In accordance with the legislative framework, AFT submits an annual audit report to Parliament on financial risk management and the prudential procedures implemented for activities concerning management of the State's negotiable debt and cash holdings.
In recent years, AFT has relied on the expertise of a specialised external audit firm to conduct the audit. The audit assesses the appropriateness of AFT’s procedures with regard to its activities and the associated risks by considering five angles with reference to current regulatory provisions applying to financial institutions:
- Organisation of internal control;
- Accounting organisation;
- Risk and result measurement systems;
- Risk supervision and management system;
- Documentation and reporting system and IT risk management.
The assessment gives ratings ranging from one to four:
- one: the existing mechanism satisfactorily covers identified risks generated by AFT’s transactions;
- two: the existing mechanism needs to be extended to cover identified risks;
- three: the existing mechanism has substantial shortcomings requiring immediate corrective action to cover the identified risks;
- four: the existing mechanism does not cover the identified risks generated by AFT’s transactions.
This external assessment is one component of the first performance indicator presented to Parliament during the budget preparation process. It considers the quality of AFT’s control system.
It is supplemented by data on the number of incidents or violations of the general framework for AFT’s activities. This data allows for qualitative and quantitative tracking of various incidents, which are broken down into the following categories:
➜ Violations of accreditation and delegation rules
➜ Violations of risk exposure limits
➜ Violations of transaction procedures
It is an internal quality measurement of AFT’s organisation and compliance with requirements.
Source: External audit firm; Agence France Trésor
AFT submits a performance indicator to Parliament that measures the number of execution incidents occurring in AFT’s debt transactions to ensure rapid detection of problems or incidents that could disrupt the proper execution of debt and cash management transactions.
This indicator relies on the day-to-day record of these transaction execution incidents, divided into three categories, depending on whether or not they have an impact on the Treasury Account.
Source: Agence France Trésor
These operating incidents may have affected the smooth execution of transactions, but none of the recorded incidents led to any threat to the State’s financial continuity.
Incidents that affect the Treasury Account are rare and short-lived: as a general rule they consist of a one-day delay in a receipt or disbursement on the account.
“Other incidents” that have no impact on the Treasury Account balance are the most frequent. These are mainly one-off minor technical incidents occurring in the internal or external information systems and the internal and external communications networks used to manage operations. They sometimes lead to delays in processing flows of funds or market transactions. They can generally be corrected on the same day, without impacting due fulfilment of the transactions.
The incident record, which relies on the comprehensiveness of controls and the granularity of the risk indicators used, is part of a continuous improvement approach with regard to the operational quality of internal and external operations.