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2017 Annual report – spring report No. 06 - better use budget funds to build more lorry parking lots

The Federal Ministry of Transport and Digital Infrastructure needs to ensure that the roadworks administrations of the federal states obtain better value for money in planning parking lots for lorries (trucks) at federal motorways. This will permit building more parking lots with the budget appropriations available.

Parking lots for lorries (trucks) at federal motorways are built as part of upgrading rest areas. These rest areas are planned and built by the roadworks administrations of the federal states on behalf of the Federal Government. The Ministry has issued planning guidance on this matter. This guidance calls for three examination stages. At each stage, the roadworks administrations have to submit documents to the Ministry. The Ministry uses them as basis for approving construction.

The planning guidance calls for an efficiency appraisal only at the last stage. Prior to that, the roadworks administrations chose locations and upgrading options without adequately appraising cost-effectiveness. They regularly did without an efficiency appraisal also at the final examination stage. The Ministry did not object to this practice. It accepted expenditure per lorry parking space that significantly exceeded the average amounts itself had determined.

We do not question the need for additional parking lots for lorries (trucks). However, we note with concern that the Ministry has rest areas planned without seeking to achieve good value for money. The roadworks administrations are required to prove efficiency only after they have already determined key parameters of the rest areas. However, these parameters largely determine to what extent the construction project can be efficient at all.

Efficiency appraisals may ensure that as many parking lots as possible are built with the available budget funds. We expect the Ministry to require justifications of efficiency for all planning stages. On this basis, the Ministry will have to ensure good value for money at all planning stages.

 

2017 Annual report – spring report No. 05 - Federal Ministry of Transport and Digital Infrastructure claims refunds with a delay of several years

The Ministry needs to assert Federal Government claims against the federal states more effectively.

For the first time in 2008, we asked the City-State of Berlin to refund €2 million to the Federal Government. The City-State had received these funds for nature conservation measures in connection with road construction. It had the task to fully replace green space destroyed by the construction of a motorway. The City-State used the funds for other purposes. We were successful in making the City-State of Berlin refund part of the amount in question. We requested the Ministry to claim the refund of the remaining amount. The Ministry confirmed the merit of the refund claim. Since 2013, it has negotiated unsuccessfully with the City-State about the refund of the remaining €1.2 million.

We hold that the Ministry needs to conclude the negotiations with the City-State. The Ministry needs to ensure that the Federal Government will receive the further refund of €1.2 million. We recommend that the refund claim be set off against other payments by the Federal Government to the City-State of Berlin. Apart from this isolated case, we found weaknesses in the Ministry’s management of refund claims against the federal states.

 

2017 Annual report - spring report No. 04 - Roadworks: State burdens the federal budget with millions of euros for disposing of cancerogenic bituminous road surfaces

Over the past years, the roadworks administration of the State of North Rhine-Westphalia extracted bituminous surfaces from state roads, reprocessed them and built them into federal trunk roads. By doing so, it burdened the federal budget with estimated costs of €7 million for the future disposal of this hazardous waste. The Federal Transport Ministry has the task to stop wasteful spending of federal budget funds.

The roadworks administration of the State of North Rhine-Westphalia is responsible for building, maintaining and operating the state roads and the federal trunk roads in its territory. When a road is renewed, material is broken up which partly contains bituminous substances. This pollutes the environment and is also believed to be a cancerogenic substance. Broken-up material is hazardous waste. Pursuant to the Closed Substance Cycle and Waste Management Act, the “polluter-pays” principle applies in this case. Accordingly, the Federal Government and the State have to arrange for disposing the waste of their respective roads.

Over the past years, the State’s roadworks administration extracted 145,000 tonnes of bituminous material from state roads, reprocessed it and subsequently built it into federal trunk roads. As the owner of the trunk roads, the Federal Government assumed the responsibility for the future disposal of the bituminous material. We estimate the cost of disposal at about €7 million.

The Federal Transport Ministry must take leadership in arranging for compensation by the State of North Rhine-Westphalia in order to avoid an unnecessary financial burden for the federal budget.

 

2016 Annual report Volume II No. 16 - Uniform procedure for the upgrading to federal long-distance roads avoids financial disadvantages for the Federal Government  

In response to our recommendation, the Federal Transport Ministry has promulgated uniform requirements applicable nationwide for the upgrading of roads to federal long-distance roads. Financial disadvantages for the Federal Government are thereby avoided and administrative burdens at federal and state level are reduced.

The roadworks administrations of the German states may upgrade roads to federal long-distance roads (federal motorways or federal roads) if they become more significant in terms of traffic. In that case, maintenance of the road is from then on incumbent on the Federal Government. The upgrading requires approval by the Ministry.

We found that the roadworks administrations proceeded differently and often erroneously when upgrading roads. For instance, they either did not notify the Ministry at all or did so only after the upgrading instead of obtaining the Ministry’s approval. They also failed to inform the Ministry about the condition of the roads or the relevant bridges and tunnels. Moreover, they had an insufficient overview of the upgradings because written records were lacking.

As a consequence, the Ministry was often unable to take balanced decisions about upgradings because they lacked information about the condition of the road and thus the financial impact on the federal treasury. Where the roadworks administration upgraded roads unlawfully without the ministry’s approval, the Ministry was either unable to assert objections at all or to do so only with a higher administrative burden. Due to lacking records, it was impossible to retrace the upgrading procedures in the roadworks administrations.

The Ministry has taken up our recommendations and promulgated uniform nationwide requirements to be met by the roadworks administrations. It demanded that the roadworks administrations seek its prior approval before upgrading roads, to provide it with all information about the conditions of the roads in question needed for decision-making and to document the upgrading procedures. These requirements enhance legal certainty, avoid financial disadvantages for the Federal Government and reduce administrative burdens at both federal government and state level.

 

2016 Annual report Volume II No. 37 - Tax revenue on cross-border passenger flights  

The Federal Finance Ministry intends to promulgate regulations ensuring that the tax offices proceed uniformly in the matter of VAT remission for cross-border passenger flights. Moreover, the Ministry intends to ensure that the tax offices assess VAT on taxable extra services provided by airlines. The Ministry is thus taking up our recommendations. This will achieve equitable taxation and generate additional tax revenue.

Cross-border passenger flights take place in both German and foreign air spaces. VAT is payable on the part of the flight that takes place within the German air space. Subject to certain conditions, the tax offices may remit the VAT on the transport services. Additional services subject to VAT provided by the airlines, e.g. the sale of food and beverages on board are not privileged. The airlines have to pay VAT on these sales.

We found that the tax offices followed differing practices where tax remission was concerned. Moreover, they did not check whether the airlines provided additional services for which VAT is payable. We recommended that the Federal Ministry of Finance ensure that the tax offices proceed uniformly in granting VAT remissions. The Ministry should also ensure that the tax offices levy VAT on additional services provided by airlines.

The Ministry has followed our recommendations. It announced its intention to address, in conjunction with the states, the shortcomings in the taxation practice. This includes promulgating regulations ensuring uniform practices in all tax offices in connection with the remission of VAT. This will achieve equitable taxation and generate additional tax revenue.

 

2016 Annual report Volume II No. 36 - No more impediments to the assessment of interest in connection with the solidarity surcharge

In future, the tax offices will completely and accurately assess interest payable in connection with taxes evaded regarding the solidarity surcharge. This will be ensured by alerts in the IT systems and by administrative guidance.

Where persons have evaded taxes they are obliged to pay not only the arrears but also interests on them. The same applies to the solidarity surcharge.

We found that the tax offices assessed interest on evaded solidarity surcharge only in every second case they inspected. The reasons were:

  • Inadequate communication: The tax offices did not pass on information on evaded taxes or did so incompletely.
  • Ignorance: The tax offices did not know that interest on evaded solidarity surcharge had to be assessed in the same way as in the case of other tax evasion.
  • Unclear instructions: The tax offices erroneously assumed that other interest due had to be deducted from the interest on evaded solidarity surcharge.

We recommended that the Federal Finance Ministry take action to address these problems in conjunction with the states. The objective should be the accurate and complete assessment of interest on evaded solidarity surcharge.

The Federal Ministry of Finance and the states have implemented our recommendations. An alert built into the IT system reminds the tax offices to assess interest on evaded solidarity surcharge. Furthermore, the states have taken steps to ensure that communication within the tax offices is improved. They also clarified the relevant instructions.

 

2016 Annual report Volume II No. 30 - Additional revenue from special VAT inspections

In cooperation with the German states, the Federal Finance Ministry will secure additional revenue generated by special VAT inspections, thus counteracting tax losses. To do so, it will strengthen the existing control system. The Ministry is thus implementing our recommendations.

By means of special VAT inspections, the tax administration intends to ensure that traders correctly remit their VAT. In 2015, the special VAT inspections carried out by the tax offices generated additional revenue of €1.7 billion.

Key issue in connection with special VAT inspections: The tax offices need to follow up on the additional revenue claims. If they fail to do so, traders may disregard their additional liabilities. As a result, traders do no pay the additional VAT they have to remit according to the results of the special VAT inspection.

We audited the way in which tax offices followed up on the additional VAT liabilities generated by special VAT inspections. We found several shortcomings, e.g. the lack of uniform guidance for the traders or the failure of tax offices to check the facts.

