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Organisational management

2016 Annual report Volume II No. 27 - Federal Ministry of Education and Research sets up an internal audit service for the first time

Based on our recommendation, the Federal Ministry of Education and Research set up its own internal audit service. It has to ensure that the internal audit service will be permanently able to discharge its function in a comprehensive, independent and effective way.

The Ministry manages grant funds in the range of billions of euros. This naturally implies risks. Nevertheless, the Ministry was one of a few federal ministries that did not have an internal audit service. It relied on its controls in place which included e.g. sample audits as part of the awarding of grants or checks in the IT system.

We held that each federal authority needed an internal audit function. This function must supplement, evaluate and improve existing controls. We considered the Ministry’s tasks in the management of grant funds as being especially risk-prone. The controls mentioned by the Ministry are no substitute for an internal audit service. They are themselves a part of the business processes whose functioning has to be examined independently by an internal audit service. We therefore held that the Ministry could no longer choose to do without an internal audit function.

We asked the Ministry to put an internal audit function in place without delay.

In April 2016, the Ministry set up an internal audit service. We will monitor the development and work of this service. In doing so, we will focus on whether the internal audit service enhances the effectiveness of the other controls.

 

2016 Annual report Volume II No. 05 - The Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety does not adequately oversee the Konrad Final Repository

The Ministry has not been fully committed to contributing to the speedy and cost-effective construction of the Konrad Final Repository for low- and medium-level radioactive waste. It exercised insufficient technical oversight and failed to resolve conflicts between the project participants. The Ministry should in future monitor the project more closely and take prompt remedial action when difficulties emerge.

Up to 2016, the Federal Office for Radiation Protection was responsible for the construction and operation of final repositories, subject to technical oversight by the Ministry. In 2008, the Federal Office commissioned the German Specialized Engineering Company for Final Disposal of Radioactive Waste (DBE) to construct the Konrad Final Repository for low- and medium-level radioactive waste in a former mine. This was based on a contract concluded between the Federal Government and the Company. In mid-2016, the Legislature decided to reorganise the tasks related to final storage. In future, a federal limited company is to be in charge of constructing and operating final repositories.

The Ministry has not been fully committed to contributing to the speedy and cost-effective construction of the Konrad Repository for low- and medium-level radioactive waste. Even nine years after construction began, the Ministry cannot reliably assess when the Konrad Repository will be completed and what its total cost will be. According to current but not robust estimates it is to be completed nine years later and to cost €1.6 billion more than originally planned.

Due to differing interpretations by the Federal Office and DBE of the contract concluded between the Federal Government and DBE, there was disagreement about what tasks are to be performed by DBE. We attribute the time slips in this project also to the conflicts protracted for years between the Federal Office and DBE. The Ministry should have exercised its technical supervision more strictly and resolved the conflicts.

The Ministry admitted that the time overruns resulted in considerable cost overruns. It attributed this to special project risks given that the Konrad Repository was constructed in a former mine. In addition, the Ministry stated that it generally exercised “remote technical oversight”, giving its subordinate agencies such as the Federal Office sufficient leeway for discharging their functions self-reliantly and intervening by means of instructions only when major policy or technical issues were involved.

We uphold our assessment. The Ministry has for years been aware of the potentially differing interpretations of the contract concluded between the Federal Government and DBE and of the conflicts between the project participants. Nevertheless, it did not take rigorous leadership for steering the project. With its “remote technical oversight”, the Ministry failed to pay due regard to the policy and financial importance of this project. This has at least favoured the time and cost overruns. We expect the Ministry to monitor the project more closely in future and to take prompt remedial action whenever difficulties arise.

 

2016 Annual report Volume II No. 03 - Armed Forces tolerate the loss of duty hours equivalent to several thousand personnel posts due to health courses

Effective from 2016, the units and agencies of the Armed Forces may permit their civilian and military personnel to attend health courses during duty hours for up to two hours a week. For soldiers, these health courses take place in addition to their standard physical training. The Ministry does not have comprehensive data on the loss of duty hours caused by the attendance at the health courses. It has not resolved the question as to whether and how it can compensate for the loss of duty hours which is equivalent to several thousand full-time posts. Moreover, the Ministry has not considered other options for promoting personnel health by means of other measures providing better value for money.

We found that the Ministry did not ascertain the volume of duty hours lost by attending the health courses and the related costs. If only one in five staff members attended the health courses offered, this would imply the loss of about 103,000 normal duty hours per week. This would be equivalent to 3,300 full-time posts. Without any cost calculation, there is no way to reliably assess whether health courses are the most efficient option for promoting personnel health and enhancing the Armed Forces’ attractiveness as an employer.

The Ministry commented that it would take our suggestion and consider the organisational possibilities for recording the duty hours spent on attending the health courses. It did not make any statement as to how it intended to compensate for the loss of duty hours amounting to several thousand full-time equivalents. In our opinion, merely recording the duty hours lost is not sufficient. Before continuing to permit attendance of health courses credited as duty hours, the Ministry should ascertain whether and how it can compensate for the loss of duty hours. Moreover, it should consider other options for achieving its goals more efficiently.

 

2016 Annual report Volume II No. 02 - Risk for the “Reversal of personnel trends” scheme: Plans for career centres are not in line with actual needs

The Federal Ministry of Defence intends to reorganise the career centres although reliable data on staffing needs are lacking.

The Armed Forces career centres are responsible for reservists, continued training and recruitment. The Ministry had set up the career centres already in 2012 without any previous organisational management study. Multiple structural shortcomings emerged subsequently, e.g. waiting times of applicants for interviews and the workload of the career centres differed widely. Therefore, the Armed Forces developed a new organisational structure for the career centres. However, the analysis on which this organisational structure was based was neither sustainable nor consistent. Nevertheless, the Ministry ordered the reorganisation to take place. We recommended that the reorganisation be discontinued and an organisational management study be started.

The Ministry acknowledged that the study would be needed “in the near future”. It stated that it had approved the new organisational structure, because it provided better performance.

We uphold our assessment that, without valid data on staffing needs, the Ministry’s plans for the career centres are not in line with actual needs. To preclude the short-term need for another restructuring exercise, we recommend that the reorganisation be suspended until an organisational management study is available.

 

2016 Annual report Volume I No. 17 - Customs Administration needs a framework for shooting facilities

The Customs Administration needs to develop a new shooting facilities’ framework for armed officers. Many facilities that are currently in use will soon be unavailable for training purposes or do not meet current requirements applicable to mission-oriented weapon training.

Some 12,000 customs officers carry firearms. In order to be allowed to carry firearms, officers need to participate in regular training at shooting facilities. Such training also takes place at 52 shooting facilities of the Federal Armed Forces. These shooting facilities will soon be unavailable or only available to a limited extent due to recent reforms of the Federal Armed Forces.

In 2013, the Ministry adopted new requirements applicable to mission-oriented weapon training. Many shooting facilities in use, however, do not meet these new technical requirements.

We criticised that the Customs Administration has not yet developed a new concept specifying the procedure of weapon training and the sites available for training other than the shooting facilities of the Federal Armed Forces. We requested the Ministry to develop a shooting facilities concept that also provides information on the amount of budget funds required to build new shooting facilities. In addition, the Ministry should examine whether the number of armed officers could be reduced.

 

2016 Annual report Volume I No. 16 - The Customs Administration does not have a location scheme for its national training institutions

The Customs Administration does not have a location scheme for its national training institutions. The high number of small institutions is not fit for the future.

At its training institutions, the Customs Administration offers a broad training program for own staff members. For historical reasons, the distribution of such institutions throughout Germany is uneven. Many institutions are so small that teachers are unable to work efficiently. In addition to that, operating costs varied largely between the institutions. Since most small institutions do not offer accommodation facilities, annual costs incurred by training participants for hotel accommodation and cancellation amount to €1.5 million.

We found that the Customs Administration did not have a location scheme for its national training institutions. As a result, rehabilitation works – such as in Sigmaringen which amounted to more than €110 million – do not follow a comprehensive approach.

We requested the Ministry to develop a national scheme for the training institutions of the Customs Administration. The small institutions should not be operated in this form, but be merged. The Ministry should also take into account that initial and further training needs will probably decrease in the future.

 

2016 Annual report – spring report – No. 07 - Armed Forces maintain expensive collection of specimens without a viable strategy

According to their own assessment, the Armed Forces have not maintained their Scientific Collection of Defence Engineering Specimens in a regular and state-of-the-art manner. Maintaining the collection cost at least €3.7 million annually. As early as in 2010, the Public Accounts Committee of the Budget Committee of the German Parliament had requested the Federal Ministry of Defence to decide whether there is a need for the collection of specimens and whether it should be continued.

The Armed Forces have maintained a Scientific Collection of Defence Engineering Specimens for more than 50 years. The collection consists of more than 22,000 items related to defence technology, weapons and equipment. A small portion of this is presented in an exhibition to which the public also has access. Meanwhile, the collection of specimens belongs to the Federal Office of Armed Forces Equipment, Information Technology and In-Service Support. In October 2015, the Federal Office confirmed that the collection of specimens was no longer maintained in a state-of-the-art manner. The collection gave the impression of a “walk-in depot”. The Federal Office estimates that the liquidation of the collection would take seven years and cost €30.9 million.

However, the Federal Office advised the Ministry to continue the maintenance of the collection of specimens, arguing that it was indispensable and that a feasibility study had proved its exceptional character. The Federal Office advocated a new strategy to realign the collection with such goals as promoting the integration of the Armed Forces into civil society and supporting recruitment and knowledge management of the Armed Forces and that it was necessary to work out details concerning the substantive and didactic design of the collection and the exhibition. The same applies to organisation, operation and human resources management. Furthermore, they perceived the need for erecting a new exhibition building and to triplicate the number of staff. The Federal Office estimates that the costs of maintaining the collection of specimens during the next seven years will total at least €68.3 million, including one-off costs of at least €34.9 million. The subsequent annual operating costs would amount to €4.8 million.

In our opinion, the collection of specimens can be dispensed with. We criticise that it is still maintained without viable strategy. The Federal Office’s estimate of additional costs of €37 million for the collection’s continued maintenance is alone sufficient to justify disposal of the collection. According to our calculation, continued maintenance of the collection would even cost €60 million more than disposal.

