cover-age under the direction of the CNAMTS.

The URSSAF network and its central agency, the ACOSS, collect contributions and certain charges for the general system, but also for other organisations.

Organisations of the General System

Source: Cour des comptes

Distribution of General System Expenses by division in 2010 (as % of costs) Summary of ce rtif ica tion of th e accou nts of th e ge ne ra l s ocia l s ecu rity s ys tem

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Continued

Worsening of the

General Social

Security System’s

Deficit

Since 2008, when it was already at

€10.2 billion, the general system’s deficit has multiplied by 2.3. After the unprecedented level reached in 2009 (-€20.3 billion), it worsened even further in 2010 (-€23.95 billion).

All divisions are affected by deficit: health (-€11.6 billion), pensions (-€8.9 billion), family (-€8.9 billion), and AT MP (-€0.7 billion).

The financial debt of the ACOSS was €49.6 billion as of 31 December 2010. It had more than doubled in rela-tion to 2009 (€23.9 billion), a year marked by the transfer of €17 billion in debt to the CADES (the public organi-sation responsible for the periodic assumption and reimbursement of accumulated social security debt).

General System Deficit per division in 2009 and 2010 (in € Billions)

The General Social

Security System

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Cour des comptes

Certification:

Mission and Objectives

The Mission of

Certification

Entrusted to the

Cour des Comptes

- The organic law informing the social security financing laws of 2 August 2005 entrusted the Cour with the mission of certifying the accounts of the general social security system. The Cour is an independent institution having no relationship with the produc-ers of the accounts or their dependents.

- The accounts of the other social security systems are certified by official auditors (commissaires aux comptes).

- Certification is a written and founded opinion formulated on its own responsibility by an organisation inde-pendent of an entity’s accounts. It con-sists of collecting the necessary ele-ments for obtaining a reasonable assur-ance of the absence of significant anomalies in the accounts, as well as the conformity of the financial statements to a set of rules and principles.

- In performing its certification mis-sion, the Cour des Comptes refers to ISA (International Standards on Auditing) norms, established by the International Federation of Accountants (IFAC).

- An unreserved certification opin-ion can not be issued if the audit reveals certain problems (disagreements with the producer of the accounts, limita-tions on audit work, uncertanties, etc.)

which prevent the certifier from reach-ing a reasonable assurance of the absence of significant anomalies in the audited accounts. Depending on the nature, extent, and degree of these diffi-culties, the issue may be pronounced as certification with reservations, inability to certify, or refusal to certify.

The stakes of the

certification

mission

- Certification gives Parliament and the government a basis of standard and honest financial statements providing a reliable picture of the end results of management, assets, financial situation, and the rights and obligations of the audited entities.

- Certification encourages national funds and the organisations making up their networks to identify and control the financial risks related to their activi-ties. It favours the progressive strength-ening of internal control and encour-ages the development of initiatives to ensure appropriate expenditure and combat fraud of any kind. In so doing, it contributes to the quality of service provided to subscribers and the preser-vation of the social security system’s financial interests. Summary of ce rtif ica tion of th e accou nts of th e ge ne ra l s ocia l s ecu rity s ys tem

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- While it is part of and accompa-nies the progress of the general system’s divisions in managing risk, internal con-trol, and quality of accounting, certifica-tion is not a linear exercise. Depending

on the degree and number of problems identified during audit work, accounts that have been certified with reserva-tions in the past may entail a refusal of certification for a later financial year.

Certification: Mission and Stakes

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Production of Accounts

The nine ledgers which make up the “accounts” of the general social security system are based on a specific organisational system, the unified accounting system for social security organisations (PCUOSS), which reflects, with certain modifica-tions, the rules of the French general accounting system.