We noted that tax revenue is lost if traders succeed in ignoring the results of the special VAT inspections. We recommended that the Federal Finance Ministry strengthen the control system in conjunction with the states. For instance, the Federal Finance Ministry should urge the states to use identical forms for providing guidance to traders. Furthermore, the Ministry should press for a more thorough examination of the facts by the tax offices.

The Federal Finance Ministry has taken up all our recommendations. In conjunction with the states, it will secure the additional revenue generated by special VAT inspections. We will monitor the extent to which the tax administration has implemented the steps announced.

 

2016 Annual report Volume II No. 29 - VAT risk assessment – better use made of information generated by inspections on company premise

The Federal Ministry of Finance has successfully ensured that the German states are enabled to make better use of the results generated by inspections on company premises for assessing VAT risks. For this purpose, it established, jointly with the states, the technical prerequisites needed for doing so and closed information gaps. New business processes make sure that risk-related issues do not remain exempt from inspection.

The tax offices use a risk management system (RMS) for processing preliminary VAT returns. This IT system assists the tax offices in their efforts to avoid VAT losses by assessing the default risk and enabling risk-oriented inspections to be performed. The necessary data are also obtained through special VAT inspections or general tax inspections on company premises. As a rule, the special VAT inspections (which do not cover other taxes) should be carried out in a timely manner. In contrast, tax inspections on company premises look into the comprehensive tax situation of the taxable person in question and may cover all taxes.

We found that general tax inspections on company premises also reveal facts that may be relevant for VAT risk assessment. However, this information cannot be adequately used for VAT risk assessment because it is not available in electronic format. The Federal Government and the states should therefore establish the technical prerequisites for feeding the relevant information from the inspection reports on company premises into the RMS.

Moreover, we found that the tax offices waived special VAT inspections if a general tax inspection on the premises of the taxable person was planned. However, since the units in charge of processing preliminary VAT returns did not systematically check whether the inspections on company premises had actually been carried out, high risk cases may not have been inspected. We therefore recommended that the units in charge of processing preliminary VAT returns be informed whenever a proposed inspection on company premises is cancelled.

The Federal Finance Ministry followed our recommendations by establishing, jointly with the states, the technical prerequisites for the electronic communication of reports on tax inspections carried out on company premises. The states may use the new IT component as from September 2017. This is a step in the right direction.

Furthermore, the Federal Government and the states have jointly adapted business processes. As a result, the units in charge of processing preliminary VAT returns are notified of the cancellation of scheduled inspections on company premises. This makes sure that the tax offices can initiate further inspection action and that VAT risks do not remain uninspected.

 

2016 Annual report Volume II No. 21 - The Federal Government receives refund of €0.8 million charged for the construction of bicycle lanes on bridges

Following our demand, the Federal Government was refunded €0.8 million which had been charged for the construction of bicycle lanes on bridges. The roadworks administration of the State of Schleswig-Holstein financed the bicycle lanes from federal funds although the State and the county were liable to bear the costs by virtue of the applicable legal provisions.

The roadworks administration of the State of Schleswig-Holstein had three bridges built with bicycle lanes across federal motorway A 20 between Lübeck and Bad Segeberg. The State and the county had commissioned the bicycle lanes to be built.

We audited the planning and construction of this section of federal motorway A 20. We pointed out that there were no bicycle lanes before and after these bridges and that none had been planned either. Thus, the State and the county were liable to bear the costs. The bicycle lanes required an extension of the width of the bridges. This caused additional costs of €0.8 million, which the roadworks administration financed from federal funds.

We highlighted that contrary to regulations in place federal funds had been disbursed to bear these additional costs. In fact, the State and the county were liable to bear these costs. We therefore asked the roadworks administration to refund the additional costs to the Federal Government. In response, €0.8 million were refunded to the Federal Government.

 

2016 Annual Report Volume II No. 20 - Roadworks costs apportioned inadequately – State of Saxony-Anhalt refunds €1 million to the Federal Government

Following our demand, the roadworks administration of the State of Saxony-Anhalt refunded €1 million to the Federal Government. It had paid this amount to several testing laboratories for the inspection of road surfaces. Although the State was liable to bear the costs, the roadworks administration spent federal funds on this.

The structure and condition of the road surfaces need to be inspected before, during and after building work on federal long-distance roads. This is to ascertain e.g. the extent of damage to the road. Whether the Federal Government or the respective state is liable to bear the costs differs according to the stage of the work. For instance, the states have to fund the inspections during the preparatory stage of the work, while the Federal Government pays for inspections during construction.

We found that the roadworks administration of the State of Saxony-Anhalt had erroneously paid a total amount of €1 million from federal budget funds.

We asked the roadworks administration to refund this amount to the Federal Government. Since one reason for the faulty apportionment of costs was an erroneous regulation of the State, we also asked the roadworks administration to amend the relevant regulation.

The roadworks administration acknowledged our findings. It repaid €1 million to the Federal Government and amended its regulation.

 

2016 Annual report Volume II No. 19 - State of North Rhine-Westphalia refunds €2.3 million in maintenance and operating costs to the Federal Government

Following our demand to this effect, the roadworks administration of the State of North Rhine-Westphalia repaid €2.3 million to the Federal Government. Since the 1970’s, the State’s roadworks administration charged the Federal Government the costs of the maintenance and operation of a valley bridge, although the funding responsibility did not lie with the Federal Government.

In the 1970’s, the roadworks administration of the State of North Rhine-Westphalia built state road no. 693 between Delstern, part of the City of Hagen, and the Hagen-Süd junction of federal motorway A 45. This required the construction of a bridge across a valley. According to the planning confirmation for the construction of the state road, the State of North Rhine-Westphalia is owner of the valley bridge and responsible for its maintenance. Contrary to the terms of the planning confirmation, the roadworks administration recorded the Federal Government as the party liable to pay maintenance costs. As a result, the Federal Government has borne the costs of maintaining and operating the valley bridge since 1976.

We found that the recording by the roadworks administration of the Federal Government as the party liable for maintenance costs had shortcomings. The State of North Rhine-Westphalia is the party liable to pay the repair and maintenance costs for the bridge. Following our demand, the roadworks administration refunded the €2.3 million incorrectly charged to the Federal Government.

 

2016 Annual report Volume II No. 18 - North Rhine-Westphalian roadworks administration refunds €2.5 million to the Federal Government

Following our audit, the State of North Rhine-Westphalia repaid €2.5 million to the Federal Government. It had charged the Federal Government expenditure on former federal roads and on the rehabilitation of state roads including civil engineering structures on these roads, although such constructions did not qualify for reimbursement.

We audited construction expenditure for federal long-distance roads at a branch of the North Rhine-Westphalian roadworks administration. We found several cases in which the branch had charged the Federal Government excess expenditure in the total amount of €2.5 million. The Federal Government thus funded work for the drainage of former federal roads in inner cities and for the rehabilitation of state roads and civil engineering structures such as bridges on these roads. Moreover, the State of North Rhine-Westphalia had charged the Federal Government expenditure on construction supervision and administrative costs.

We noted that the Federal Government had borne these expenditures. According to applicable legal provisions, the state or municipality had to bear these costs. We urged the branch to refund those expenditures to the Federal Government.

As a result, the State of North Rhine-Westphalia repaid more than €2.5 million to the Federal Government.

 

2016 Annual report Volume II No. 17 - Costs for adaptive traffic control systems reduced by €56.4 million

In response to our respective audits, the Bavarian roadworks administration did not construct an adaptive traffic control system on Federal Motorway A 6 near Nuremberg. Moreover, it intends to downsize an adaptive traffic control system on Federal Motorway A 73 near Erlangen. This will reduce construction costs by a total amount of €56.4 million.

Federal Motorway A 6 from Lichtenau to Roth
In 2012, the Bavarian roadworks administration planned a system temporarily permitting hard shoulder running. The system was to cost €53 million. Its purpose was to increase the traffic capacity of the 28 km long section of Federal Motorway A 6 between the junctions Lichtenau and Roth near Nuremberg.

We noted with concern that the roadworks administration had failed to justify the cost-effectiveness of the planned system. We recommended that a new traffic study be made and the upgrading to six lanes of Federal Motorway A 6 be assessed.

The Ministry used its leadership to prevent the construction on Federal Motorway A 6 of the system temporarily permitting hard shoulder running. This will save €53 million. At present, the Bavarian roadworks administration is planning the upgrading to six lanes of Motorway A 6.

Federal Motorway A 73 from Baiersdorf-Nord to Erlangen-Nord
The roadworks administration planned an active traffic management system temporarily permitting hard shoulder running between the junctions Erlangen-Nord and Forchheim. The total cost of the system was to be €11 million.

We found several planning errors, as a result of which we questioned the construction of the system on the motorway section between the junctions Baiersdorf-Nord and Forchheim.

The Federal Transport Ministry reviewed the plans and approved them with the appropriate modifications. Savings of €3.4 million will thereby be achieved.

Our audits generated savings on adaptive traffic control systems in the total amount of €56.4 million.

