External Auditing It Is Subject Only to the Law
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The Bundesrechnungshof www.bundesrechnungshof.de Information at a glance The Bundesrechnungshof examines federal financial management. Audit missions cover annual federal revenues and expenditures amounting to more than €600 billion. It also reviews social security institutions and the management of government shareholdings in private-sector companies. The Bundesrechnungshof informs the two Houses of Parliament and the Federal Government about its key findings in its annual report. We report on our audit findings by means of observations in management letters that are addressed to the audited bodies. In addition to auditing, providing advice to government bodies – especially the lower House of Parliament – is a major function of the Bundesrechnungshof. As an independent body of external auditing it is subject only to the law. No other government institution may instruct it to perform an audit. On the other hand, the Bundesrechnungshof does not evaluate policy decisions made in compliance with applicable legislation. The Bundesrechnungshof is a supreme federal authority. In the Federal Government structure, the German SAI ranks equal with the Office of the Federal President, the Federal Chancellery and the federal ministries. The Bundesrechnungshof has some 1,250 staff. The SAI’s headquarters are located in Bonn. 1 www.bundesrechnungshof.de Address: Bundesrechnungshof Adenauerallee 81 53113 Bonn Telephone: +49 228 307-0 Facsimile: +49 228 307-2990 Email: [email protected] Internet: www.bundesrechnungshof.de 2 www.bundesrechnungshof.de CONTENTS Preface 5 External Auditing Historical background: 300 years of external government auditing 7 Legal status: An institution in a class of its own 11 Mission statement: Values and objectives of government auditing 12 Functions: Auditing and advisory functions 13 Audit procedures: Independent, objective and target-oriented 21 Organisation: How is the Bundesrechnungshof organised? 26 Responsibilities: The responsibilities of the individual divisions 29 Decisions: Who makes what decisions? 35 Staff: Bundesrechnungshof staff 37 Technology: Auditing in the digital age 41 Public relations 43 Petitions: Input from citizens 45 National cooperation: Bundesrechnungshof and the regional audit institutions (RAIs) 47 European cooperation: European Union, European Court of Auditors and EUROSAI 49 International cooperation: INTOSAI, audit mandates and bilateral cooperation 52 The President of the Bundesrechnungshof in his/her capacity as Federal Performance Commissioner 56 Annex Mission statement 63 Organisation chart of the Bundesrechnungshof 66 Presidents of the Bundesrechnungshof 68 3 www.bundesrechnungshof.de PREFACE Dear Readers, Many of you may have heard of the Bundesrechnungshof from the media. Media often focus on seas of criticism or worse, faced by public sector management. However, this distorted picture of our audit findings does not provide a balanced view of our activities. If you look at the Bundesrechnungshof, there is much more than meets the eye. In accordance with our constitutional mandate, we review federal financial management and report thereon. This means: We look at the entire range of government activities at the federal government level and analyse whether government operations comply with statutory requirements and whether it is efficient and effective. It is our concern whether and how tax money provides best value for money. Furthermore, our audit work helps enhance the transparency of government actions. This again helps to strengthen the confidence citizens place in the government. In the course of time, the Bundesrechnungshof has become well known by the citizens. However, there remain questions about what our precise functions are, how we work and what impact our work has. This booklet outlines how the Bundesrechnungshof examines public expenditure and revenue at the federal government level. It shows that auditing represents only a portion of the manifold tasks to be performed by the external audit bodies. 