Audit reports
You are here: Home / Audit reports / Products / Advisory Reports / Sammlung / 2017 Report – Compliance by the Federal Ministry of Economic Affairs and Energy with requirements of the Financial Assistance Policy to limit grants to specified periods with declining amounts of funding

Document Actions

2017 Report – Compliance by the Federal Ministry of Economic Affairs and Energy with requirements of the Financial Assistance Policy to limit grants to specified periods with declining amounts of funding

Nov 17, 2017

0 Summary
We audited compliance of the Federal Ministry of Economic Affairs and Energy with the Federal Government’s Financial Assistance Policy and the General Administrative Regulations on the Federal Budget Code. Such financial regulations require that financial assistance shall be phased out after specified periods with declining amounts of funding. Based on our audit findings and the comments made by the Ministry, we have developed the following conclusions:

0.1
Financial assistance shall be granted for limited periods only. The Ministry circumvents the limitation requirement. The Ministry repeatedly extended the validity of the funding guidelines subject to which financial assistance was granted. By doing so, the Ministry has granted financial assistance under various programmes for more than 40 years. Since 2003, total expenditure of €55 billion has been incurred under these programmes.

We have requested the Ministry to comply with the requirement to limit the periods for which financial assistance is granted. The Ministry should specify the cases in which exceptions are admissible and document the reasons for such exceptions.

0.2
As a rule, the Ministry’s funding guidelines specified periods of between three and five years. The Ministry was unable to convincingly explain the criteria used in limiting the funding periods. The approach appeared schematic and was not reasonable.

We recommended that the funding periods stipulated in funding guidelines be set with reference to the goal of the funding, its purpose and the expected target achievement. The Ministry should transparently document its decisions prior to the launch of each funding scheme.

0.3
As a matter of principle, financial assistance should be granted in amounts declining over time. In most cases, the Ministry did not do so, thereby establishing the exception from the principle as a general rule.

We expect the Ministry to derogate from the limitation requirement only in exceptional cases where this is justified. It should stipulate rules for permitting exceptions. The reasons for such exceptions shall be documented prior to launching any funding scheme.

0.4
The disclosure in the Subsidy Report of the limitation periods and the reduction of grants over time was not transparent. This hampers parliamentary oversight and the verification of compliance with the Financial Assistance Policy.

We expect the Ministry to transparently and accurately disclose the information about time limits and the gradual phasing out of its financial assistance in the Subsidy Report.

0.5
Comments by the Federal Economic Affairs Ministry:
The Ministry announced its intention to have its respective directorates explore how they can be implemented. Concerning its funding practices, the Ministry made reference to a report on the reform of the overall structure of financial assistance submitted to the Budget Committee of the German Parliament in 2015 (Committee document 1863). In that report, the Ministry outlined various approaches aimed at restructuring its financial assistance schemes. These included the specification of key issue areas and funding priorities within them. In addition, the report stated that the Ministry had implemented a financial assistance controlling system and set up a coordination group consisting of senior representatives of its respective directorates. That group’s work was to provide the basis for decisions at top executive level about which projects were to be terminated, reduced in scale or duration, expanded or newly launched. The Ministry claimed that these measures and a new strategic process in the procedure for drafting the budget estimates had already been reflected in various decisions of the Ministry. The Ministry argued that, for the sake of clarity, no separate data sheets should be used to disclose each of its funding measures.

0.6
Overall assessment:
The steps taken by the Federal Economic Affairs Ministry may be steps towards greater transparency of its funding activities and greater uniformity of the processes within the Ministry. Nevertheless, they do not prove that the Ministry complies with the requirements of the Financial Assistance Policy. There is no evidence that the structural and organisational reforms have had any impact on the fixing of limitation periods for and/or the gradual reduction of financial assistance. Those decisions which, according to the Ministry, have already been reflected in measures to reform the structure of financial assistance have always concerned the extension of grant programmes. Also, the reform of the structure of financial assistance did not aim at facilitating better compliance with the requirements of the Financial Assistance Policy. Instead, the aim was “to adapt the historically grown structure of the financial assistance programmes to current economic priorities.” This obviously even impeded the justified reduction of financial assistance schemes.

Our audit findings reveal a considerable discrepancy between the requirements of the Financial Assistance Policy and their implementation in the Ministry’s funding programmes. The effects intended by the requirements for limiting funding periods and reducing the volume of funding over time have not been achieved. We therefore uphold our recommendations. We request the Ministry Economic Affairs Ministry to close the gap between the requirements of the Financial Assistance Policy and its implementation in the various funding programmes and to comply with the Policy’s requirements in the future.

© 2019 Bundesrechnungshof