 

2016 Annual report Volume I No. 20 - Booming tourism sector's funding share in the German National Tourist Board needs to be increased

The German National Tourist Board has the task to market Germany internationally as a travel destination. The Ministry provides annual funding of €30 million to support the German National Tourist Board and thus constitutes its major and almost only funding source. Although the German tourism sector is booming, tourist industry merely contributes 2.5 per cent of funding. However, the German National Tourist Board could do more to generate revenues. We expect the Ministry to develop a new funding strategy for the German National Tourist Board. In particular, the tourist industry’s funding share should significantly be increased and federal budget support should be reduced accordingly.

The Federal Ministry stated that the number of nights foreign guests spent in hotels and similar establishments showed that the German tourism sector was booming. The Ministry has lead responsibility for designing the tourism policy of the Federal Government. The lead responsibility to further develop tourism and to promote German travel destinations lies with the federal states. It is the Federal Government’s task to put in place the required framework for tourism in Germany. The Ministry supports marketing Germany as a travel destination at an international level. Such initiatives are managed by the German National Tourist Board, which was founded in 1948. Members of the German National Tourist Board are mainly tourism sector companies, industry stakeholders and retailers.

Federal Government is almost the only funding entity supporting the German National Tourist Board, whereas board members merely contribute 2.5 per cent of funding (2015). The German National Tourist Board also used federal funds where alternative sources of funding would have been available. The Board did not always calculate costs of its services in a transparent manner. In addition, the Board co-funded marketing measures initiated by the federal states although such measures are in the sole interest of the federal states.

We believe that this high level of funding is no longer reasonable under current conditions. We expect the Ministry to develop a new funding strategy according to which the German National Tourist Board

  • significantly increases contributions of its members enabling the Federal Government to reduce funding accordingly and
  • uses federal funds efficiently to achieve cost recovery and to pay due regard to the responsibilities of federal government and federal states.

 

2016 Annual report Volume I No. 43 - Delays and reconstruction of a federal road to be downgraded unduly burden the federal budget with €3.4 million

The State of Saxony-Anhalt belatedly downgraded a federal road to state road, thereby unduly burdening the federal budget with expenditure of €1.7 million. Also, the State unduly apportioned to the Federal Government further costs of €1.7 million for the reconstruction and expansion of the road.

Two sections of the new federal road (B) 6n in Saxony-Anhalt replace the old federal road B 6 with the cross-town link through Wernigerode. They were opened to traffic in 2002-2003. The Federal Government and the State had agreed to downgrade the cross-town link to a state road at the beginning of the subsequent year. This was in line with legal requirements. As a consequence, the maintenance of the road would have been incumbent on the State rather than the Federal Government.

The State downgraded the road as late as in 2011, i.e. seven years later. We estimated that the Federal Government had to pay at least €1.7 million in maintenance costs in the period 2004-2011. We demanded that the Federal Government reclaim this amount from the State.

In addition, the State apportioned to the Federal Government further costs of €1.7 million for the expansion of the cross-town link. The State built such amenities as a roundabout and a cycling lane. We hold that the State was entitled to make up for omitted maintenance work at the Federal Government’s expense. However, this does include reconstruction and expansion. We demanded that the Federal Government also reclaim these €1.7 million from the State.

The Federal Ministry of Transport and Digital Infrastructure acknowledged the facts described above. It did not comment on the demand for repayment of the amounts in question. We affirm our view that the Federal Ministry has to reclaim €3.4 million from the State.

 

2016 Annual report Volume I No. 50 - Inadequate federal oversight over the recovery of excess payments of parental allowance

The Federal Ministry for Family Affairs, Senior Citizens, Women and Youth has inadequately overseen the way in which the local parental allowance offices recover parental allowance unduly paid. The parental allowance offices used the prescribed federal payment monitoring system inconsistently or not at all. The Ministry is therefore not aware of the amount of recoverable allowance payments.

The federally funded parental allowance is to financially support parents after childbirth. The German states execute the Federal Act on Parental Allowance and Parental Leave and have assigned this task to different authorities (parental allowance offices). These offices must claim the repayment of parental allowance unduly paid and record each recovery claim in the Federal Government’s payment monitoring system. The Federal Ministry for Family Affairs, Senior Citizens, Women and Youth and the states have to exercise oversight so as to ensure that the parental allowance offices correctly execute the Federal Act on Parental Allowance and Parental Leave.

We found that the Federal Ministry exercised only inadequate oversight over the recovery of unduly paid parental allowance. It had failed to agree minimum oversight standards with the states. The Federal Ministry was not aware of the fact that parental allowance offices used different and inefficient recovery procedures. The offices used the prescribed federal payment monitoring system inconsistently or not at all. The Federal Ministry is therefore not aware of the amount of existing claims for the recovery of unduly paid parental allowance.

We demanded that the Federal Ministry take steps to ensure that all parental allowance offices correctly record the recovery claims in the federal payment monitoring system. Moreover, the Federal Ministry needs to improve its oversight and develop minimum oversight standards in conjunction with the states.

 

2015 Annual report No. 83 - VAT control procedures – simplifications for tax authorities and traders

Traders have to declare their intra-Community deliveries in two VAT returns with different filing deadlines. Amalgamating the declarations with a unified filing deadline would substantially simplify the procedure. We see a considerable potential for reform in this field. The Federal Finance Ministry should exploit this potential and, in conjunction with the states, enable the procedure to be simplified for both the tax authorities and the traders.

Traders have to declare their deliveries of goods within the European Union in recapitulative statements. In addition, they have to declare their intra-Community turnovers in preliminary VAT returns. We found that the double duty to declare has been an additional administrative burden on both tax authorities and traders. Due to different filing deadlines and declaration periods, the tax offices were unable to effectively match the information in the returns and counteract losses of tax revenue. We therefore have for years advocated an amalgamation of the returns. When auditing this issue again in 2015, we found that there were no plans for implementing any reform proposals.

We noted that no reform has been implemented in spite of extensive preparatory work.

The Federal Finance Ministry stated that, in conjunction with the states it had decided against a reform for financial management reasons. Certain VAT payments would be received later, if filing deadlines were postponed. Moreover, a reform would result in shifts between financial years since receipts of payments would have to be entered into the accounts after yearend.

In our opinion, the arguments of the Federal Finance Ministry do not justify abandoning any reform efforts. According to our findings, the delay in the receipt caused by different filing deadlines would not exceed three weeks. The financial advantages of such a reform would clearly outweigh the disadvantages stemming from the delay in VAT receipts. Given the importance of intra-community trade for Germany, an effective VAT control procedure in the Single Market is of major importance for the German treasury. A reform could address weaknesses and counter-act losses of tax revenue.

Concerning the shifts between financial years cited by the Federal Ministry of Finance it needs to be taken account, taking a multi-year perspective, tax revenue does not decline. The reform could be designed so as not to jeopardize compliance with the constitutional debt limit in the year when the procedure is changed. We therefore hold that potential shifts between financial years are no reason for fully abandoning the project of uniform filing deadlines. Rather than that, the Federal Finance Ministry should liaise with the states to look for a solution that realizes as much reform potential as possible without leading to unacceptable shifts within financial years.

 

2015 Annual report No. 70 – “Federal/state loan” is inefficient: €14 million of additional expenditure for the Federal Government

For the first time, the Federal Government and ten states jointly issued a “federal/state loan” in the total amount of €3 billion in June 2013. This loan was to enable the states to incur debt at more favourable terms, thus relieving the burden on their budgets. This generated financial advantages for the states at the expense of the Federal Government.

During the currency of the loan, the Federal Government took up extra expenditure on interest and fees in the amount of €14 million. Conversely, the participating states obtained a financial advantage totalling €13 million.

We found that the loan was inefficient for the Federal Government in comparison to its regular borrowing. Moreover, since the states obtained savings at the expense of the Federal Government, the loan had the same effect as a federal grant to the states. This threatens to undermine the constitutional principle that the Federal Government and each state are separately responsible for their respective budgets.

The Federal Ministry of Finance has not considered the loan as financial assistance by the Federal Government to the states, arguing that, while the additional federal expenditure had financially benefitted the states, this was not due to a grant by the Federal Government.

We uphold our view that the loan has been inefficient. Even the savings from which the states benefitted do not fully compensate the additional federal expenditure. Constitutional principles also speak against the further use of this instrument. Therefore, the Federal Government should refrain from issuing further “federal/state loans”.

 

2015 Annual report No. 45 - Savings of more than €3.8 million by replanning bridges

Following our demands and those of the Federal Ministry of Transport and Digital Infrastructure, the Road Works Authority of the State of Lower Saxony changed its plans for federal motorway A 39. An underpass will not be built and two bridges will have a smaller size. This will generate savings of more than €3.8 million for the Federal Government.

The Road Works Authority of Lower Saxony planned several bridges and passageways for a new section of federal motorway A 39. For cyclists, it intended to have an underpass built under the motorway in little distance from a bridge with a cycle lane. A bridge for an unpaved farm truck was to become about 10 metres wide. A valley bridge 230 metres long was to overpass a small body of water. The Road Works Administration submitted these plans to the Ministry for approval.

We audited the plans assisted by our Hamburg field office. We showed that the additional underpass for cyclists was unnecessary and that, moreover, the planned bridges were oversized. For one of the bridges, the Ministry had come to the same conclusion.