The Federal Ministry of Defence must now decide whether or not to build up a new collection of specimens at additional costs of €60 million and permanent annual costs of €4.8 million, taking into account the fact that the strategy to be adopted and the potential benefits are still unclear.

 

2015 Annual report No. 85 - Child benefit: duplicative payments

The Federal Finance Ministry has delayed implementing the cross-checking procedure for payments of child benefit. The family benefits offices are therefore still not able to check whether another family benefits office is already paying child benefit. This still results in duplicative payments.

The family benefits offices of the Federal Employment Agency and those of the public service pay child benefit in accordance with the Income Tax Act. We found a number of duplicative payments for one and the same child. In most of these cases, parents had applied for child benefit from two different family benefits offices, although this was inadmissible. We therefore demanded in our 2009 annual report that duplicative payments should be ruled out by data matching. The Federal Finance Ministry was to develop an IT system to this effect.

In 2010, the Ministry presented its strategy for an IT-assisted cross-checking procedure. However, it delayed implementation for several years. The Ministry addressed the need for a cross-checking system only in late 2014 when the Legislature amended the regulations on child benefit. Effective from January 2016, the amendment requires parents applying for child benefit to identify themselves and their children by means of their respective tax identification numbers. The family benefits offices are to cross-check the tax identification numbers of the children, thus preventing duplicative payments. However, the Ministry intends to launch the cross-checking system in January 2016 only at the family benefits offices of the Federal Employment Agency. The remaining family benefits offices are to follow suit in the course of 2016.

Notwithstanding the short deadline, the Federal Finance Ministry needs to ensure that the cross-checking system becomes operative without delay. Moreover, it needs to speedily link up all family benefits offices in the course of 2016. Duplicative payments will be ruled out only when this process has been completed. To achieve this, it is necessary to have a time schedule with binding milestones for implementation.

 

2015 Annual report No. 74 - Inadequate control of the manufacture of gold coins

The Federal Republic of Germany issues euro gold coins for collectors. In the years 2012-2014, the value of the gold purchased for minting totalled about €440 million. The Federal Office for Central Services and Unresolved Property Issues exercised inadequate control over the delivery and consumption of the gold.

The Federal Office for Central Services and Unresolved Property Issues was unable to completely and traceably prove the “trail of the gold” from delivery, minting and sale of the gold coins to the return delivery of the gold not consumed (flow of material). It failed to carry out a physical inventory of the gold stocks and to check whether the result tallied with the stock records. Moreover, the Office assigned the same staff to manage the purchase of gold and the control function, thus infringing anti-corruption regulations.

The Federal Finance Ministry admitted deficiencies in the tracing of the flow of material and lacking physical stocktaking. However, it argued that the checks carried out by the Office had shown that the gold had been properly delivered, accounted for and consumed. Nevertheless, the Office would commission a private-sector auditor to examine the purchase and consumption of gold and the stock records and to identify potential improvements for checking the flow of material. Moreover, the Federal Finance Ministry assured us that the Office had meanwhile completely implemented the anti-corruption regulations.

In our opinion, these measures are not sufficient. We uphold our demand that the Ministry reconsider the existing system of controls and to adjust it without delay. This is contingent upon the reliable recording of gold stocks. In addition it is necessary to carry out physical inventories on the gold stocks in the mints in regular intervals. Without stock records, physical inventories are devoid of purpose and without them the actual stocks cannot be determined. We also expect the Ministry to exert pressure to ensure compliance by the Office with the anti-corruption regulations and to identify and stop undesirable developments at an early stage.

 

2015 Annual report No. 52 - Federal Armed Forces modify location decision for parachuting

The Federal Ministry of Defence abandoned its plans to relocate the Airborne Operations and Air Transport Training Facility from Altenstadt in Bavaria to Oldenburg in Lower Saxony. As a result, the Federal Armed Forces will save €50 million.

In October 2011, the Federal Ministry of Defence announced closing down the Airborne Operations and Air Transport School in Altenstadt. It planned to establish a facility in Oldenburg as from 2016. The Federal Ministry of Defence wanted to preserve the location Altenstadt for a new battalion.

We noted that the Federal Ministry of Defence wanted to relocate the parachuting to Oldenburg even though the location Altenstadt was supposed to be preserved. We pointed out that this might cause avoidable expenditure of up to €50 million. Furthermore, less favourable conditions and thus a lower level of training, more effort and higher running costs were expected at the Oldenburg location. We recommended that relocating the parachute jump training to Oldenburg be abandoned.

The Federal Ministry of Defence decided to leave the parachute jump training in Altenstadt. Since the stationing decision in 2011, the framework conditions had changed. The Federal Armed Forces save €50 million and training of consistent quality. Thus, the Federal Ministry of Defence has implemented our recommendations.

 

2015 Annual report No. 47 - Too costly intermediary basing

The Federal Ministry of Defence adhered to the intermediary basing of an artillery demonstration battalion even though there was a more cost-efficient accommodation option. It would have been at least €5.6 million less if the artillery demonstration battalion had stayed at its former location until its definitive accommodation. We recommend to the Federal Ministry of Defence examining whether plans are still up-to-date and cost-efficient before implementing basing decisions.

The Federal Ministry of Defence had determined to close the previous location of an artillery demonstration battalion. The Federal Armed Forces decided to temporarily base the artillery demonstration battalion in other barracks until the barracks of the future location were ready for occupation. In its decision, it did not take into account the costs or option to use the previous barracks for a longer period.

After it had become apparent that the construction costs for the intermediary basing quadrupled to €12.6 million, the Federal Armed Forces assessed the barracks’ state of the artillery demonstration battalion’s previous location. They determined costs of a maximum of €7 million for a temporary stay. They recommended remaining for the time being at the previous location as a cost-efficient solution. Nevertheless, the Federal Ministry of Defence chose the intermediary basing.

At the end of 2014, the artillery demonstration battalion was relocated. In May 2015, the Federal Armed Forces estimated the construction costs for the intermediary basing at €13.7 million. The Federal Ministry of Defence intends to close the barracks after the intermediary basing in 2019.

92 The Federal Ministry of Defence stated that the construction costs for a temporary stay at the previous location were estimated to be €13.66 million. For this reason it considered the intermediary basing as cost-efficient solution.

We pointed out that the Federal Armed Forces decided for the intermediary basing without examining the efficiency. Furthermore, we pointed out that the Federal Ministry of Defence did not change plans even though there were indications that it was inefficient. The Ministry’s estimate on the construction costs at the previous location did not correspond with the structural condition determined by the Federal Armed Forces. The Federal Ministry of Defence did not take into account that some construction measures had already been executed and most of the buildings were fully functionable for a temporary use.

The strategy in relocating the artillery demonstration battalion shows that the Ministry of Defence does not always take the costs adequately into account in implementing basing decisions. In the next years, further relocations in the Armed Forces are projected which are associated with extensive construction measures. We recommended to the Federal Ministry of Defence examining whether the projected implementation is still up-to-date and cost-efficient before implementing basing decisions. Moreover, due to the large capital expenditure, we asked it to examine whether the barracks prepared for the intermediary basing can be used efficiently beyond 2019.

 

2015 Annual report No. 41 - The Road Works Authority improved surveying

Following our recommendation, the Road Works Authority of the State of North Rhine-Westphalia has taken organisational measures to improve the verification of surveys. This is to identify surveying errors at an early stage and to avoid additional costs.

We audited the upgrading of federal motorway A 2 between Kamen and Hamm from four to six lanes. The Road Works Authority of the State of North Rhine-Westphalia is in charge of this project. The survey division of the Road Works Authority had furnished contractors with faulty survey data. The errors also remained undetected on occasion of a first control survey. As a result, a bridge was erected at a location other than planned and this section of motorway A 2 was built with a 0.45 m deviation. The reason for this was that the Road Works Authority had taken insufficient regard to the relevant directives. In order to make the shifted section fit with the motorway outside the deviating section; 600 metres of the motorway had to be adapted. This caused additional costs of €0.6 million to be borne by the Federal Government.

The Road Works Authority followed our recommendations. It promised that it would change the organizational procedures and remind all staff of the cross-check principle. In future, it intends to annually train staff for compliance with the respective regulations and to post relevant information on its intranet. Furthermore it pledged to furnish site supervisors or survey records in order to be able to check the location of structures.

 

2015 Annual report No. 38 - Air-traffic control and oversight clearly separated to avoid conflicts of interests

In exercising oversight over air-traffic control, the Federal Ministry of Transport and Digital Infrastructure accepts the risk of conflicts of interests and doubts about the Government’s impartiality. For years, it has employed staff of an air-traffic control organisation in the Ministry’s relevant section. That organisation comes under government oversight and, moreover, is even a competitor.

Air-traffic control organisations, e.g. communication and navigation services are to assist the operation of air transport services. They are largely delivered by private-sector entities. According to the law as it stands, certain air navigation services are to be provided subject to market conditions as private-sector services.

Government supervision of air-traffic control is incumbent on the Federal Supervisory Authority for Air Navigation Services. To safeguard that Authority’s independence, it is not allowed to employ staff of any air traffic control organisation that comes under its oversight. The Authority is in turn subject to oversight by the Ministry. For more than 15 years, the Ministry’s air-traffic control section has successively employed one staff member of an air-traffic control organization trained as air-traffic controller. These staff members are paid by the air-traffic control organisation and usually return to it later. This obviously implies the risk of conflicts of interests. The same applies to the appearance that undue influence is exercised in the competition between air-navigation services.

Irrespective of the foregoing, the German Parliament’s Budget Committee decided already in 2008

• that any employment of individuals in the federal administration that gives rise to doubts about the Government’s neutrality are inacceptable and

• that employment in areas involving the risk of conflicts of interests and material and technical dependencies must be excluded.

The Ministry argued that the employments objected to posed no problem but were urgently needed. The employees concerned would not be assigned to the supervision of the Federal Supervisory Authority for Air Navigation Services and they also did not take the final decisions. The Ministry further argued that, so far, no conflict of interests or risks to competition had arisen. And that, given the pay structure of the public service, the urgently needed technical knowledge could only be maintained in the Ministry in this way.

