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Modernising the administration

2016 Annual report Volume II No. 12 - Lump-sum simplifies administrative procedure

In response to our recommendation, the Federal Ministry of Labour and Social Affairs has considerably simplified the procedure for reimbursing administrative costs to the German Pension Fund. Since 2016, the accounting for and reimbursement of administrative costs, which constitutes a large administrative burden, was replaced by a lump-sum whose amount is to decline from year to year.

Claims and accrued rights under the supplementary and special pension schemes (extra schemes) of the former German Democratic Republic are to be transferred to the statutory pension insurance scheme. The extra schemes covered e.g. full-time staff of political parties and members of the National People’s Army. The Federal Government reimburses the administrative costs caused by the transfer to the German Pension Fund.

We found that the German Pension Fund did not submit the respective accounts on time. Moreover, we pointed out that the administrative costs have declined significantly over recent years. We recommended that the reimbursement procedure be replaced by a lump-sum, to be reduced from year to year in line with the diminishing administrative work.

The Ministry took up our recommendation and made new arrangements for reimbursement. Effective from 2016, a lump-sum has been paid. Its initial amount was €10 million and it will be reduced by €0.5 million each year.

 

2015 Annual report No. 5 - More inter-agency benchmarking needed

The Federal Government has failed to establish benchmarking, which is called for in the German Constitution, as an effective tool for administrative modernisation. It needs to make more use of benchmarking to compare the performance of federal administrative entities so that the best practice principle leads to efficient government operations.

In 2009, the Legislature amended the German Constitution so as to provide for inter-agency benchmarking. This tool may trigger a competition for innovative solutions. Moreover, it may strengthen parliamentary oversight.

In response, the Federal Government included benchmarking as a project in its Transparent and Network-Based Administration programme. Benchmarking both within the federal administration and with the administrations of the German states aimed at developing best practices and to contribute to a continuous improvement process. Up to 2013, each ministry was to take part, where possible, in at least one benchmarking exercise involving several authorities and looking into the same function (benchmarking group).

Up to mid-2015, a benchmarking group on continued training was launched in the federal administration. Two federal ministries and three agencies subordinate to other ministries took part. In another benchmarking group on occupational health management, one federal ministry was the only participant from the federal government level together with state administrations. No best practice proposals came forward.

We noted that the Federal Government did not make adequate use of benchmarking in the past six years. It did thus not make use of the options from the Legislature. We attribute this insufficient number of participating entities to a reluctance of the ministries and agencies to face comparison.

We therefore recommended that more use of benchmarking be made to improve the efficiency of government operations. This would be worthwhile especially for horizontal functions with large caseloads (e.g. processing claims for the reimbursement of travel expenses).

 

2013 Annual Report - spring report No. 10 - Electronic communication of notarial deeds to tax offices is long overdue

Up to the present, notaries are obliged to forward deeds about legal transactions concerning incorporated companies to tax offices as printed format rather than electronically. This impairs the necessary exchange of information. In our opinion, it is necessary and feasible to introduce electronic communication of these deeds without delay. The Federal Chamber of Notaries had submitted proposals to this effect already in 2007. However, these proposals have not yet been implemented. The Federal Finance Ministry should advocate the change in the relevant joint bodies of Federal Government and state government representatives.

Already in 2007, the Federal Chamber of Notaries had suggested to the Federal Finance Ministry to forward deeds about incorporations and certain other legal transactions concerning incorporated companies to tax offices electronically and no longer as printed format. The Federal Finance Ministry then stated that, in principle, this proposal could be implemented in the IT system in place. This has not been done so far.

The current paper-based procedure that is still in use impairs the necessary information exchange. In 2011, we therefore recommended introducing electronic communication of such deeds. The Ministry told us that, before implementing the proposal, it wished to wait for the experience gathered with the technical implementation of another communication procedure. It went on to say that the objective was not only to forward the communications electronically but also to process them by computer. This preparatory phase is still under way.

Already since 2007, notaries have forwarded such deeds to the commercial register electronically. Arranging for their electronic forwarding to the tax offices would have been feasible years ago. Processing there would be significantly facilitated, even if the deeds could not yet be processed completely by computer.

We therefore hold that the electronic communication of such deeds – independent of any other communication procedures – is both necessary and feasible and could be speedily introduced. The Federal Finance Ministry should be committed to switching to electronic communication in the relevant joint bodies of Federal Government and state government representatives.