The Road Works Administration followed our demands and those of the Ministry. It has meanwhile changed its plans. The changes of the construction plans will generate federal budget savings of more than €3.8 million.

 

2015 Annual report No. 44 - Savings of €3.7 million: junction Edisonstrasse in Kiel is not built

The Federal Ministry of Transport and Digital Infrastructure did not contribute €3.7 million towards the building of the junction Edisonstrasse in Kiel. Following our advice, the Ministry found that this access point to federal motorway A 21 was not necessary. The City of Kiel that had desired this junction eventually also waived its construction.

The Road Works Authority of the State of Schleswig-Holstein is planning the upgrading of federal road B 404 to become federal motorway A 21. It had the junction Wellseedamm built on the outskirts of Kiel. For the next section of the motorway, it planned a further junction Edisonstrasse. The distance between the two junctions was to be about 400 metres.

With the support of our Hamburg field office, we alerted the Ministry to methodological errors in the studies that evaluated the two junction projects. The studies could not substantiate the need for the Edisonstrasse junction. The Road Works Administration eventually found that the existing junction Wellseedamm can be easily upgraded. It would then be able to accommodate the transport of the planned junction Edisonstrasse.

In response, we informed the Ministry that federal funding for the junction Edisonstrasse was no longer needed.

The Ministry followed our recommendation. This saves the Federal Government building costs of €3.7 million. The City of Kiel, which originally had desired the junction, also chose not to build it.

 

2015 Annual report No. 43 - Road works authorities repay €1.5 million to the Federal Government

The States of North Rhine-Westphalia and Schleswig-Holstein charged the Federal Government excessive expenditure for the routine maintenance of federal long-distance roads. Following our audit, the two states repaid a total amount of €1.5 million to the Federal Government.

The road works authorities of the German states administer the federal long-distance roads on behalf of the Federal Government. The maintenance depots are responsible for the maintenance of federal roads, state and local roads. The respective expenditure is divided into direct costs and overhead costs. Depending on which authority is responsible for road works and maintenance, the costs have to be borne by the Federal Government, the regional or local government respectively.

The overhead costs cannot be directly allocated to any of the authorities responsible for road works and maintenance and is apportioned according to working hours. To do so, the authorities annually calculate the total of all paid working hours performed for maintenance of the three classes of roads mentioned. Then they identify the numbers of paid working hours attributable to the maintenance of federal roads, state roads and county roads. The ratio between the working hours performed and the total of all working hours determines the share of each authority responsible of road works and maintenance in the overhead costs.

Direct expenditure is divided into expenditure to be allocated either to exclusively the Federal Government or to the regional or local governments. Damages payable as a result of accidents of road maintenance vehicles on federal roads have to be borne by the states as direct expenditure. The same applies to accidents on federal motorways.

We found that the working hours apportioned by the Road Works Authority of North Rhine-Westphalia also included paid working hours performed on federal motorways. However, these are not part of the paid working hours apportionable to overhead expenditure. The Road Works Authority of the State of Schleswig-Holstein charged the Federal Government damages arising from accidents with road maintenance vehicles rather than apportioning such damages to the State. Therefore, the Federal Government paid excessive amounts for routine maintenance in both these cases.

We therefore demanded that the States of North Rhine-Westphalia and Schleswig-Holstein repay the expenditure inappropriately charged to the Federal Government. In response, North Rhine-Westphalia and Schleswig-Holstein repaid €1.1 million and €0.4 million respectively to the Federal Government.

 

2015 Annual report No. 40 - Federal Government saves up to €8 million for road works by means of cost sharing

Following our advice, the Federal Ministry of Transport and Digital Infrastructure and the constituent states have changed plans and shared the costs with third parties. Thus, the Federal Government will save up to €8 million.

Assisted by our field offices in Frankfurt on the Main and Stuttgart we found deficiencies in the planned construction projects at federal long-distance roads. The Bavarian Road Works Authority planned higher development standards for crossings in the by-pass of federal road B304 Altenmarkt without adequately examining less costly options. It failed to consider all cost-effective options in the construction of a new crossing of federal road 14 in Ansbach. The Road Works Authority of North Rhine-Westphalia planned three bridges and a municipal road broader than necessary in upgrading the federal road B224 into federal motorway A52. Furthermore, it provides for unnecessary noise abatement measures. Moreover, it accepted demands of a third party to build bridges with larger spans than required without sharing the costs with the third party.

We recommended examining cost-effective alternatives, to reduce the scope of new constructions and upgradings to a minimum and to share the costs of bridges with the third party.

The Federal Ministry of Transport and Digital Infrastructure and the road works authorities followed our recommendations and changed their plans accordingly. Compared to the previous plans, the Federal Government will save up to €8 million.

 

2014 Annual report – spring report No. 02 - Non-compliance with cost-sharing agreement for adaptive traffic control systems: refund claims of €9 million

The States of Schleswig-Holstein and Baden-Württemberg did not comply with the provisions of the cost-sharing agreement relating to adaptive traffic control systems. For years, they paid the personnel costs for the monitoring of the technical installations and for traffic regulation from federal funds, although they should have paid these costs from their own budgets. So far, the Federal Ministry of Transport and Digital Infrastructure has not been successful in obtaining the refund of €9 million from the two States. This amount is equivalent to the estimated personnel costs of the last ten years. The Federal Government could enforce its claim by setting off the amounts against payments it owes to the States.

The Federal Revenue Administration's Training and Knowledge Centre trains candidates for the higher intermediate customs service at the financial management science department of the Federal University of Applied Administrative Sciences. The Federal Finance Ministry issued a directive determining the working hours of full-time teaching staff. This directive also prescribes obligatory teaching hours, which are defined as the number of hours which the staff must, as a rule, spend on preparing, holding and following up on lectures.

The directive stipulates that obligatory teaching hours are reduced, if the teaching staff do other work. Such other work may include e.g. internal meetings or the supervision of exams. The list of types of work eligible for being credited to the total obligatory teaching hours includes 25 items. This reduced the actual teaching hours to the extent that overtime and the hiring of additional teaching staff was necessary to deliver training at the department of financial management sciences.

We objected to the fact that the Ministry’s directive listed more types of work creditable against the obligatory teaching hours than provided for in an agreement of the Conference of Education Ministers. We recommended revising the list.

In response, the Ministry revised the working hours regulation and reduced the number of types of work creditable against the obligatory teaching hours. In our opinion, this is not yet sufficient. Under the revised scheme, the number of actual teaching hours available in the department of financial management sciences is still smaller than provided for in the agreement of the Conference of Education Ministers. We therefore demanded that the Ministry proceed with its efforts to reduce the number of types of work creditable against the obligatory teaching hours.

 

2014 Annual report No. 58 - Reimbursement claim calculated too high: State of Thuringia refunds building grants of €650,000 to the Federal Government

Following our recommendation, the Building Ministry demanded the refund of cost reimbursements of €650,000 from the State of Thuringia. As we suggested, the Ministry also intends to promptly clarify open questions with the States of Brandenburg, Thuringia and Saxony-Anhalt concerning the cost reimbursement for decontamination and explosive ordnance disposal.

The Federal Government may enter into administrative agreements with the German states about the transfer of building construction tasks to the states. This also includes decontamination and explosive ordnance disposal.

The Federal Government made excess payments of €650,000 to the State of Thuringia as compensation for decontamination and explosive ordnance disposal carried out by the State. After we identified the excess payment, the Federal Government claimed the refund of the excessive reimbursement. The State of Thuringia acknowledged the claim and refunded the money to the Federal Government.

The Building Ministry also intends to follow our recommendation to improve the examination of the states’ invoices. Furthermore, it intends to promptly clarify, with the States of Brandenburg, Thuringia and Saxony-Anhalt, the open questions concerning the reimbursement of costs of decontamination and explosive ordnance disposal.

 

2014 Annual report No. 56 - Prevention of corruption in federal building projects in the State of Saxony is improved

Following our recommendation, the Saxon Ministry of Finance has taken steps to further improve the prevention of corruption in the procurement of building services for federal construction projects in Saxony. This will further impede manipulations in the awarding of building contracts.  

We found that the regulations on preventing corruption in the awarding of building contracts for federal construction projects in Saxony were largely complied with. However, omissions and infringements were found in a number of contract-awarding procedures. For instance, possibilities for manipulations were not precluded or the cross-check principle was not complied with.

These omissions were attributable mostly to inadequate knowledge of the regulations on corruption prevention, mistakes in implementing these regulations or organisational deficiencies. In addition, some of the regulations on the prevention of corruption are inadequately harmonised and can be misunderstood.

The Saxon Finance Ministry has acknowledged the audit findings and emphasized the importance of the regulations on corruption prevention. It took up our proposals and will improve corruption prevention measures. The Federal Ministry will consider a harmonization of the concepts used in the federal building regulations.

We consider the measures thus announced as an important step towards improving the prevention of corruption in the awarding of building contracts and towards eliminating uncertainties in the application of the relevant regulations.

 

2014 Annual report No. 46 - Road construction administration refunds €1.9 million to the Federal Government

The State of Brandenburg charged the Federal Government excessive expenditure on the routine maintenance of federal roads. Following our audit, the State of Brandenburg refunded €1.9 million to the Federal Government.