We emphasized that, in this case, no proof of specific conflicts of interests is needed. Conversely it is necessary to already avoid the structural possibility of such conflicts arising in order to avoid the appearance of undue influence. Such exercise of undue influence is by no means contingent upon the power to take final decisions, for even the largely technical activity of preparing decisions offers leeway to exert influence, the more so, since it frequently results in proposing a decision.

We expect that the Ministry terminate the objectionable employments as soon as possible. If it substantiates that maintaining the relevant technical knowledge in the Ministry, other solutions must be found.

 

2015 Annual report No. 34 - Federal Employment Agency improves its procedure for Budget Officer participation

Following our recommendation, the Federal Employment Agency changed its rules for the involvement of budget officers in spending measures.

One of the tasks of the budget officers is to ensure that the staff of their respective entity comply with the principle of efficiency. The budget officers must be involved in all spending measures. The Federal Employment Agency has set monetary thresholds which, when exceeded, requires the staff to involve the budget officers.

We found that the staff partly submitted incomplete records to the budget officers. In particular, adequate efficiency appraisals for the planned measures were omitted. Moreover, the thresholds were not adequate to ensure appropriate involvement of the budget officers. In the Agency’s specialised services, regional directorates and local branches, the result of the thresholds was that the budget officers were not involved in the management of a large part of their entities’ expenditure. In the Agency’s headquarters, the budget officer was largely involved in financial transactions that accounted for only a minor portion of total expenditure.

Following our recommendation, the Agency adjusted its internal rules and developed guidance for carrying out efficiency appraisals. By doing so, it intends to improve the documentation that is relevant for the budget officers. The Agency partly changed the monetary thresholds for the involvement of the budget officers in order to ensure that these become involved in managing a large portion of their entities’ expenditure.

 

2015 Annual report No. 25 - Trust fund of more than €100 million no longer necessary

The pension fund for farmers has managed a federal trust fund since 1952. Since 2005, this trust fund has been used to promote agricultural innovations. The Federal Government performs the same task with own programmes and budget funds. We recommended that the trust fund be dissolved and transferred to the federal budget to eliminate duplicative structures. The Federal Government could increase its budget by more than €100 million.

The pension fund has managed a federal trust fund since 1952. The purpose of this fund is to promote innovations in agriculture, forestry, horticulture and fishery. It amounted to €109 million at year-end 2014.

We examined how the pension fund managed the trust fund. We found that marketable products or procedures were promoted as innovation in about one third of the cases we looked at. These included, for example, the development of a seal for wines even though there had already been six comparable seals on the market.

The Federal Ministry of Food and Agriculture also promotes agricultural innovations. As it is a priority for the Ministry, it provided federal funds amounting to €59 million in 2014.

We note that the trust fund is only adequate if the task can be performed more efficiently than if it is made by the Federal Government. This is not the case. We therefore requested the Federal Ministry of Food and Agriculture to have the trust fund dissolved and transferred to the Federal Government, which would eliminate duplicative structures and increase the federal budget by more than €100 million.

We expect the Federal Ministry of Food and Agriculture to ensure a speedy amendment of the applicable regulation.

 

2015 Annual report No. 19 - Land Utilisation and Management Company winds up subsidiary, thereby generating annual savings of €5 million

In response to our recommendation, the Land Utilisation and Management Company discontinued the operations of a subsidiary. It took on the subsidiary’s task itself, thereby saving at least €5 million each year.

On behalf of the Federal Government, the Land Utilisation and Management Company sells farmland and woodland formerly owned by the defunct German Democratic Republic. It has transferred some of its tasks such as the management of woodland to a subsidiary. As the sale of this land by the Land Utilisation and Management Company progressed, the subsidiary increasingly lost one of its key functions. Therefore, the sales turnover of the subsidiary dropped sharply while this was not matched by a similar reduction of its operating costs.

We recommended that the Land Utilisation and Management Company consider whether winding up the subsidiary is an efficient solution.

The Company took up our recommendation and discontinued the business activities of the subsidiary effective from year-end 2014. Since then, the Company has performed the functions of the subsidiary. Effective from 2015, this generates annual savings of at least €5 million.

 

2015 Annual report No. 18 - Better use needed of mobile X-ray equipment for combating smuggling

The Customs Administration needs to make better use of its mobile X-ray equipment for combating smuggling. This is illustrated by the fact that 28,000 screenings resulted in only 30 interceptions.

To combat smuggling in Germany, the Customs Administration uses partly or fully mobile X-ray appliances to screen vehicles.

In 2013, the Customs Administration carried out 23,000 screenings, which resulted in 80 interceptions. By using the fully mobile appliances, it achieved 30 interceptions as a result of 28,000 screenings.

We consider the number of interceptions as inadequate. We attributed this to the scarcely risk-based deployment of the X-ray appliances. The use of the appliances was at the discretion of custom officers. No risk analysis was done to indicate where and how the appliances should best be effectively deployed.

We demanded that the Federal Ministry of Finance arrange for the more effective deployment of the mobile X-ray appliances on the basis of risk analysis. In addition, it should improve the framework conditions for the use of the appliances.

 

Good Practice Note 07/04: Foundations under public law

Principles

(1) Establishing a foundation under public law is an option especially where a function is to be performed more independently from external influences than a federal department and agency could fulfil it. The pros and cons for choosing this legal form for fulfilling the administrative function in question needs to be adequately deliberated.

(2) When considering the establishment of foundations, it is necessary to take regard to the allocation of legislative powers between the Federal Government and Germany’s constituent states stipulated in the German Constitution, especially in its Art. 87 para. 3 sentence 1 (central performance of functions). As a matter of principle, there should be no other federal entity that already fulfils the same functions.

(3) Capital endowments are the best option for achieving the typical goals of a foundation such as autonomy and sustainable mission performance. The goals may also be achieved by income endowments where the regular allocation of funds is guaranteed by statute. In contrast, income endowments without a statutory guarantee of allocations (from the federal budget) are subject to other external influences.

(4) Any foundation should be organised so as to fulfil its purpose as effectively and efficiently as possible. Based on reliable indicators, the foundation’s governing bodies may ascertain performance and to identify needs for managerial action. The ratio between the foundation’s administrative expenditure and expenditure on mission performance is an important indicator.

(5) In the case of capital endowments, a professional investment and risk management strategy is of particular importance. (Uniform) investment guidelines may contribute to enhancing professionalism. A single investment management for several foundations may be of advantage. Where foundations have small investment volumes, risk and yield aspects can thus be optimised.    

(6) Since the board of trustees determines the general direction of the foundation’s activities, its decisions must fundamentally guarantee the independence of the foundation from external influences. Therefore, it would be a matter of concern, if the composition of the board of trustees undermined the foundation’s autonomy. 

(7) The authority having legal oversight must systematically check whether the foundation’s governing bodies comply with applicable law and whether the purpose specified in the Act by which the foundation has been established is actually met. The allocation of legal oversight powers within the federal ministries may be problematic where trustees belong to organisational units that are responsible for legal oversight. 

(8) Foundations established under public law need to be systematically evaluated after an appropriate period of time. Such evaluation also has to reconsider the form of organisation chosen.

Background

The Federal Government may fulfil its administrative functions through different forms of organisations. Art. 87 para. 3 sentence 1 of the German Constitution authorises the Federal Government to incorporate, by federal legislation, federal public-law bodies. This so-called optional indirect federal administration includes public-law institutes, corporations and foundations.

The following characteristics of public-law foundations having legal capacity can be identified:  

•   They have been incorporated by act of state.

•   They are legal entities having public powers.

•   They are under government oversight.

•   They administer an earmarked fund of assets (or a flow of allocated
     revenues).

•   They fulfil public functions.

 

Thus, essential features are the purpose of the foundation, its organisation and its assets.

Having reviewed selected foundations, the German SAI has made good practice recommendations for the management of foundations. These especially address the following aspects:

(1) Specific vehicles of government action (e.g. federal department or agency, incorporated institute or foundation) are particularly suitable for fulfilling certain functions. Prior to incorporating a foundation under federal public law, it is therefore necessary to consider alternative organisational options and such considerations must also be documented. The statements of legislative intent pertaining to the respective Acts of Incorporation did not always set forth sound arguments in support of opting for a foundation. As a matter of principle, foundations perform their tasks without time limit and are characterised by their autonomy. Establishing them is therefore a viable option e.g. where tasks are to be performed permanently that require decisions to be taken as free as possible from political or other external influences. The statements of legislative intent should set forth the arguments that prompted the decision for establishing a foundation.

(2) Where the Federal Government wishes to fulfil functions through public-law foundations, it has to observe the limits imposed by the German Constitution on its legislative remit. It is necessary to verify - based on the criteria and required characteristics-  that legislative competence for the matter in question lies with the Federal Legislature and the result of such verification must be set forth in the statement of legislative intent. Pursuant to Art. 87 para. 3 sentence 1 of the German Constitution, the foundation may only have purposes that come within the remit of the Federal Legislature. In addition, Art. 87 para. 3 sentence 1 of the Constitution requires that the function to be fulfilled must be performed centrally for the entire national territory, without intermediate and lower federal authorities. It is required that, “based on its typical characteristics, the function must be capable of being performed centrally.” In the case of one of the foundations audited, this was, however, more than questionable.

The incorporation of foundations under public law is only appropriate where there is no other federal entity that fulfils the same functions. In the course of its audit, the German SAI identified overlaps between the functions of some foundations and those of other federal entities. However, the Federal Government must clearly define the remit of each of its entities and/or give sound reasons for intended overlaps.

(3) When establishing a foundation, it is necessary to weigh the pros and cons of modes of funding. Income endowments where most of the funding comes from recurring annual grants may be affected by budget cuts. It is more vulnerable to the exertion of political influence. Capital endowments are generally less vulnerable to the exertion of external influence but depend more on yield levels for its financial investments. Where the yield level is low, less money is available for fulfilling the foundation’s functions. This may lead to conflicts of interest between the preservation of assets and the achievement of the foundation’s purpose.

(4) The organisation of foundations must comply with the provisions of the Foundation Act. Its structures should be clear and be in line with the requirement of efficiency. In the course of its audit, the German SAI had found that, in most foundations, management/administrative expenditure had increased regularly, substantially in some cases. Robust figures on the foundations’ expenditures and revenues could permit comparisons with federal departments and agencies and are therefore indispensable for the work of the managing board and the board of trustees. The proportion of administrative expenditure in relation to the expenditure on fulfilling the foundation’s purpose is therefore an important indicator. On its basis, the governing bodies can assess the efficiency of mission performance and identify needs for managerial action.