 

2014 Report on the proposed implementation of harmonised European Public Sector Accounting Standards (EPSAS) in the Member States of the European Union

The European Commission plans to introduce a set of harmonised and binding European Public Sector Accounting Standards (EPSAS) based on accrual accounting. Supplementary to the status report on the relevant facts and figures developed by the Federal Ministry of Finance (Budget Committee Paper 18/0027), the German Supreme Audit Institution (Bundesrechnungshof) advises the Budget Committee on the matter. In the present report, the Bundesrechnungshof discusses unresolved issues, chances and risks associated with the proposed EPSAS implementation. 

0 Executive Summary

The European Commission plans to introduce a set of harmonised and binding European Public Sector Accounting Standards (EPSAS) based on accrual accounting. Supplementary to the status report on the relevant facts and figures developed by the Federal Ministry of Finance (Budget Committee Paper 18/0027), the German Supreme Audit Institution (Bundesrechnungshof) advises the Budget Committee on the matter. In the present report, the Bundesrechnungshof discusses unresolved issues, chances and risks associated with the proposed EPSAS implementation.

0.1 Situation at European level

In order to enhance the quality and comparability of reportable financial and statistical data of the public sector, the European Commission aims at introducing EPSAS in all EU Member States. By doing so the Commission hopes to reduce expenditures on the European Statistical System (see item 2.1).

So far, the Commission has not considered any alternative option to EPSAS implementation. A study on costs and benefits of EPSAS is expected by mid2014 (see items 2.2-2.4).

Germany on its own would not be in a position to thwart European framework legislation on EPSAS governance as proposed by the Commission. It can also not be ruled out that the EU Member States may have little influence on the adoption of individual EPSAS (see item 2.5).

0.2 Situation in Germany

In Germany, the introduction and implementation of uniform accounting standards would affect some 17,500 individual public budgets at all three government levels and social security bodies. This would entail a major collective effort (see item 3.1).

Statistical data reported from Germany have so far largely complied with the quality requirements of the European System of national and regional Accounts (see item 3.2).

0.3

Introducing uniform accounting standards involves significant risks. These include cost risks and the risk of temporarily deteriorating data quality (see item 4), particularly in the current financial crisis.

0.4

The Bundesrechnungshof has compiled recommendations on the next steps to take (see item 5).

 

2013 Annual Report No. 72 - Urgent need for legislative provision on the tax exemption of recapitalisation gains

Applicable legal provisions on the tax exemption of recapitalisation gains might impair the financial rehabilitation of companies in distress. Municipalities and tax offices decide, independently of each other, about the exemption of recapitalisation gains from taxes on earnings. Therefore, companies do not have the planning reliability they need for financial rehabilitation.

Companies in distress undergo financial rehabilitation in order to avoid their complete breakdown. One of the most frequent rehabilitation measures is the waiver by creditors of their claims. This generates recapitalisation gains. By virtue of administrative guidance issued by the Federal Finance Ministry, these gains are to be exempted from income and corporation tax. The decision about the exemption is incumbent on the local tax offices. Municipalities decide about the exemption from trade tax and are neither bound by administrative guidance nor by the decision of the local tax offices.

Companies need to file their applications for tax exemption both with the responsible tax office and with each municipality involved. Deviating decisions are likely and actually occur. This makes it difficult for companies to plan and implement financial rehabilitations and causes avoidable administrative burden.

We recommended legislation which automatically exempts recapitalisation gains from tax liability. This would considerably reduce the administrative burden and provide the necessary planning reliability.

 

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. 33 - German Occupational Safety and Health Exhibition intends to increase its outreach efforts by providing online services

The Federal Institute for Occupational Safety and Health operates the German Occupational Safety and Health Exhibition located in Dortmund. By offering supplementary online services, the Institute intends to enhance the exhibition's outreach to stakeholders all over Germany.

The German Occupational Safety and Health Exhibition is, in particular, designed to inform the public about the importance of organising work in accordance with employees' needs. In 2013, expenditure of more than €8.5 million has been appropriated for the exhibition.

Each year, the exhibition was visited by 150,000 to 190,000 visitors. Although the exhibition was targeted at people from all over Germany, a huge majority of its visitors came from the immediate vicinity or closer surroundings. Until 2012, the exhibition's website contained visitor information and a calendar of upcoming events. Educational films, e-learning courses or other online services of this kind were, however, not provided.

We recommended that the Institute make available adequate educational services on the Internet to share part of its relevant knowledge and expertise, thus creating a significantly larger, nationwide impact.