The road construction administrations of the German States manage federal long-distance roads on behalf of the Federal Government. The relevant staff of the road construction administration carry out the routine maintenance work on all federal, state and district roads within the state concerned. Routine maintenance especially comprises the inspection, maintenance and servicing of the roads. The respective authority responsible for road construction and maintenance has to bear the resulting costs. In the case of federal roads, funding is incumbent on the Federal Government. Where state roads are concerned, the respective state has to bear the costs. For the entire routine maintenance of federal, state and district roads, the road construction administrations annually establish a standard hourly wage rate. They have to calculate the percentages on the basis of the routine maintenance working hours for each road. The standard hourly wage rate is the basis for apportioning the expenditure to be charged to the individual authorities responsible for road construction and maintenance.

We found that the apportionment of hours worked as established by the Brandenburg road construction administration in the years 2006-2012 also included working hours not pertaining to routine road maintenance. The road construction administration did not notice this when establishing its annual charges to the Federal Government. Therefore, the Federal Government paid too much for the routine maintenance of federal roads in the State of Brandenburg.

We objected to this. In response, the State of Brandenburg recalculated the portion of routine maintenance costs to be borne by the Federal Government in line with our recommendations. As a result, it refunded €1.9 million to the Federal Government.

 

2014 Annual report No. 45 - Commissions and costs of building control unduly financed from federal funds: road construction administration refunds € 760,000

The road construction administration of the State of Baden-Württemberg unduly used federal funds of €760,000. It used these funds to finance commissions for the acquisition of land for federal long-distance roads and expenditure on building control. By our remonstrations, we achieved the refund of this amount by the road construction administration to the Federal Government.

The road construction administration of the State of Baden-Württemberg has federal long-distance roads built on behalf of the Federal Government. To do so, it manages federal funds.

The road construction administration commissioned a service provider to buy land for several federal road construction projects. It paid the €400,000 in commissions due to the service provider from federal funds.

In connection with the upgrading of an existing federal road, the road construction administration purchased a residential property adjacent to the new carriageway. It intended to accommodate its building control staff in that property during the road works. It also funded the purchase price of €360,000 from federal resources.

We pointed out that financing these two amounts were unduly financed from federal resources. We achieved that the road construction administration refunded the unduly used federal resources of €760,000 to the Federal Government.

 

2014 Annual report No. 44 - Uniform retention of accounting records pertaining to the construction of federal long-distance roads

The road construction administrations of the German States build and manage federal long-distance roads on behalf of the Federal Government. So far, the retention of the pertaining accounting records is governed by the respective regulations of each state. Following our recommendation, the Federal Finance Ministry has addressed this issue. In future, the Federal Transport Ministry will make sure that the states will uniformly apply the provisions of the Federal Budget Code on the retention of documents. This is to increase legal certainty and to avoid extra administrative burdens for the road construction administrations.

The road construction administrations of the German States build and manage federal long-distance roads on behalf of the Federal Government. To do so, they manage federal funds and are required to retain the pertaining accounting records. Different regulations apply to such retention.

The Federal Budget Code requires that all entities that manage federal funds comply with the federal regulations on retention of documents. Conversely, the Federal Transport Ministry advised the road construction administrations that the regulations of the respective state apply.

We have drawn the attention of the Federal Transport Ministry and the Federal Finance Ministry to the disadvantages of inconsistent regulations on the retention of the accounting documents. The Federal Finance Ministry took up our recommendation. It asked the Federal Transport Ministry to make sure that the states will in future comply with the provisions on retention laid down in the Federal Budget Code. This can avoid extra administrative burdens on the road construction administrations and increase legal certainty.

 

2014 Annual report No. 43 - Optimised planning of a bypass generates savings of up to €1.4 million

The Federal Transport Ministry demanded that the road construction administration of the Free State of Bavaria change its plan for the construction of the Dinkelsbühl bypass. By renouncing the bridge and reducing the size of the planned wildlife overpass, the Federal Government will save up to €1.4 million. The Federal Transport Ministry has thus followed our recommendations.

The Federal Government commissioned the road construction administration of the Free State of Bavaria to plan the new construction of the Dinkelsbühl bypass. Seven bridges were planned for this section of federal road B 25 which was 3.4 km long. One bridge was to reroute an existing road via the new bypass. In addition, a wildlife overpass was to enable bats to cross the new bypass without danger. The road construction administration did not consider more cost-effective alternative options.

We pointed out options for reducing the costs of the construction of the new bypass. Apart from an at-grade intersection as an alternative to the bridge, one option was to downsize the wildlife overpass. These measures can enhance cost-effectiveness and permit compliance with environmental standards.

The Federal Transport Ministry followed our recommendation. It promised to have the road construction administration revise the plan for the bypass. This will generate savings of up to €1.4 million for the Federal Government.

 

2014 Annual report No. 42 - Unnecessary adaptive traffic control system built on motorway A 14: State of Saxony-Anhalt refunds €700,000 to the Government

The State of Saxony-Anhalt had an unnecessary system for temporary hard shoulder running on federal motorway A 14 built at the expense of and without the consent of the Federal Government. Construction costs totalled €700,000. We successfully demanded that the State of Saxony-Anhalt refund this amount to the Federal Government.

In order to increase the traffic capacity of Federal Motorway A 14, the road construction administration of the State of Saxony-Anhalt planned a system for temporary hard shoulder running between the Schönebeck and Magdeburg-Reform junctions. The Federal Transport Ministry considered this system as unnecessary. Therefore, it did not approve the preliminary plan of the road construction administration and prohibited that the State’s transport ministry further pursue the planning and construction of the system.

Nevertheless, the State’s transport ministry ordered its road construction administration to have the system for temporary hard shoulder running built. The road construction administration financed the costs of €700,000 from federal funds. The Federal Transport Ministry was not informed of the construction of the system.

We asked the Federal Transport Ministry to recover the federal funds of €700,000 unduly used by the State. Meanwhile, the State of Saxony-Anhalt has refunded this amount to the Federal Government.

 

2014 Annual report No. 40 - Federal Government may save €10 million by not having a tunnel built

The road construction administrations of the States of Brandenburg and Berlin are planning a tunnel for mostly urbanistic reasons. The protection of local residents can be achieved without building a tunnel. The Federal Government may save €10 million by not having the tunnel built.

The tunnel is to be 150 metres long and is to be part of the planned Ahrensfelde bypass of federal road B 158. In the tunnel area, the route is to run closely past multi-storey residential houses. In the first planning stage, the Brandenburg road construction administration studied several options but discarded the tunnel option for financial and other reasons. However, the road construction administration eventually continued to plan for the tunnel option. The Federal Transport Ministry approved this plan. The tunnel is to reduce the partition of the neighbourhood which could result from the erection of noise abatement walls. However, the tunnel is not to be level with the adjacent ground but to stick out up to four metres. The road construction administration forecast that the proportion of trucks in the total traffic load would be 7 per cent in 2025. However, it calculated the noise abatement need on the basis of a standard proportion of 20 per cent laid down in relevant guidance. We objected to this. In response, the Federal Transport Ministry asked the road construction administration to recalculate the noise abatement need. Apart from that, the Ministry stated that the planned tunnel would vitiate the neighbourhood less than other solutions and therefore was advantageous.

We consider a ground-level option with noise abatement walls as sufficient. It would meet the legal requirements for noise abatement. After recalculation of the noise abatement need, the administration can reduce the vitiation of the residential neighbourhood concerned by using transparent noise abatement walls. The Federal Government may thus save €8 million in construction costs and another €2 million in maintenance costs.

 

2013 Annual report No. 80 - Taxation of interest income from private loans has been improved

The Federal Finance Ministry and Germany’s constituent states have created the prerequisites for improving the accuracy of the taxation of interest income from private loans. In response to our recommendation they simplified the income tax return form and intend to adjust the IT programmes for tax assessment accordingly. Moreover, the states provided intensive training for their tax inspectors.

Yields on private capital are subject to the final withholding tax of 25 per cent. To preclude the possibility that high-income taxpayers obtain an undue advantage in respect of this tax by granting private loans, the Legislature has provided for exceptions. Thus, interest income has to be taxed with the individual tax rate of up to 45 per cent where

  • the lender and the borrower are closely associated with each other and the interest expenditure generates operational expenditure or work related expenses of the borrower;
  • a loan is granted by a partner or shareholder to the partnership or company and where the lender holds at least a 10 per cent interest in the borrowing partnership or company.

We found that the tax offices frequently applied the final withholding tax rate of 25 per cent to interest income to which the higher individual tax rate should have been applied. We therefore recommended that:

  • Tax inspectors be once more instructed about the circumstances in which the individual tax rate and not the final withholding tax rate must be applied.
  • The schedule “capital assets” should be simplified.
  • To adjust the IT programmes to facilitate the identification of the exceptional cases by the tax inspectors.

The Finance Ministry and the states have taken up our proposals.

 

2013 Annual report No. 68 - Overhead funding for universities – limits of federal funding responsibility

The German Research Foundation grants overhead funding towards universities’ research programmes to co-finance there infrastructure. These overhead allowances are borne by the Federal Government alone, although the Foundation is jointly funded by the Federal Government and the state on a pro-rata basis. We have called upon the Federal Research Ministry to extend its overhead funding beyond 2015 only, if the states make an appropriate contribution. The Ministry should also substantiate the appropriateness of the overhead allowances.

