The legislation governing AFT requires it to submit an annual audit report to Parliament on financial risk management and the prudential procedures implemented. 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 the regulatory provisions applying to financial institutions:
- transaction and internal procedures supervision system;
- accounting organisation and information processing;
- risk and result measurement systems;
- risk supervision and management systems;
- documentation and reporting systems.
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. This data allows for qualitative and quantitative tracking of various incidents, which are broken down into three categories:
➜ Violations of powers of signature
➜ Violations of risk 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
A second indicator that is submitted to Parliament measures the number of execution incidents occurring in AFT’s 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 execution incidents.
Source: Agence France Trésor
These operating incidents may have affected the smooth execution of transactions, but none of the incidents recorded in 2020 led to any threat to the State’s financial continuity.
“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 communications networks used to manage operations. They sometimes lead to delays in processing flows of funds or transactions. The increase seen in 2020 stems in part from the COVID-19 crisis and implementation of teleworking at AFT and in its ecosystem.
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 quality of internal and external operations. It is AFT’s responsibility to reduce the number of incidents, regardless of their source. This ensures accountability on the part of all of the operators concerned, and not just AFT personnel.