5 www.bundesrechnungshof.de The Bundesrechnungshof provides advice, on the basis of its audit experience, to Parliament and the Federal Government about major government spending programmes, structural governance matters and proposed legislation. Apart from auditing, the advisory function is an important tool for providing assurance that federal public funds are used efficiently and effectively. This is because modern government auditing is designed to prevent shortcomings or irregularities. Since the Bundesrechnungshof has no powers of enforcement, we need to rely on the persuasive power of our arguments in order to have our recommendations accepted by Parliament and the Government. The fact that Parliament usually endorses our proposals in more than 90 per cent of the cases brought to its attention is ample proof of the soundness of our recommendations. A sole glance at the figures shows that external audit is worthwhile: The Bundesrechnungshof costs the taxpayer about €150 million, i.e. only about 0.05 per cent of total federal expenditure. In turn, the Bundesrechnungshof’s advice and recommendations result in savings and additional revenue of between €1 billion and €2 billion annually. However, the figures alone do not tell the full story. Let us suppose that the Bundesrechnungshof did not exist. A major deterrent effect on the federal departments would be lost, i.e. tireless efforts to scrutinise their own actions in accordance with the criteria of efficiency and compliance. I hope that this booklet will raise your interest in the external audit function at federal government level and help enhance the understanding of the work done by the Bundesrechnungshof. Kay Scheller President of the Bundesrechnungshof Bonn, May 2017 6 www.bundesrechnungshof.de EXTERNAL AUDITING HISTORICAL BACKGROUND 300 years of external government auditing In 1714, Prussian King Frederick William I established the first external audit institution In 1714, the Prussian King Frederick William I founded a “General Chamber of Accounts”, which was renamed the “Superior Chamber of Accounts” in 1744. The Chamber was to function as an independent, collegiate, external audit body, autonomous within the Prussian administration. The Chamber’s task was to audit the state accounts, report on its findings and submit expert opinions on administrative reforms. It originally had its headquarters in Berlin and moved to Potsdam in 1818. Building of the former Audit Court of the German Reich, today’s branch office of the 7 Bundesrechnungshof in Potsdam www.bundesrechnungshof.de In 1868, the Prussian Superior Chamber of Accounts was additionally entrusted with auditing the accounts of the North German Federation. In 1871, when it was renamed “Audit Court of the German Reich”, it was also commissioned to audit the accounts of the German Reich. Thus the President of the Reich Court of Audit was ex officio President of the Prussian Superior Chamber of Accounts. The Superior Chamber of Accounts continued to exist as a Prussian audit institution until 1945. However, the Audit Court of the German Reich located at Potsdam ensured the audit of the budget of the entire German Reich between 1871 and 1945. Establishment of the Bundesrechnungshof on the basis of the Basic Law in 1950 After the end of World War II, the Hamburg Branch Office of the former Reich Court of Audit resumed its activities and continued its work under the name of “Audit Court for Special Tasks”. In 1948, the “Audit Court of the Combined Economic Area” was established in Frankfurt. This was the immediate predecessor of the Bundesrechnungshof. It was assigned the responsibilities and powers of the Audit Court for Special Tasks. After the Basic Law had come into force, it temporarily carried out the responsibilities of the audit office for the Federation. Based on Article 114 of the Basic Law, the Bundesrechnungshof was established in Frankfurt on the Main in 1950. The fact that for the first time ever an independent audit institution was enshrined in the Constitution, underlines the importance attached to external auditing and its continuity also in the Federal Republic of Germany. As part of the Berlin/Bonn Act, the Bundesrechnungshof’s headquarters were relocated from Frankfurt to Bonn. Since 1 July 2000, the Bundesrechnungshof has been located in the building of the former postal ministry in the Adenauerallee. The Bundesrechnungshof has several branch offices including one in Potsdam which has occupied the building of the former Reich Court of Audit since 1 December 1998. 8 www.bundesrechnungshof.de Office building of the Bundesrechnungshof in Frankfurt on the Main Official ceremony “300 years of external government auditing” November 2014: The Bundesrechnungshof commemorated the establishment of the Prussian General Chamber of Accounts by King Frederick William I in 1714 in a ceremony held at the former Plenary Hall of the German Parliament in Bonn in the presence of the Federal President, representatives from government and administration, the regional audit institutions and numerous European audit institutions. The then Federal President, Joachim Gauck, recognised the Bundesrechnungshof as “a pillar of our state” which is crucial for the balance of powers in the Federal Republic of Germany. “We commemorate an instrument of modern governance, a crucial instrument to ensure transparency and control of the public sector, a key element of our democracy.” 9 www.bundesrechnungshof.de 2017 structural reform In the course of a structural