The German Research Foundation gives grants towards universities by financing their personnel and material expenditure. Since 2007, they have additionally received overhead allowances of 20 per cent. Their purpose is to set off the burden on the infrastructure of universities.

We found that, in contrast to other grant-funding, overhead allowances are financed exclusively by the Federal Government. Neither during the negotiations for the Higher Education Pact up to 2010 nor in connection with its extension to its 2015 did the Federal Research Ministry succeed in securing a contribution from the states. Also, the Federal Ministry set the overhead allowance at 20 per cent without knowing whether the universities actually suffer this advantages which the Federal Government may compensate for at that level.

For the period beginning in 2016, the Federal Research Ministry intends to make an attempt to secure a contribution from the states. The Ministry claimed that it had obtained a declaration of intent according to which the states would accept their obligation to contribute and that there would be a study about the level of the overhead allowances which would look into their impact on the universities’ infrastructure.

In our opinion, the states’ declaration of intent is no clear funding commitment. We called upon the Federal Research Ministry to make any extension of the overhead allowances conditional upon a reasonable contribution by the states. We believe that, in the long term, it will not be in the best interest of the universities, if the states partially renege on their responsibility for the universities so that the latter become increasingly dependent on time-limited federal grants. To determine the appropriate level of the overhead allowances, we consider representative economic data necessary in order to identify the additional burden on infrastructure. We therefore demand that the study be aligned so as to generate appropriate results.

 

2013 Annual report No. 63 - Verification of income for determining the claim to parental allowance simplified

In response to our recommendation, the Federal Legislature simplified the calculation of the claim to parental allowance. The new regulations make it easier for the states’ units responsible for administering parental allowance to verify the incomes of the claimants and to accurately calculate the claims to the federally-funded parental allowance. This may also reduce the states’ administrative burden.

With the support of our field offices, we found that the units administering parental allowance had inaccurately assessed claimants’ net incomes in one third of all parental allowance cases audited. We attributed this to the complex provisions on calculating incomes. The staff of the units administering parental allowance often did not have the required knowledge of accounting and tax law for calculating net incomes accurately.

We repeatedly recommended that the Federal Family Affairs Ministry simplify, in conjunction with the states, the calculation of parental allowance. In 2012, the Legislature decided to facilitate the calculation of incomes. In the case of claimants who are employees, the parental allowance units calculate claimants’ net incomes by deducting lump sums for social security contributions and taxes. Self-employed claimants present the latest income tax assessment notice issued before the birth of the child to prove the amounts of their incomes. In our opinion, this legislative amendment considerably simplifies the work of the parental allowance units. The amended provisions contribute to the accurate administration of the Parental Allowance Act and the proper use of federal funds. Moreover, they may reduce the administrative burdens on the states.

 

2013 Annual report No. 62 - Reduction of administrative burdens: Amendment of advances on child maintenance

A major contribution to the reduction of administrative burdens may be achieved, if the statutory advances were no longer set off against claims to benefits under the basic security scheme for jobseekers, since such setting-off is cumbersome to administer. This would not affect the total benefit claims of single parents and their children. In our opinion, the Federal Family Affairs Ministry needs to step up its efforts to have the legal amendment enacted. The resulting shift of financial burdens between the Federal Government, the states and municipalities needs to be compensated.

The claim to basic security benefits for jobseekers, e. g. for subsistence and accommodation are subordinate to the statutory claim to advance payments for child maintenance. The latter claim is set off against the claim to basic security benefits. We have found that this involves unnecessary administrative burdens. We have estimated the related personnel and material costs incurred by states and municipalities at €160 million annually.

We believe that a major contribution to the reduction of administrative burdens may be achieved by abolishing the setting-off of the statutory claims to advance payments for child maintenance against the claims to basic security for jobseekers. Only children that do not have a claim to basic security for jobseekers (and their dependents) should be entitled to advance payments for child maintenance. This arrangement would not affect the aggregate benefit claims of single parents and their children.

The Federal Family Affairs Ministry has acknowledged the large administrative burden the present arrangement places on states and municipalities. It has stated its intention to arrange for a legislative amendment concerning the statutory claim to advance payments on child maintenance in the long to medium term.

We hold that the Ministry needs to pursue such legislative amendments with greater urgency. The resulting shift of burdens between the Federal Government, the states and municipalities must be compensated.

 

2013 Annual report No. 59 - Prevention of corruption and control of the use of grant funds improved

In response to our recommendation, the Federal Health Ministry and the State of Hesse will impose effective rules designed to prevent corruption on a jointly funded research institute. Moreover, the Federal Health Ministry and the State of Hesse agreed that the latter will audit the expedient and cost-effective use of funds in line with prescribed standards.

Together with the State of Hesse, the Federal Health Ministry gives grants to a scientific research institute which tests new methods for the treatment of cancer and AIDS. Both the Federal Government and the State give institutional grants. Under the funding agreement between the Federal Government and the State of Hesse, the research institute is obliged to apply Hesse’s regulations for corruption prevention and the State has to audit the documents proving the use of the grant funds.

We found that the Hessian rules for corruption prevention are limited to an administrative regulation about accepting rewards and gifts. No obligation was imposed on the research institute to implement other important measures of corruption prevention, e.g. the transparency of contract award procedures and the rotation of staff in areas that are particularly vulnerable to corruption. The Federal Health Ministry tolerated this and did not impose regulations of its own concerning corruption prevention. Furthermore, the Federal Health Ministry had accepted that the State of Hessen had the documents proving the use of the grant funds audited by a private-sector auditor commissioned by the research institute.

The Federal Health Ministry concurred with us in that corruption prevention and the audit of the documents proving the use of funds need to be improved. Both the Federal Government and the State of Hessen will oblige the research institute to comply with the Federal Government Directive concerning the Prevention of Corruption in the Federal Administration. This Directive specifies measures of corruption prevention for all important fields of activity. Moreover, the Federal Health Ministry and the State have agreed on the provisions that apply to the member institutions of the Leibniz Association with respect to the back-up documentation of the use of grant funds. These institutions have to comply with an extensive set of standards for proving and auditing the use of funds.

 

2013 Annual report No. 46 - Administrative costs overcharged: Federal Government claims refund

Following our recommendation, the Federal Building Ministry has claimed the refund of overcharged administrative costs in the amount of €0.6 million from the Free State of Saxony. Moreover, the Ministry intends to take up our suggestion that, for the sake of legal clarity, the Federal Government should agree with the states that, in connection with building work carried out by the states on behalf of the Federal Government, neither party shall invoke a statute of limitation in connection with compensation for administrative expenses.

The Federal Government paid €0.6 million too much in compensation for the performance of federal building tasks by that state. When we discovered the excess payment in the course of our audit, the Federal Government set off its claim to a refund from the state against compensation claims of the state. The state objected to the setting off because it was of the opinion that the federal claim was forfeited due to a statute of limitation. The Federal Building Ministry rejected the argument that the claim was statute-barred. The Ministry was of the opinion that the statute of limitation laid down in the Civil Code was not applicable arguing that the relation between the two parties of the agreement was not that of separate legal entities.

The Federal Building Ministry insists on setting off the refund claim. It also has taken up our suggestion to negotiate with the states, for the sake of legal clarity, about a mutual raver of the statute of limitation.

 

2013 Annual report No. 45 - Overloaded road transport of building materials

In respect to our recommendation, the Federal Transport Ministry induced the road construction administrations of the states to step up its monitoring of compliance with weight limits for transport vehicles on building sites of federal long-distance roads. This will avoid unnecessary costs of repairing to federal long-distance roads damaged as a result of overloading of vehicles. We had repeatedly pointed out the adverse effects of overloaded vehicles transporting building materials.

The building materials needed on road construction sites are usually transported by simple lorries/trucks or tractor-trailers. The maximum permissible gross laden weight of such vehicles may not exceed 40 (metric) tons.

During our audits, we found that the gross weight of transport vehicles on building sites of the road construction administrations often exceeded the permissible maximum. Individual delivery and weight notes indicated gross weights of up to 58 tons. We pointed out that overloaded transports cause considerable damage to roads and bridges. We recommended that the road construction administrations take stricter action against overloaded transports of building material.

The Federal Transport Ministry followed our recommendations and issued guidance to the states’ road construction administrations, urging them to clarify by appropriate provisions in the building contracts that transport vehicles may not exceed the permissible maximum weight and that overloading will be reported as an administrative offence which carries a penalty.

 

2013 Annual report No. 44 - Optimised construction of the Kramer Tunnel: millions saved and safety risks reduced

In response to our recommendation, the Federal Transport Ministry and the road construction administration of the Free State of Bavaria had initially built only the rescue tunnel for the Kramer Tunnel near Garmisch-Partenkirchen. The knowledge thereby generated about the difficult geological and hydrological conditions of the Kramer Massif is now used to determine the method of construction of the main tunnel. Thus, costs of several millions of euros will be saved and safety risks will be reduced.