(5) A professional investment and risk management strategy is of particular importance for capital endowments. The level of yields from the foundation capital differed between the foundations audited and so did the fluctuation of yields. Uniform investment guidelines could contribute to enhancing the professionalism of the management of financial investments. They provide a sound basis for a systematic investment and risk management by the foundation’s managing board and the monitoring of investment decisions by the board of trustees. The primary option is to follow a low-risk investment strategy with earnings as constant as possible in order to preserve the asset value of the endowment.

Such a uniform investment management may be advantageous for all foundations. Especially in the case of smaller foundations, this could contribute to higher investment security. For foundations that have less investment expertise and whose investment volume is low, this could open the way to obtaining investment terms that are optimal under both risk and yield aspects.

(6) As a rule, foundations have at least one internal oversight body, frequently the board of trustees. The board of trustees exercises technical and administrative supervision and monitors management with respect to the expediency, efficiency and legality of its actions. Regular decision-making on fundamental issues of the foundation’s work and the focus of its mission performance is also incumbent on the board of trustees. Therefore, that board must be of appropriate size and composition to discharge its functions as steering and supervisory body. Its decisions must guarantee the foundation’s fundamental autonomy. At least in one foundation audited, the composition of the board of trustees gave rise to doubts about this autonomy.

(7) Federal public-law foundations are subject to legal oversight by the cognisant federal ministry. Such oversight involves monitoring whether the foundation’s governing bodies comply with applicable law and whether the purpose expressed in the Foundation Act is accomplished. Systematic oversight takes up certain events and the connected documents and records its actions and findings. The allocation of legal oversight may give rise to conflicts of interest. This is the case e.g. where trustees belong at the same time to organisational units that are tasked with exercising legal oversight. Under such aspects, the concrete allocation of the legal oversight function within the federal ministries appeared problematic in the case of several foundations.

(8) After some time, the considerations and expectations underlying the establishment of a foundation need to be reviewed. However, most of the foundations examined had not systematically evaluated their mission performance. In particular, they had not evaluated the lawfulness and suitability of the chosen legal form “foundation”. However, such an evaluation of the establishment and work of the foundation is in line with the general administrative regulations on the Federal Budget Code. An evaluation clause to this effect could already be included in the respective Foundation Act.

 

2014 Annual report No. 25 - Improved supervision of the Federal Institute for Materials Research and Testing

The Federal Ministry for Economic Affairs and Energy and the Federal Institute for Materials Research and Testing pledge to determine measurable targets in their target agreements in future. They intend to regularly review target achievement. Thus, the Ministry wants to improve its supervision of the Federal Institute for Materials Research and Testing. The Federal Institute pledges to better document the procedures for undertaking the tasks review and substantiating staffing needs, and to present the results. Furthermore, it intends to fix its fees and charges so as to ensure full cost recovery. The Federal Ministry for Economic Affairs and Energy and the Federal Institute for Materials Research and Testing concurred with our recommendations.

In 2013, we reviewed the financial management of the Federal Institute for Materials Research and Testing by examining the target agreements between the Federal Ministry for Economic Affairs and Energy and the Federal Institute, the tasks review in the Federal Institute and its fees and charges. The following was criticised:

• The target agreements were only partly suitable for an appropriate supervision by the Ministry. It has to clearly define the targets for mission performance to ensure target-oriented control of the Federal Institute. The Ministry has to determine measurable indicators and to periodically assess and document target achievement.

• Its insufficient description of tasks resulted in the inability to demonstrate which tasks were carried out to fulfil legal obligations or contracts and which it performs on a voluntary basis. However, it needs a comprehensive catalogue of tasks and a task review analysis in order to efficiently organise its internal procedures and to appropriately substantiate its staffing needs.

• The fees and charges imposed by the Federal Institute do not cover the resulting costs. The Federal Institute has to fix its hourly rates so as to fully cover all performance-related costs.

The Ministry and the Institute pledged that they would implement the recommendations. They will in future define measurable targets and indicators for measuring target achievement and will assess them periodically. The Institute intends to systematically document its catalogue of tasks and the resulting tasks review. Furthermore, it pledges to better demonstrate how it substantiates its staffing needs, and to review and adjust its fees and charges so as to ensure full cost recovery.

We will monitor how the Ministry implements its pledges.

 

2014 Annual report No. 21 - Contaminated site management has been centralised

Following our recommendations, the Federal Ministry of Finance has centralised the management and eventual sale of contaminated sites. At the same time, the Ministry is continuing the required efforts towards the disposal of assets acquired in the course of disbanding the Treuhand (the trust agency selling off East German state assets).

The Federal Real Estate Agency is in charge of the management and disposal of numerous federal properties that are contaminated by toxic wastes and explosive ordinance. To perform this task, it has begun to set up a central contaminated site management function. The Finance Ministry had considered the option of conveying contaminated properties held by the Federal Real Estate Agency to a federally-owned company. That company intended to take over about 70 contaminated properties from the Agency. That company is one of the successor entities of the Treuhand and also sells contaminated properties.

We pointed out the risk of duplication of structures for the management and disposal of contaminate properties. This is not in the Federal Government’s interest. Therefore, we suggested that the Ministry arrange for bringing together the two contaminated site portfolios in the Agency.

The Ministry followed our recommendation by assigning its shareholding in the company to the Agency. Those in charge of managing and selling contaminated properties can now pool their expertise and clean up and sell the contaminated properties more efficiently. At the same time, the Ministry has succeeded in further reducing the successor entities of the Treuhand.

 

2013 Annual report No. 55 - Expenditures on foreign assignment allowance cannot be sufficiently verified

During their assignment abroad, e.g. in Afghanistan, Armed Forces personnel received foreign assignment allowances in addition to the pay they draw when serving in Germany. Owing to inadequate keeping of files, the quality of processing and the amounts paid out cannot be verified. Excess or underpayments thus go permanently unnoticed.

Armed Forces personnel assigned to a humanitarian or support mission abroad are paid foreign assignment allowances under the relevant legislation. Depending on the strain implied in local conditions, tax-free allowances in six brackets ranging between €30 and €110 per diem are granted. We intended to audit the payment of foreign assignment allowances to 20,000 staff in the annual amount of €180 million on the basis of a sample of payroll cases. The Armed Forces did not keep the corresponding files in good order. Only with a considerable input of work were they able to furnish records on payments of such allowances. As a result, we had to limit the scope of our audit which impeded accurately assessing the processing quality of the allowance cases by the Armed Forces. We also audited the calculation of the allowances in Germany. In one Armed Forces entity, 30 per cent of the cases had been processed inaccurately. Soldiers were frequently either overpaid or underpaid.

We expect the Federal Defence Ministry to ensure checks of the allowance payments and the accurate keeping of files as soon as possible. This will be the only way for the Ministry and its subordinate authorities to exercise their power of technical oversight and to ensure accurate payment of the foreign assignment allowances.

 

2013 Annual report No. 52 - Armed Forces cannot completely verify the whereabouts of lent materiel

Over the last 20 years, we repeatedly criticised that the Armed Forces do not have an overview of defence materiel lent to others. In 2012, they were once more unable to trace the whereabouts of defence materiel worth €92 million. Even with the assistance of additional specialist staff, the Armed Forces were unable to fully clarify accounting differences. After years of investigation and futile clarification efforts, they have no choice but writing off these assets worth millions.

The Armed Forces temporarily hand over defence materiel both to scientific institutions and manufacturers of defence materiel for testing, development and research purposes.

In 1993 and 2006, we had already criticised that the Armed Forces were unable to trace defence materiel it had lent to such institutions and companies. In 2012, with the support of our Munich field office, we looked once more into the way in which the Armed Forces organised the tracing of lent materiel. We found that the Armed Forces had meanwhile set up a central unit for the tracing of materiel but that this unit worked with unsuitable procedures and too few staff. Moreover, we advised the Armed Forces that there was more untraceable materiel than they had known.

Only as a result of our audit work did the Armed Forces step up their efforts to trace lent materiel. In spite of extensive investigations, the special unit was unable to trace defence materiel worth €92 million. The Federal Defence Ministry now intends to introduce a formal procedure similar to that used to deal with damaged materiel. It thereby intends to write off a lump sum of €92 million in the relevant accounts without being able to ascertain whether and by whom damage has been caused in individual cases. In spite of their repeatedly announced intention to clarify this matter, they have not been able to fully trace the whereabouts of lent defence materiel during the last 20 years.

We consider it necessary that, in future, the Armed Forces continuously trace lent materiel right from the start. Doing so will require a robust procedure and a suitable IT system along the lines of the intentions declared by the Armed Forces for years. Failing that, the Armed Forces cannot exclude the loss of assets.

 

2013 Annual report No. 37 - Pension insurance bodies throughout Germany intend to harmonise their guidance to ensure consistent application of the law

Acting on our recommendation, statutory pension insurance bodies intend to provide their staff with nationwide, uniform guidance on how to apply relevant legislation. Joint guidelines can help the bodies to implement federal law consistently and to enhance the Federal Pension Insurance's public reputation.

Two federal bodies and 14 regional bodies perform the tasks of statutory pension insurance. Their staff decides on pension matters according to the German Social Law Code, such as old-age pensions and pensions on account of reduced earning capacity.

As early as in 2001, we found that statutory pension insurance bodies provided their employees with inconsistent guidance on how to deal with pension matters. We recommended that the bodies consolidate their guidance to ensure uniform application of the law. They promised to act on our recommendation.

During a follow-up audit carried out in 2012, we found, however, that inconsistent guidelines on the application of the law persisted. In our view, this situation involves significant legal risks for the bodies and could be detrimental to the public reputation of the statutory pension insurance. We demanded that relevant guidance be harmonised.

According to information provided by the bodies, they have responded to our demands and agreed on harmonising their technical guidelines. They informed us that they were currently discussing when and in what steps to implement the harmonisation. We hold that joint guidance will contribute to a consistent application of federal legislation.

 

2013 Annual report No. 36 - Enhanced utilisation of training capacities generates savings amounting to millions of euros

 

Following our recommendation, the Federal Employment Agency intends to make better use of pre-vocational training programmes. In the future, above a specified participation rate, the Agency will only have to pay for training places that are actually filled.

