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2016 Annual report Volume II No. 15 - Federal Railway Authority obtains refunds of €1.4 million

The Federal Railway Authority has enforced the repayment of grant funds amounting to €1.4 million that had been received by railway infrastructure companies although they did not have a good claim to these grant funds. The companies had invoiced the Federal Government construction costs and supplementary contract costs which they themselves or third parties would have had to bear. We had alerted the Federal Railway Authority to these faulty invoices.

The Federal Government reimburses to the railway infrastructure companies eligible construction costs for the building and upgrading of federally-owned railway lines. The railway infrastructure companies call the federal funds directly from the account of the Federal Cash Office. The Federal Railway Office defines the work and services eligible for grant-funding and demands that the companies use the federal funds according to the specified purposes and so as to obtain good value for money. If the Authority detects infringements of these requirements as a result of sample checks, the companies have to refund the grants plus interest to the authority.

We audited two projects not included in the sample. We found that the companies infringed the provisions laid down in the Handbook. They had called federal funds for costs that were not eligible for reimbursement or that should have been financed by third parties. The Authority acknowledged our audit findings and the companies have repaid €1.4 million to the Federal Government. The Authority is considering further refund claims in the range of millions of euros.


2016 Annual report Volume II No. 14 - Federal Railway Authority and Deutsche Bahn now comply with the prescribed retention periods for contract and invoicing documents

In response to our recommendation, the Federal Railway Authority has made it clear that grantees have to retain invoices and contracts for construction expenditure for the periods prescribed by public funding law. This is to forestall the risk that grantees destroy records prematurely.

The Federal Government gives grants in the magnitude of billions of euros towards the renewal of railway lines, stations and the power supply for railways. The Federal Railway Authority discharges functions as grant-awarding authority.

Grantees must prove that they have used the grant funds in accordance with the specified purpose and the good value for money requirement. To do so they have to submit documents proving the use of grant funds to the grant-awarding authority. This already applies during the construction phase (interim proof of use) and also after completion of the construction work (final proof of use). We also need to have access to the proofs of use.

The documents proving the use of funds comprise back-up documents on the awarding of contracts or invoices. The grantees have to retain these documents for five years. The retention period begins after submission by them of the final proof of use.

In the case of one project, no back-up documents were available for our audit because, allegedly, they had already been destroyed. The Ministry of Transport and Digital Infrastructure considered this to be in compliance with the law, arguing that the retention period expired five years after submission of the interim proof of use.

We noted that the relevant documents were not submitted to us immediately. We made it clear that the retention period begins to run only on submission of the final proof of use.

The Ministry meanwhile informed us that there had been a risk of confusion between the terms “interim proof of use” and “final proof of use”. Therefore, the Federal Railway Authority had drawn attention internally and vis-à-vis the grantees to the obligation to comply with the retention periods.


2016 Annual report Volume II No. 13 - Federal Railway Authority has improved processes related to the promotional funding of railway lines

The Federal Railway Authority has introduced standard forms and guidelines to ensure compliance of the promotional funding of the upgrading and building of federally and privately owned railway installations. By doing so, it ensures that applications and grant award notices include all required information.

The Federal Government gives grants towards investments in federally owned railway lines and privately owned railway sidings. This covers noise mitigation at existing railway lines e.g. by sound insulating windows as well as the construction and rehabilitation of private railway sidings. The Federal Railway Authority processes the grants. Where grantees apply for funds, the applicable legal provisions require them to make certain declarations on e.g. the start of construction and the acknowledgement that subsidy fraud is a punishable offence.

We found that often both the applications and the grant award notices did not include all required declarations. Without these, it is difficult to claim the refund of grants paid in cases of non-compliance. This could involve risks for the federal treasury.

We recommended that the Authority take steps to ensure that, in future, all applications and grant award notices will include the required declarations.

The Authority followed our recommendations and improved its processes. It has introduced standard forms and guidelines for the processing of grant applications. We consider these forms and guidelines suitable for enhancing grant-funding of investments in federally owned railway lines and private railway sidings.


