Financial report , 4,124,963 2,683,224 1,441,739 1,392,229. Management report

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1 PROPERTY, PLANT AND EQUIPMENT 18,388,750 8,844,559 9,544,190 9,421,559 INTANGIBLE ASSETS Other 299, , , ,744 Transport equipment 4,409,584 2,787,038 1,622,547 1,676,411, Financial report 2007 Management report 78 President s report 83 Consolidated financial statements 98 Financial statements 142, 4,124,963 2,683,224 1,441,739 1,392,229 Management report Organisation chart 78 Overview 79 Significants events 79 Group condensed financial information 81 Outlook 82 77

2 1. ORGANISATION CHART RATP Développement 95.41% RATP Tram Firenze 24.9% Mobicité 100% RATP International Xelis 100% 100% EM Services 90% Flexcité 51% Flexcité 94 51% Orlyval Service 99% TP2A 51% Equival 50% Financière Transdev 49.89% Transdev group 51.3% Alexa 37% LFI 32.46% LFI Services 100% TFT SPA 100% RFT SPA 100% Financière Systra 50% Systra group 71.73% Telecommunications Telcité 100% Naxos 100% Commercial Promo Métro 100% Real estate SEDP 100% SADM 100% Cars Giraux group 100% Gest Spa 51% TVO 35% STBC 15% Autolinee Toscana 100% SQY Bus 52.54% 37.11% Société financière Perrier group 100% Cars Perrier 79.87% 20.13% SCIPerrier 40% 60% Eurailco GmbH 50% Trans Regio 75.1% MDINA Bus 20% SLT 50% Bombela Operating Company 51% SELT 49% TRANSPORTATION ENGINEERING REAL ESTATE AND TELECOMMUNICATIONS 78 Annual report 2007

3 Changes in scope The following companies were newly-consolidated in financial year 2007: Cars Giraux group (operating in the conurbation of Mantes-la-Jolie and Cergy), acquired in February 2007; Autolinee (Italy), fully acquired in October 2007; Bombella Operating Company (BOC), South Africa, formed in financial year The companies that were newly consolidated in 2007 contributed 40.6 million to revenue and 2.3 million to consolidated net income, group share. In addition, following RATP Développement s capital increase, which was not subscribed by Transdev, RATP s stake in RATP Développement increased from 75% to 95.41%. 2. OVERVIEW Consolidated revenue was up by more than 5% to 3,908 million. The contribution of RATP and its subsidiaries increased and the company posted net income, group share of 112 million. Although the last quarter was affected by strike action over the reform of the retirement scheme, as a whole RATP performed well in Gross passenger income increased 1.6% from the previous year, up 3.1% in the first three quarters, before the negative effect of the strike action in the last quarter. The strikes decreased RATP s net income by 30 million, due to the STIF contract terms and the compensation paid to transport users. Despite these circumstances, in 2007 RATP posted high net income of 84 million and net cash from operations was up 12% to 625 million. Traffic measured by number of trips was up 0.3% to 2,873 million, but the strikes decreased overall growth by 3 points. The increase in traffic was also generated by STIF s decisions regarding its service offering, which resulted in a 2% rise in traffic income (additional payments from STIF for new services) and expenses. The other transport entities also posted considerably higher revenue. RATP Développement and Transdev continued to expand and raised capital of 80 million and 253 million respectively at the end of RATP Développement extended its operations in France by purchasing Cars Giraux, a group of companies that operates bus lines in Cergy- Pontoise and Mantes-la-Jolie. Also in France, record levels of traffic were recorded on the Orlyval Service and Open Tour. Outside France, it was the first full year of operations for BOC, the Gautrain project operator in Africa, and RATP Développement further increased its presence in Italy by acquiring Autolinee Toscana, the company operating the majority of the interurban services around Florence. It was a difficult period in Morocco and Germany, with further discussions on the economic environment in Casablanca and more termination costs following the loss of contracts in the Rhineland-Palatinate region. The Transdev group entered into a new development phase with the acquisition during the last quarter of the Dutch group Connexxion in partnership with a local public bank. The Engineering division performed well again: Xelis, which took over management of RATP s contractual plan is ahead of its business plan. The Systra group maintained high growth levels, boosting net income. The Real Estate and Telecommunications division expanded considerably, driven once again by the telecommunications subsidiaries. 3. SIGNIFICANT EVENTS 3.1 Transportation division RATP Net income for the year ended December 31, 2007 amounted to 84 million, up from 41 million for the previous year. While dampened by end-of-year strikes, the one-off decrease in business tax for 2007 introduced by new legal provisions had a positive effect on the year s results. They comprised the following items: (in millions of euros) 12/31/ / CHANGE CHANGE (A) (B) (B) (A) (%) Revenue 3,555 3, Net operating expenses 3,041 3, Gross operating surplus Expenses Net income Cash earnings

4 Effect of the strikes The total impact of the strikes on RATP s gross income was 30 million, while there was practically no impact on STIF. Pursuant to its contract, RATP paid an aggregate 20 million in compensation to travel card holders. This amount was partially offset by savings on running costs. It also paid contractual penalties for not fulfilling its public service obligations. Revenue The revenue recorded by RATP in 2007 was up 4.1% to 3,700 million from 3,555 million in Income from RATP traffic (payment by the STIF for transport services, based on the number of tickets sold times the contractual rate) amounted to 3,260 million (up 4.7%) boosted revenue. It was driven by: Volume of sales Despite the strikes, RATP s gross income was well above expectations. The risk sharing mechanism provided for in the contract boosted remuneration by 19 million compared with Price effect The price escalation clause is based on the cost-weighted allocation of the main production factors. Changes in the costs measured on the basis of Insee indices resulted in a 2.3% increase in the amount invoiced to STIF by RATP. Increased service offering A specific amount is paid by STIF in addition to the basic contract payment. The 2007 decisions and their full year effect from 2006 represented 59 million (up 1.9%). Other income was down 23 million as a result of the strikes, mainly due to the compensation of approximately 20 million paid to travel card holders. Net operating expenses Net operating expenses were up 3.1% to 3,136 million compared with 3,041 million in The most significant changes were due to: inflation (up 1.5%): 46 million increase; STIF s decisions concerning its service offering: 59 million increase; a number of positive external factors: a 32 million decrease in taxes and duties due to the new cap on business tax. Gross operating surplus increased by 50 million, representing 15.2% of revenue from sales compared with 14.5% in Cash earnings ( 625 million) were up significantly from However, they did not fully offset the increase in debt. Capital expenditure amounted to 933 million, including expenditure of 115 million outside the STIF contract. It was up 65 million from Net debt amounted to 4,294 million at the end of 2007, up 93 million from the previous year. The resources recognized only covered 86% of capital expenditure. Other transportation subsidiaries For the transportation subsidiaries, the significant events of financial year 2007 were: In France: Flexcité won the contract to provide transport services for disabled people in the Seine-Saint-Denis area. Flexcité now operates in Val-de-Marne, Yvelines and Seine-Saint-Denis; the majority-owned subsidiary TP2A renewed the operating contract for the Annemasse network; strong performance by the SLT s Open Tour and Orlyval link operated by Orlyval Service on behalf of RATP; Mobicité won the contracts for Aubergenville and Rosny-sous-Bois. Outside France: contract won to operate the Algers metro; Transfegio, the German subsidiary jointly owned with Transdev, lost the bid to renew the contract to operate two of its current lines. The loss of this contract led to the recognition of a substantial provision in 2007 for operating and termination costs in 2008; M Dina Bus is still loss-making. Discussions are underway with the Moroccan Interior Minister on future operating arrangements; Bouygues, Alstom and RATP Développement jointly negotiated the contract to develop, design, build and operate a train network between the main towns on the island of Trinidad. Within the Transdev group, the acquisition of half of the Dutch group Connexion enabled Transdev to double its revenue to 2 billion, with the Netherlands as its primary business area. 3.2 Engineering division Within the Engineering division, revenue generated by the Systra group increased considerably, with a strong market presence in the Middle East (Dubaï, Saudi Arabia) and major infrastructure projects (Algeria). Growth was profitable. 3.3 Real Estate and Telecommunications division In the Real Estate and Telecommunications division, the telecommunications subsidiaries reported further improvement in performance. 80 Annual report 2007