The Federal Employment Agency (Agency) can help school leavers to gain easier access to the labour market by offering them pre-vocational training programmes. The programmes are implemented by providers with whom the Agency has concluded relevant framework contracts. Under these contracts, the Agency's field offices (offices) can call off training places. They are, however, obliged to call off a specified minimum number of places irrespective of whether these are actually filled or not. Where the offices had called off a number of places exceeding the specified minimum, they also had to pay for places not used.

We found that the offices had called off a significant number of places above the minimum threshold although they were, in fact, unable to assign participants. Thus, in our sample alone, places worth €4 million remained unfilled.

We recommended that the Agency only call off training places above the minimum threshold if and as long as these can actually be filled. To this effect, it should continuously monitor the current utilisation of training capacities and make use of contractual options available.

The Agency has instructed its field offices to adjust their planning so as to fill all places that have been called off. It uses an IT application to monitor capacity utilisation. Furthermore, it has amended the framework contract. The offices are now only required to pay for places exceeding the minimum number if these are actually filled.

 

2013 Annual report No. 35 - Federal Employment Agency intensifies efforts to detect, trace and prevent economic loss

Following our recommendation, the Federal Employment Agency has announced its intention to enhance its procedures for detecting, tracing and preventing economic loss. Thereby, the Agency seeks to improve the quality of reporting and gain a more in-depth insight into the causes of loss. Moreover, it intends to strengthen precautions and monitoring in order to take more effective action against economic loss.

The Federal Employment Agency may incur losses of financial and tangible assets if its employees neglect their duties. This may, for example, be the case where employees authorise unemployment benefits or basic security benefits for jobseekers without adequate justification or where they cause damage to or lose property of the Agency. In 2011, some 24,000 cases of loss were recorded, equivalent to an amount of €26 million. In 160 cases, totalling €1 million, the Agency perceived its staff to be liable for the loss caused.

We found that, in part, the Agency incompletely recorded the economic loss incurred and deviated from its own rules of procedure. Therefore, it had insufficient information on the causes and extent of loss. The Agency failed to conduct targeted evaluations to assess the effectiveness of measures implemented to remedy the causes of loss. Options to fully disclose and effectively prevent economic loss were hardly ever seized.

The Agency has, to a large extent, followed our recommendations. It has taken first steps to ensure a more effective prevention of future losses. For instance, it has repeatedly outlined to its staff the need to record all data on economic loss fully and accurately. The Agency intends to evaluate more systematically whether measures introduced to remedy causes of loss have the desired impact. Furthermore, it is committed to strengthening precautions and monitoring in order to reduce economic loss.

 

2013 Annual report No. 24 - Enhancing organisational structure for dealing with government shareholdings in stabilised banks

The Federal Ministry of Finance lacks adequate organisational structures needed to properly manage government shareholdings in banks acquired in connection with financial market stabilisation programmes. Subject matter questions related to stabilisation were assigned to one directorate-general, while another directorate-general was in charge of mentoring and guidance for new members of the relevant banks' supervisory boards.

The Federal Government granted assistance to banking institutions in order to stabilise the financial markets. The shareholdings which it acquired in two of the banks were managed by the Federal Ministry of Finance. One directorate-general provided preparatory training to the Ministry officials who, at the instigation of the Federal Government, had been appointed new members of the supervisory boards. The stabilisation measures and the relevant banks, however, fell within the remit of another directorate-general. We found that information available on the banks in question varied greatly between the two directorates-general.

The Ministry admitted that it was necessary to improve liaison between the organisational units involved. This would help to thoroughly monitor banks that had undergone stabilisation programmes and effective training of supervisory board members appointed from within its staff. The Ministry declared that it had arranged for the necessary steps to be taken and that information exchange had been improved. According to the Ministry, the new arrangements ensured full preparatory training of supervisory board members. The Ministry rejected any further pooling of responsibilities.

We acknowledge that the Ministry has successfully improved communication between the units involved as well as guidance provided to its representatives on the supervisory boards. Nevertheless, the action taken is as yet insufficient to ensure an effective performance of financial market stabilisation by the board. Responsibilities for subject matter questions related to financial market stabilisation and the preparatory training of supervisory board members have still not been pooled in one organisational unit.

We uphold our recommendation to merge the tasks that are currently separated within the directorate-general in charge of stabilisation measures.

 

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.

 

2013 Annual report No. 08 - Cross-departmental rules: Travel costs incurred for attending job interviews

At our suggestion, the Federal Ministry of the Interior developed a guideline for the reimbursement of travel costs incurred by applicants for public service positions when travelling to job interviews. The guideline will be adopted by all federal departments and agencies. All applicants will be accorded equal treatment. The simplification of the rules will significantly reduce administrative burden.

When auditing the reimbursement of travel costs for job interviews, we found that eleven different guidelines for such reimbursements were in place in the federal administration. Most departments had not adopted a guideline promulgated by the Federal Ministry of Finance for its remit designed to reduce such travel costs. They were concerned about potential adverse effects on the number of applicants and therefore introduced different rules. The results of our audit did not substantiate that concern.

Due to indeterminate legal concepts, large scope for discretionary decisions and comparative calculations, the rules promulgated by the Federal Ministry of the Interior and similar guidelines adopted by other departments turned out to be error-prone and cause administrative burden. Provisions that halved foreign applicants’ claims to reimbursement infringed the non-discrimination principle enshrined in EU law.

We recommended that the two Federal Ministries jointly develop rules about the reimbursement of job applicants’ travel costs that are binding on all federal departments and agencies, taking our suggestions into account and exempting travel costs below a minimum threshold from reimbursement. We drew attention to the EU rule which requires that all EU citizens be accorded equal treatment.

The Federal Ministry of the Interior implemented our suggestions by promulgating a guideline on reimbursing travel cost incurred by applicants in order to attend job interviews.

 

2013 Annual report No. 06 - The Federal Government fails to consistently implement recommendations for the efficient operation of large mail rooms

In 2012, our audit revealed once more that many federal departments and agencies have not yet proven the efficiency of their large mail rooms. As early as in 2005, we had recommended that the organisation of mail rooms in the federal administration be reviewed and that steps be taken to ensure their efficient operation.

In the years 2004 and 2011, we audited large mail rooms in federal departments and agencies. We found that the audited entities had modified the organisation of the mail rooms but in many cases had adopted an unstructured approach. The line units rather than the mail rooms prepared letters for dispatch. In a number of cases, mail room staff manually folded and inserted outgoing mail although an enveloping machine was available. Departments and agencies that produced bulk mail did not check whether outsourcing would have been efficient. Moreover, the auditees largely failed to identify the overall costs of handling outgoing mail.

Both in 2005 and in 2012, we recommended a systematic review of work processes and the assessment of staffing needs. Based on these recommendations, the auditees were to identify and eliminate weaknesses. The Federal Ministry of the Interior has the lead responsibility for organisational issues in the federal administration. It generally endorsed the recommendations for all federal departments and agencies.

At year-end 2012, we once more asked all government departments whether they had implemented our recommendations. In many cases, replies were negative. In response, we again demanded that the mail rooms be organised efficiently. We asked the Federal Ministry of the Interior to support this process.

The Federal Ministry of the Interior pointed out that, since 2005, the government departments had made vast efforts to organise all service processes efficiently but that experience had shown that blanket contracts with external service providers for dispatching mail had rather increased the workload.

We uphold our view that work processes in the large mail rooms of federal departments and agencies need to be improved. The Ministry should encourage organisational studies in the mail rooms and should provide pertinent advice to the government departments.

 

2013 Annual report No. 03 - Legal provisions on the assignment of public functions to private individuals or entities

The Federal Ministry of the Interior has so far failed to lay down basic legal regulations for the assignment of public functions to private individuals or entities (arrangements known as concessions). This results in considerable weaknesses in administrative practice. We hold that it is necessary to provide guidance to federal departments and agencies to enhance quality assurance in connection with the granting of such concessions.

The performance of certain public functions may be entrusted to concessionaires. These are private individuals or entities that discharge certain government functions. The purpose of granting such concessions is to have public tasks performed effectively and, above all, efficiently. This is possible especially where existing expertise and structures of the concessionaires are used.

The granting of a concession requires an enactment. However, there is no overarching federal legislation on concessions. Concession authorisations and prerequisites for granting them are governed by various Acts of Parliament.

In connection with various concessions granted, the governing legal provisions were ambiguous so that it was not clear whether the concession conferred public authority on the concessionaire. Therefore, one federal ministry was not certain as to whether concessions granted to private entities conferred public authority or not. The purpose of concessions was to avoid the enlarging of the departments or agencies. However, the necessary structures were then built up within the concessionaires. In one administrative procedure, a new organisation was set up first and then granted a concession. In another case, a federal ministry, after analysing the issue, concluded that granting concessions to private service providers generated good value for money. It remains unclear, whether federal expenditure was actually reduced by this arrangement. Transparent and competitive procedures need to be applied in the selection of concessionaires and the extension of concessions. Nevertheless, a federal ministry conferred administrative tasks similar to a nation-wide monopoly on a private sector contractor in 1986. When that individual retired in 2011, the concession was extended in favour of the retiree’s successor without inviting competitive bids. The disadvantage caused by the lack of general legal regulations becomes especially apparent in case of concessionaire’s misconduct. Claiming damages from the concessionaire requires a provision on recourse in the respective Act of Parliament. In most of the cases audited, such a provision did not exist. This means that, if damage occurs, it will eventually have to be borne by the taxpayer.

We therefore recommended that the Federal Government clarify the legal concept of concession and provide relevant guidance to federal departments and agencies, thereby ensuring compliance and good performance and improving quality assurance. More legal certainty and clarity could be achieved by adopting a legal framework. Such overarching legislation would have to lay down fundamental provisions whose repetition in special enactments could then be dispensed with. Such overarching legislation would at least have to consist of a definition and the description of general prerequisites for granting a concession and rules for selecting concessionaires, overseeing their performance and provisions about liability. For instance, if an overarching enactment imposed general provisions on liability, these provisions would not have to be enshrined in each special enactment. The special enactments providing for the conferral of certain powers on concessionaires in specified circumstances could then lay down necessary supplementary provisions or intentional derogations from the overarching enactment. Therefore, the Federal Ministry of the Interior should consider what guidance needs to be given to federal departments and agencies to ensure compliance and good performance when granting concessions.