2016 Annual report Volume I No. 38 - Inaccurate determination base results in excessive grants for railway installations

The Federal Transport Ministry gives the federal railway infrastructure companies grants towards replacement investments in railway lines. The amounts of these grants were determined on the basis of the railway installations to be renewed. We advised the Ministry of numerous railway installations that were included in the determination base although they are not to be renewed. This leads to excessive grants of at least €10 million annually.

The Federal Transport Ministry gives the federal railway infrastructure companies grants towards replacement investments in existing railway lines. Since 2009, such financial support has been governed by a performance funding agreement under public law concluded between the Ministry and the railway infrastructure companies. Under this agreement, the railway infrastructure companies receive an annual lump-sum grant and in return commit themselves to maintain the railway lines in a condition specified by quality targets.

We drew attention to the fact that the amounts of the agreed grants were based on obsolete data. For instance, switches that can be no longer used were included in the determination base: their connections other tracks were interrupted or they had for years been overgrown with trees and shrubs. This resulted in excess grant payment of at least €10 million annually. The Ministry does not see any possibility for recovering these funds or to adjust the performance and funding agreement.

We demanded that, in negotiations for a follow-up agreement, the Ministry ensure that the grant amounts will be based on current and complete data but also that the contract include a provision for adjustment when he determinants for the grant amounts or for the agreed quality targets change.


2016 Annual report Volume I No. 37 - Officials sitting on project advisory boards may jeopardise independence and impartiality of authorities

Federal officials took part in the adoption of resolutions of local project advisory boards for citizens’ participation in railway projects. This may jeopardise the independence and impartiality of the Federal Government, especially of the Federal Railway Office. We expect the Federal Government to refrain from taking part in the work of project advisory boards in the future.

The Federal Transport Ministry provides financial support for investments in the construction of railway lines. The railway projects are preceded by regional planning and plan approval procedures that require participation by the general public. After that, the Federal Railway Office weighs all interests impartially and independently. It must avoid any exposure to undue influence.

Project advisory boards are to improve the participation of the public and the communication with the people concerned; they are no formal element of the plan approval procedure. Senior officials of the Federal Transport Ministry and the Federal Railway Office are co-founders and/or members of project advisory boards for several large railway projects. The project advisory boards called for additional noise abatement measures that exceed the legal requirements and would cause considerably higher expenditure.

We pointed out that the participation of federal officials in the work of project advisory boards may invalidate, impair and prejudice the regular administrative procedures. We also drew attention to the risk of conflicts of interest. We recommended that the Ministry prohibit the participation of federal officials in project advisory boards.


2016 Annual report Volume I No. 36 - The Federal Ministry of Transport and Digital Infrastructure accepts excessive planning costs linked to investments in existing railway lines

When signing a funding agreement for investments in railway lines, the Federal Ministry of Transport and Digital Infrastructure did not limit the funding of planning and administrative costs by the Federal Government to ensure the economic and efficient use of funds. During the five-year-term of the agreement, these costs are €922 million higher than in the case of comparable funding agreements that provide for a funding limit. We expect that the Ministry will in future limit the amount of planning and administrative costs eligible for funding.

Within a five-year period, the Federal Government provides funds of €18.8 billion under a so-called performance and funding agreement for the existing network (railway lines, stations and energy supply). In contrast to other funding agreements, the Ministry did not limit the amount of planning and administrative costs eligible for federal funding. It assumed that the entrepreneurial management of the grantees would guarantee the economic and efficient use of the federal funds also in the field of planning and administrative costs.

In fact, planning and administrative costs incurred in 2013 were equivalent to a 23 per cent premium on the construction costs. Thus, they were €922 million higher than e.g. with a 16 per cent limitation as provided for in the case of grants from the European Regional Development Fund. We therefore urged the Ministry to appropriately limit the financing of planning and administrative costs from federal funds under a subsequent funding agreement.


2016 Annual report Volume I No. 30 -Unlawful reimbursement of Deutsche Bahn AG for free transport of severely disabled persons  

The Deutsche Bahn AG is reimbursed for transporting severely disabled persons free of charge. For decades, the Ministry did nothing to stop the Federal Office of Administration from unlawfully reimbursing Deutsche Bahn AG for its loss of income caused by the free transport of severely disabled persons.

