In France, the organic law concerning with the finance laws of the 2001 (shortened in LOLF ) is the Loi which determines the legal framework of the finance laws.

A new financial constitution

The Finance laws, which regulate the Budget of the State, were previously subjected to the ordinance n°59-2 of the January 2nd 1959 bearing organic law concerning with the finance laws.

During its 45 years of existence, this ordinance knew more than thirty abortive reform proposals. Two only went in their term, but they related to only minor points.

The history of what it is habit to call the “financial constitution” of the France is thus that of a text surprisingly perennial, from the hat of the executive without passing in front of the national representation and exempted examination in front of the Constitutional council normally planned for the organic texts.

The dispute of a fragmentation of the budget in addition to 800 chapters of expenditure, considered to be antiquated, will to introduce a culture of the performance and responsibility into the public administration, as well as the wish to increase the capacities of the Parlement during the budgetary procedure will have finally been right of the ordinance of 1959 which was definitively repealed by the new organic law concerning with the finance laws. This text results from a parliamentary initiative: it is in the beginning a Private bill presented by Didier Migaud (appointed) and taken again with the Senate by Alain Lambert (senator and future deputy secretary with the Budget) and under the blessing of the president of the National Assembly Laurent Fabius, the meeting of personalities of the majority and of the opposition a broad political consensus allowed. Promulgated in 2001, it enters fully into force as from the finance bill for 2006.

The new budgetary paradigm promoted by the LOLF

The LOLF constitutes a direct answer to the insufficiencies of the ordinance of 1959. She intends to cure it while making revolve the budgetary procedure around two key poles: a logic of performance of the public administration on the one hand, and on the other hand a transparency of budgetary information suitable to institute a narrow control by the Parliament.

Logic of performance

On the first point, namely a budgetary culture directed towards the results rather than towards a logic of means, the LOLF tries to mitigate two major shelves of the ordinance of 1959. Thus, the managers from now on are held to return accounts on the effectiveness of the use of the appropriations which were allotted to them, thus breaking with the lacunar character of the control of performance of before the LOLF. This one founds Annual Projects of Performance (PAP), which present the actions of the various administrations for the year to come. The evaluation of the objectives is done the following year, in the Annual reports of Performance (RAP)

Then, it is put an end to an excessive fragmentation of the budget of the State which did not incite to leave a quantitative approach of the expenditure and responsabilisait the public managers little. Thus a budgetary nomenclature by destination of the expenditure is installation by article 7 of the LOLF (in addition to the only nomenclature by purpose of the expenditure which is maintained by article 5 as an indication). This innovation nomenclatrice makes “mission” a goal of public policy to reach, which one declines in “programs” themselves subdivided as an indication in “actions”. Within the programs, the manager has a great freedom to break down his appropriations: there is thus a principle of fungibility and globality in the programs which makes it possible for example to transform operating expenses into capital expenditures, directing of this fact the public administration towards the effectiveness of the allowance of the financial resources of the state and generalizing the practice of the payment appropriations and the renamed authorizations of program commitment appropriations.

The technique of fungibility is known as " asymétrique" , insofar as the appropriations of personnel are restrictive and cannot be abounded by other appropriations. It is on the other hand possible to use the appropriations of personnel to feed from other types of expenditure. The Ministry for Foreign Affairs made the bet extend the principle of asymmetrical fungibility to the operating expenses current.

The public administration should thus be radically modified by instruments such as the annual projects of performance aimed to article 51 of the LOLF or the annual reports of performance aimed for their part to article 54, because the public expenditure will have from now on to be evaluated with the ell of the objectives which it is intended to serve.

The LOLF falls under the logic of the old budgets of program, which however did not include/understand nomenclature of execution, and confined themselves with a presentation by program of the voted budget. the principal idea is to uncouple the functions from the State from with its structures, through the missions . The reception by the Médias was extremely favorable, the experts still wonder about his installation. This organization still poses problems of management, in particular of synthesis of data more complex than in the old device. The operational budgets presented at present by the various ministries too many, are departmentalized too much and should be centred at the regional level in order to have a critical mass in management. Other reforms of the State and its organization, statute of the Public office, public Accounts Department and a more important Déconcentration will be necessary to make it possible the LOLF to achieve its goals.

Transparency of information and control of the Parliament

As envisaged in the article 47 of the Constitution of 1958, the Parliament vote projects of Finance laws, the Parliament and the Government being always assisted by the Court of Auditors for the control of the execution of the Finance laws in this novel mode of operation.