On behalf of the Transport Ministry, the road construction administration of the Free State of Bavaria is planning the Garmisch-Partenkirchen bypass, which will be routed west of the town through a tunnel underneath the Kramer Massif at a length of 3.6 km. The Kramer Tunnel is to consist of a single-tube main tunnel and a rescue tunnel passable for vehicles. The road construction administration planned to invite tenders jointly for both tunnels. It intended to start with the construction of the rescue tunnel. Work on the main tunnel was to start as early as four months after that.

We audited the construction project with the assistance of our Stuttgart field office. We found that, owing to inaccessibility of the Massif, the road construction administration did not know the geological and hydrological conditions for the whole length of the tunnel. We considered it likely that geological fault zones, loose stone layers or ground water would impair the works and endanger the workers. The road construction administration would have neither been able to take regard to such factors when inviting tenders for the main tunnel nor when deciding about the construction method.

We urged the Transport Ministry first to invite tenders only for the construction of the rescue tunnel. The road construction administration was to use the knowledge gained about geological and hydrological conditions to determine the method of construction of the main tunnel and to make a detailed estimate of the building costs.

The Transport Ministry and the road construction administration complied with our demand. This resulted in cost savings in the range of millions of euros and a reduction of the safety risk.

 

2013 Annual report No. 43 - Follow-up audit of the structural conversion of a crossing leads to reimbursement

Our follow-up audit led to the refund to the Federal Government of €420,000 by the road construction administration of the State of North Rhine-Westphalia. The said administration had failed to timely and completely claim financial contributions from the State and the municipality concerned towards the costs of the structural conversion of a crossing.

The road construction administration of the State of North Rhine-Westphalia had a crossing of federal road B 239 in the town of Detmold converted at a cost of €800,000. The crossing links a state road and a municipal road with the federal road. The apportionment of the conversion costs is governed by the Federal Trunk Roads Act. Already in 2008, we alerted the road construction administration to deficiencies in the apportionment of the costs. We had found that, contrary to the Federal Trunk Roads Act, the road construction administration had not charged parts of the costs to the municipality and the State. At that time, the road construction administration had promised to do so retroactively.

With the support of our Stuttgart field office, we conducted a follow-up audit in 2011 to ascertain whether the road construction administration had done as promised. We found that the road construction administration had neither apportioned costs for a traffic light system nor value-added tax. Moreover, it delayed claiming the financial contribution from the municipality by more than one year. We urged the road construction administration to correct the erroneous apportionment and to refund the amounts unduly charged to the Federal Government.

The road construction administration complied with our demand and refunded €420,000 to the Federal Government.

 

2013 Annual report No. 42 - No construction of an unnecessary traffic control system at a cost of €4 million

In response to our recommendation, the road construction administration of the State of Schleswig-Holstein waived the construction of an unnecessary adaptive traffic control system on federal motorway A 1 near Lübeck, which was to cost €4 million.

In the Lübeck area, federal motorway A 1 has six lanes. The Schleswig-Holstein road construction administration planned the construction of an adaptive traffic control system with a length of 11.2 km on this motorway section. It estimated the construction tests at €2.3 million. Adaptive traffic control systems are to safely control the flow of traffic in line with the current traffic load.

Our Stuttgart field office supported us when we examined the planning of the adaptive traffic control system in 2012. We found that the Schleswig-Holstein road construction administration had not taken into account construction costs of €1.7 million. In addition, the road construction administration had based its investment appraisal on obsolete data about accidents and congestions on the motorway section concerned.

Following our advice, the road construction administration re-examined its estimates and came to the conclusion that an adaptive traffic control system on A 1 in the Lübeck area is unnecessary because it did not improve the traffic flow.

 

2013 Annual report No. 41 - Misuse of federal budget funds for state road upgrade: Brandenburg reimburses more than €3 million to Federal Government

In response to our advice, the Brandenburg road works administration has reimbursed an amount of more than €3 million to the Federal Government. Brandenburg commissioned a widening programme for a road that it had downgraded from federal to state level before.

In the year 2000, the Federal Highway Research Institute (Institute) included a section of the federal trunk road no. B 115 into a research project in the field of road safety. The planning for the necessary construction of fast lanes and the road surface dressing was done by the Land of Brandenburg. It was not finalised before 2003.

In the same year, the Federal Ministry of Transport agreed with the road works administration on downgrading the respective section of the B 115 to state level as it was no longer used by long-distance traffic. As from 2004, the responsibility for road construction and maintenance and all related tasks were delegated to the Land.

In 2004 and 2005, the road works administration had the road widening programme carried out as planned and charged the related expenditure totalling €3.26 million to the Federal Government. The administration assumed that construction costs for the research project were still borne by the Federal Government even if it did no longer fund construction and maintenance.

We criticised that the administration had used federal budget funds to widen a road that had been downgraded to state level. The widening programme was not necessary for federal mission performance. In response to our advice on this topic, the road works administration reimbursed the construction costs amounting to €3.26 million to the Federal Government in 2012.

 

2013 Annual report No. 39 - Proposed noise protection wall virtually ineffective

A road works authority plans to build a noise protection wall worth €900,000 which would be nearly ineffective. We demanded that the Federal Ministry of Transport, Building and Urban Development ensure that federal budget funds earmarked for noise protection are used effectively and efficiently.

In the Bavarian municipality of Diedorf, the road works authority intends to build a noise protection wall for residents living near a new federal trunk road to be constructed. While the wall would protect residents from road noise, it would not block out the much louder train noise coming from an adjacent railway line.

The road works authority tried in vain to develop a noise abatement plan in cooperation with the federally owned Deutsche Bahn AG to adequately protect residents from train noise. Deutsche Bahn gave noise protection investment at other locations higher priority.

We advised the Ministry that the proposed noise protection wall was inefficient as its enormous costs were not matched by any appropriate benefit. We expect the wall to be constructed at a site where it will yield maximum benefit for residents and protect them from both road and railway noise. The Ministry should take leadership to help ensure that the Deutsche Bahn AG build the wall between the railway line and the residential buildings.

 

2013 Annual report No. 17 - Protection of the population on a national scale requires better planning and legal bases

The separate responsibilities of the Federal Government for civil protection and of the states for disaster preparedness impair effective arrangements for the protection of the population. In 2002, the Federal Government and the states decided to pool civil protection and disaster preparedness under the umbrella of protection of the population. Although more than ten years have passed since then, no conclusive strategy has been developed. Relevant legislation is needed for ensuring effective protection of the population.

Civil protection in the state of defence or tension is incumbent on the Federal Government. The states fulfil this function by delegation from the Federal Government, which provides part of the equipment and supplies. In the years 2010-2012, the annual expenditure on this totalled more than €30 million. Preparedness for disasters such as floods is incumbent on the states. The Federal Government will provide assistance on request but does not have operative powers in this field. The states have to fund disaster preparedness programmes. In 2002, the Federal Government and the states agreed on the New Strategy for the Protection of the Population in Germany in order to ensure nationwide protection of the population.

We found that the distinction required by the Constitution between civil protection and disaster preparedness is difficult in practice. In the field of civil protection, the Interior Ministry provides the states with supplementary equipment and supplies without having complete information about the states’ human and material resources in the field of disaster preparedness. Furthermore, the Federal Government maintains a situation centre with a large staff, in spite of the fact that it does not have operative powers even in case of disasters on a national scale. In the latter case, there is a particular risk that it will be impossible to effectively pool information and coordinate resources nationwide. On the other hand, the states are under no obligation to cooperate and to inform the Federal Government about disasters. Ultimately, there is a lack of risk analyses and of an overall federal-state strategy for the protection of the population.

We pointed out the need to create the planning and legal bases for the effective protection of the population. The responsibility of the Federal Government and the states is no longer to be determined by the cause of a disaster. In particular, we suggest that the Federal Government and the states use overarching scenarios as basis for analysing the risks to the population, pooling their resources and develop an overall strategy for the protection of the population. We hold that a fundamentally improved cooperation between the Federal Government and the states in the field of nationwide protection of the population will be possible, once the constitutional distinction between civil protection and disaster preparedness is abolished.

 

2012 Annual report – spring report No. 05 - Waiver of a planned tunnel for a federal road would permit savings of at least €12.7 million

In our opinion, the construction of a tunnel by which the federal road B 304 is to cross below a municipal road near Reitmehring is unnecessary. The crossing of the two roads can be designed so as to achieve traffic safety and effectiveness, if the crossing area is flattened and provided with a lane for turning traffic and a traffic light. If this option is adopted, the Federal Government will save at least €12.7 million.

Federal road B 304 runs parallel to the federal motorway A 8 between Munich and Salzburg and connects regional centres such as Ebersberg, Wasserburg and Traunstein. Near Reitmehring, a village belongs to Wasserburg; B 304 crosses a municipal road. In 2004, the Bavaria State construction administration planned to make the crossing saver and increase its capacity for traffic. To do so, the area of the crossing was to be flattened and the crossing was to be provided with lanes for turning traffic and with traffic lights. Moreover, the plan called for a flyover by which B 304 was to cross the nearby railway line. These measures were to cost €8 million.

For reasons connected with urban development, the Town of Wasserburg objected to this plan. In response, the road construction administration waived this option and instead planned for a tunnel with a length of 130 metres by means of which B 304 was to cross below the municipal road. According to the Federal Transport Ministry, this variant would cost €20.7 million plus €0.1 million annually for operating and maintaining the tunnel. The Ministry approved this plan 2012 on grounds that this crossing was an accident black spot. Moreover, it was argued that B 304 connected the metropolitan area of Munich with supra-regional centre Salzburg and took evasion traffic as long as motorway A 8 was not upgraded to six lanes.