5 4. GROUP CONDENSED FINANCIAL INFORMATION Preliminary remark: the consolidated financial statements as at December 31, 2007 are the first to be prepared under International Financial Reporting Standards (IFRS). Figures for financial year 2006 have also been presented under IFRS for comparative purposes, as pro forma data. 4.1 Changes in consolidated revenue (in millions of euros) CONSOLIDATED REVENUE AS CONSOLIDATED REVENUE AS CHANGE IN REVENUE AT DECEMBER 31, 2006 AT DECEMBER 31, 2007 COMPARED WITH 2006 VOLUME % VOLUME % RATP 3, % 3, % 4.0% Other % % 79.8% Transportation 3, % 3, % 5.1% Engineering % % 10.8% Real Estate and Telecommunications % % 4.8% TOTAL RATP GROUP 3,711 3, % SUBSIDIARY CONTRIBUTION % % Group revenue increased by 5.3%. The subsidiaries, which contributed 247 million, excluding equity-accounted affiliates, performed better than RATP itself (up 28.5%), due to: the first-time consolidation of Cars Giraux, BOC and Autolinee. On a like-to-like basis the contribution of subsidiaries only increased 7.8%; growth from the engineering companies (up 10.8%), particularly Systra; growth from the telecommunications subsidiaries (up 16.1%). The share of the subsidiaries in consolidated revenue increased from 5.2% to 6.3%. 4.2 Changes in consolidated net income (in millions of euros) DECEMBER 31, 2006 DECEMBER 31, 2007 CHANGE % CHANGE RATP % Other transportation subsidiaries % Transportation % Engineering % Real Estate and Telecommunications % TOTAL % RATP s contribution to consolidated net income increased considerably compared with 2006, due to the items mentioned in paragraph 3.1. The contribution of the subsidiaries increased from 11 million to 13 million. The difference reflects the uneven performance reported by: RATP Développement and its subsidiaries, 1.6 million due to: the dilution of Transdev ( 1.5 million) and the financial expense incurred in anticipation of the capital increase, major commercial expenditure by RATP Développement, an increase in the losses reported on Trans Regio in connection with the termination loss recorded following the loss of the bid on two of its lines, companies newly consolidated in 2007 (up 2.3 million); increase in the contribution of Transdev (up 1.5 million); increase in the net income of the Systra group (up 1.2 million), due to a number of exceptional factors, in addition to the good margins generated on the new contracts; considerable increase in the net income of the telecommunications subsidiaries (up 1.4 million). 81

6 4.3 Group net debt as at December 31, 2007 (in millions of euros) GROUP RATP OTHER TRANSPORTATION ENGINEERING REAL ESTATE/ DEBT DIVISION DIVISION TELECOMS Financial assets , ,246 20,688 34,080 Loans and borrowings (1) 4,614 4,579 28,052 4,607,315 6,380 2 NET DEBT 4,236 4,282 2,666 4,284,069 14,308 34,078 including leaseback IFRS restatement 39 RATP DEBT 4,294 (1) Not including accrued interest and deposits and guarantees. Consolidated net debt was up 74 million from December 31, 2006 mainly due to RATP s contribution. The subsidiaries contributed slightly ( 2 million) to lowering debt levels. 5. OUTLOOK For RATP, financial year 2008 will be the first year of implementation of the new STIF contract signed at the beginning of For the other entities of the Transportation division, 2008 will be a year of consolidation, integrating the recent acquisitions by RATP Développement (Cars Giraux, extended operations in Algeria and Trinidad) and Transdev (Connexxion in particular). In the Engineering division, Xelis should continue to expand, while Systra group s growth will probably be slower with profits more in line with industry levels, as no extraordinary events are expected during the period. The subsidiaries of the Real Estate and Telecommunications division should maintain the same levels of performance as reported previously, particularly as the telecommunications companies have found new growth engines. 82 Annual report 2007

7 President s report on the preparation and organisation of the Board of Directors work and internal control for the year ended December 31, 2007 Introduction 84 The Board of Directors 84 The organisation of internal control 85 Control activities 89 Appendices 91 83

