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2019 Annual Report – Supplementary Report – Preface

The annual report of the German SAI on federal financial and commercial management provides a cornerstone for the parliamentary decision on granting discharge to the government. For FY 2018, the 2019 annual report is relevant which we submitted and published in December 2019. In the present supplementary report, we report on additional audit findings of current interest and thereby update and complement the 2019 annual report.

 

1 The German SAI’s annual report – basis for the annual decision about granting discharge to the federal government

Whereas parliament is responsible for budget preparation, government is responsible for the execution of the budget. Government has to ensure that the funds provided are duly managed according to the principles of efficiency, effectiveness and economy. After closure of the FY, government is held to account by parliament and the Federal Council of Constituent States. To this end, the Federal Ministry of Finance submits the annual financial accounts. Following submission, parliament and the Federal Council of Constituent States decide on granting discharge for the respective FY.

This report provides the basis for informed decision-making by parliament about granting discharge to government. In our annual report, we especially state

  • whether the amounts posted in the annual financial accounts tally with the amounts stated in the underlying accounting records and whether the audited revenues and expenditures have properly been backed up by vouchers;
  • major cases where the audited entities have not complied with applicable regulations and principles;
  • the key findings generated by our audits of the management of government shareholdings in enterprises; and
  • what steps we recommend for the future.


The President of the German SAI communicates the annual report to government, parliament and the Federal Council of Constituent States. Parliament refers our annual report to its Budget Committee. The Budget Committee communicates the report to its sub-committee, the Public Accounts Committee (PAC) for deliberation.

At the same time, the German SAI presents the annual report to the public. The reports are also available on our website.

The 2019 annual report is composed of two volumes:

  • In December 2019, the German SAI submitted and published the 2019 annual report. The report covers the findings on the annual financial accounts, the trends in federal public finance and in cross-departmental and government-wide issues. In addition, it sets out the audit findings on individual budgets.
  • In the present supplementary report, we report on additional audit findings of current interest. We use this possibility to report on audit findings that have become available only after submission of the annual report as input for the discharge procedure.

 

2  Audit findings promote compliance and efficiency in government operations

The annual report sets out those of our audit findings and recommendations which the executive branch has so far not taken up. They are discussed in the Public Accounts Committee (PAC). The government departments have to answer to the PAC. The Committee usually invites the responsible policymakers to attend the deliberations.

In the vast majority of all cases (more than 90 per cent), the PAC endorses our findings and recommendations. The PAC then adopts a resolution calling upon government to implement our recommendations and to ensure that government operations provide good value for money and comply with applicable regulations.

The Budget Committee prepares the annual decision about granting discharge, taking into account the results of the deliberations of the PAC on our annual report. Based on this, parliament and the Federal Council of Constituent States decide on granting discharge to the government. They call upon government to pay due regard to the resolution of the Budget Committee on our audit findings when preparing the budget estimates and implementing the departmental budgets.

We follow up on whether the government has duly implemented resolutions adopted by the PAC. During this period, the respective government departments have to answer to the PAC. Furthermore, the results may serve as input for the budget deliberations, thus having a bearing on the appropriation of funds for the following financial year.

In many cases, the audited bodies directly implement our recommendations in the course of the audit. If so, our findings and recommendations are usually not relevant for parliament’s granting of discharge to the government and they will not appear in the annual report.

 

3 Quality of audit findings is ensured by a structured procedure and the involvement of audited bodies

We are independent in the choice of our audit matters and the design of our audit exercises. Whenever possible, we accede to audit requests of parliament and its committees.

In our audit work, we apply the criteria of performance, regularity and compliance as set forth in Art. 114.2 German Constitution. Furthermore, we check whether the audited bodies have used funds in an efficient way and whether their measures actually accomplished the intended objectives. When auditing regularity and compliance, we check whether the audited bodies adhere to applicable standards and principles.

As a matter of principle, we communicate our audit findings to the auditees, e.g. the competent federal ministries, and request them to comment on our findings, giving them the chance to explain the circumstances or to justify their actions. On this basis, we decide on the final wording of our audit findings and whether they will be included in the annual report.

We follow up on any remedial action taken or improvements made by the audited bodies in response to our audit findings. We also verify compliance by the audited bodies with the requirements imposed by parliament and the Federal Council of Constituent States.

Our work is carried out in line with clear principles and free from any bias. We continuously reconsider our methods and adapt them where necessary. We do not evaluate policy decisions. However, we may audit and report on whether the assumptions underlying these decisions are accurate and whether a measure based on them has achieved the intended effect.

 

4 The German SAI advises government and parliament

On the basis of audit findings, we may provide advice especially to parliament and the Federal Council of Constituent States, the government and individual government departments. We have to be consulted or notified in many cases such as the promulgation of grant funding guidelines by the government departments or changes of government shareholdings in companies incorporated under private law.

We may at any time report to parliament, the Federal Council of Constituent States and the government on matters of particular importance (Art. 99 sentence 1 Federal Budget Code). When we communicate our annual report or special purpose reports to parliament, we  publish them at the same time on the internet. To fulfil our advisory function, we may summarise our audit findings and recommendations pursuant to Art. 88.2 Federal Budget Code. The reports addressed to parliament are thoroughly deliberated at committee level, especially in the Budget Committee and the Public Accounts Committee, its sub-committee. During these deliberations, decisions are also taken about the way in which our recommendations are to be implemented. Once parliamentary deliberation has been concluded, we publish the reports on the internet where it is compatible with the protection of privacy rights of individuals, the interests of businesses and the public interest. The annual reports, other reports and management letters published so far can be accessed on our website.

5 The Federal Performance Commissioner also provides advice to government and parliament

By tradition, the President of the German SAI holds the ex officio position of Federal Performance Commissioner. One of the Federal Commissioner’s principal functions is to provide advice to government and parliament on the impact legal provisions may have on government performance. For this purpose, government departments have to involve the Commissioner at an early stage in drafting bills, delegated legislation and administrative regulations.

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