ANNUAL REPORT on FEDERAL FINANCIAL MANAGEMENT Abridged Version
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– 1 – 2013 ANNUAL REPORT ON FEDERAL FINANCIAL MANAGEMENT Abridged Version BUNDESRECHNUNGSHOF (Supreme Audit Institution of the Federal Republic of Germany) – 2 – C o n t e n t s Introduction Part I (General financial management) Financial audit of the federal accounts for FY 2012 Trends in federal public finance Part II (Cross-boundary and government-wide audit findings) Part III (Development of departmental budgets and department-related audit findings) Federal President and Federal President’s Office The Two Houses of Federal Parliament Federal Chancellor and Federal Chancellery Federal Foreign Office Federal Ministry of the Interior Federal Ministry of Justice Federal Ministry of Finance Federal Ministry of Economics and Technology Federal Ministry of Food, Agriculture and Consumer Protection Federal Ministry of Labour and Social Affairs Federal Employment Agency Pension Insurance Federal Ministry of Transport, Building and Urban Development Federal Ministry of Defence Federal Ministry of Health Federal Ministry for the Environment, Nature Conservation and Nuclear Safety Federal Ministry for Family Affairs, Senior Citizens, Women and Youth Federal Constitutional Court Federal Ministry for Economic Cooperation and Development Federal Ministry of Education and Research Federal Debt General Fiscal Administration Activities and Budget of the German SAI – 3 – 2013 Annual Report Introduction 1 Subject of the report Germany’s Supreme Audit Institution (SAI) audits the entire financial management of the Federal Government including federal off-budget funds and industrial or trading funds (Art. 88.1 German Federal Budget Code). Where the result of its audit may be significant for granting discharge to the Federal Government in respect of the budget and capital accounts, the SAI reports to the two Houses of Parliament (Art. 97.1 German Federal Budget Code). According to Art. 97.2 German Federal Budget Code, special emphasis is put on the following questions: • Do figures stated in the budget and capital accounts tally with those stated in the relevant accounting documents? Are revenue and expenditure duly backed up by vouchers? • In what significant cases did the audited federal departments and agencies not comply with the underlying rules and principles of financial management? • What are the key results of the audit on the Federal Government’s management of its shareholdings in businesses incorporated under private law? • What future action do auditors recommend? The annual report deals with the Federal Government’s revenue and expenditure, assets and liabilities. The report may address all measures that have a financial impact on the federal budget. When reporting on our audit findings, we also comment on the trend in federal financial management. Moreover, we provide key financial data and information on individual departmental budgets. The purpose of our departmental budget items is to increase transparency for parliament and understanding of the general public and to place our audit work in the relevant financial management setting. In our capacity as external audit body, we do not evaluate policy decisions that comply with the law as it stands. For instance, it is not our task to assess the merits of paying certain grants. Nevertheless, we can audit and report on whether the facts and assumptions on which the policy decision is based are accurate and whether the grant-funding has led to the intended outcomes. We may recommend legislative amendments, if our audits have generated information indicating that existing legislation does not lead to the outcomes intended by the Legislature. Thus, we meet our statutory duty to point out in our annual report what action to recommend for the future (Art. 97.2 no. 4 German Federal Budget Code). We thereby also comply with the Parliament’s request to inform the Parliamentary Appropriations Committee about audit findings that are of importance for proposed legislative projects. 2 Procedure for drafting and adopting the annual report The annual report is based on our audit findings and deliberations and on the advisory work of the SAI’s President in his capacity as Federal Performance Commissioner. They are compiled in accordance with a structured procedure. The German SAI sends a draft of each annual report item to the respective audited bodies, giving them the opportunity to comment. This part of the procedure especially serves to once more verify the audit evidence which, as a rule, our auditors have already discussed with the audited bodies during the preceding audit exercise. Where opinions about the facts and figures presented differ, this is expressly stated in the annual report. Where the bodies concerned have expressed divergent opinions as to the conclusions drawn, these opinions are also stated in the annual report. The annual report is adopted by the SAI’s Board (Art. 14.1 no. 2 Bundesrechnungshof Act). After that, the SAI’s President communicates them to the two Houses of the German Parliament and to the Federal Government and presents them to