 

Good Practice Note 03/04: General internal services

In-house document management and long-term archiving

Principles

(1) Functions, powers and responsibilities with respect to in-house document management and long-term archiving should be clearly defined.

(2) All incoming and outgoing documents relevant for official records should be filed and managed within a registry system.

(3) A comprehensive and current filing plan should be used in line with the respective authority’s tasks.

(4) As a matter of principle, all records no longer needed by federal entities for discharging their functions have to be offered to the Federal Archives. Records may not be destroyed without the approval of the Federal Archives. This does not preclude general agreements with the Federal Archives about the type of documents to be offered.

Background

All documents produced and received in the course of discharging Federal Government functions are official records irrespective of the type of medium on and the way in which they have been recorded. Any document relevant for filing must be registered, filed and made available in an orderly manner.

The federal constitutional bodies, authorities and law courts, non-department federal bodies and foundations are obliged to offer all documents which they no longer need for discharging their functions to the Federal Archives. The latter shall decide, in conjunction with the offering entity, about the permanent value of the documents for the research in or the comprehension of German history, the protection of the rightful concerns of citizens or the provision of information for legislation, administration or jurisdiction. The Federal Archives shall permanently preserve, make available for use and arrange for the scientific analysis of federal archival material.

In 2008, we studied the successive steps followed by seven federal entities from retaining records to handing them over to the Federal Archives or, alternatively, destroying them. We found that not all authorities manage their records in a cost-effective and expedient way:

(1) Since tasks, powers and responsibilities were partly determined inadequately, the tasks of records management and registration were not performed at all or only inadequately.

(2) By failing to index their records, by registering them only on index cards or in an unsuitable indexing system, some authorities hazarded long processing times.

(3) Authorities had difficulties with classifying, locating and discarding their records because their filing plans were often incomplete, inaccurate or outdated.

(4) In a number of cases, authorities destroyed records without seeking the approval of the Federal Archives in individual cases or in the form of general agreements. The authorities thereby infringed the provisions of the Federal Archives Act and risked irretrievably losing records of permanent value.

Notes

In addition to the weaknesses pointed out above, we found that applicable regulations were not very suitable especially for cost-effectively managing documents received or furnished electronically, hybrid files and electronic files. We therefore recommended that the Federal Ministry of the Interior revise applicable regulations on electronic document management in cooperation with the other departments and the Federal Archives.

In May 2012, the Federal Ministry of the Interior published “Organisational Guidance for Electronic Administrative Work”. The Guidance describes the legal, professional and functional requirements to be met by electronic files and how they can be complied with organisationally in the course of an authority’s business processes.

 

2013 Annual report – spring report – No. 03 - Costly building erected without adequate prior organisational study

The German Statutory Accident Insurance, the umbrella association of occupational accident insurance funds enlarges its headquarters premises in Berlin at a cost of €48.5 million. The planned floor space in the new office building exceeds the umbrella association’s needs by 2,700 square metres. It intends to let this excess floor space rather than use it itself. The umbrella organisation should speedily consider options for using the new building in order to optimise its premises and staff resources at all of its three locations.

In May 2011, the umbrella association decided to acquire a property in the Berlin government district and to erect a new office building. When estimating its floor space needs and the sizes of the offices, it exceeded the relevant standards set for federal departments and agencies (by 700 square metres). Furthermore, it planned for reserve floor space for relocating organisational units from other locations (2,000 square metres). Apart from the office space in the new building, planning is allowed for a conference centre with a floor space of 1,500 square metres, the need for which was not adequately substantiated at planning stage.

We pointed out that no valid organisational study of all locations was made before launching the project. Moreover, the umbrella organisation limited the scope for the selection of suitable properties by its generous floor space planning and the demand for the large conference centre. Now that the decision to erect the building has been made and work actually started, the association should speedily analyse its organisation at all of its locations, optimise floor space and staff resources at its other locations in St. Augustin and Munich and explore and make use of savings potentials.

 

Good Practice Note 07/02: Structural and procedural organisation

Task review

Principles

(1) Task review shall be a permanent challenge within the administration reflecting the pre-set goals. Task review consists of three key steps: 1. compilation of a task list, 2. purpose review, 3. performance review.

(2) When listing the tasks, care should be taken to ensure that all tasks of the entity are listed fully and in sufficient detail.

(3) The first step is to check whether all tasks of an authority are really needed. Those that are considered necessary need to be checked further to find out whether they can be performed at less cost by other entities (purpose review).

(4) Once the purpose review has shown that a task should permanently be performed by the entity and the desired outcome has been defined, performance review shall follow. It focuses on checking whether the task with the same outcome can be performed at less cost. Additional assessments can be done to check whether the task defined may be accomplished more quickly, in larger quantities or in better quality at same cost.

Background

Task review is the principal organisational tool for improving efficiency in a public entity’s operations. It questions, without restrictions, the need for each task of the entity. Thus, the root of the problems is tackled in order to accomplish optimum streamlining, thereby realising savings.

Task review has for many years been an important aspect in the German SAI’s audits of organisational set-up. Since 2010, the German SAI has examined task review in various federal entities, treating it as an audit subject of its own.

(1) To assess if a task for a public entity is really needed, yardsticks for measuring are required. These are the strategic goals which essentially result from legal provisions and political requirements and may include additional goals developed by the entity from this basis. If no robust goal structure is in place, no task assessment can be done since reliable yardsticks are lacking. In its audit work, the German SAI often found shortcomings in goal structures.

The precedence of purpose review over performance review is an essential requirement, in line with the principle that “performing the right task is more important than performing the task accurately”.

Task review needs to be understood as a permanent challenge. Once a public entity has taken stock of its tasks and carried out a task assessment, the list of tasks thus developed needs to be continuously updated. New tasks added by virtue of legal provisions or political requirements need to be included in the list. If the list is not updated regularly, much more input is needed when the tasks must be inventorised completely new some years later. The Joint Rules of Procedure of the Federal Ministries (para. 3) also call for continuous task assessment to ensure that federal ministries limit their activities to their respective core functions. However, several subordinate entities as well as federal ministries have failed to do task reviews for years.

(2) If the task list is incomplete, some of the potential impact of task review is lost. Occasionally, audited entities did not go to the trouble to draw up an exhaustive list of all functions. Instead, they e.g. based their task list on a schedule of responsibilities that contained rather vague descriptions of tasks or remits. The tasks need to be sufficiently detailed so as to give a clear picture of the nature and volume of the operations to be performed (sub-tasks). Occasionally, the task lists the German SAI found in auditing the entities lacked sufficient detail. If tasks are described too ambiguously, entities are not able to identify duplication of effort or other unnecessary activities.

(3) Once a task is considered to be necessary – e.g. due to a legal requirement – the question must be asked whether the previous volume of performance is needed. For instance, quantities may be reduced, if there has been no sufficient demand in the past (e.g. in the case of booklets). Moreover, it needs to be checked whether the quality in which the outcome is generated is really necessary (e.g. expensive web portals, extensive supplementary information in written administrative rulings). If quality can be reduced, this generally permits a reduced input of resources.

Necessary tasks need to be checked to find out whether they can be performed at less cost by other entities. In the case of ministries, such a check is particularly important. Subordinate entities should be involved wherever possible given their less expensive payroll structure. In addition, tasks may be outsourced to non-departmental federal entities or private sector bodies. In such cases, it will be necessary to consider the legal framework and to identify the costs to the federal budget. In quite a number of cases, the German SAI’s audits revealed that federal ministries perform executive functions that subordinate entities could have performed as well. This practice must be restricted to exceptional cases and must be specifically justified.

(4) An overall performance review is equivalent to an analysis of business processes and business process enhancements (Good Practice Note 07/01: “Analysis and optimisation of business processes 1/basic aspects”). Apart from optimising individual business processes, vertical steps of performance review may also be considered. For instance, a group of employees could be trained for higher qualification in order to do the same sub-tasks (steps in a process) in various operations. Another option would be introducing a comprehensive quality management system.

 

Good Practice Note 07/01: Organisation

Analysis and optimisation of business processes 1/basic principles

Principles

(1) Each permanent administrative task is delivered through business processes. A business process is a fixed sequence of actions, even across the bounds of organisational units, which end up in a result (product, service). Each action within the business process is designed to add value to the result.

(2) In order to enhance the efficiency of administrative operations, authority’s business processes need to be enhanced, above all in terms of costs, quality and time needed. The first step to do so is the drawing up of a ‘process map’, which shows all of the authority’s business processes in a clear and concise way. On this basis, particularly important business processes, known as core processes, are to be explored. After the core processes, further business processes and finally support processes which only generate in-house products can be analysed.

(3) The analysis and optimisation of a business process should at least comprise the components listed below in the following order:

1. The successive steps of the process need to be documented (reflecting the actual process).

2. The process has to be analysed (to identify and evaluate weaknesses).

3. The process has to be optimised (by modelling the desired process).

4. The optimised process has to be evaluated (success monitoring).

(4) Once a business process had been enhanced for the first time ever, its documentation updated and, where appropriate, adjusted; the process needs to be checked to identify other or new deficiencies, which then need to be eliminated (continuous improvement of processes).

Background

For more than a decade, the business process approach has had a decisive role in the efforts to enhance performance in the public sector (with even earlier antecedents in the private sector). The organisation of business processes has become a valuable tool. Today, the (analysis and) optimisation of processes is the most important type of performance review (Good practice guides on “task review”) in the public sector. Optimised business processes have a valuable basis for electronic case processing, which can generate considerable savings in the Federal Government departments. The BundOnline 2005 eGovernment initiative has contributed much to creating a broader basis for the business process approach in federal departments and agencies. Nevertheless, departments and agencies will still need much time to carry out all necessary analyses and optimisations of business processes.

(1) In the course of our audits, we frequently found business processes with redundant sub-processes. For instance, a quality check was carried out twice or there was a duplication of steps in parallel processes. Sub-processes that did not add value to the final product included unnecessary communication of information.