The report describes various problems in applying these accounting principles (incomplete scope of accounts audited, accounting treatment of certain operations performed for third parties, accounting aspects of management of real estate assets, accounting treatment of the product of self-employed workers’ con-tributions, etc.). Some could be resolved by changes in the divisions’ accounting practices. Others require information system development or are the domain of the council of public account normalisation, common to the State, Social Security,

and territorial governments.

The report documents the problems the divisions have in respecting certain deadlines, which affect the conditions under which the Cour performs its work.

Every year, social security organisations perform billions of operations: collec-tion of contribucollec-tions, reimbursement of medical care, pension payments, allocacollec-tion payments, etc. The organisations’ internal control mechanisms aim to securitise the treatment of these operations. All these operations are posted to accounts by com-plex computer interfaces, as well as by manual postings. The Cour must obtain a rea-sonable assurance that the risk of significant anomalies in accounting and financial statements is under control.

The regulatory schedule for account production includes four key dates: - 31 December , for financial year closing

- 10 March, for producing provisional accounts - 31 March , for producing final accounts

- 15 April, for producing complete financial statements (balance sheet, income statement, and appendices)

Cour des comptes

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Collected: €325 Billion

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Cour des comptes

Collection Activity

Consisting primarily of 88 URSSAF offices and the ACOSS, the network col-lected €325 billion in contributions in 2010, of which 299 were posted in income accounts.

Contributions Collected in 2010 (in € Billions)

The network transferred the amount collected to approximately 620 recipients, half of them transport organisation authorities. The general social security system’s divisions represent approximately 83% of these resource transfers. The remaining 17% are divided among different recipients, among them the pension solidarity fund (FSV) and the self-employed workers’ social security system (RSI).

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Collection Activity

Contributions Collected in 2010 (in € Billions)

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Collection Activity

Certification with Reservations

Financial year 2010 saw substantial progress in terms of account auditabili-ty, also entailing increased assurance of the correct distribution of collections to recipients. The result was a reduction in scope and severity of the reservation expressed by the Cour on account auditability. For the same financial year, other improvements were noted in the accounting system, particularly in terms of the distribution of amounts due by contributors among recipients and the scope of evaluation of income to be received.

Significant gaps remain in:

account auditability, where the work performed this year by ACOSS, which provided the Cour with crucial assurances, must be extended on a wider scope;

 the accounting treatment of cer-tain operations, which is problematic in terms of the application of the legisla-tive principle of accounting for acknowledged rights (contributions by the self-employed and relevant taxes) and constitutes a risk of over- or under-evaluation (provisions for risks and loss-es, evaluation of amounts due by con-tributors) or, for other operations, raises difficulties of reconciling postings by

different social security divisions or sys-tems (contributions underwritten by social security organisations);

 the design and use of national systems for internal control and audit;

the mastery by internal control of several key points in the management process of social security withholding and the design and use of internal control;

overall insufficiency of internal control on withholding representing a minor part of posted income (AT-MP contributions, contributions by the self-employed), but creating uncertainty of general scope as to whether collected withholdings are complete and correct. The Cour des Comptes certified the 2009 accounts for collection activ-ity and the ACOSS with reservations. It adopted a similar position on the accounts for financial year 2010, certifying the combined accounts of collections activity with nine reservations and the accounts of the ACOSS with three reservations.

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Consisting primarily of 101 CPAM offices and the CNAMTS, the health divi-sion primarily finances three types of services:

- individually and directly invoiced medical benefits (in-office and clinic servic-es) and daily sick leave compensation, for which documentation is available for each item;

- health care in facilities with fees established by regional health agencies; - disability benefits, managed in the same way as family allocations or pensions (one-time calculation of amount due, followed by multiple payments).

Cour des comptes

Health Division

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Health Division

Certification with Reservations

Improved internal control mecha-nisms have allowed gradual improve-ment of risk of accounting anomalies.

The CNAMTS has developed an auxiliary accounting system for services which ensures an audit trail for city health care.