The reinforcement of the budgetary transparency and the range of the parliamentary authorization is marked by the obligation made with the government by article 50 of the LOLF present to the Parlement, at the time of the deposit of the finance bill, a report/ratio on the economic, social and financial outlooks. This report/ratio must specify on which assumptions the government for the four years is based to come, thus increasing the degree of transparency and sincerity of the budget. In the same way, article 52 of the LOLF forces the government to submit to the Parliament a report/ratio recalling the level of the taxes and social security deduction for the two years to come. Lastly, article 48 of the LOLF institutionalizes the budgetary policy debate. The parliamentary questions as their answers from now on are framed by strict temporal constraints.

The Parliament is thus the first recipient of the reform of the ordinance of 1959, which results in particular from the parliamentary origin of the LOLF. It is not only better informed, but it takes an active share with the ventilation of the appropriations since article 40 of the LOLF authorizes it to amend the distribution of the appropriations between programs and that transfers, carryforwards and cancellations of appropriations by the government are henceforth limited to respectively 2,3 and 1,5% of the open appropriations.

Management of the credits, of which the incorporeal ones

The LOLF also envisages a recasting of the accounting of the credits in the budget, this in coherence with the new standards of National accounting (European harmonization), and the news Norme S accountants IAS/IFRS of the companies.

In the credits, one counts from now on the Intangible fixed assets, which correspond primarily to the software of the administration (like with other data-processing equipment).

The annual report 2006 of the Court of Auditors on the budget 2005, before the first year of implementation of the LOLF, fact state of a great difficulty of evaluation of the Active S of the State, particularly the Intangible fixed assets, which correspond primarily to the equipment Informatique S.

This report/ratio estimates that the cost of data-processing equipment is largely underestimated (170 M€ in 2004,168 M€ in 2005), which does of it one of the smallest stations of the assessment.

The report/ratio recommends “to integrate the Intangible fixed assets in the assessment of opening in order not to distort the image which would be given incorporeal inheritance of the State” (recommendation 33).

It recommends to refine the elements of follow-up of the costs of the computing projects (recommendation 34).

The information system

The interdepartmental information system AGREEMENT, (coordinated Application of accounting, scheduling and payment of the expenditure) which was born in 2001 on the basis of law of Ordinance of 1959 was to be replaced by a new system before the application of the LOLF. The corresponding invitation to tender (AGREEMENT 2) was not validated by the board of appeals of offer for problems of administrative formalism of the documents, and Bercy made the decision to adapt AGREEMENT has minimum with the LOLF. AGREEMENT now particularly is criticized and made responsible for the difficulties of the installation of the LOLF.

It will be replaced by the system CHORUS whose problematic return on investment was shown by the " Report/ratio on the budgetary procedures and accountants and the prospects for return on investment of the Chorus" project; of Henri Guillaume and Pierre Cuneo.

The project comprises 9 macro-processes. See: Reingeniery of the budgetary and countable processes of the State

The management of the credits is the subject of macro-process 9. It integrates the intangible assets.

Implementation: a first inventory of fixtures

It is however the implementation of this legislative device in practice which will make it possible to judge relevance of its objectives. Two reports/ratios of the members of Parliament Alain Lambert and Didier Migaud, “fathers” of the LOLF, heading “To make a success of the LOLF, key of a responsible and effective public administration”, give first a progress report on the state of preparation of the administrations and on the presented main issues. The authors consider that certain preconditions will have to be assured: reduction of the number of ministers and the importance of the ministerial cabinets, critical size of the operational budgets of program (BOP), reduction in the number and greater relevance of the indicators of result.

The main aim of the LOLF, apart from the opening of the possibility of a piloting of the expenditure, is to allow the compression of the national expenditure, in particular wage, with an aim of reducing the debt of the State (cf the Pebereau report/ratio). The personnel expenditure accounts for 44% of the budget, it is thus an important station being able to generate the most substantial economies.

The managers complain about a complexification about the procedures and installation of a new bureaucracy which results in particular in a significant lengthening of the terms of payment.

• "When the budgetary reform enlise in the bureaucratie" ('' the Barber '' of November 3rd, 2006)

• Operating expenses of the prefectures (report/ratio of the Senate)

The Levy-Jouyet ratio of December 2006 on the economy of immaterial the gives a report on a difficulty of evaluation of the Intangible assets .

LOLF S

The Finance law of the social security was promulgated on August 2nd, 2005. This text introduces a step “objectives - results”, in the prolongation of the LOLF on behalf of the Social security in France.

This reform will give also more visibility and of transparency to the finance laws by allowing a true debate on balance of each branch of the social security.

External bonds

• site social security

Reactions of managements and labor

In " Monde" of February 2nd, 2006: " The installation of the organic law concerning to finance laws (LOLF), which lays down objectives ministry by ministry, reinforces fears of the trade unions with regard to a reform of the State of which they feel distant, if it is not excluded. The creation of an head office of the modernization of the State, attached to Bercy, remains for them the most explicit sign of the strictly financial approach of the gouvernement."

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