(2) In the course of our audits, we frequently found that authorities wanted to optimise individual processes or sub-processes on an accidental basis, e.g. because a new software for performing one of their tasks had become available. In the absence of an overview of all the processes performed or needed, there is the risk that cross-divisional processes may not be identified, that synergies of similar processes in different organisational units may not be taken into account or that isolated solutions will be implemented. A comprehensive approach should be adopted when it comes to designing and implementing processes in an authority. To quickly generate a decisive impact on an authority’s performance, the core processes should be optimised first. These are often those to which most staff has been assigned. Processes must be considered in terms of impact and results. This means that, prior to optimising support processes, it is necessary first to design and optimise the processes to be supported.

(3) Occasionally, auditees did not correctly implement their projects for analysing and optimising processes and were therefore unable to achieve potential results. For instance, the processes to be reviewed were described either incompletely or inaccurately, not all substantial weaknesses were identified, identified weaknesses were evaluated incorrectly or not remedied, target models for processes were not designed or not implemented.

(4) We found that, after having optimised their processes for the first time ever, authorities sometimes did not take any further action to ensure that the processes in question remained optimal. This applied especially to cases in which management consultants had taken stock of the processes and had modelled them. After the end of the consultancy activities, staff of the authority were often not trained for handling the analytic software used. As a result, maintenance of process documentation was discontinued. Processes may change from time to time, e.g. in response to changes in the legal framework. In such cases, pertinent process documentation has to be updated and there must be a continuous search for further optimisation potential. If process documentation is up to date and complete, such records can serve to induct newly assigned staff into the process.

Notes

We were largely involved in drafting the chapter on process organisation of the manual on organisation studies, staffing and rating (organisation manual) published in 2007. An appendix of the organisation manual describes optimisation potentials which we identified in a broadly-based multi-agency audit.The German language organisation manual is available in the Federal Government’s intranet: http://www.orghandbuch.de/cln_090/nn_414290/OrganisationsHandbuch/DE/node.html?

 

Good Practice Note 03/03: General internal services

Organisational set-up of corporate services

Principles

(1) The organisational structure and procedures of general internal services should be reviewed and streamlined periodically. For that purpose, the authorities should have available organisational studies including an assessment of staffing requirements.

(2) Authorities having central and field offices at several locations should always pool their general internal services. Any exceptions should be adequately justified and documented.

(3) The authorities should use efficiency appraisals to determine whether to perform general internal services in-house or to contract them out to a private sector contractor.

(4) Where general internal services have been contracted out, the authorities should issue invitations to tender at maximum intervals of five years.

(5) The authorities should identify all costs for the use of premises by contractors and determine an appropriate remuneration on this basis.

(6) Benchmarking is a suitable means for improving the quality of general internal services.

Background

To enable general internal services to support the core functions of the authority as best as possible, they must work effectively and efficiently. In 2009 and 2010, we carried out a horizontal study of the internal services of non-departmental federal bodies. We found that there was scope for enhancing the efficiency and organisation of these services.

(1) We found that, in the majority of cases, the audited authorities did not review and streamline the structural organisation and procedures of their general internal services. In most cases, they failed to do organisation studies followed by an assessment of staffing requirements. If general internal services are streamlined, an authority is able to discharge its core functions as best as possible. Systematic review of structural organisation and procedures is needed to detect weaknesses, to identify and use savings potentials. Rather than restricting such review to individual services, the whole range of general internal services with all managerial, executive and support functions needs to be studied.

(2) In a number of cases, authorities with several locations had in place a decentralised organisation of their general internal services. In these cases, they failed to assess as to whether the centralisation of these services would have been more appropriate.

Where several internal services work in parallel, this may lead to gaps in information exchange and to overlaps. In contrast, unified internal services for all locations permit a consistent and efficient performance of tasks. Moreover, the centralisation of services prevents excessively small organisational units with mini-sections.

(3) In most cases, the audited authorities did not assess as to whether they should run the general internal services themselves or contract them out to the private sector. Only in a few cases did they carry out efficiency appraisals. Where such appraisals had been conducted, they were often incomplete and methodology was flawed.

An efficiency appraisal is absolutely needed for reliably identifying the way in which individual internal services can be performed efficiently. When making such appraisal, the authorities should consider all options for performing the tasks (e.g. themselves, in cooperation with third parties, contracting out to private sector) and estimate the costs of each option. The appraisal should use the present-value method recommended by the Federal Finance Ministry and by us (relevant guidance in German: “Introduction to efficiency appraisals”; Interdepartmental Circular GMBl. (2011) pp. 76 seq.).

(4) The audited authorities mostly contracted out the functions of access control, guarding and management of premises to the private sector. At the time of our audit, the remaining contract terms frequently significantly exceeded five years.

To foster competition and make use of the resulting price advantages, public invitations to tender for general internal services should be issued at least every five years. Prior to that, the volume of service to be contracted out (e.g. cleaning intervals) needs to be assessed and adjusted where necessary. Where it is foreseeable that services will be used not at all or only in part (e.g. winter-related services), a proportionate refund should be stipulated.

(5) The audited authorities did not record the costs of internal services. This was the case especially in connection with making rooms available for use by contractors. The contractual charges often did not take into account related operating and personnel costs (e.g. caretaker and doorkeeper services) and costs of technical equipment (e.g. microphone system, video projector).

(6) The authorities conducted benchmarking exercises only in isolated cases. Benchmarking is an appropriate tool to achieve transparency as to the costs and quality of general internal services and continuously improving these services. The basis for this may be data from cost and performance accounting. Benchmarking across various authorities suggests themselves for looking into similar functions discharged across the board.

 

 

Good Practice Note 03/02: General internal services

Expenditure on in-house relocations

Principles

(1) Prior to any internal removals, federal departments and agencies, non-departmental federal public bodies and grantees in receipt of institutional federal grants should consider where there are cost-effective alternative options. Such consideration should be based on the estimated removal costs. Apart from the mere costs of transport, these estimates should also allow for indirect following costs e.g. the refurbishment of office premises.

(2) Where removals are necessary, they should study at an early stage whether work can be delivered cost-effectively and appropriately by in-house staff. Where contracts are awarded to external service providers, all provisions of procurement law need to be complied with.

(3) The responsibility for the organisation of internal removals should be clearly defined. In this context, it may be helpful to designate a responsible officer to coordinate the removal together with all parties concerned.

Background

Removals within federal entities are prompted by organisational changes, reconditioning of buildings, abandoning of premises or relocation to other premises, reassignment or promotion of staff members or request of individual staff members. In 2007, we studied internal removals at five entities that were federal departments or agencies, non-departmental federal bodies and recipients of federal institutional grants. At each entity, expenditure on such removals totalled up to €650,000 annually.

(1) We found that, prior to the removal, three entities studied whether relocation was expedient and cost-effective at all. Two entities were able to avoid expenditure by opting for cost-effective alternatives such as having state-of-the-art IT systems in place. The remaining two entities did not study such aspects. Nevertheless, it was always pointed out that internal removals impose a considerable burden on all parties concerned.

Therefore, we have recommended exploring alternative options on a timely basis and limit removals to the necessary extent.

Before staff moved into their new offices, some entities renewed wall-to-wall carpets, repaired and painted walls, complemented office equipment and adapted ICT equipment.

We have drawn attention to the fact that total removal costs include transport costs and indirect following costs. Only if the entity has identified all costs it can fully and reliably assess cost-effectiveness of a removal.

(2) One audited entity relied solely on in-house staff for carrying out the removal. Another entity was able to carry out removals with its own staff, if no more than three to four staff members were relocated. Two entities had decided that, in case of any removal, the standardised office and IT equipment and furniture were to remain at the previously occupied offices. The staff were to find identical equipment and furniture at their new offices.

We consider an expedient solution limiting removal costs.

Some entities also contracted out removal services but failed to observe the cost ceilings for awarding negotiated contracts and the thresholds for an EU-wide open procedure. Other entities failed to base their contract awards on blanket agreements concluded for removal services or to conclude blanket agreements.

We pointed out that, in principle, public invitations to tender are needed for removal services. Any decision to deviate from this principle in exceptional cases needs to be documented. Where removal services are needed at regular intervals, blanket agreements may be expedient and cost-effective.

(3) In most cases, many in-house units and external service providers were involved in carrying out removals within entities. This included users and decision-makers, janitors, in-house driver services, technical facility managers, procurement officers, materials managers, officers in charge of health and safety at work and finance divisions. Some audited entities issued extensive guidance in various forms on how to organise internal removals, (e.g. material posted on the intranet with removal forms, basic rules of procedure with lists of contacts).

We hold that clearly defined responsibilities facilitate the systematic cooperation of all parties involved.

2012 Annual report No.78 - Federal Government discontinues insignificant and inefficient transactions with private investors

Following our recommendation, the Federal Finance Ministry is going to discontinue the sale of debt instruments to private sector investors by year-end 2012. This business with private investors has become insignificant for the Federal Government’s borrowing because the volume of federal debt instruments purchased by private investors has declines steadily during the last 20 years. Moreover, business with private investors generated losses in the range of tens of millions of euros in recent years.

The Federal Government covers its borrowing needs partly by selling debt instruments to private investors. These sales are carried out by the Federal Republic of Germany – Finance Agency on behalf of the Federal Finance Ministry.

During the period 1990-2011, the volume of sales to private investors dropped from €28 billion to less than €2 billion. Thus, its share in total federal borrowing declined from 40.9 per cent to 0.7 per cent. Moreover, business with private investors generated losses partly in the range of tens of millions of euros in recent years. The Federal Finance Ministry and the Finance Agency assumed that their business with private investors could be conducted on cost-recovery basis only if sales increased in the long term. To achieve this, the Finance Agency primarily intended to introduce new investment products. It also hoped that an increase in the general level of interest rates would increase the volume of sales.

The small proportion of securities sold to private investors has shown how insignificant this business has become. It does no longer make any substantial contribution to federal borrowing.

We expressed doubts as to whether the business with private customers can be significantly increased and run on a cost-recovery basis by introducing new products or by an increase in the general level of interest rates. Even if these expectations materialised, there are economic reasons that prevent the Federal Government from paying higher interest rates to private investors than it pays to institutional investors. Moreover, banks frequently offer investments that carry higher interest rates. These are often more attractive to private investors in spite of the Federal Government’s strong credit rating.

The Federal Finance Ministry has taken up our recommendation and is going to discontinue business with private investors by year-end 2012. This does not exclude private investors from acquiring federal debt instruments. They may continue to do so via banks.