Records of cash movements from private insurance companies managing basic health care by delegation are now identical in terms of quality to those directly managed by CPAMs, due to the application of the computer standard known as “NOEMIE 303”.

But in many respects, the division still has progress to make in order to remove reservations regarding:

Risks of error in payment and posting of services in kind (double pay-ments, missing documentation, etc.);

CPAMs’ ability to verify hospital expenses, particularly for “medicine, surgery, obstetrics, dentistry” (MCOO), on invoices sent directly to them by the health care facilities, as well as collection of advance payments for T2A (tarifica-tion à l’activité, French unified health-care rate and financing system);

The risk of double billing or incorrect billing for payments to med-ical-social facilities for the disabled;

The extension to all private insur-ance companies deputised to cover basic health care of the appropriate internal control and cash flow securisation mechanisms.

Furthermore, there are still uncer-tainties affecting certain accounting entries (acceptance by the division of part of the contributions of medical practitioners and auxiliaries), while the refusal by the auditors of the agricultur-al insurance collective to certify the combined accounts of this system does not allow the Cour the appropriate assurance of the amounts for which the division will be held responsible. As in previous years, for financial year 2010 the Cour des Comptes cer-tifies the accounts of the health division and the CNAMTS with reservations. Six

reservations concern combined accounts, two the accounts of the national fund.

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As implemented by the CARSAT network, the management process for the AT-MP division’s operations is similar to that of the health division for health care serv-ices and to that of the pension division for cash allocations.

The division’s resources are essentially constituted of employer contributions for industrial accidents, the rate being adjusted for each establishment according to risk. The process of determining risks and applicable rates requires the joint action of the AT-MP division and Collections, contributions being collected by collections organisations.

The AT MP Division

Expenses for 2010: €12 Billion

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The AT MP Division

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Refusal to Certify

The Cour found a lack of assurance on the correctness and completeness of AT-MP contributions, which represent three quarters of the division’s income, due to major defects in internal control in each of the two networks concerned. Of particular importance are:

The fact that some of the divi-sion’s organisations apply internal con-trol procedures in an incomplete man-ner;

The existence of important diver-gences between the data of the two net-works on the population of attached establishments;

The extreme uncertainties con-cerning the correct determination of employers’ applicable contribution rates, particularly due to an observed lack of interaction between the two networks.

Furthermore, the weaknesses in internal control observed for the health division regarding in-office services and payments to hospitals also affect the accounts of the AT-MP division.

Finally the division’s accounts are also affected by the conclusions that the Cour must draw from the refusal of the agricultural insurance collective’s audi-tors to certify the combined accounts of this system, as the balance of the agri-cultural workers’ system must be inte-grated in the combined accounts.

As part of collection activities, the division has agreed, as of 2011 and according to a defined schedule, to exchange computer data between the two networks in order to ensure that contributions are complete and correct. The implementation of these commit-ments will be examined by the Cour as part of the account certification process for financial year 2011.

Over several financial years, examination of internal control in the AT-MP division and for collections activity has revealed cumulative weaknesses. In 2010, the Cour’s audit showed problems of an increasing severity and over a wider scope. Given their nature and their combination, the Cour does not feel it can

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Consisting primarily of 123 CAFs and the CNAF, the family Division of the general social security system ensures the calculation and payment of some thirty types of benefits, for itself or on behalf of a third party, of which the main types are described below.

STATE

Allowance for adults with disabilities (€6.0 billion)

Earned income supplement(€1.3 billion) Return to work bonus (€0.35 billion) Single parent allowance (€0.15 billion) Special RMI/RSA bonus (€1.3 billion) Other (less than € 0.1 billion): return to work bonus, back to school allowance bonus, temporary housing assistance.