Under certain conditions, severely disabled persons are eligible to receive discounts on passenger transport services, even transport services free of charge. The Federal Office of Administration reimburses transport companies for their losses; in the case of Deutsche Bahn AG, such losses amounted to hundreds of millions of euros. The Ministry instructed the Federal Office of Administration to do so. According to these instructions, the Federal Office of Administration is required to make prepayments. Although Deutsche Bahn failed to submit the required evidences triggering the reimbursement in due time for decades, the Federal Office of Administration did not recover such prepayments. Instead of closing pending cases, it even made further advance payments in addition to the first prepayment and called them final payments with reservation.

The ninth German Social Code stipulates that losses from free local passenger transport are to be reimbursed at local rates. Deviating from this rule, the Ministry agreed with Deutsche Bahn that such losses be reimbursed at a national rate and irrespective of local agreements. In 2012, the Ministry reimbursed €38 million at this national rate.

We requested the Ministry to adhere to applicable statutory provisions.


2016 Planning a new Fehmarn Sound Bridge

The Federal Ministry of Transport and Digital Infrastructure intends to decommission the existing Fehmarn Sound bridge and build a new bridge. The German SAI found major shortcomings in the relevant capital expenditure appraisal. The bridge is in a bad condition, also because the German Railways company has for many years neglected its duty of proper maintenance. As a result, the Public Accounts Committee demanded that the Ministry ensure the safe and smooth operation of the bridge until the structures designed to replace the former bridge are completed. As to the capital expenditure appraisal, the Committee wants the Ministry to include the option of retrofitting the existing bridge.

Apr 11, 2016

0 Summary

The island of Fehmarn in the Baltic Sea is connected to the German mainland by a road and rail bridge crossing the Fehmarn Sound. As part of the Fehmarn Belt fixed link project, the Federal Ministry of Transport and Digital Infrastructure intends to decommission the existing Fehmarn Sound Bridge and replace it by a new bridge or tunnel. By the end of September 2015, the Ministry reported on this issue to the Public Accounts Committee, a subcommittee of German Parliament’s Budget Committee. The Public Accounts Committee took note of the report and requested the Ministry to provide a justification for selecting a definite option until 30 August 2016. Among many options for new bridges or tunnels, one option focuses on repairing the existing bridge as it stands. Jointly with our field offices in Hamburg and Stuttgart, we looked into the documents on which the Ministry based its selection. The Ministry and the German Railways company were requested to submit their comments. To do so they also submitted new documents. In the present audit report, we have taken their comments into account. The report also informs about the condition of the existing bridge.


The Ministry’s report as of September 2015 was based on incomplete and little convincing documents, some of which were drafts. Moreover, the final deliberations between the Ministry, German Railways and the road construction authority of the federal state of Schleswig-Holstein took place in November 2015 only, i.e. after submission of the report to the Public Accounts Committee. The Ministry’s report refers for the most part to a document that does not comply with the requirements set by the Federal Ministry of Finance. The Ministry and German Railways developed supplementing documents only upon our specific request.

We believe that at that current stage of the project the Ministry should not discard any options merely on the basis of the studies the Ministry has conducted so far. The Ministry may make better use of the time left until 30 August 2016 to carry out any supplementary studies needed without delay. (No. 5)


The Ministry's documents are not very meaningful in view of the following points:

The capital expenditure appraisal is mainly based on a spreadsheet supplemented by some comments and is therefore little transparent. Sources of key input variables have not been cited. In our opinion, the Ministry and German Railways used inappropriate approaches. They included maintenance costs only in such options which, in a first step, provided for retrofitting the existing bridge. However, maintenance work needs to be performed in the short term for all options.