 

2012 Annual report No. 76 - Leibniz Social Science Research Institute reorganised

Following our recommendation, the Federal Research Ministry reorganised the Leibniz Social Science Research Institute. It centralised the Institute’s work at two locations, abolishing the previous structure of 19 locations in four cities. Moreover, it corrected grave deficiencies in the Institute’s management.

The Institute makes information about social science research accessible, archives and makes it available to the scientific community. The Ministry gives grants of €14 million annually to the Institute, thus covering 80 per cent of the latter’s expenditures. The remaining portion is funded by three German states.

We found that the Institute had premises at 19 locations in Bonn, Cologne, Mannheim and Berlin. The Institute was of the opinion that this fragmentation of premises did not provide a basis for successful scientific work. In 2008, the Federal Government and the three participating German states therefore approved a new location scheme which, however, called for maintaining locations in all three states. This solution was not cost-effective. The fragmentations of premises also affected the Institute’s management. This caused numerous deficiencies in financial management. For instance, staff members had access to cash and credit cards. There was no uniform recording of working hours and the Institute did not comply with public procurement rules. In addition, the Federal Government’s representation on the Institute’s supervisory body was not proportionate to its share of the funding.

Following our recommendation, the Federal Research Ministry improved the location scheme. The scheme now calls for two central locations in Cologne and Mannheim. The Bonn location has been abandoned and the Berlin premises are to be closed down by 2014. The Institute’s management has been centralised and reorganised in Mannheim. It is addressing the numerous deficiencies found. For instance, cash control is now in place and procurement rules are complied with. A central system for the recording of working hours has been implemented. The Ministry intends to strengthen its influence in the Institute’s governing body. It has proposed amending the Institute’s charter to increase its voting rights.

The Ministry has taken steps to fully improve the Institute’s management and working conditions. We expect the Ministry to exercise stronger control in future and to implement the new location scheme.

 

2012 Annual report No. 65 - Savings of €1 million annually as a result of giving up military rescue service schools

We recommended that the Ministry transfer the initial and continued training of rescue service personnel to military hospitals and to disband its own rescue service schools. This will result in savings of €1 million annually.

The Defence Ministry operated five rescue service schools for the initial and continued training of its rescue service personnel. Paramedics, first responders in the medical corps and emergency medical assistants were trained in these schools. This caused personnel costs of about €1.5 million annually. The instructors had little practical experience with emergency situations and had to draw on physicians of military hospitals specialised in rescue service and emergency room (ER) work. The rescue service schools cooperated intensively with the military hospitals. Only there was it possible to impart realistic training and ER experience to the rescue service personnel.

We audited initial and continued training of military rescue service personnel and found that, owing to the cancellation of many training courses, there were excess capacities of instructors and equipment. We held that the expensive operation of separate rescue service schools was unnecessary. We recommended that the Defence Ministry disband the five rescue service schools and transfer initial and continued training to the military hospitals. This will enable the Armed Forces to train rescue service personnel to a higher standard and to save up to €1 million annually in the medium term.

The Defence Ministry has taken up our recommendation and ordered that the rescue service schools be disbanded. The relevant training will now be provided more cost-effectively in training and simulation centres of military hospitals.

 

2012 Annual report No. 34 - Common strategy for German Pension Insurance public relations work is lacking

The public relations work of the German Pension Insurance is not based on a common strategy. There is a lack of clearly visible goals. We expect the pension insurance bodies to re-target their public relations activities and to visibly organize them more in line with actual needs and the requirements of cost-effectiveness. The Federal Social Ministry and the Federal Insurance Office should monitor this process in their capacity as sponsoring government departments.

Since a restructuring exercise in 2005, the bodies that administer the statutory pension insurance system are to coordinate and jointly steer their public relations activities through their umbrella organization German Federal Pension Insurance. By consolidating public relations in the field of pension insurance, the Legislature intended to improve the information of the public about the pension system which is governed by uniform nationwide provisions.

We found that the public relations activities of the pension insurance bodies lack clearly identifiable goals and consistency. It is questionable whether public relations activities are designed in line with actual needs and the requirements of cost-effectiveness. The pension insurance bodies use media without coordination and partly duplicate work for the same purpose. While the Federal Pension Insurance has announced that the pension insurance bodies intend to develop goals and strategies for coordinated public relations and to review the use of media under criteria of cost-effectiveness, it does not appear that all pension insurance bodies are ready to combine their efforts in this field.

We expect the community of pension insurance bodies to target their public relations work in line with actual needs and in a cost-effective way through their umbrella organisations Federal Pension Insurance. We call upon the Federal Social Ministry and the Federal Insurance Office to monitor this process in their capacity as sponsoring government departments.

 

2012 Annual report No. 32 - Federal Employment Agency disbands its in-house copy shops

The Federal Employment Agency disbands its in-house copy shops. These were often not used to full capacity and operated inefficiently. For the time being, it will assign the copying work to its mail rooms. At the same time, it will examine ways in which it can have the copying work done cost-effectively. Thus, it is implementing our recommendations.

In 2007, the Agency assigned the administrative task of its local branches to central units (internal services). Within these, it sets up in-house copy shops for extensive printing and copying work. According to our estimates, the personnel and material costs for the more than 100 staff in the in-house copy shops totalled €6.6 million in 2010.

We found that, when setting up the in-house copy shops, the Agency had not considered other organizational options. It also did not know whether or not the copying work is done cost-effectively. For instance, the work capacity of the staff assigned to the copy shops was only partially utilized by the copying work. Moreover, the copy shops often used copying machines whose capacities often were far from being fully used. They also infringed their own rules by procuring multi-function colour printers. With these, they often produced significantly more expensive colour copies in cases where black and white copies would have been sufficient.

The Agency has taken our recommendations. It is going to disband the in-house copy shops in the short term, assigning their tasks to the mail rooms of its local branches. Furthermore, it intends to reorganize its entire internal operations including the copying work. It intends to centrally record all its copy jobs. By doing so, it intends to step up its technical oversight and to identify ways in which it can have the copy work done more cost-effectively.

 

2012 Annual report No. 14 - Federal Police redesigns its driving schools

Following our recommendation, the Federal Police has begun to redesign its driving schools and to adjust training courses for special driving licences for police officers to actual demand. It intends to consider to what extent it may outsource basic modules of its drivers’ training to private-sector driving schools and to concentrate police-specific drivers’ training at fewer locations.

Apart from holding a civilian Category B driving licence, police officers must obtain a special driving licence for police officers, if they are to drive vehicles of the Federal Police. The training required for obtaining the special licence is provided by the Federal Police itself, which operates driving schools at several locations.

We identified a lack of demand-driven operational and training strategies for the respective driving licence categories. Moreover, the Federal Police did not know the costs of providing drivers’ training for special driving licence categories. Thus, it lacked information essential for comparing the internal provision of special drivers’ training with the costs and performance of private-sector driving schools and for merging the driving schools. It assigned the same numbers of staff to each driving school without taking into account different functions of the individual schools.

We recommended that the Federal Police develop demand-driven location, operation, staffing and training concepts for each police driving licence category. To do so, it should consider the possibilities for outsourcing basic modules of general drivers’ training to private-sector driving schools. Its own drivers’ training programme should be limited to police-specific contents.

The Federal Police has begun to implement our recommendations.

 

2012 Annual report No. 13 - Ministry’s oversight over the Federal Agency for Digital Radio of Security Authorities and Organisations is inadequate

The Federal Interior Ministry inadequately discharges technical oversight duties in respect of the Federal Agency for Digital Radio of Security Authorities and Organisations. Due to the Ministry’s failure to oversee the Agency, inefficient and improper operations were not identified.

In several instances, the Agency acted inefficiently and improperly, e.g. by

• regularly procuring luxuriously equipped vehicles for its president and vice-president;

• leasing these vehicles rather than buying them on favourable terms;

• using these vehicles mostly for short courier trips;

• spending more on entertaining visitors than the Ministry during the same period;

• excess spending on furnishing the offices of its president and vice-president.

The Ministry was largely unaware of these operations of the Agency. Effective technical oversight is required to ensure that the Agency’s operations comply with legal requirements and are conducted in an expedient way. Even in the future, the Ministry intends to refrain from “systematically” monitoring the Agency’s operations. In the Ministry’s opinion, it is primarily the Agency that has the duty to remedy deficiencies. Nevertheless, the Ministry instructed the Agency to comply with the guidance on the procurement of official vehicles promulgated by the Federal Finance Ministry.

We demanded that the “Principles on the Exercise by the Federal Ministries of Technical Oversight over the Agencies within their Respective Remit” be applied to the Agency. To do so, the Ministry is to receive reports by the Agency on its operations and conduct administrative controls.

 

2012 Annual report – spring report – No. 08 - No progress made with consolidating family allowance payment units

Since 2004, the Federal Finance Ministry has not succeeded in significantly reducing the number of family allowance payment units (‘units’) and thereby public spending on these units by €170 million annually. Instead of the targeted number of no more than 120 such units, their actual number is still 8,500. This impairs accountability for family allowance payments and prevents effective oversight by the superior authority.

Family allowance is disbursed by the family allowance payment units. In 2010, they remitted €38.8 billion for 17.5 million children. Technical oversight is incumbent on the Federal Tax Office which comes within the remit of the Federal Finance Ministry.

In 2004, there were about 16,200 of such units. Their large number prevented effective technical oversight and, as our audit revealed, resulted in such irregularities as duplication of payment. Therefore, the Federal Finance Ministry aimed at reducing the number of the units to not more than 120 by the year 2007.

The Ministry clearly failed to meet this target. At present, there are still about 8,500 such units; the Ministry is not aware of the precise figure. 102 of these units exist within the Federal Employment Agency and pay for more than 80 per cent of the child allowance cases. Together with the 100 biggest units within federal, state and local government they process 98 per cent of all child allowance cases. Another 8,300 units within federal, state and local government process the remaining 2 per cent of the child allowance cases.

We perceive an urgent need for restructuring family allowance payment units. We recommended consolidating the entire processing of all family allowance cases. This would improve processing quality and permit a reduction of public spending. We urge the Federal Finance Ministry to design a strategy and timetable for the restructuring of the units and to draft legislation to this effect.

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