REGIONAL

Minimum income guarantee / Earned income supplement (€7.2 billion) Solidarity income in the Dominions (€0.1 billion)

Other (less than €0.1 billion): subsidised employment contracts

NATIONAL HOUSING ASSISTANCE FUND Personalised housing assistance (€6.6 billion) Social housing allowance (€3.9 billion)

GENERAL AND OTHER SOCIAL SECURITY SYSTEMS

Family allocations (€12.3 billion) Fixed allocations (€0.1 billion)

Complementary family allocation (€1.6 billion) Family support allocation (€1.25 billion) PAJE – bonuses (€0.7 billion)

PAJE – allocations (€4.2 billion)

PAJE - complementary allocation for reduced employment (€2.2 billion) PAJE - complementary allocation for childcare (€5.3 billion

Back to school allocation (€1.5 billion) Family housing allocation (€4.1 billion)

Allocation and complementary payments for disabledchild allocation (€0.7 billion Dependency expenses (€0.3 billion)

Old age insurance for fulltime parents (CNAVTS €4.3 billion) Increased children’s allowance (FSV €3.6 billion)

Paternity leave ( €0.3 billion)

Others (less than €0.1 M€) allocation for young children, adoption allocation, parental leave allocation, parental education allocation, differential allocations, etc.

Cour des comptes

The Family Division

Expenses for 2010: €54 Billion

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The Family Division

For the first time since 2006, in 2009 the Cour certified with reservations the accounts of the family Division and the CNAF, taking account of significant progress made for this year and particularly of:

The fact that the base organisations’ internal audit and account validation had improved operationally;

The implementation of a renovation initiative for the internal control mecha-nism of the division, particularly in regards to the securitisation of the calculation and payment of the main benefits and on the management of information system projects;

Progress observed in data exchange, leading to securitised benefit payments; Implementation of a national database of allocation recipients (the national beneficiary directory) including a certification of INSEE identification for most of them.

In 2010, the division confirmed that it was continuing on this upward path, allowing the Cour to certify with five reservations the combined accounts of

the division, those of the CNAF being certified with three reservations.

Certification with Reservations

Advances have been made on the accounting level, allowing two reserva-tions to be lifted, taking into account the adjustments of the method for estimat-ing certain inventory postestimat-ings and their improved presentation. As for internal control, progress is less visible, but the division has continued its commitment to reforming the totality of its opera-tions, implementing for the first time in 2010 new internal control instruments (“quality loop”).

Nevertheless, there are real and sig-nificant gaps in this progress. The Cour’s reservations primarily concerned:

Internal control, which despite observed progress still provides only partial assurance of the division’s man-agement of the risks inherent in its activity. Such is particularly the case for old age insurance for full-time parents, where the internal control mechanism for contributions due by the division is not well-adapted. Furthermore, the

percentage of errors with a financial impact on calculated benefits remains significant;

The process of establishing com-bined accounts, which must still be improved and better documented;

The methods used for certain accounting estimations, because they are based on extra-ledger statements of uncertain reliability ou because they dif-fer fro those established by other divi-sions for the same purpose.

Furthermore, the refusal of the agri-cultural insurance collective’s auditors to certify the combined accounts of this system do not allow the Cour to have the appropriate assurance as to the amounts for which the division will be held responsible.

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Retirement structured around CARSAT offices, the CRAV (Alsace Moselle), CGSS offices (overseas regions), and the CNAVTS, the retirement Division collects throughout the professional life of its contributors the employment-related data necessary to calculate retirement pensions.

When the conditions for opening rights are fulfilled, the division calculates the pensions of any contributor who requests them and initiates their payment through-out retirement, revising them as necessary in accordance with any change in the con-tributor’s circumstances (resources, family situation, etc.).

Cour des comptes

The Retirement Division

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The Retirement

Division

Since 2008, the Cour has not felt justified in certifying the accounts of the retirement Division and the CNAVTS. Its judgment was based on the combination of its limited work and uncertainties relating primarily to the discover of errors affecting the calcula-tion of retirement pensions, the man-agement of employment data, and risks observed in the payment and accounting circuit for legal benefits.