The Ministry and German Railways did not adequately document the utility analysis. Nor did they explain the assessment criteria they used. Moreover, such criteria were blurred and ambiguous. We found duplicate assessments since individual requirements such as accessibility to the island during construction were covered by several criteria. Furthermore, the utility analysis does not comply with the requirements set by the Federal Ministry of Finance. German Railways calculated the utility values of monetary criteria already included in or arrived at in the capital expenditure appraisal. According to the requirements set by the Federal Ministry of Finance, such values must not be used again in a utility analysis. In an effort to remedy this shortcoming, the Ministry and German Railways submitted modified documents. As the supplement was a mere display of results, the German SAI was not able to derive reliable conclusions from the data provided.

The results of the capital expenditure appraisal show that option ‘A’ ranks in second place: This option provides for retrofitting the existing bridge with regard to road transport and constructing a new bridge for rail transport. According to the utility analysis conducted by the Ministry and German Railways, option ‘A’ ranks in fifth place only. Applicable requirements set by the Federal Ministry of Finance stipulate that detailed justifications are needed in cases where the ranking changes significantly. Such a justification is lacking. (No. 3.2)


At present, the Fehmarn sound bridge is in a bad condition. We believe that German Railways and the Federal Government, represented by the road construction authority of the federal state of Schleswig-Holstein, have neglected their duty for proper maintenance for decades. Since 2000, corrosion damage identified on the bridge has not been removed by German Railways. As a result, such damage deteriorated and led to consequential damages. In 2012, German Railways stated that maintenance and repair costs amounted to €21 million (around three quarters of which were needed for protection against corrosion). In our opinion, a large portion of this amount needs to be invested in the short term in order to prevent additional traffic restrictions regarding the Fehmarn Sound Bridge. (No. 3.1)


The Ministry and German Railways denied that they had neglected their duty for proper maintenance. In addition to that, the Ministry and German Railways wish to invest merely €8 million in maintenance because they are of the opinion that the existing bridge will be replaced by new structures by 2028. In their view, urgent corrosion protection works are to start in 2017, once worn out suspension ropes have been replaced.

The Ministry and German Railways argue that the capital expenditure appraisal may be based on lower maintenance costs. They stated that extensive maintenance work was only needed if the existing bridge was to be strengthened for a continued use. According to the Ministry and German Railways, the comments on the capital expenditure appraisal were concise, but sufficient, since all calculations were disclosed in the spreadsheet.

The Ministry and German Railways confirmed that they had assessed the remaining useful life of the existing bridge to be 30 years. This parameter was included in the static verifications as part of bridge design appraisal and the analyses underlying the selection of a final option in accordance with applicable federal regulations. The Ministry and German Railways believe that a longer remaining useful life would reduce the efficiency of option ‘A’ compared to the options aiming at a new construction of the bridge, because of the increased need for maintenance work. However, they did not provide any evidence to back their argument.

The Ministry and German Railways underlined that the methods underlying the utility analysis, which were pointed up by the German SAI, had been agreed upon with the federal railway authority and the road construction authority. In particular, German Railways believed that a utility analysis served best to combine both qualitative and quantitative aspects. The Ministry and German Railways further stated that they considered accessibility to the island during construction the key criterion. Since that criterion was not met in option ‘A’, this option could be discarded as planning proceeded. (No. 4)


We are not convinced by the argumentation of the Ministry and German Railways. They do not use the results of their studies in a way that is compliant with the requirements for capital expenditure appraisals set by the Federal Ministry of Finance. An option is to be selected on the basis of both a utility analysis and capital expenditure appraisal. However, the Ministry and German Railways base their decision exclusively on the results of a utility analysis relying on disputable methods.

German Railways failed to provide evidence that they had made maintenance work a priority in the past few years. The company lacks any incentive to perform long-term maintenance work. While maintenance work is to be funded by the company, a new construction would be funded from the federal budget.

For example, German Railways would have needed to replace damaged bridge components and to renew corrosion protection. This would be the way to ensure that the bridge meets all requirements regarding a safe, proper and reliable operation until 2028. If German Railways starts renewing corrosion protection only in 2017 it might be too late.

