SFIL Annual financial report 2018

1 I Management report 18 SFIL Annual Financial Report 2018 •  The effective implementation of the new IFRS 9 account‑ ing standard applied in connection with the preparation of SFIL’s consolidated financial statements and, on a volun‑ tary basis, to publish IFRS-compliant financial statements for its subsidiary CAFFIL. 2.1.1. Role and organization of the Accounting division SFIL’s Accounting division reports to the Finance division, which also comprises the Back Office and the Financial Per‑ formance Management division, which in turn includes the balance sheet oversight functions, management control and the Purchasing division. The Accounting division plays a cen‑ tral role in SFIL’s steering and financial management, thereby making it possible to benefit from a central viewpoint. The Accounting division is also responsible for producing the basic separate and consolidated accounting data and summary financial statements for SFIL and Caisse Française de Financement Local. It also handles the ancillary account‑ ing for La Banque Postale within the context of the activ‑ ities assigned to it. It is likewise responsible for producing the consolidated financial statements of the SFIL Group and ensuring, in cooperation with the Risks division, that all regu‑ latory and prudential standards are complied with. The Accounting division is tasked with analyzing and veri‑ fying accounting data. It relies notably on the reconciliation of this data against that of the other Finance division units, in particular as regards the formation of managed entities’ results. This approach is also used to confirm the information on the Company’s balance sheet, and in particular entries in the risk databases used to calculate prudential indicators. To carry out its role, the Accounting division sits on the main committees with a potential impact on its activity and has access to an extensive range of information, either directly or through the Chief Financial Officer. It participates actively in the technical development of IT systems, and relies on a cross-divisional team within the Technology and Organiza‑ tion division to improve, secure and ensure the sustainability of its IT system. The Technology and Organization division is notably in charge of accounting and regulatory tools as well as ALM and management control tools. Its role is to partic‑ ipate actively in the development and improvement of the tools used by SFIL’s operating divisions. This system makes it possible to ensure continuous improvement in terms of pro‑ cess quality and efficiency and in the reliability of financial information. 2.1.2. Preparation of the annual and consolidated financial statements In the preparation of the annual financial statements, SFIL’s accounting system is mostly automatically fed by upstream systems that manage transactions with customers and market counterparties, as well as operating expenses. When data is entered into one of the management systems, it is recorded immediately and directly as one or more accounting entries, based on an automated process. This automatic entry system also includes manual entry for certain specific transactions. SFIL’s accounting system can handle dual accounting for compliance with French GAAP and EU IFRS. The summary of this data is then obtained automatically using configured publication tools. 1.6.3. Internal Audit and Inspection division activity reporting SFIL’s Executive Committee receives regular updates on the activities of the Internal Audit and Inspection division. In par‑ ticular, the audit plan is presented to it every year for infor‑ mation after discussion with SFIL’s General Management. Before audit missions actually take place, their scope, objec‑ tives and schedules, etc., are presented for information and comment. The results and findings of each completed mis‑ sion are presented for discussion and decision-making via a report that includes: •  a general assessment of the topic under audit; •  an assessment of residual risks, so that the Executive Committee can validate their appropriateness to the SFIL Group’s risk profile; •  recommendations to enhance the effectiveness of pro‑ cesses and internal controls. A report on the follow-up of the recommendations of inter‑ nal audit, inspection, regulatory bodies and the Statutory Auditors as well as the implementation of any related action plans is presented every six months. Moreover, the internal audit charter and the charter of inspection activities are submitted for validation to the Risks and Internal Control Committee. The audit and inspection plan is also submitted annually to this committee for valida‑ tion. This committee is informed regularly of the results of the follow-up of recommendations by internal audit, inspec‑ tion, regulatory bodies and the Statutory Auditors, and of the progress made in related action plans. Regular divisional activity reports and reports on the results of completed audit missions are also presented for review. In addition, the annual report on SFIL’s and CAFFIL’s internal control system (articles 258 et seq of the arrêté of November 3, 2014) is presented every year for review. A summary of these vari‑ ous reports is presented to SFIL’s Board of Directors by the Chairman of the Risks and Internal Control Committee. 2. Preparation and processing of accounting and financial information 2.1 – FINANCIAL STATEMENTS The main purpose of a company’s annual financial state‑ ments and all the financial data produced by the accounting department is to give a true and fair view of its assets, lia‑ bilities, financial position and results. The accounting sec‑ tion of the arrêté of November 3, 2014, on internal control stresses that the organization adopted should guarantee the existence of audit trail procedures, making it possible to establish a link between any accounting data and the original supporting documentation, and vice versa. All these items should make it possible to reconstitute, justify and explain any and all financial items produced for accounting or regulatory purposes. This principle dictates the organiza‑ tion of accounting practices in the SFIL Group and applies equally to SFIL and Caisse Française de Financement Local. 2018 was marked by two major changes for SFIL: •  The overhaul of a large part of SFIL’s information system with the implementation of a new market transaction management tool, as well as the provision of a single data warehouse for all of the institution’s activities;