8 Introduction The purpose of this document is to report on the preparation and organisation of the Board of Directors work and on the internal control procedures implemented by RATP, in accordance with the provisions of article L of the French Commercial Code. The structure of this report is based on the reference framework on internal control published in January 2007 by the French securities regulator, Autorité des Marchés Financiers (AMF). The AMF set up the Market Advisory Group specifically to develop the reference framework on internal control, which is to be used by French companies governed by the requirements of the Financial Security Act. According to the reference framework, internal control is a system used by the Company to ensure: compliance with current laws and regulations; the implementation of the instructions and guidelines set by Senior Management or the Management Board; the smooth running of the Company s internal processes, particularly those used to safeguard assets; the reliability of financial information. The reference framework on the internal control system is based on five components: internal control environment; risk assessment; financial reporting and disclosures; control activities; management activities. As stated in the reference framework, internal control cannot provide absolute assurance that the Company s objectives will be met. The first part of this report relates to the Board of Directors: the governance body, which guarantees the quality of the internal control system. It describes the way the system works and the most significant work conducted during 2007, followed by the strategic approaches adopted during the year. The second part of the report describes the organisation of the internal control system. The third part describes the control and management activities and the role they play in ensuring the reliability of accounting and financial information. This report is for the attention of the Audit Committee and Board of Directors. 1. THE BOARD OF DIRECTORS 1.1 The work of the Board The RATP Board of Directors comprises 27 members, pursuant to the decree of April 13, 1984, amended by the decrees of June 7, 2004 and of August 11, 2006 (Appendix 1). The Board is chaired by Mr Pierre Mongin, who was appointed Chairman and Chief Executive Officer (CEO) by the decree dated July 12, The Board is responsible for all the Company s major strategic decisions in economic, financial and technological terms, particularly with regard to Company s State-Region Contractual Operating Plan (Contractual Plan), the Business Plan and the RATP/STIF contract. The work of the Board is planned and managed by two standing committees, one of which deals with matters concerning technical and technological modernization and development, and the second economic and strategic issues. The Committee on Economic and Strategic Issues also monitors the implementation of the contract between RATP and STIF, and the Business Plan. The role of the Audit Committee, comprising six Board members, is to advise the Board on a range of issues including the reliability of the information systems used to prepare the financial statements, financial management, accounting and management principles, risk management and financial reporting. The Board s President sets the agenda of strategic issues to be discussed for the purposes of policymaking. He may decide to set up ad hoc working groups on specific issues. 1.2 Significant work conducted by the Board in 2007 The Board approved the financial statements for the year ended December 31, 2006, as well as the individual Company and consolidated financial statements for the six-month period ended June 30, It also approved the Company s budget for 2008 at its meeting in November Following the strike action in November, the Board voted on the President s proposal to pay compensation to transport users. The capital expenditure budget was higher than for previous years, due to the expenditure required for development in connection with the Contractual plan, the purchase of the associated new rolling stock and an overall increase in the internal program. The preliminary conclusions of the Board s working group on the Company s indebtedness were presented at its meeting on June 1, They showed that RATP s indebtedness is not related to operating losses or working capital requirements, but to capital expenditures. Various recovery plans were presented to the Board. The President gave the Directors detailed information on the status of the negotiations on RATP s retirement scheme. In 2007, the Board worked at length on development policy. It decided to enhance the governance rules of the subsidiary RATP Développement and amended the subsidiary s internal procedures to do so. The subsidiary is now required to present its Medium-Term Business Plan and budget to RATP s Board for opinion, every year. RATP s Board also gives an opinion on RATP Développement s investments for amounts above certain thresholds. It has also requested that two independent Directors be appointed on the Board of RATP Développement. An extraordinary Board meeting was convened in March 2007 to provide an opinion on the terms of the bid to operate and maintain the Algers metro, which was subsequently won by RATP Développement. The Board also gave RATP s guarantee to its subsidiaries on two development projects in Germany. 84 Annual report 2007

9 At the same time, the Board s benchmarking group continued its work on comparing RATP s efficiency and effectiveness in relation to other transport operators, particularly for surface transport networks, the Paris metro and the Paris surburban metro/trains (RER). The Board also approved major contracts for the provision and renovation of tramway rolling stock. It approved purchase orders for tyre and bus equipment, infrastructure required to develop operations under the Contractual Plan and operating supplies. It examined the annual report on purchasing policy. During its work, the Audit Committee validated the way in which the annual and half-yearly financial statements had been prepared, and assessed the risks relating to the subsidiaries, to ensure the financial security of the Company. It also approved the work performed by the Company to adapt its accounting system to International Financial Reporting Standards (IFRS) and examined the 2007 report of the Internal Audit function and its annual plan for The list of the main issues addressed by the Board is provided in Appendix Follow-up on the Chairman and CEO s guidelines in 2007 The President decided to set up an ad hoc committee reporting to the Board to monitor the implementation of the 17 commitments laid down in the document presented to the Board at its meeting on October 6, 2006, entitled Building Tomorrow s RATP Together. At its meeting in September 2007, the ad hoc committee conducted a full review on the implementation of these commitments. 1.4 Negotiation of the STIF contract for and preparation of the Business Plan for The Chairman and CEO regularly informed the Board of progress in the negotiations on the contract between RATP and STIF, which were not concluded within the given deadline of December 31, 2007, despite the Company s efforts. The terms of the contract were approved by the Board on February 8, 2008 and the contract for was signed on February 21, The President worked closely with the Board on several occasions to develop the Business Plan for , entitled Ambition 2012: We ll show you how to enjoy getting around town. He gathered input from the Board on the strategy set out in the document during an extraordinary meeting exclusively on the subject. The Board validated the plan as a whole, which specifies the Company s values and performance goals for in five areas: Innovation and Customer Service, Development Strategy, Economic and Financial Performance, Cross-country Integration, and Human Resources Development, and gave comments and recommendations, which have been taken into account. 2. THE ORGANISATION OF INTERNAL CONTROL Due to the complex institutional environment in which it operates, and its status as a public transport company, RATP has a customized internal control system. The system is designed to comply with laws and regulations, create an effective control environment, implement methods to assess and manage the risks inherent in its activities and promote internal communication, to enable all those involved to perform their work efficiently. 2.1 Complex institutional environment RATP adheres to ethical values, through its commitment to charters such as the Charter of the International Association of Public Transport (UITP 1999), the United Nations World Pact (2003), the National Accessibility Charter (2003), and the framework agreement with the Agency for the Environment and Energy (ADEME 2004). Given its field of business and legal status (EPIC), internal controls have always been an integral part of RATP s operations. As a state-owned company, RATP is subject to French government controls, which are conducted by: the Economic and Financial Control Board for Transport (1) ; the French Procurement Board, set up by the order of January 11, 1973 (2) and chaired by a representative of the National Audit Office. In addition, its financial statements are audited by the Statutory Auditors, Pricewaterhouse Coopers and KPMG. RATP entered into a contract with Syndicat des Transports d Île-de- France (STIF) in It has been regularly updated since by riders and new contracts (see 1.4 above). RATP implements the contract at business unit level, by setting contractual objectives and using indicators to measure performance and ensure that contractual obligations are met. Improving quality is a constant concern for the Company. Quality control systems are in place and the Company has received quality certification under French and International Standards (ISO, NF and Qualicert). The certifications, which are issued by independent bodies, concern both management systems and performance in terms of environmental issues and quality of service. At the end of 2007, 82% of RATP employees were working in certified activities. Quality audits are conducted regularly and promote cross-company exchanges. The employees involved in internal control procedures (senior management, operational managers and specialized audit and control staff) base their work on professional audit and internal control standards and on the definition of internal control issued by the professional bodies such as the French Audit and Internal Control Institute (IFACI) for the Internal Audit. The Board also monitored implementation of the Contractual Plan and Business Plan during Details of the work performed by the Board and committees are provided in Appendix 3. (1) As an EPIC, RATP is subject to economic and financial control by the government (decree no of December 18, 2002). (2) Amended by the order of March 23, 2005 (Journal Officiel of April 13, 2005). 85

