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2018 Press release 03 – 2017 annual report -spring report

P R E S S   R E L E A S E

Current audit findings

- Health, taxes, defence, roadworks -

Supplementary to its 2017 annual report, the German SAI published further audit findings. ”The audit findings we are publishing today update the basis for the ongoing parliamentary discharge procedure. We are thus able to present our findings and recommendations in a timely manner, thereby accelerating the procedure for addressing public sector shortcomings and mismanagement said Kay Scheller, President of the German SAI when presenting the spring report. The Public Accounts Committee, a sub-committee of the parliamentary Budget Committee, will deliberate on these audit findings before the parliamentary summer recess.

The present spring report supplementing our 2017 annual (autumn) report includes the following items where the federal government departments have not taken on board our recommendations.

Health

Need to study, prove and evaluate the utility of orthodontic treatment (No. 9)

Need to study, prove and evaluate the utility of orthodontic treatment (No. 9)

The statutory health insurance funds spend more than €1 billion annually on orthodontic treatment, although insufficient research on its utility has been done. The Federal Ministry of Health and the statutory health insurance funds have no scientifically valid information on the impact and utility of orthodontic treatment. Moreover, they have little insight into the specific treatment provided. There are no federal data on the nature, duration and success of a treatment or on the underlying diagnoses. The Ministry has not taken up the issue for years despite criticism within its own remit. The Ministry and statutory health insurance funds should collect and objectively analyse information on orthodontic treatment (treatment needs and objectives as well as quality indicators and checks)

Such collection and analysis should also cover the self-payer services, as the Ministry is not aware of which self-payer services are purchased by insured persons. There is a lack of scientifically valid and easily understandable information on the pros and cons of self-payer services.

Legislation required to ensure that panel physicians carry adequate medical malpractice insurance for treatment errors (No. 10)

Legislation required to ensure that panel physicians carry adequate medical malpractice insurance for treatment errors (No. 10)

Panel physicians should have the duty to regularly submit proof of medical malpractice insurance with sufficient coverage, as not all physicians carry adequate third party liability insurance. As a result, insured persons and their health insurance funds may be unable to obtain full compensation for treatment errors. Proof of third party liability insurance cover has to be submitted only in isolated cases on request and there are no provisions for verifying that insurance cover is being maintained. The German SAI therefore recommends that permanent insurance cover be made a prerequisite at federal level for letting physicians provide medical services under the statutory health insurance scheme (panel physicians).

Defence

Poor project management causes serious schedule and time overruns in the frigate modernisation effort (No. 7)

Poor project management causes serious schedule and time overruns in the frigate modernisation effort (No. 7)

The Armed Forces committed grave errors when modernising navel ICT systems on frigates. As a result, the modernisation of these systems which steer radar units and weapons was delayed for several years. The cost per vessel has quintupled from €6 million to €30 million. The Armed Forces committed errors in project management. They did not adequately specify the required services in the contract and did not arrange for effective quality management. The Armed Forces were unable to take legal steps against the contractor because it had inadequately specified their requirements in the contract. Moreover, the Armed Forces had agreed to test essential components of the delivery system only after acceptance. As a result, they paid for poor performance (e.g. software), that did not meet their requirements.

We have found general shortcomings in the contractual arrangements made by the Navy that go beyond this isolated case. We recommended that better project management be ensured in future defence projects. The Armed Forces should test components more thoroughly before acceptance. In doing so, they could better assess performance and avoid the acceptance of unfit material.

Fully utilise Eurofighter simulator capacities for aviator training (No. 8)

Fully utilise Eurofighter simulator capacities for aviator training (No. 8)

Although there were not enough Eurofighters available for aviator training, the Air Force did not fully utilise simulator training capacities. In this way, developing and maintaining aviator skills was possible only to a limited extent. According to a NATO requirement, pilots of the Eurofighter aircraft are to complete 180 flight hours each year to ensure their aviator skills. Up to 40 flight hours can be done in the Eurofighter simulators. However, only a few pilots completed NATO’s annual requirement of 180 flight hours. We found that, in the years 2015 and 2016, on average, no pilot had completed more than 30 simulation flight hours. For 2017, the Eurofighter groups did not plan for the full use of 900 available and paid simulator hours for aviator training, although the number of Eurofighters available for aviator training was inadequate. We demanded that the Defence Ministry make best use of Eurofighter simulator capacity to compensate for the inadequate number of Eurofighters available for aviator training. The Eurofighter groups should not at all leave simulator capacities unused that are available and have been paid for.

Taxes

VAT control procedure – provide full coverage (No. 12)

VAT control procedure – provide full coverage (No. 12)

Due to a lack of IT support, the tax authorities’ ability to audit intra-Community services is inadequate although the control procedure has to also cover these services since 2010. The Federal Central Tax Office does not compare the amounts of recapitulative statements against with the VAT return data and is therefore unable to identify deviations. Control of cross-border services (e.g. of lawyers or experts) is thus not ensured. In the light of a turnover of more than €126 billion in 2015, this represents a considerable risk to tax revenues. The Federal Finance Ministry should close the gaps in the system and compare the data electronically.

In earlier work, the German SAI several times audited the VAT control procedure of intra-Community services and found that the tax authorities did not systematically match the data available.

