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2017 Management Letter – Federal Employment Agency provides grant-funded German language start-up courses

Between October and December 2015, the Agency’s field offices were authorised to fund German language start-up courses, if these were necessary to support job integration. We have studied the requirements for the start-up courses set and implemented by the Federal Employment Agency. “We acknowledge the efforts made by the Federal Employment Agency to foster integration of refugees in a difficult situation”, emphasizes Kay Scheller, President of the German SAI, when issuing the management letter. “Particularly in such a case, however, some baseline rules governing the design and implementation of language courses need to be in place.” In a similar future situation, the Federal Employment Agency should set the terms and conditions required to ensure that the aims of the measures taken can be achieved in the best way possible. “We particularly highlighted that certain requirements were not complied with although the Federal Employment Agency had set them in advance”, Kay Scheller stated. Even if the Federal Employment Agency developed product and service specifications and parameters applicable to start-up courses prior to their implementation, the Agency later chose not to rely on them. As a result, service providers did not keep attendance records. In our opinion, the effectiveness of start-up courses is at least doubtful. A major portion of the funds have likely been wasted since attendance of the courses steadily declined over time.
Feb 09, 2017

0 Summary

Pursuant to section 421(1) phrase 1, book III of the German Social Code, the Agency’s field offices were authorised to grant funding to foreign citizens who attended German language start-up courses between 24 October 2015 and 31 December 2015. The prerequisite for funding was, however, that such participants had the right of abode pending proceedings for asylum and were likely to be granted a permanent and proper right of residence, and that such courses were necessary to support job integration.

We studied the requirements for the start-up courses set and implemented by the Federal Employment Agency.

We have duly taken into account the comments made by the Agency, and confirm the following audit findings as final:

Pursuant to section 421(5) of book III, German Social Code, German language start-up courses are an instrument used in active employment promotion within the meaning of section 3(1) and (2) of book III, German Social Code. However, the Agency found such start-up courses “not to be an instrument of employment promotion but a task for the benefit of society as a whole”. Therefore, the Agency took the internal management decision to provide such courses as “rapid and unbureaucratic immediate assistance”.

Due to the statutory provisions that do not leave much room for interpretation, however, the Agency’s position is not legally tenable. The supporting legislative documents are unambiguous in this respect (cf. number 3).

Prior to the enactment of section 421, book III, German Social Code, the Agency had developed parameters for implementing the start-up courses and product and service specifications. However, the Agency chose not to rely on them since the start-up courses had to be implemented rapidly and lead times were very short. As a result, management made the internal decision to provide such courses as an “immediate assistance”. Even against the background of time constraints in providing the start-up courses, the Agency would have had the duty to develop or retain at least minimum requirements in order to ensure that unemployment insurance funds were used in line with the purpose for which they had been appropriated. Hence, in a similar future situation, the Agency should set clear and compulsory terms and conditions such as product and service specifications (cf. number 4).

The Agency, however, chose not to define a refundable maximum cost rate but used a local cost rate instead, although the Agency had carried out a prior market survey and identified an adequate cost rate of €4.50 for private-sector service providers.

The reasons given by the Agency for not choosing to rely on the maximum cost rate that had previously been defined are not fully convincing (e.g. a higher unit cost rate in the case of courses in small groups). The Agency successfully reduced the required funding needs by realigning the system several times during the later programme stages. The Agency was able to reduce expenditures by renegotiating excess unit cost rates and by recovering funds paid to individual service providers as a result of the findings issued by its internal audit service for labour market services (cf. number 5).

The Agency only gradually tightened the requirements for reviewing the cost calculation. Private-sector service providers that had submitted invoices in a timely manner were thus exempt from review of their cost rates. Moreover, the Agency’s regional directorates imposed differing requirements on how to handle excess unit cost rates. The Agency needs to rely on transparent and comprehensive requirements to ensure a consistent procedure to be adhered to by all responsible organisation units. In view of the practices applied by the various regional directorates, the Agency stated that at the early stages of the reimbursement process there had been avoidable frictions in communication between the central unit and regional directorates. Against this backdrop, the Agency pledged to further refine communication channels (cf. number 6).

Although the start-up courses are an instrument of employment promotion, the Agency tolerated service providers’ billing practices that included children as course participants. As the review of a sample of 136 start-up courses showed, a total of 88 children up to the age of 13 had attended the courses (4.3 per cent).

In this respect, the Agency reiterated its view that start-up courses were no instrument of employment promotion. Since this view is not in line with law, the Agency should have excluded children from attendance right from the start (cf. number 7.1).

When performing field work, the Agency’s internal audit service detected a number of major shortcomings in quality. Since the Agency issued only little guidance on implementing start-up courses, it is hardly possible to hold service providers liable for compensation.

We acknowledge that the Agency has addressed cases in which it detected shortcomings. However, it is likely that other measures not reviewed also have similar shortcomings. Since after programme expiry field work can be done to a limited extent only, all these efforts will largely remain futile (cf. number 8).

In violation of article 7(2), Federal Budget Code, the Agency failed to put into place a structured system for adequately assessing the results of start-up courses. For example, the fact that service providers did not have the duty to keep attendance records impairs conducting a robust assessment. In our opinion, the effectiveness of the start-up courses can at least be doubted. A major portion of funds used have likely been wasted since attendance of the courses declined so sharply over time that a number of courses was even discontinued.

In its comment, the Agency points out that the start-up courses do not aim at achieving a certain language level. The Agency also contests that a major portion of funds has been wasted (cf. number 10).

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