At year-end 2012, the Institute redesigned its website and ensured that information provided was more in line with the interests of individual target groups. Apart from the contents that have already been available before, it is now also possible to download files for preparing teaching units in schools. The Institute intends to expand its Internet service by adding more photos, video clips and more advanced subject matter papers.

We hold that the supplementary online presentation of learning contents is suitable for improving the outreach to stakeholders across Germany. The Institute should evaluate if and to what extent this approach helps to achieve this goal.

 

2013 Annual Report No. 30 - Federal Government fails to implement recommendations for regulatory and administrative simplification of statutory health and long-term care insurance

Although the Federal Government acknowledged the merit of our recommendations on the regulatory and administrative simplification of statutory health and long-term care insurance for jobseekers receiving basic security benefits, it has, so far, failed to implement them. Government thereby tolerates error-prone administrative practices and avoidable administrative costs although it is well aware of the need for reforms.

Beneficiaries of basic security for jobseekers, who are not insured through another wage earner as dependents, are, as a rule, subject to compulsory statutory health and long-term care insurance. Social security contributions for this group of beneficiaries are borne by the Federal Government and transferred to the insurance bodies via the job centres. Job centres therefore need to verify for each beneficiary whether he or she is subject to compulsory insurance due to the benefits received. The contributions to be paid are reduced by any supplementary income earned by compulsorily insured beneficiaries.

We found that in almost 50 per cent of the cases under scrutiny, job centres had determined the insurance contributions inaccurately. In every fifth case, the job centres made mistakes when deciding on the eligibility for compulsory insurance. Processing of statutory health and long-term care insurance matters was cumbersome and time-consuming.

We recommended abolishing the principle according to which statutory health and long-term care insurance for dependents takes precedence over the compulsory insurance for beneficiaries of basic security. Instead, we suggested introducing a lump-sum contribution for each month in which basic security benefits for jobseekers are received. The aggregate amount of these lump-sums should not exceed current expenditure.

The Federal Ministry of Labour and Social Affairs and the Federal Ministry of Health acknowledged the merit of our findings in August 2012. Both concur with the key points we made about the complexity of the legal situation as well as with our conclusions derived from the evidence gathered. They aim at taking policy decisions by year-end 2013/the beginning of 2014 on the basis of current discussions on the amendment of applicable laws.

However, no initiative for amending the provisions in force has been announced up to now. We demand that the Ministries revise applicable legislation without any further delay. This is to ensure legally reliable and efficient administrative procedures in the field of statutory health and long-term care insurance for recipients of basic security benefits. When determining the lump-sums, the Ministries should make sure that their aggregate amount does not exceed current expenditure.

 

2013 Annual Report No. 7 - Streamlining of federal legislation proves successful

The streamlining of federal legislation which we called for has significantly reduced outdated legal provisions. We recommended that the residual work necessary is to be brought together in an interdepartmental Regulatory Reform Bill. The efforts to streamline legislation should be steadily pursued and broadened to include substantive aspects. The approaches adopted by the Federal Ministry of the Interior and the Federal Ministry of Justice provide a suitable basis for doing so.

To ensure that legislative objectives are effectively accomplished, a legal system must be clear, understandable and easily accessible. This requires the continuous repeal or updating of formally or substantively obsolete legal provisions. Legislative streamlining thus assures the quality of the legal system.

Since 2003, the Federal Government has pursued a strategy for streamlining federal legislation. These efforts have been coordinated by the Federal Ministries of the Interior and of Justice, which have the lead responsibility. We encouraged this streamlining process, e.g. with respect to the legislation on the consequences of the War and the legislation connected with German reunification. In the period 2006-2012, the Federal Government submitted eleven departmental and three cross-cutting regulatory reform bills. It was thus possible to reduce the number of laws by up to 4.9 per cent and to significantly impede its further growth.

We commended the results as a major step towards streamlining the legal system. The success of these efforts should be ensured and enhanced. In addition, we recommended that the future focus should be on substantive objectives.

The Federal Ministries of the Interior and of Justice committed themselves to bringing together the remaining streamlining needs and to incorporate them into a cross-departmental Regulatory Reform Bill. To make sure that legislation is streamlined continuously, the task force of state secretaries on the reduction of bureaucracy decided to enhance the evaluation of legislation projects. The screening of legislation provided for in the Act on the Promotion of Electronic Administration and the Amendment of Further Legal Provisions is expected also to contribute to the substantive streamlining of legislation.

We will keep a close look on further developments.

© 2019 Bundesrechnungshof