We acknowledge that the need for short-term maintenance work depends largely on the subsequent use of the bridge. However, we believe that the amount of €8 million estimated by German Railways is not enough. German Railways holds the view that if the maintenance backlog is not fully addressed in the near future, the Fehmarn Sound Bridge may need to be closed due to structural weaknesses. As a result, there would be no fixed link between the island of Fehmarn and the mainland any more. The island would permanently be cut off from the mainland not only during construction but even prior to that.

In their utility analysis, the Ministry and German Railways did not describe the concept of “accessibility of the island during construction” in more detail. Nevertheless, this criterion is key to them. In their report to the Public Accounts Committee they give this criterion overriding priority as if it was the only argument decisive for selecting an option. In the utility analysis that criterion was also very important to the two bodies. However, the criterion was only one among a total of ten criteria. Since, the German Railways company currently plans to cut off Fehmarn from the railway system for a period of four years, retrofitting work might possibly be performed without closing the bridge for traffic as often as still expected in early 2015. It is not clear if this aspect was also given significant weight in the utility analysis.

It seems that the Ministry and German Railways already decided in early 2015 not to strengthen the existing bridge but to build new structures. However, we hold that it was too early for a final decision, since the studies submitted by the Ministry and German Railways does in no way permit drawing final conclusions (No. 5).


2015 Annual report No. 39 -Railway construction: Federal Government receives refund of €320,000  

The Federal Railway Authority succeeded in obtaining the refund of €320,000 from a railway infrastructure company. It had followed our recommendation.

On the basis of contracts, the Federal Government reimburses railway infrastructure companies for eligible building and planning costs for construction projects in its railway network. The companies have to use the federal funds economically and efficiently. If they obtain revenue, e.g. from the sale of waste material, they have to credit the respective amount to the Federal Government.

One company had sections of track renewed by contractors. We found that the company charged the Federal Government excessive costs and did not credit it with revenues. The company also invoiced faulty work delivered by the contractors.

We alerted the Federal Railway Authority to the company’s excessive invoices and requested claiming the refund of the federal resources inappropriately used by the companies.

The Federal Railway Authority acknowledged our findings. The company refunded €320,000 to the Federal Government.


2015 Annual report No. 36 - Federal Railway Authority is expected to demand an appropriate refund from railway infrastructure companies

Railway infrastructure companies systematically charged the Federal Government excess costs. The Federal Railway Authority has not yet demanded an appropriate refund.

The Federal Government compensates railway infrastructure companies for costs eligible for funding the construction of new and the upgrading of existing railways tracks. This also includes the companies’ planning and administrative costs.

Companies charged their costs differently than agreed with the Federal Government. Thus, the Federal Government paid planning and administrative costs twice which led to considerable excess payments.

The Federal Railway Authority stated that it wanted to use sampling to determine the total amount of loss. In doing so, it depends on the companies’ willingness to cooperate. It did not have appropriate data for the sampling before three years have elapsed.

We recommended that the Federal Ministry of Transport and Digital Infrastructure ensure that an appropriate refund be demanded without delay. In future agreements, the Federal Railway Authority is expected to provide for possible sanctions if the companies systematically do not charge their costs in accordance with the agreement.


2014 Annual report No. 41 - Federal Government successfully claims refund of €921,000

Following our advice, the Federal Railway Administration claimed the refund of €921,000. A railway infrastructure company had charged planning costs both as construction costs and as flat rate remuneration.

The Federal Government reimburses the railway infrastructure companies the expenditure on eligible construction costs. Necessary planning costs are remunerated by a surcharge calculated as a percentage of the construction costs. This so-called planning-cost flat rate also covers the cost of renting equipment for testing and inspection. We audited the accounts of the building costs for the Chemnitz rail node. We found that the company had invoiced rental costs of €815,000 as construction costs. It had thus also received an excessive planning-cost flat rate.

We criticised that the Federal Government had both recognised the rental costs as building costs and remunerated them via the planning-cost flat rate. We asked the Federal Railway Administration to claim the refund of the federal grants wrongly received by the company.

The Federal Railway Administration confirmed our findings and claimed the refund of €921,000 from the company. This refund claim was one of the reasons that prompted the Federal Railway Administration to conduct an overall review of the companies‘ invoicing practices of recent years.