10 2.2 Compliance with laws and regulations The Company s Legal department provides advice and analysis, draws up contracts, and handles complaints for all the Company s business activities. One of its roles is to prepare for the future by monitoring legal developments (except on technical matters), disseminating information on best practice, assessing risks and setting up insurance coverage. Its permanent primary objective, particularly as it is positioned to provide support to all levels of the Company, is to ensure that the legal aspects of all the projects and operations undertaken by the Company are legally secure and compliant. In 2007, the Legal department participated in setting out the general regulations governing the Company and recasting the authorizations and signatures used within the whole Company in order to adapt them to recent developments and ensure they were reliable and wellmanaged. In addition, it focused on preparing for the consequences of the entry into force of the European regulation on public service transport obligations (3), relations with the public transport authority in the Île-de-France region and the implementation of labour law reforms and those regarding the funding of retirement schemes as provided for by European Union law. 2.3 Governance adapted to the Company s challenges At the Convention on May 29, 2007 entitled Building our Future, the Chairman and CEO announced the Company s growth and competitive objectives for the coming years. He set out two principles in terms of organisation and management to enable these objectives to be met: members of the Executive Board would be fully responsible for one or several departments, enabling them to report on operations on a daily basis, without decreasing their Company-wide responsibilities: the new structure of the Executive Board, effective from the end of August 2007, reflects the implementation of this principle; the sharing of tasks between the contractor and works manager would be clarified in order to enhance engineering work and the Company s efficiency when implementing major investment projects. The creation on January 1, 2008 of two new departments dedicated on the one hand to contracts for transport work and on the other hand to real estate assets was a clear reflection of working toward these objectives. 2.4 The control environment Organisation of internal control The internal control system is effective if all employees are involved at all levels of the Company. This is why the Company involves all of its employees in the internal control system, which is aimed at ensuring the personal safety of its employees and secure operations Business unit level At local level, internal control is performed directly by management, together with control and support groups: operational managers play a key role as they are responsible for ensuring that production processes are in compliance with current legislation and policies, and that transport users are provided with quality services; they are assisted in achieving their goals by support and control groups, which lend their expertise and measure performance. This is the case, for instance, for the management control, human resources, purchases and communication functions Department level Other employees are involved at department level: transport and service controls are decentralized and performed per type of control (transport or maintenance inspections); specialized audits are performed within each department; systems risk management; quality controls are performed within each department Company level The Inspectorate General/Internal Audit, the terms of reference of which are laid down in general regulation 432 C of September 2, The Internal Audit function was set up in 1986 to provide assurance on the level of control over operations by controlling and assessing the business activities of RATP group (4). The Inspectorate General was set up in 1999 to enhance RATP s management and internal control (5). The internal control work is part of an annual plan drafted on the basis of the proposals made by the Executive Board (6) and the main risks identified through the Company s risk mapping. The annual plan is submitted to the Audit Committee, then approved by the Executive Board. The auditor is formally appointed by the Chairman and CEO. The auditor sets out his findings and recommendations in a report drafted for the attention of the Chairman and CEO, which is copied to the other members of the Executive Committee and to the department and business unit Directors directly concerned. The reports issued by the Inspectorate General are strictly confidential and are submitted directly to the Chairman and CEO and to the person that requested the engagement. Within two months following each audit, the managers that have been audited prepare and submit an action plan to the Internal Audit, which ensures that the plan is relevant and appropriate given the recommendations made. The Internal Audit then sends the action plan with its opinion for validation by the managers of the departments concerned or to Senior Management, depending on the type of audit performed. From time to time, the Audit Committee may ask for audit engagements to be performed and have the final report presented by the Internal Audit. Since 2006, the Inspectorate General/Internal Audit has been evaluated by an external body (compliance with professional standards, practices used and overall effectiveness). In 2007 the evaluation gave rise to the preparation of an action plan, which will be initiated in (3) JOUE of December 3, (4) IG 432 C of September 2, 2003, art (5) NG 5265 of May 19, (6) Members of the Executive Committee, department managers and delegates. 86 Annual report 2007

11 General Safety Control, which was set up by the general memo 5294 of February 25, The main role of the General Safety Control is to monitor all the processes relating to Company safety, particularly in terms of railway safety, fire safety, information systems security, the safety of goods and persons and the prevention of natural disasters. The entity comprises two units: the Fire Safety unit and the Corporate Risk Management unit. The Fire Safety unit provides training and guidance on regulations and goals regarding stations and tunnels and on the implementation of fire safety systems. The priority of the Corporate Risk Management Unit is to enhance employee safety and the security of property and ensure compliance with all regulations concerning design, engineering, operations and maintenance. The audits are carried out on the basis of an annual program approved by Senior Management upon the advice of the Controller- General for Security. Systems risk management audits may be performed on a product, procedure, process or monitoring system. The audit procedures comply with the principles set out in French standard NF EN ISO of December A written report with recommendations is issued upon the completion of each audit assignment. The audited departments prepare an action plan based on the recommendations, which is validated, as appropriate, by the departments or Senior Management, upon the advice of the Controller-General for Security. The integrity of the Company was enhanced during 2007, by combining two delegations of Company-wide policy-makers (research and innovation, quality and sustainable development) and creating a Delegation for Innovation and Sustainable Development, which also includes specialists on forward planning and environmental issues (6). The purpose of this new structure is to work closely with the departments to prepare, implement, guide, accompany, and monitor the Company s policies in these fields. The delegation will work to promote quality, sustainable development and research and innovation within the Company by providing methodological and technical assistance to the different entities and implementation guidance. This structure should enhance the synergies generated by innovation and meeting the challenges of sustainable development, and increase the Company s capacity to plan ahead and provide meaning to its action and the action of its employees. The prime objectives of the new delegation are to enhance RATP s corporate responsibility, set up cross-company processes for innovation, make a contribution to the rocade metro project around Paris, streamline the existing management systems and improve service quality. The various sectors within RATP now all believe that sustainable development is part of their responsibility and they are gradually including sustainable development goals in their annual contract. Eleven departments, representing nearly 80% of the total workforce, have officially agreed, by signing an internal charter, to adopt a long-term approach to performance in terms of saving resources, transparency and rigorous practices The Audit network The role of the Inspectorate General/Internal Audit is also to advise the various departments and ensure that they comply with professional ethics and knowledge-sharing methods. This is done through the Audit network, which combines all RATP s Audit and Inspection departments. The Audit network convened four times in The diagram in Appendix 4 illustrates the internal control system. The table in Appendix 5 summarizes the role of the cross-company entities Evaluation and Review of Internal Control: project completed Launched at the end of 2005, the project entitled Evaluation and Review of Internal Control comprises five separate areas of work that are fundamental for internal control. In addition to risk mapping (2005), the system for delegating authority and authorized signatories and the complete set of internal control procedures applicable to RATP group (2006), two other reports were completed in 2007: the review of audit, inspection and control structures, which provides an overview of all the internal control structures currently in place along with the resources allocated to them and their importance within the Company; the inquiry on the training requirements of managers training needs and expectations in terms of governance, risk management and internal control Human resources management policy To deal with institutional change, technological developments and competition, the Company has adopted a human resources policy focused on developing its employees skills with the aim of providing high-quality transport services. To prepare to meet future needs (between now and 2014, 32% of operators, 46% of supervisors and 50% of executives will retire), a list has been drafted identifying the posts that will need to be filled and setting out action plans for the various sectors of the Company. This skills management tool will enhance career development and training within the entire Company. The recruitment process is certified by a quality control body (Qualicert). A satisfaction survey is conducted for each person recruited by the department welcoming the new employee and the quality of service rendered is reported once a year. Since 2006, all those participating in the selection and recruitment process have signed a commitment to comply with a strict internal code of ethics. The staff are trained to work in an open multicultural environment, as stipulated in the Charter on Company diversity, signed by RATP in To facilitate the integration of new managers, a Company-wide training process has been put in place. In addition to obtaining a global understanding of the Company, specific modules are used to develop management skills (people management, micro-economics, human resources management ). (7) General memo 5695 of January 1,

