CADES has been assigned the task of amortizing France's social security debt by means of a financially balanced debt amortization fund that relies notably on fiscal resources. It is an institution which combines the guarantees provided by government-backed issuers (e.g. it cannot fail) with the organisation and transparency associated with traditional financial institutions.
CADES (Caisse d'Amortissement de la Dette Sociale or Social Security Debt Repayment fund) was established by the government order n° 96-50 dated January, 24th 1996.This legislation was recently amended by Act n° 2004-810 of August 13, 2004, as part of the ongoing reform of France's social insurance system. CADES's existence is therefore inseparable from efforts to balance the accounts of the French social security system.
CADES's mission is to finance and extinguish the debt accumulated by the basic national social security scheme from 1994 to 2006. The total debt include a deficit of 34.2 billion euros for 1994 to 1998, an estimated €35 billion for the years from 2002 to 2004, and €15 billion for 2005 and 2006 .
Moreover, every year until 2005, CADES will be under the obligation to make a 3 billion euros payment to the state budget by way of compensation for the 16.77 billion euros social security liability taken on by the state in 1993.
The Budget bills for the Social Benefits System per fiscal year 2003 and 2004 provide for an exeptional payment of Euro 1.28 billion in 2003 and Euro 1.1 billion in 2004 to various social security funds.
CADES' debt financing relies on its borrowing power on financial markets and on the use of a great variety of financial instruments.
The repayment of these issues is mainly guaranteed by the proceeds of a mandatory levy on citizens' income. This levy is known as the "Contribution to the Repayment of Social Security Debt ("CRDS") . In addition to this main resource, CADES collects the proceeds from the sale of part of the social security system's property portfolio.
|
|
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
|
CRDS* |
3,2 |
3,8 |
4,1 |
4,3 |
4,5 |
4,6 |
4,65 |
4,7 |
4,9 |
5,2 |
* in billion euros
CADES' organizational structure is featured by a strict separation between the Front Office and the Back Office . It complies with the profession's accepted standards and practices.
Its internal auditing is carried out in line with the recommendations of the Banking Regulatory Committee.
CADES issues daily reports on its transactions, positions and compliance with exposure limits. It also produces a monthly report for members of the Board of Directors.
CADES' accounts are kept in accordance with the accounting principles used by French banks and finance companies. Nevertheless, CADES also complies with the rules in enforced in public sector agencies and corporations because its accounts are kept by a government accountant.
CADES' accounts are realized by an international accounting expert office which issues, each year, an opinion letter about these accounts. Those ones are certified by an accounting representant of the state revenue department.
In other words, CADES' accounts are published in two forms: first, in accordance with the standard accounting plan used by finance houses; second in the various forms specific to public sector accounting (M9-1 form).
The government order dated may, 22nd 1998 gives all the financial auditing control forms which are taken in charge by the state department. The CADES' Board of Directors must determinate all principles, rules, limitations and authorizations which are relative to the internal auditing procedures and applicable to financial institutions. It checks the respect of these dispositions, notably about these which concern market operation riskes analysis.
Furthermore, this government order entrusts an independent auditor organism with the task of doing the external auditing. This firm must valide the accounting procedures and accounts and provide a quarter activity report to the Board of Directors.
As an administrative public agency, CADES is a separate entity from the French state. It operates under the dual authority of the Minister of Economy, Finance and Industry and the Minister of Employment and Social Security, which appoint CADES senior managers and closely monitor their its operations.
The Chairman is appointed after being jointly proposed by the Minister of Economy, Finance and Industry and the Minister of Employment and Social Solidarity.
The Board of Directors is solely composed of state representatives, as follows:
The Board of Directors is assisted by a Supervisory Board made up of members of Parliament, chairmen of National Social Security Funds and representatives of the state.
The accounting rules applicable to CADES are similar to those that apply to the government sector in France. Thus, receipts and disbursements are handled by a government accountant (jointly appointed by the authorities in charge of CADES), under the supervision of the Cour des Comptes (French State Audit Office).
In addition, CADES is monitored by an expenditure commitment auditor from the Ministry of the Economy, Finance and Industry.
Moreover, all the important events in the CADES' life (budget, financial accounts etc.) are enforceable only after having been approved by the ministries in charge of the CADES' supervision. Similarly, all securities issues must have the prior approval of the Minister of the Economy, Finance and Industry.
CADES can, thanks to a convertion, give out its administrative and its management to the goverment.
Once a year, the government draws up a report on CADES' activities. This report is submitted to parliament.