In 2009, progress made by the divi-sion was insufficient to alter the Cour’s opinion.

In 2010, the Cour received further assurances in several important areas:

The division had implemented computer/accounting agency protocols improving the internal control mechanism;

Despite the absence of an auxil-iary accounting system, the correct post-ing of legal benefits was corroborated;

Tests conduced by the CNAVTS to evaluate the financial impact of pen-sion calculation errors, which affected nearly 10,000 dossiers and involved all metropolitan organisations, show a reduction of financial impact in 2010.

the division continued the imple-mentation of a securitisation effort for employment data transmitted by social organisations, in light of eventually ensuring coverage for the situations

requiring an equivalent period to be taken into account.

For the years to come, the Division has committed to completing important projects, such as the redesign of the risk coverage matrix, as well as the renova-tion of the accounting informarenova-tion sys-tem and the payment chain.

While acknowledging the progress made so far, the Cour must still note certain remaining defects that pose a risk of account anomalies. These obser-vations are the basis for seven reserva-tions on the Division accounts (two for the national fund):

The account audit is still limited by the absence of an automatic interface from the benefit management tool to the accounting application;

Despite the reduction of their financial impact, errors in pension cal-culations still affect a high proportion of dossiers:

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Employment data transmitted to CARSAT offices, required for pension calculations, are still affected by uncer-tainties. The absence of a unique refer-ential for employers does not allow the assurance of a complete and exact car-ryover to the individual contributor’s account of salaries declared by different employers;

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Uncertainties as to amounts paid and posted, resulting from the conse-quences of the absence of revision or of

Certification with Reservations

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incorrect revision of rights and benefits have not all been cleared up;

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For most of financial year 2010 the payment chain did not have automatic and restrictive controls, due to the late implementation of these mechanisms;

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Uncertanties affect the complete-ness and exactcomplete-ness of the products of

Assurance Vieillesse des Parents au Foyer paid by the CNAF;

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The refusal of the auditors of the agricultural insurance collective to certi-fy the combined accounts of this system do not allow the Cour an appropriate assurance as to the amounts for which the division will be responsible.

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ACOSS

: agence centrale des organismes de sécurité sociale / Central

Agency for Social Security Organisations

AOT

: autorité organisatrice de transport / Transport Organisation

Authority

AT-MP

: accidents du travail, maladies professionnelles / Work-Related

Accidents and Diseases

AVPF

: assurance vieillesse des parents au foyer / Old Age Insurance

for Fulltime Parents

CADES

: caisse d’amortissement de la dette sociale / Fund for

Reduction of Social Debt

CAF

: caisse d’allocations familiales/ Fund for Family Allocations

CARSAT

: caisse d’assurance retraite et de santé au travail / Fund for

Retirement and Work-Related Health Insurance

CGSS

: caisse générale de sécurité sociale / General Social Security

Fund

CNAF

: caisse nationale d’allocations familiales / National Fund for

Family Allocations

CNAMTS

: caisse nationale d’assurance maladie des travailleurs

salariés / National Fund for Health Insurance of Salaried Workers

CNAVTS

: caisse nationale d’assurance vieillesse des travailleurs

salariés / National Fund for Old Age Insurance of Salaried Workers

CPAM

: caisse primaire d’assurance maladie / Primary Fund for

Health Insurance

CSG:

contribution sociale généralisée / General Social Contribution

FSV

: fonds de solidarité vieillesse / Solidarity Old Age Fund

ISU

: interlocuteur social unique / Single Social Interlocutor

RNB

: répertoire national des bénéficiaires / National Register of

Beneficiaries

RSA

: revenu de solidarité active / Earned income supplement

RSI

: régime social des indépendants / Self-Employed Workers’ Social

Security System

URSSAF

: union de recouvrement sécurité sociale et allocations

familiales/ Union for Social Security and Family Allocation Collections

Glossary

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