12 2.4.8 Information systems adapted to the Company s objectives The Company s information systems are managed and developed by Information Systems Steering Committees, dedicated to each business process, which validate expenditure. The objectives assigned to these systems and their subsequent development is determined by the project managers. The systems are managed based on a three-year forward-looking master plan. For protection, the information systems are hosted in two separate computer centres, which are equipped with the appropriate technical environment (access controls, fire safety, secure electrical power systems and air conditioning). They are protected on a logical level and are regularly audited. Professional staff training includes components on information systems security. The information systems architecture is based on storage area network infrastructure (SAN technology) which stores critical data on two separate sites. In addition to storage, data is backed up daily. The storage and backup activities are stipulated in the operating procedures. The unit which manages these systems is ISO 9001 certified. Continuity of operations is guaranteed by secure architecture on the two production sites (corporate messaging system, institutional web site) and by the implementation of business continuity plans. The continuity plan for the accounting system is tested annually and the plan for the human resources system will be deployed during The Information Management units manage all the documentation relating to data analysis, programming and processing using the document management procedures. These units are ISO 9001 certified and are audited annually to ensure they remain compliant. 2.5 Risk assessment and management The cartography of risks used by the Company since 2003 and updated at the end of 2005 enables the Company to assess and measure the risks inherent in its business activities. More specific risk management tools (railway business, information security) are also used by the departments concerned. The incidents that occurred during the year were addressed and resolved, and measures were taken to ensure that they do not happen again Business risk Members of the Executive Board, department Directors and delegates and internal auditors all provided input to establish the cartography of risks (8). This tool enables all the risks taken by the Company to be classified in terms of their importance and the extent to which they are controlled. The risk cartography is used to prepare the annual audit plan. In connection with the business plan for , a global framework for risk management will be set out and a risk management Director appointed, who will be responsible for implementing the plan in all the departments. In 2007, several audits were performed on policies and processes, concerning, for instance, commercial activities over the networks, the internal communication function, contract approval management and partnerships. Recommendations were made on ways to improve, which entail: putting in place tools to evaluate systems effectiveness; setting out formal standards to standardize practices; opening and extending certain activities to develop cross-company systems and systems integration within the Company. The audits of the business units were performed based on a set of standards aimed at measuring the units performance, by assessing their control of processes and achievement of goals, as well as the Company s strategic objectives. The audits of subsidiaries led to recommendations on improvements to be made in order to enhance business performance and administrative procedures and secure certain risky contractual clauses. Company-wide audits were also performed by the General Safety Control division in connection with the annual audit program for corporate risk management, approved by Senior Management. In 2007, these audits concerned: the reliability and consistency of databases on incidents, which are used to prepare indicators to manage rail transport security; equipment at risk and the associated continuity plans (conducted jointly with the Inspectorate General/Internal Audit); Decentralized PCC (lines 4, 13 and 14) Risk management relating to the railway business In order to develop a tool to manage the risk relating to the Paris metro and RER, a monthly risk alert report is prepared, using data collected from the Operating and Maintenance departments. The report, which provides recommendations on each of the indicators mentioned, is distributed to Senior Management and the departments concerned Information security risk management The Company has implemented a Company-wide information security policy and system since This system is managed at high level to ensure that all the departments take measures to cover the risks relating to information systems, in compliance with the principles and rules adopted. A specific policy for ticketing, which is a highly critical system, and a framework for classifying the Company s information resources were approved in Specific (organisational, technical, compliance) and Internal Audits are performed to ensure that the policies and framework are correctly applied, along with audits, feedback, exercises, simulations or incident monitoring. A person responsible for data protection was appointed on January 31, (8) Executive Committee members, department Directors and delegate generals, internal auditors. 88 Annual report 2007