We hold that a continued comprehensive review of the companies‘ invoicing practices will be necessary.


2014 Annual report No. 38 - The Federal Transport Ministry approved funding of €54 million for novel signal technology without the required operating schedule

The Ministry did not concurrently monitor and control the new construction of a railway line to the required extent. The technical and operational requirements have changed several times since the planning was started. The Ministry approved federal funding of the novel Europe-wide standardised signal technology without taking due regard to these changes. For purposes of the programme results evaluation required under budgetary law, it would have had to lay down technical and operational requirements for the equipment of the railway line with signal technology.

For the construction of the new railway line from Nuremberg to Erfurt, the Federal Transport Ministry awarded grants of €1.8 billion since planning had started. Since then, the legal framework changed several times. In 2009, the Federal Republic of Germany had entered into an obligation to use a novel Europe-wide standardised signal technology. In 2012, the Ministry awarded grants of €54 million for the equipment of the said railway line with signal technology. However, it did not state any line capacity requirement the planned signal technology would have to meet. We found that the funding applications of the railway infrastructure company lacked information on the operation schedule, i. e. the planned daily number of trains, their speeds and the distribution of train services to the night and day hours.

We have criticised that the Ministry monitored and steered this infrastructure project inadequately. Before approving federal funding for the signal technology, the Ministry would have had to establish the current operating schedule.

The Ministry argued that, when approving the signal technology, it was able to waive an operating schedule and the proof of line capacity. It went on to say that these had already been examined when federal funds for other construction services were granted.

We expect the Ministry to exert its influence to achieve the highest possible line capacity with the novel signal technology in spite of the changed regulatory framework. In our opinion, concurrent project monitoring and control by the Ministry continues to be necessary for the rest of the construction period. The Ministry must obtain current information about the operating schedule and impose appropriate requirements for the planning and construction of the signal technology. Without such information and requirements, the Ministry moreover lacks the basis for a programme results evaluation.


2014 Annual report No. 37 - Savings potential of more than €35 million not used

For the construction of a new railway line leading through Thuringia and Bavaria, the Federal Transport Ministry has funded different track spacings and structural dimensions. It failed to require the railway infrastructure company to apply the technical regulations equally in both German states. Thus, the Ministry has failed to use a savings potential of more than €35 million.

The new railway line between Nuremberg and Erfurt leads through Thuringia and Bavaria. Since 1995, in their capacity as plan approval authorities, the relevant field offices of the Federal Railway Administration issued successive plan approvals for the sections of the new railway line. As grant-awarding agency, the Federal Railway Administration has given the railway infrastructure company grants in the total amount of €1.8 billion. The Federal Railway Administration comes under the technical supervision of the Federal Transport Ministry. Moreover, the Ministry is involved in the planning of the project by the company and coordinates planning with the Federal Railway Administration. In 1997, the company changed its internal technical regulation for the new construction of railway lines. Since then, smaller track spacings may be planned and built. This also permits more cost-effective structural dimensions.

For the Thuringian section of the railway line the company adapted its spacing to the smaller structural dimensions. The responsible field office of the Federal Railway Administration approved this change in 1998. Our auditors found that the company did not change its planning for the Bavarian section of the railway line. It planned and built the larger structural dimensions in Bavaria. The Federal Railway Administration stated that it had been concerned about risks to the legal validity of the plan approvals due to objections raised by third parties.

We criticised that the Ministry has failed to use a savings potential of at least €35 million. It permitted that different track spacings and cross-sections of bridges and tunnels were built and funded for a new railway line through two German states. To avoid this, the Ministry should have become effectively involved in the company’s planning and should have appropriately exercised its technical supervision of the Federal Railway Administration. The latter would have had to clarify why its field offices approved different structural dimensions for the construction of a new railway line.

The Ministry commented that it was exercising its technical supervision by continuous coordination during planning. The Ministry considers this as sufficient. It invoked the independence of the Federal Railway Administration as plan approval authority. Changing the plan approvals in Bavaria would have involved incalculable risks.

