Where can the Federal Government use its budget funds in a better, more targeted and more effective way? Our annual report provides answers to this question. The current volume on federal financial management – consisting of 23 reporting items – contains key audit findings which are of importance to the parliamentary procedure for granting discharge to the Federal Government.
Annual report: Keep well within the budget
A new Federal Government will face exceptional challenges owing to the tense financial situation. In addition to past structural failures which continue to get worse, new problems arise. Approaches to ensure long-term sustainability of the social security systems are still lacking. A federal budget which is largely used to meet legal claims is not flexible and lacks leeway to act.
Therefore, it is more important than ever to keep well within the budget: Our annual report shows options on how to address shortcomings and on how to better use budget funds – and, ultimately, on how the government might enhance its ability to act. The annual report makes cases transparent in which public bodies do not work in an efficient manner, in which the Government does not ensure revenue collection or in which risks to the federal budget are not properly taken into account:
Bundeswehr: plan better
The Federal Armed Forces, Bundeswehr, are expected to enhance their operational capability with a lot of money. However, procurement projects repeatedly fail. Therefore, corvettes worth billions of euros have to do without unmanned aerial vehicles and thus without key reconnaissance capabilities, for example ( item 15 ).
The Bundeswehr delays the implementation of European standards to maintain continued airworthiness of military aircraft. These standards require the development of a management organisation which contributes to improved aircraft readiness while requiring less effort than before ( item 17 ).
Provide the right support
Funding programmes are expected to provide targeted incentives. However, the Ministry of Transport provides inefficient support to train operating companies with €87.5 million (item 13 ) and to road haulage companies with €200 million annually without setting measurable goals ( item 12 ).
Generally, the Government has acted without a strategy and thus without a target for more than 30 years when it comes to German railways, DB AG. Since the privatisation in 1994, the Federal Government has failed to exercise its owner rights and obligations and determine them in an ownership strategy ( item 10 ).
The labour offices do not succeed in stopping the permanent receipt of citizen’s benefit by self-employed persons. They poorly implement the principles of demanding and supporting. Almost 65,000 self-employed persons receive citizen’s benefit; in one-third of the cases reviewed by the Bundesrechnungshof for five years or more ( item 7 ).
Act in a transparent manner
The Government has to be more thorough in providing evidence of the need and efficiency of many projects and comply with the budget guidelines. Furthermore, the Government needs to remain transparent to ensure that it acts in a comprehensible manner. Here, the Government has room for improvement: For example, the Government uses green bonds also for expenditure for which it cannot provide any evidence of an impact on the climate or environment – even though purchasers of green bonds do without interest income and expect a positive impact on the environment or climate in return “for their money” ( item 19 ).
The Government lacks a complete overview of the German contributions to international organisations. According to the audit evidence we collected, the Government paid contributions of €8.7 billion to international organisations in 2022. So far, the Federal Foreign Office has only recorded contributions to United Nations organisations: in 2022, these contributions amounted to €6.8 billion. €1.9 billion are not recorded ( item 2 ).
Each year, the Government awards many and expensive consulting contracts. The German Pension Insurance shows: not always is evidence provided for the need or are there specific consulting targets ( item 9 ).
Government risks revenue shortfalls
The Government also needs to scrutinise its revenue. For example, the Government did not succeed in fully using the EU funds budgeted for Germany. As a result, funds of the Brexit Adjustment Reserve amounting to €52 million have been lost subsequently ( item 6 ).
When it comes to revenue, it is also important that tax offices can work well. Digital transformation and reforms are required to that end. Therefore, it is all the more incomprehensible that the Federal Ministry of Finance intends to postpone the reduction of administrative burdens ( item 23 ). At the same time, lacking IT procedures cause significant shortfalls in tax revenue and outdated software jeopardises the work of tax inspectors ( item 5 ).
The Federal Governments needs to better manage its financial resources. The current budget situation underlines the urgent need for better management. Our audit findings provide approaches to keep well within the budget.
The annual report lays the groundwork for the decision to grant discharge to the Government
After the closure of each financial year, the Government is held to account by Parliament and the Federal Council of Constituent States. Following submission of the annual financial accounts, Parliament and the Federal Council decide on granting discharge for the respective financial year.
Our annual report provides a key cornerstone of this procedure. The annual report deals with the Government’s revenue, expenditure, assets and liabilities. Our annual report encompasses recommendations to address shortcomings and use budget funds more efficiently and effectively.
In addition to the findings on the annual financial accounts, our current annual report includes 25 other examples that show where the Government needs to enhance its financial management.
The Public Accounts Committee, a sub-committee of the parliamentary Budget Committee, is set to deliberate on our 2023 annual report in the months to come. During the course of its deliberations, the Committee would request the Government to implement our recommendations.
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Please note: the report is only available in German.