13 2.5.4 Risks related to strike action The reform of RATP s special retirement scheme was a major risk for Providing information and discussing the related issues helped limit conflict, although it was not completely avoided. Discussions between all those concerned were possible due to the culture of dialogue generally accepted in the Company. The conflict alert system regularly used by all the unions also enabled social unrest in the Company to be kept in check Targeted response to incidents Feedback on incidents and potentially dangerous situations is reported (e.g. REX files used by the RER) or provided through inspections, when necessary. Decisions are then taken on the corrective measures, training, and organisational or technical improvements required. The human factor, which is often present in risk scenarios, is systematically taken into account in studies and feedback. Some of the major events that occurred in 2007, with consequences well beyond the Company, and high media coverage, were as follows. On July 29, 2007, a short circuit in the motor coach of a train on line 13 caused an explosion and smoke fumes at Varenne station. Passengers evacuated the station spontaneously, and three other stations were also evacuated. Inspections were carried out on several components of rolling stock. It is assumed that the incident was caused by a foreign body, which triggered an electric arc, leading to the short circuit. Following the technical incident, the decision was taken to implement the following measures, from the first quarter of 2008: procedure applicable when closure for work on rectifier station; feedback on how the fire-smoke alarm was triggered, to be used in training; improved formal procedures for those managing the incidents. A report on the incident was presented to BIRMTG (9) on August 8, During the summer of 2007, several accidents occurred, particularly on the bus network, which highlighted anomalies in the organisation and circulation of information, making it difficult to deal with the reaction by the media and also the overly legal-based approach to the victims. The CEO mandated the Inspector General to assess the information available and the share of responsibilities in the internal circulation of information, as well as propose changes in the organisation of media coverage and relations with victims. At the end of 2007, this led the CEO to entrust the RATP mediator with an additional assignment on the follow-up and assistance provided to victims of accidents. The Bus department also requested an audit of the treatment of these accidents and recommended a number of measures, such as improving the services provided by the Bus skeleton staff, more formal arrangements for dealing with incidents, an improved circulation of information internally, a more complete follow up of the driver-operators and better follow up and feedback of the accident. 2.6 Communication and dissemination of information To enable all employees to fulfil their role, the Company has gradually set up systems to ensure that the information they require circulates well: the internal communications system comprises: the Argos website, which is open to RATP employees, and can be accessed from home. This intranet comprises a corporate part and pages per department, supporting neighbourhood communications. There is also a Video Mag, a discussion forum on the corporate intranet, and a magazine published every fifteen days, which is delivered to the homes of 45,000 employees. The magazine is prepared by an editorial board representing all the Company s departments. Management also has an additional tool at their disposal, the Step-Ahead Management application (LAM). It provides news, presentations and comments on new laws and their effects on the Company s operations (service continuity, European regulations). The Communication department holds conventions and seminars and provides expertise for the conventions held by departments; all the publications are widely distributed internally: annual report and report on sustainable development, key indicators, development reports; RATP adopted an inclusive consultative approach for the preparation of its Business Plan for During 2007, a series of discussions were held with employees to establish the Plan, which sets out guidelines on the Company s activities for the next five years. In the first half of the year, five strategic goals were identified on the basis of 23,000 contributions, including 9,000 proposals by more than 6,000 participants. These goals were recognized as priorities by 88% of employees. In the second half of the year, 1,300 proposals were made by 5,000 participants. This has resulted in a great number of employees being fully committed to working on the 22 Company-wide projects currently under way. 3. CONTROL ACTIVITIES 3.1 The internal control procedures for accounting and financial information Accounting principles applicable to RATP Due to its legal status as a public sector trading company (EPIC), RATP applies the same accounting principles as those generally accepted by and legally binding for commercial companies. It also has to meet the requirements specific to public service missions. Consequently, it applies the accounting policies set out in CRC regulation no of April 29, RATP s chart of accounts is tailored to its social security obligations, as instituted by Decree no of February 23, The chart was approved by France s National Accounting Council (CNC) on January 25, 1984, in accordance with the order of April 27, (9) Interdepartmental committee for mechanical lifts and automated transport systems. 89

14 RATP is required to appoint an independent auditor in accordance with the provisions of article 30 of the law no of March 1, 1984, relating to the audit of financial information in public sector trading companies (EPIC) and the provisions of article 33 of decree no of March 1, 1985 (10). The recent regulatory changes and improvements made in order to comply with those changes are presented below. A description of the procedures adopted for the production and control of financial information prepared by RATP is presented in Appendix Financial information The timetable has been set for monthly, half-yearly and annual reporting of financial information. RATP uses the Oracle Financials software system. Monthly statements are available just nine working days after the end of the month, while the level of analysis and detail during the pre-closure period remain the same. The monthly statements enable the departments to carefully monitor their business performance and budget throughout the year. Both individual company and consolidated financial statements, prepared for the first time under IFRS, were presented to the Board of Directors in September 2007, a week earlier than the previous year. In order to meet closing deadlines, for the second consecutive year, the Statutory Auditors audited preliminary financial statements at the end of May in order to prepare their audit of the financial statements at the end of June. Financial statements are controlled at various levels using highly effective query tools, which are available over the majority of the accounting information system and are constantly upgraded International Financial Reporting Standards (IFRS) The IFRS project was completed in 2007 with the preparation of the consolidated financial statements as at June 30, in compliance with IFRS. The final accounting choices were made by the Audit Committee during the first half of 2007, enabling the half-year financial statements and 2006 pro forma financial statements to be prepared in compliance with IFRS. Procedures have been set out to process the information required to prepare the financial statements, particularly in compliance with the following standards, which have a material impact on processes: financial instruments (IAS 39) RATP has set up a tool to monitor cash transactions in compliance with IFRS. This tool has an accounting component, interfaced with the information system and general accounts, thus avoiding manual data entries. It is configured to support the dual accounting principles French GAAP/IFRS and provides input for the Group s financial statements and RATP EPIC s financial statements. The configuration of the accounting entries was validated first by the Statutory Auditors to ensure that the accounting trail complied with current standards. employee benefits (IAS 19) After listing the various benefits to be provisioned for the Company s transport and social security activities, the Statutory Auditors validated the methods used and information required to measure the benefits. A procedure was drafted specifying the participants and data to be reported at each closing date RATP pension fund (CRPRATP) The RATP s pension fund (CRPRATP) was set up on January 1, After transitional arrangements in 2006, 2007 was the first year of ordinary operations between RATP and the CRPRATP, both in terms of contributions and operating costs. The contributions declaration process was reviewed to ensure the separation of the roles of certifying officer and payer. In addition, the contributions paid into the CRPRATP are now declared on pay-in slips in compliance with decree no of December 26, Creation of an audit office within the Company s Accounting department Plans to set up an audit office were finalized in The purpose of this office is to complement the controls already performed by the various accounting offices and to audit certain accounting processes in order to guarantee the reliability of the financial statements. The office works alongside the Inspectorate General/Internal Audit, to ensure that their audit recommendations are implemented on accounting matters, and on specific issues. The audit office is part of the Audit network managed by the Inspectorate General/Internal Audit Continued updating of rules and procedures The regulations and procedures relating to accounting and financial matters have been listed and the impact of changes in regulations is assessed regularly. A timetable now needs to be set for drafting procedures. At the same time, the Company is looking for ways of making these procedures easily accessible, particularly over the intranet Transfer of property tax declarations to the Accounting department Property tax declarations were previously made by the Property department. In order to facilitate exchanges with the accountants who are largely responsible for the information declared, the activity was transferred to the Accounting department during the first half of (10) Implementation of law no of March 1, 1984 on the prevention and settlement of Company difficulties. 90 Annual report 2007