the general public. Our annual report is a major basis for the annual parliamentary discharge procedure when the two Houses of Parliament individually grant discharge to the federal government for annual financial management (cf. Art. 114.1 Basic Law). The procedure is based on the annual accounts to be submitted by the Federal Ministry of Finance on all – 4 – federal receipts, expenditures, assets and debt. Our annual report supplies relevant information to Parliament on the shortcomings found in the annual accounts and financial management of the previous financial year which they need to consider in their decision-making. Figure 1 Annual reporting procedure Submission Parliament B Annual report u Presentation Public n d Board e s Comment r e Draft annual report Transmission c h Audited n body u Comment n Audit findings g Audit opinion s The Bundestag (the directly elected Lower House of the German Parliament) passes on our annual report to the Appropriations Committee, which has a leading role in the deliberation. The Appropriations Committee in turn passes the report to a sub-committee, the Public Accounts Committee. The resolutions adopted are communicated to the Appropriations Committee to prepare the decision on discharge incumbent on the lower House of Parliament. The resolution on recommended action adopted by the Appropriations Committee also includes the demand addressed to the Federal Government to implement the decisions made in our annual report, to introduce or pursue efforts to enhance efficiency and to report on the progress made in due time. This is to ensure that the results achieved can be duly taken into account in the budget deliberations. When deciding on granting discharge, the Bundestag plenary session places reliance on the recommended action included in this resolution. During the parliamentary procedure for granting discharge to the Federal Government, our annual report may prompt the Bundestag to impose requirements on the Government (Art. 114.2 Federal Budget Code) or expressly disapprove of specific matters under scrutiny (Art. 114.5 Federal Budget Code). 3 Topicality The scope of the annual report is not limited to FY 2012, for which a grant of discharge is sought. It may also cover subsequent or preceding financial years (Art. 97.3 Federal Budget Code). – 5 – Drafting the annual report requires some lead time. This is needed especially in order to take into account audited bodies’ comments on the draft report items. Timelier reporting is the result of joint reflection by the Public Accounts Committee and the German SAI. To reduce this time lag, we developed supplementary spring reporting. The findings of federal financial management generated after the conclusion of the traditional annual reporting process are communicated to the Public Accounts Committee for deliberation early in the following FY. This new procedure provides a more up-to-date basis for the decision on granting discharge for the last but one FY to the Federal Government which is scheduled for June each year. 4 Structure of the annual report The annual report on federal financial management consists of three parts: The General Part of the annual report (Part I) sets forth our audit findings on federal budget and capital accounts for FY 2012 and findings on trends in federal public finance during the medium-term financial planning horizon (2013- 2017). This part also deals with the impact of the economic and financial crisis on the federal budget. Part II highlights audit findings not closely associated with receipts or expenditure items in individual departmental budgets. Such findings may concern, for example, topics on which audit focus has been placed for one year and that have been investigated as cross-cutting issues. In this part, we also report on audit findings produced in government- wide audit work on public sector management. We also designate the pertinent federal government department having lead responsibility for a matter which should in our view take leadership in addressing any shortcomings stated. Part III reports on our audit work on individual departmental budgets in chronological order of the federal budget. The reporting items are classified as A items referring to budgetary trends, B items deliberated by the Public Accounts Committee or C items, i.e. other audit and advisory findings. Each reporting item has the following structure: first briefing information is presented on the major revenue and expenditure items, commitment authorisations and staffing costs. Then, data on the budget structure and recent trends is given and audit findings are presented that we have discussed with the audited bodies (A items). Our comments on the individual departmental budgets focus on the 2012 budget, for which the Federal Government has to obtain discharge from Parliament. However, they also refer to current trends and to budget planning for FY 2014. Nevertheless, owing to the general elections that took place in September 2013, the 2014 draft budget is subject to discontinuity (Art. 125 of the German Parliament’s Standing Orders) and has to be introduced anew during the life of the new Parliament.