We uphold our opinion that the Ministry could have saved at least €35 million. We hold that there is no sufficient proof for the risks in Bavaria about which concern has been expressed. We recommend that the Ministry requires the companies to analyse how changes of technical regulations affect infrastructure projects. We expect that the Ministry will in future arrange for cost-effective planning and building of future infrastructure projects and will consequently use any savings potentials.


2013 Annual report - spring report No. 04 - Federal Railway Assets Fund pays an inadmissible and excessive lump sum to compensate for personnel costs  

By virtue of a flat rate agreement, Deutsche Bahn AG received a total amount of €278 million in compensation for personnel costs. Contrary to applicable legal provisions, it did not have to supply evidence justifying that the conditions for such compensation were met.

The relevant legislation gives rise to compensation claims, if, owing to rationalisation measures, Deutsche Bahn AG (the national railway company) can no longer employ staff taken over by or assigned to it. For this purpose, Deutsche Bahn AG has to prove its claims in detail. In the past, it had not succeeded in doing so. The Federal Transport Ministry and the Federal Finance Ministry concluded an agreement with Deutsche Bahn AG providing for a lump-sum payment to compensate for any arising claims. As a consequence, considerable amounts of compensation were paid for groups of employees not legally eligible for such compensation.

The Federal Transport Ministry and the Federal Finance Ministry regard the regulations as being of little use. They argued that, owing to the lack of insight into strategic company data, it was impossible to verify the claims on the basis of detailed circumstances.

We found that the prescribed detailed determination of the compensation claims is reasonable and therefore mandatory. Deutsche Bahn AG has to give detailed proof that the prerequisites for compensation have been met. Moreover, we recommend amending of legislation to completely abolish such compensation claims.


2013 Annual report No. 49 - Federal railway authority claims the return of €2.7 million of federal funds

Based on findings developed by our audit, the Federal Railway Authority demanded a refund of a total amount of €2.7 million by the railway infrastructure companies. These used federal funds inefficiently and in violation of the relevant agreements.

The Federal Government finances the construction, upgrading of and replacement investments in its railway lines. Payments are based on project-related funding agreements with federal railway infrastructure companies. These commit themselves to using the federal funds received cost-effectively and for the purposes specified in the agreements. If the companies divert the funds to other purposes, they have to repay them.

We audited how the companies have used the federal funds. In our audit, we found that the companies had charged supplies or services twice against the funds, had funded their own planning and construction errors and procured unnecessary equipment. We alerted the federal railway authority to these shortcomings and urged it to claim the return of the federal funds used in violation of agreements.

The Authority followed our findings. It demanded that the companies repay €2.7 million. The companies have already paid back €1.5 million.


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

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

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

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

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


2012 Annual report - spring report No. 04 - Need to avoid unnecessary interest expenditure for building subsidies  

The Federal Transport Ministry gives annual lump-sum grants of €2.5 billion to Deutsche Bahn AG for the replacement of railway infra-structure assets without making sure that the Federal Government does not incur unnecessary interest expenditure.

Where beneficiaries receive federal grants in excess of €500,000, they are responsible under budgetary law for requesting the funds from the relevant federal cash office on the day when the funds are needed and only to the extent that they need them to meet their own payment obligations (funding request procedure). Exceptions from this procedure are admissible where there are special reasons for doing so or where following the procedure may cause disadvantages for the Federal Government. Based on the respective Service Level and Funding Agreement, Deutsche Bahn AG receives amounts of €150-250 million on the 15th day of each month up to €2.5 billion annually by way of lump-sum payment. The normal procedure for requesting funds is not applied to these lump-sum payments. In case of other construction projects, Deutsche Bahn AG applies the procedure in order to request funding under federal grants.

According to their own statement, neither the Federal Transport Ministry nor the Federal Finance Ministry have an overview when Deutsche AG actually uses these lump-sums to make due payments to its contractors. Lump-sum payments imply the risk that the federal budget is charged prematurely. This is the case where, on the day when the grant funds are disbursed, Deutsche Bahn AG does not need funding in the requested amount to meet its own payment obligations for the replacement of railway infra-structure assets. The disbursement of federal grant funds before they are actually needed results in unnecessary interest expenditure for the Federal Government, because the disbursements need to be refinanced in the credit market. Building subsidies under the Service Level and Funding Agreement are the individual federal grant item so that unnecessary interest expenditure in the range of millions is already incurred, if Deutsche Bahn AG uses the funds only ten days after it requested the disbursement.