15 3.2 Control of subsidiaries Subsidiaries are subject to a range of specific controls, designed to manage the risks inherent in company development Upstream controls Subsidiaries corporate strategy is controlled on the basis of mediumterm plans. Control is exercised by a Commitments Board comprising representatives of each subsidiary s management, members of RATP s Finance department and Senior Management. Significant decision-making issues concerning budgets, the preparation of financial statements, bids on major calls for tender, major contracts, capital transactions, equity investments and the founding of sub-subsidiaries, are controlled by the Commitments Board of each subsidiary. Major decisions and those affecting major subsidiaries may also be controlled by RATP s supervisory bodies (State Equity Investment Agency, Economic and Financial Control Board for Transport, Budget department, and Transport and Maritime Board). The subsidiaries Commitments Boards convene prior to Board meetings, to enable them to provide input and guide Directors decision-making Downstream controls Monthly financial reporting is performed on the basis of accounting information gathered in the Magnitude application. The information is presented to the Executive Committee in the form of an operating report. The Magnitude application is used for both monthly reporting and consolidation purposes, which guarantees consistent data management. A complete audit of operations is performed on certain subsidiaries every year. Upstream controls and monthly financial reporting are performed by the unit of the Finance and Management Control department responsible for Subsidiaries, Financial Transactions and Tax, while audits are performed by the Internal Audit department Other controls RATP s Board of Directors examines the financial position of subsidiaries twice a year: in March with regard to the previous year s results and consolidated financial statements; in September with regard to the results as at June 30, and the consolidated financial statements for the first six months. In addition, at the end of 2003, the Audit Committee set up a series of risk indicators to report on the key risks facing subsidiaries Developments Since being set up, control procedures relating to subsidiaries have constantly been adapted to take into account changes in the business environment and any incidents that may have occurred. Since 2007, RATP s control has gradually been enhanced by the management control exercised by the subsidiary RATP Développement over its own subsidiaries and equity investments. The governance of RATP Développement has been strengthened by the appointment of an independent Director to the Board. Appendices Appendix I BOARD OF DIRECTORS AND COMMITTEES 1. Board of Directors Pierre Mongin In conformity with decree no of April 13, 1984, amended by decrees of June 7, 2004, and of August 11, 2006, the RATP Board of Directors comprises 27 members, which include: nine government representatives appointed by decree; nine persons appointed by decree: two persons selected for their expertise in transport and mobility policy, three persons with a professional background in business, two representatives of public transport users, two local authority representatives from areas directly affected by the Company s activities; nine employee representatives elected by Company employees. The Board nominates one of the Directors as Chairman and Chief Executive Officer. The appointment is made by decree by the Government Ministers after the Cabinet has heard the report from the Transport Minister. The Government Commissioner and Head of the Economic and Financial Control Board for Transport are entitled to attend all Board meetings, along with the secretary or representative of the Works Committee. The secretary of the Board is nominated by the Chairman and Chief Executive Officer, and appointed by the Board of Directors. The secretary is responsible for preparing the reports and minutes of all the meetings of the Board and of the standing and ad hoc committees. The Board convenes at least six times a year, and may also hold extraordinary meetings to renew the mandate of the Board or Chairman and CEO. 91

16 2. Committees Two standing committees, each comprising an equal number of Directors, are responsible for preparing the Board s work. The first deals with the Company s technical and technological development, particularly in terms of network development and maintenance, improvement of service quality, research and contracts. The Economic and Strategic Committee deals with RATP s operating budget and investment plans, financial statements, public and service provision agreements and contracts. It also addresses business and social issues such as training, housing policy, developments outside the RATP/STIF contract, subsidiaries activities and the annual report and sustainable development report. It also enforces implementation of the RATP/STIF contract and the RATP Business Plan. An Audit Committee, comprising six Directors (two elected by employees, one leading business person and three government representatives) is responsible for advising the Board on the individual and consolidated financial statements and the reliability of the information systems used to prepare them. It also advises on financial management, management and accounting principles, cost accounting, accounting information systems and management control, the quality of the Internal Audit program and methods, and risk management policies. Apart from the management decisions, which are voted on by the Board, the Chairman and CEO may propose issues to the Board for discussion, particularly on subjects where medium and long-term policy-making is required. 3. Subsidiaries and investments The Chairman and CEO appoints the RATP s representative at the shareholders general meetings and Board meetings of companies in which RATP holds equity interests. The RATP s Board of Directors hears a report on each of the companies in which it holds a significant stake at least once a year, and gives its opinion on RATP Développement s medium-term plan. 4. Annual report and sustainable development report The annual report and sustainable development report are submitted to the Board for approval. Appendix II MATTERS EXAMINED BY THE BOARD IN 2007 Progress report on the implementation of the President s commitments. Progress report on the renegotiation of the STIF contract. 2. Economic and strategic issues Economic, business and financial issues Presentation of the RATP group s individual and consolidated financial statements as at December 31, Presentation of RATP group s individual and consolidated financial statements as at June 30, Operating budget for Investment program for 2008 borrowing authorizations. Corporate training program RATP group management report as at December 31, RATP group management report as at June 30, Report on the STIF/RATP contract and Business Plan. Draft annual report and sustainable development report for RATP housing policy for Development issues Information on subsidiaries outlook Participation in the capital increase of Financière Transdev. Bid by RATP Développement for the contract to operate and maintain the Algers metro. Improvement of RATP Développement s governance rules. Capital increase of RATP Développement. RATP surety on RATP Développement s guarantee in connection with the bid for the Mosel Rheinbahn contract. RATP surety on RATP Développement s guarantee in connection with the lease of Mittelrheinbahn rolling stock. 3. Contractual Plan between the State/Regions and other operations AGREED IN PRINCIPLE Extension of tramway T3 Porte d Ivry Porte de la Chapelle. PROJECT DISCLOSED Development of metro and bus areas in the multi-modal division of Mairie de Montreuil. PRE-CONTRACT AGREEMENTS Amendment Creation of public transport between Pompadour and Sucy-Bonneuil. Additional agreement Tramway line Chatillon-Vélizy-Viroflay additional pre-contract agreement on the underground section. 1. Discussions Overview on purchasing policy. Discussion on the Business Plan following the convention of May 29, Business Plan Report by the working group on debt to the Board of Directors. 92 Annual report 2007