Vehicle licensing authorities should fulfil their reporting duty in the taxation of new vehicles imported from other EU countries (No. 11)

Vehicle licensing authorities should fulfil their reporting duty in the taxation of new vehicles imported from other EU countries (No. 11)

The vehicle licensing authorities fulfil their reporting duty in connection with the taxation of new vehicles imported from other EU countries only inadequately. This makes it difficult for the tax offices to control the acquisitions of vehicles and thus to secure tax revenue. In one third of the cases, the vehicle licensing authorities did not comply with their statutory obligation. Furthermore, they sent only hard copy reports to the tax offices. We therefore requested the Federal Finance Ministry to urge the Federal Transport Ministry to improve cooperation between vehicle licensing authorities and tax offices. To this end, the previously paper-based reporting procedure should be replaced by electronic data communication.

Roadworks

Government may save €6.7 million in building a tunnel (No. 2)

Government may save €6.7 million in building a tunnel (No. 2)

To upgrade federal motorway A 8 to six lanes, the Federal Ministry of Transport and Digital Infrastructure should build the Frasdorf tunnel without shoulders. The Federal Government could save €6.7 million. The planned shoulders are not necessary to safely accommodate the average traffic load of 65,000 motor vehicles. Shoulders need to be provided only above an average traffic load of 110,000 motor vehicles per day. Due to the delayed planning approval procedure, replanning may not result in major time overruns.

Waiver of unnecessary upgrading of federal road 303 will save €33 million (No. 1)

Waiver of unnecessary upgrading of federal road 303 will save €33 million (No. 1)

The Federal Ministry of Transport and Digital Infrastructure should waive the upgrading of federal road 303 (Schirnding bypass) near the border to the Czech Republic to four lanes, to save €33 million. The road upgrade is not necessary. The existing road has been designed to safely accommodate three times the traffic load expected for 2030. Efficient transport links between the Czech Republic and the European transport network in Germany already exist. The construction project does not provide good value for money either. The costs have been estimated incompletely and are not transparent. Costs may significantly increase in the light of the yet unexplored ground conditions and any restrictions as a result of nature conservation requirements. The German SAI expects the Ministry to abandon the bypass project.

€7.2 million for a new motorway junction could be saved (No. 3)

€7.2 million for a new motorway junction could be saved (No. 3)

The Federal Ministry of Transport and Digital Infrastructure intends to disburse €7.2 million for a motorway junction although two municipalities had committed themselves to taking up the costs. The driver for building this new junction is a trading estate run by a company. Therefore, the two municipalities had committed themselves to funding all transport infrastructure measures needed to set up the trading estate. The written agreement also applies to local government relations with the Federal Government. The Federal Ministry of Transport and Digital Infrastructure had learnt about the agreement only from the German SAI. Nevertheless, the Ministry agreed to share the cost. We advised the Ministry to approve the additional junction only if the municipalities bear the related cost.

Apr 24, 2018

Better use budget funds to build more lorry parking lots (No. 6)

Better use budget funds to build more lorry parking lots (No. 6)

The Federal Ministry of Transport and Digital Infrastructure needs to ensure that budget funds are available to build as many parking lots as possible and that the roadworks administrations of the federal states provide better value for money in planning lorry parking lots at federal motorways. To this end, the German SAI recommends that a consistent approval practice and better requirements be put into place such as efficiency appraisals right from the beginning. The Ministry has to require proof of efficiency very early – already when selecting locations and upgrading options of rest areas – and a review prior to the approval of the individual project stages.

State burdens the federal budget with millions of euros for disposing of cancerogenic bituminous road surfaces (No. 4)

State burdens the federal budget with millions of euros for disposing of cancerogenic bituminous road surfaces (No. 4)

The roadworks administration of the State of North Rhine-Westphalia burdened the Federal Government with estimated costs of €7 million for the future disposal of hazardous waste. In the past years, the roadworks administration extracted 145,000 tonnes of bituminous surfaces, which pollutes the environment and is also believed to be cancerogenic, from state roads, reprocessed it and subsequently built it into federal trunk roads. As the owner of the trunk roads, the Federal Government bears the costs for the future disposal of the bituminous material although it belongs to the State – without compensation. We estimate the cost of disposal at about €7 million (approx. €50 per tonne). The Federal Ministry of Transport and Digital Infrastructure must stop wasteful spending of federal budget funds and speedily assert the claim for compensation from the State of North Rhine-Westphalia.

The German SAI repeatedly reported on these findings in its annual report, most recently in the year 2013 (No. 5). As a result, the Ministry decided to stop using bituminous material in federal trunk roads as from 2018.

Refunds claimed with a delay of several years (No. 5)

Refunds claimed with a delay of several years (No. 5)

For several years, the Federal Ministry of Transport and Digital Infrastructure has delayed a refund of the City-State of Berlin amounting to €1.2 million. The claim is resulting from an audit carried out by the German SAI in 2008. The City-State had received €2 million for nature conservation measures to replace green space destroyed by the construction of a motorway (A 100). However, the City-State used the funds among others for playgrounds and sport facilities and the artistic design of a tunnel surface. Since 2013, it has been negotiating unsuccessfully with the City-State about refunding the remaining €1.2 million. The Ministry needs to conclude the negotiations with the City-State. The Ministry will have to ensure that the Federal Government will receive the pending amount to set off the refund claim against other payments by the Federal Government to the City-State of Berlin.

The German SAI highlighted weaknesses in the Ministry’s management of refund claims already in earlier audit work, most recently in its 2015 annual report.

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