In our opinion, building a tunnel is unnecessary. The accident statistics do not show that the crossing is an accident black spot. B 304 connects regional centres and not metropolitan areas or supra-regional centres. The assumption of evasion traffic is not substantiated and is irrelevant for the upgrading of the federal road. Even as late as in 2008, the road construction administration had crossing with traffic lights built on B 304 at the Ebersberg bypass. We therefore asked the Federal Transport Ministry to withdraw its approval of the tunnel construction. The Federal Government would thus save at least €12.7 million. If the Town of Wasserburg and the State of Bavaria insists on the previous plan for reasons of urban development, they will have to bear the additional costs of construction and maintenance.

 

2012 Annual report No. 56 - City-State of Bremen repays €0.5 million to the Federal Government for building construction projects

The Federal Government paid too much to the City-State of Bremen for construction projects. Following our recommendation, the Federal Building Ministry demanded a refund from the City-State. As a result, €0.5 million were returned to the federal budget.

As remuneration for federal building projects, the Federal Government made unjustified payments of about €0.5 million to the City-State of Bremen during the years 2002-2006.

The City-State had set up a federal building division for the execution of construction projects within the remit of the Federal Government. According to an agreement with the City-State, the Federal Government was to assume the resulting personnel costs. However, less staff was employed within the division than had been stipulated in the agreement.

Based on our audit findings, the excess payments were returned to the federal budget.

 

2012 Annual report No. 53 - €8.8 million refund for route inspections at federal long-distance roads

The Hessian road construction administration wrongly charged the federal budget for the costs of route inspections at federal long-distance roads. The accumulated refund claim for nine years totals €8.8 million. In response to our advice, the Federal Transport Ministry claimed this refund from the road construction administration.

The road construction administrations of the German states operate and maintain federal motorways and federal roads (federal long-distance roads) on behalf of the Federal Government. In performing these functions, they carry out route inspections especially to identify damage and obstacles. The costs of route inspections are borne by the states, while the Federal Government funds the costs of maintenance and repair.

We found that the road construction administration of the State of Hessen did not carry out road inspections separately but usually together with maintenance work. It funded both the costs of route inspection and route maintenance from federal resources.

We objected to this practice. A distinction must be drawn between route inspection and route maintenance. The Federal Government can only be charged for the maintenance work actually performed. According to our calculations, the road construction administration thus inappropriately charged the Federal Government €8.8 million in the years 2003-2011.

With reference to our audit findings, the Federal Transport Ministry has claimed a refund of €8.8 million from the road construction administration within a specified deadline. The Ministry reserved the right to set off its refund claim against reimbursement claims of the road construction administration. Moreover, the Ministry demanded that the road construction administration ensure, retroactively from 1 January 2012, that the Federal Government is neither charged the personnel costs for route inspection nor the related material costs.

 

2012 Annual report No. 50 - Upgrading of a state road wrongly financed from federal funds: road construction administration refunds €1.2 million

The North Rhine-Westphalia road construction administration upgraded state road L 288 near Lohmar in connection with the reconditioning of the crossing with federal road B 484. It used federal funds to pay construction costs of €1.2 million for the upgrading of L 288. We objected to this funding mode. There is no legal basis that would require the Federal Government to pay for this work. The road construction administration repaid this amount to the Federal Government.

The road construction administration of the state of North Rhine-Westphalia reconditioned the Lohmar bypass of federal road B 484. In the course of this construction project, it adapted the crossing of federal road B 484 with federal road B 507 and state road L 288 to the new bypass. In connection with this work, the road construction administration upgraded state road L 288 on a length of 1 km at a cost of €1.2 million. It increased the number of lanes from two to three, rehabilitated a bridge, and built a noise abatement wall and a concrete guide wall.

We objected to the charging of the costs of upgrading state road L 288 to the Federal Government. While the latter must take up a share of the costs to the extent that they have been incurred on the crossing or its immediate vicinity, the upgrading work on state road L 288 does not belong to this area.

We demanded that the road construction administration refund the costs for upgrading state road L 288 to the Federal Government. The road construction administration did so and repaid €1.2 million to the Federal Government.

 

2012 Annual report No. 48 - Mistakes in cost allocation for the construction or reconditioning of crossings between railway lines and roads

The road construction administrations of the German states inaccurately accounted for projects involving the construction or reconditioning of crossings between railway lines and roads to the disadvantage of the Federal Government. Based on our findings, the states repaid €3.4 million of federal funds which the Federal Government had paid too much. In exercising its technical oversight, the Federal Transport Ministry must make greater efforts to ensure that construction projects will in future be accurately accounted for.

The Federal Government takes up a share of the costs for the reconditioning, dismantling or new construction of a crossing between railway lines and roads. Each year, it spends about €90 million for this purpose.

We found that the road construction administrations frequently made errors in cost allocation, calculating the Federal Government’s share in the costs inaccurately. Thus they inappropriately charged the Federal Government more than €4.4 million. Based on our findings, they have refunded more than €3.4 million to the Federal Government and are considering further refunds.

We recommended that the Federal Transport Ministry simplify the compact rules for cost allocation and cost accounting. Furthermore, we demanded that the Ministry monitor the states’ road construction administrations more closely in exercising its powers of technical oversight. The Ministry is of the opinion that an adjustment of internal administrative regulations would require amendments of several Acts of Parliament.

We uphold our opinion that a simplification of the complex rules is desirable. As long as this is not done, we think it imperative that the Ministry step up its technical oversight over the states’ road construction administrations. It should urge the road construction administrations to accurately account for construction projects in connection with rail-road crossings. Furthermore, we recommend that the Ministry inform the states’ road construction administrations about the lessons that can be learnt from our audit findings so that these take corrective action and do not repeat errors.

 

2012 Annual report No. 29 - Federal Employment Agency must discontinue the funding of professorships

The Federal Employment Agency funds professorships at various German universities staffed by personnel of the Agency’s Institute for Employment Research. This funding practice is incompatible with the division of responsibilities laid down in the German Constitution. Neither are these expenditures necessary to fulfil the research tasks of the Federal Employment Agency. We demanded that the funding of the professorships be discontinued. There are other ways to benefit from scientific cooperation with universities.

Since 2008, the Federal Employment Agency has funded university professorships in various German states. All professorships are staffed by managers or other personnel of the Agency’s Institute for Employment Research.

We objected to the lack of a legal basis that would permit the Agency to fund professorships. According to the German Constitution, the Federal Government may fund scientific and research projects at universities only, if it concludes an agreement to this effect with all German states.

In addition, we objected to the Agency’s practice of funding professorships for staff of its own research institution from contribution revenues. The expenditures were unnecessary because existing cooperation arrangements with universities already permitted comprehensive scientific cooperation. Moreover, the requirements imposed and the strong influence exerted by the Agency with respect to the selection procedure show that its main motive is to promote its own staff.

The Agency should discontinue the funding of university professorships. There are other ways not implying an infringement of the Constitution by which the Agency can benefit from cooperation with academia.

 

2012 Annual report No. 03 Inadequate federal oversight over the execution by the German states of laws on monetary benefits

Several federal ministries have failed to effectively oversee the execution of laws on monetary benefits by Germany’s constituent states. They have not taken the necessary steps to ensure that the states regularly carry out sample checks to monitor the work of the agencies responsible for awarding benefits. This facilitated high error rates and led to excess payments. The federal ministries do not have a sound notion about the requirements of appropriate federal supervision and of the way in which this function was to be performed. No inter-ministerial guidelines on the performance of this function were in place.

In 2010, we audited federal oversight over the execution of laws on monetary benefits by Germany’s constituent states. Laws covered by our audit were the Conscripts and Dependents Maintenance Act, the Housing Benefit Act and the Federal Parental Benefit Act. Federal oversight over the administration of these benefits is incumbent on various federal ministries. It is their job to monitor the legality and expediency with which the states implement the legislation.

We found deficiencies in federal oversight. The review of samples of benefit awards for the maintenance of conscripts and their dependents revealed that more than one third of the benefit award decisions contained errors. We also found similarly high error rates in the processing of applications of self-employed persons for housing benefit and with parental benefit. These shortcomings resulted in avoidable extra expenditure for the federal and the state budgets. The federal ministries did not make sure that the states regularly monitored the activities of their benefit award agencies by means of random checks. The federal ministries only had isolated information about the procedures and quality of the benefit awarding agencies’ work; e.g. where third parties approach them with complaints or petitions. Moreover, the sponsoring departments were uncertain about the scope of their rights and duties of oversight over the states. There were neither administrative instructions nor any other guidance in place to define the requirements for effective and appropriate federal oversight and how this function was to be discharged.

We called upon the federal ministries to ensure the monitoring of the work of the states’ benefit awarding agencies by means of regular random checks. We recommend sharing more information and lessons learnt with the states. Moreover, we expect the Federal Interior Ministry and the other federal ministries to develop common inter-ministerial guidance for the exercise of federal oversight. We recommend that the project organisation necessary for doing so be set up without delay.

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