17 4. Major contracts Rider to the contract regarding the implementation of the Ouragan control-drive system on line 13 of the metro. Refurbishing the platform façades on lines of 1 and 13 of the metro. Tramway line T1 between Saint-Denis and Bobigny renovation of the railway platform. Cleaning services of areas and trains. Provision of cables for fixed installations in tunnels and underpasses. Renovation of MI79/Z8100 trains of RER line B appraisal and provision of renovation kits. Tyre guided tramway between Saint-Denis, Garges and Sarcelles appraisal and provision of tramway components appraisal, provision and fitting of guiding system. Provision of 356 articulated buses with diesel engines that also run on biofuel (three lots). Provision of fuel (diesel and B30) for RATP s buses. Metro line 4 extension of the line from Porte d Orléans to Bagneux first phase at Mairie de Montrouge. (Two lots of engineering work.) Metro line 12 extension of the line from Porte de la Chapelle to Mairie d Aubervilliers First phase to Proudhon Gardinoux lot T1: civil engineering work on the tunnel and line buildings. Credit card transaction processing at RATP s points of sale. Appendix III BOARD MEETINGS AND WORK IN 2007 MEETINGS NUMBER ACTIVITY NUMBER Board of Directors February 9 March 16 March 30 June 1 September 28 October 6 November 30 8 Decisions 61 December 14 Committee on Corporate Development, Including: contracts of no less than 16 million 19 Technical Issues and Technology 6 Agreements in principle 1 Projects disclosed 1 Pre-contract agreements 2 Committee on Economic and Strategic Issues 7 Audit Committee 7 Working group 5 Discussions 3 TOTAL 33 93

18 Appendix IV ORGANISATION OF THE INTERNAL CONTROL SYSTEM COMPANY Inspectorate General / Internal Audit (IGIA) General Safety Control (CGS) Corporate Risk Management Quality and Sustainability Commission (DGQDD) Fire Safety Unit DEPARTMENT Transport-specific controls Specialized control entities Risk Management Quality Network Inspections of the operating departments (MTS, RER) Inspections of the maintenance departments (EST, MRF, M2E) Decentralized audits departements (BUS, CGF, MES, M2E) Systems Risk Management (EST) Risk Management Engagement (M2E) Quality audit engagements to control ISO- and NF-certified departments Risk Management Committee (MOT, ESP) UNIT Support Group 1 Manager Control Group 1 Verifying the quality of services Support Group 2 Control Group 2 Implementing production processes in conformity with current regulations Production Process 94 Annual report 2007

19 Appendix V COMPANY-WIDE CONTROL BODIES Instance Inspectorate General/Internal Audit department (IG/IA) General Safety Control (GSC) Delegation for Innovation and Sustainable Development Role Conducts work and studies on: business strategy and policies; input for decision-making; sensitive economic subjects. Performs assignments on compliance, effectiveness, management and performance. The Fire Safety unit advises on all aspects of fire safety and evacuation procedures. It has the following objectives: constantly improve the Company s fire safety levels; coordinate the actions of the fire and emergency services with the Company s fire and security services; monitor operational premises and buildings under construction; train employees in fire safety; ensure regulatory compliance with the security procedures and systems in place in railway and metro stations and in buildings under construction or renovation, through the work of the Inspectorate General for Fire Safety. The Corporate Risk Management unit: constantly improve risk management for both current and emerging risks; advise on all aspects of risk (system failures, environmental issues, missed opportunities); conduct controls, investigations, audits and studies at the request of Senior Management and department managers; manage Company-wide committees when an overall systems approach is required; manage the security of IT systems with all departments. The Delegation is in charge of proposing Company-wide projects on innovation and sustainability and implementing them, once they have been approved by management by: promoting quality and sustainable development within the Company; conducting or organizing quality audit engagements; providing methodological and technical assistance; guiding departments and units through implementation. Scope of action Audits are conducted on administrative, technical, and financial matters and on all of RATP group s operating, information and management systems. TWork may focus on a department or subsidiary, on policies and processes, or on project implementation and progress. The Fire Safety unit is active at all levels of the Company, through the Technical Committee for Fire Safety and its network of local contacts. The unit performs smoke and fire tests to measure and analyse air movement in underground areas. The results of the tests are used to improve the security of the underground areas, and to set and upgrade smoke-clearing systems in tunnels and stations. The unit has an Inspectorate General for Fire and Safety that deals with all the public service providers (metro stations and train stations) for RATP s transport service business. The two main activities of the unit are information systems security and systems risk management. The unit heads a Company-wide network on corporate risk management that monitors and coordinates actions taken at Company level and shares information on best practice. The Delegation for Innovation and Sustainable Development works primarily with: Senior Management and the departments to provide guidance in policy-making and ensure that the approach adopted is consistent with Company strategy. three cross-company networks (quality, environment and sustainable development) comprising representatives from each department to prompt ground initiatives, provide units with methodological assistance, and encourage the exchange of information on best practice. Appendix VI RATP ACCOUNTING POLICIES 1. Preparation of the financial statements In addition to its monthly statements produced for internal purposes, RATP prepares audited annual individual and consolidated financial statements and half-yearly individual and consolidated financial statements. The prospectuses prepared by RATP when issuing debt are approved by the Statutory Auditors and by the French Securities and Exchange Commission (AMF). In general, the accounting information produced by RATP fulfils the requirements of its departments and units in terms of budgets and general management. RATP also produces a quarterly operating report for each of its transport networks. 95

20 2. Control procedures on the preparation of the individual financial statements 2.1 Accounting policies RATP ensures that there is a clear separation between the roles of its accountants (employees who generally work for the Management Control and Finance department), treasurers and the departments authorizing expenditure. The accountants have an array of regulatory, management and accounting texts relating to their function, which are prepared and updated in the document system of the Company s Accounting unit. Controls take place throughout the accounting process. 2.2 Midstream controls Department units and support groups are involved in RATP s accounting operations insofar as they authorize Company expenditure and revenue and define their cost accounting systems in line with the Company s common accounting rules. This may involve entering data, such as external expenses, in the Company s accounting information systems. The local accounting offices of the Company s Accounting unit are responsible for controlling the entries made in the management system. They may make the adjustments necessary and record the operations not delegated to the units. All the data is reported to central departments where summary documents are prepared and centralized work is performed: booking of payables and receivables, preparation of tax returns and social security statements, control of accounting quality, preparation of financial statements including the balance sheet, income statement and notes. 2.3 Monthly reporting A partial closing of accounts is performed every month, at which time the accounting offices ensure that the changes in expenses and income have been correctly recorded, and interim balances are recorded. A Central Accounting Office performs a cross-company analysis of the results. 2.4 Balance sheet revision, adjustments and justification Revision of decentralized bank accounts: these are managed by the Company s units and are audited at least once a year to verify compliance with the governing accounting and administrative procedures. Accounting authorizations: some of the Company s businesses allow the delegation of accounting tasks (data entries can be made without involving accountants from the Company s Accounting unit). Work is underway to formalize these authorizations (scope, responsibilities and review). Balance sheet entries are the responsibility of one or several offices within the Accounting unit. They are reviewed on the basis of documentary evidence at least once every six months. 96 Annual report 2007