The Federal Transport Ministry and Deutsche Bahn AG rejected the normal procedure for requesting funds under the Agreement. The Federal Transport Ministry is of the opinion that the risk of unnecessary interest expenditure due to premature funding requests has not existed so far. The procedure used up to now could also be beneficial to the Federal Government.

In our opinion, there is no sufficient information that would warrant derogation from the normal procedure for requesting funds. Therefore, the Federal Transport Ministry should insist on the standard procedure for requesting funds when conducting follow-up negotiations about the said Agreement.


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

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

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

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

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

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


2012 Annual report No. 40 - Federal Government received a €1.1 million refund for reused rails  

A railway infrastructure company used rails paid for by the Federal Government for projects which it had to finance from its own resources. Only after we had pointed this out did the company refund €1.1 million to the Federal Government. This amount is equivalent to the value of the rails plus interest.

The Federal Government finances the replacement of capital assets, the new construction and the upgrading of its Track, while the maintenance of the Track from its own resources is incumbent on a federal railway infrastructure company. The Federal Government and the company agreed to reuse dismantled rails wherever possible. If the Federal Government has paid for these rails, the company is to reuse them primarily for producing or replacing capital assets. If the company uses these rails for maintenance, it is obliged to refund the value of the rails to the Federal Government.

We audited whether the company reused rails paid for by the Federal Government in compliance with agreement. We found that the company had reused more than 40 km of such rails for maintenance purposes without refunding the value of the rails to the Federal Government. We called the attention of the Federal Railway Authority to this issue and demanded that the Authority demand the company to refund the value of the rails.

The Authority followed our recommendations by asking the company to refund the value of the reused tracks plus interest. In response, the company paid a total amount of €1.1 million to the Federal Government.


2012 Annual report No. 39 - Grants towards rail power systems may impose additional burden on federal budget  

The Federal Transport Ministry decided to award grants towards the construction of rail power systems. Up to now, the financing of such installations was incumbent on a railway infrastructure company. The Ministry did not analyse the need for financially supporting this company and how doing so will affect the federal budget.

The Federal Government invests in the replacement, construction and upgrading of its Track. For this purposes, it awards federal budget grants to the federal railway infrastructure companies. By virtue of a service level and funding agreement, the companies receive an annual lump-sum of €2.5 billion from the Federal Government. The agreement also stipulates for which railway installations the funds are to be used. At present, the Ministry is negotiating a new service level and funding agreement which is to come into force in 2014.

A company supplies traction power for the railway lines. To do so, it transforms electricity normally supplied to private households into traction power by means of central converters. Depending on their size, such rail power systems cost between €25 and €40 million. To avoid an inappropriate burden on the federal budget, these systems had to be funded by the companies since 1997. In 2012, the Ministry had decided to award grants towards the construction of central converters under the new service level and funding agreement. This decision took neither the company’s interest nor its financial strength into account thereby infringing principles of budgetary law (subsidiarity). Nor did the Ministry assess the bearing of its decision on the federal budget. However, this is an important factor for the negotiations about the new service level and funding agreement because the grants towards central converters could be used as an argument for increasing the funding under the agreement, thereby either burdening the federal budget or ‘crowding out’ capital expenditure on replacements.

We pointed out the Ministry’s decision because it did not comply with the principle of subsidiarity. The company is still capable of funding central converters on its own. We expect the Ministry to clarify these aspects and to study the financial impact before it commits itself under the service level and funding agreement.


2011 Annual Report No. 44 - Railway Administration reclaims €36 million spent for railway construction

Following our recommendations, the Federal Railway Administration reclaimed €36 million from a railway infrastructure company as this company spent federal grants unduly and inefficiently, thus violating agreements made in advance.

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