Modernising relations between
the Federal Government
and Germany’s constituent states
2
Modernising relations between
the Federal Government
and Germany’s constituent states
Study
by the
President of the Bundesrechnungshof
in his capacity as
Federal Performance Commissioner
3
All rights reserved
Issued by: The President of the Bundesrechnungshof
in his capacity as Federal Performance Commissioner, 53048 Bonn
Printed and bound by:
Printed in Germany 2008
4
Preface
The reform of the Germany’s federal government system is essential for
enhancing the development and implementation of policy at the different levels of
government. Since the entry into force of the German Constitution in 1949, numerous
flaws and inflexibilities have emerged in political practice, which may have an
adverse effect on government performance within Germany’s federal framework.
The simple fact is not denied in any quarter. There is also basic agreement about
those developments which in recent decades have led to dysfunctional links between
the federal and state levels of government. Against this background, the challenge is
to eliminate the rigidities in federal-state relations and to revive the potential of the
federalist structure.
The present study, which has been developed at the request of the joint
commission of the two Houses of the German Parliament on the modernisation of the
financial relationships between the Federal Government and the states, is an attempt
to contribute to this endeavour. This study is largely based on audit findings
developed by the German SAI.
The focus is placed on administrative relationships under the federal system of
government, which have resulted in a variety of interfaces between the Federal
Government and the states and in many loopholes of non-transparent
interconnections. These do not only lead to inefficient government operations but may
also impair the ability of each level of government to decide and act self-reliantly.
Thus they blur democratic legitimacy and accountability, create disincentives and
delay necessary decisions.
This suggests the need for disentangling, as much as possible, the administrative
relationships between the Federal Government and the states. Depending on the
subject matter and on the objectives set by the Constitution and by ordinary
legislation, it may appear necessary to concentrate powers and responsibilities either
at the state or the federal level of government. This study makes proposals to this
effect.
Not all arguments and options for disentanglement will meet with undivided
approval. Nevertheless, if this opinion contributes to providing a clear picture of the
factual bases for the deliberations and discussions about modernising the
administrative relations between the Federal Government and the states, it has
accomplished its purpose.
I wish to thank all those who have collaborated in developing this study:
5
My acknowledgements therefore go to the staff of the German SAI, who have
developed the audit findings and conclusions on which this opinion is based. I would
like to mention in particular Dr. Thomas Apelt and Horst Erb, my fellow Members in
the German SAI, who, with their ‘team on federalism’, laid the foundation for this
work. The team was formed by Dr. Matthias Mähring and Dr. Kai Preißmann,
Christine Rabenschlag, Dr. Reiner Löwer and Dr. Thomas Weidmann, Armin Maas
and Annette Mühlenbeck, Senior Audit Managers as well as Christina Kenn and
Carsten Nottebrock, Senior Auditors. I express my sincere thanks to all of them for
their dedication to this work.
Bonn, October 2007
Prof. Dr. Dieter Engels
President of the German SAI
in his capacity as
Federal Performance Commissioner
6
CONTENTS
0
EXECUTIVE SUMMARY
13
1
INITIATIVE FOR AND SUBJECT OF THIS STUDY
23
1.1
Request for a study from the Commission on Federalism
23
1.2
1.2.1
1.2.2
Concept, structure and earlier auditing findings
Earlier external audit work on the matter
Concept and structure
23
23
24
2
ADMINISTRATIVE INTERCONNECTIONS IN
THE FEDERAL GOVERNMENT SYSTEM:
LEGAL BASES AND EVOLUTION
26
2.1
The federal government system and interconnection
26
2.2
Origin of the federal system of government
26
2.3
Functional separation
27
2.4
2.4.1
2.4.2
2.4.3
Lines of interconnection in constitutional reality
Legislation
Administration
Financing
28
28
29
32
3
MODERNISING FEDERAL ADMINISTRATION BY
ELIMINATING OVERLAPS
34
3.1
The changing challenges
34
3.2
Need for structural modification
34
3.3
3.3.1
3.3.2
3.3.3
Separation as a fundamental principle
The principle of subsidiarity
The principle of democracy
The need for transparency
35
35
38
40
3.4
Guideline
42
4
WEAKNESSES OF ADMINISTRATIVE FEDERALISM
IN AUDIT PRACTICE
43
4.1
Taxes
43
4.1.1
4.1.2
4.1.3
4.1.4
4.1.5
4.1.6
Division of tasks under the present constitutional rules
Interconnecting structures between the administrative levels
Interconnecting structures have inadequate controlling effect
Interconnecting structures do not ensure uniform law enforcement
Interlocking structures hamper modernisation efforts
Interconnecting structures create negative management incentives
43
45
45
46
47
48
7
4.1.7
4.1.8
4.1.9
4.1.10
A model for a federal tax administration
Results of Federalism Reform I for the tax sector
Study by Kienbaum consultants
Options for eliminating overlaps
50
51
52
54
4.2
Transport infrastructure
56
4.2.1
4.2.1.1
Federal trunk roads
Basis, causes and evolution of administrative services
provided by the Länder on behalf of the Federal Government
Systemic weaknesses in federal trunk road administration
Weaknesses in the administration of federal trunk roads
Federal weaknesses in federal trunk road administration
Proposal for eliminating overlaps in the federal trunk road
administration
56
4.2.1.2
4.2.1.3
4.2.1.4
4.2.1.5
4.2.2
4.2.2.1
4.2.2.2
4.2.2.3
4.2.2.4
4.2.2.5
57
63
63
67
68
70
71
72
74
75
4.2.2.6
Federal waterways
Transfer of waterways to federal administration
Extent and importance of federal inland waterways
Administrative overlap in the case of recreational waterways
Audit findings on the recreational waterways
No agreement between the Federal Government and
the Länder on recreational waterways
Option for eliminating overlaps
4.2.3
4.2.3.1
4.2.3.2
4.2.3.3
4.2.3.4
Local public passenger transport
Special financial equalisation under Basic Law Art. 106a
Incompatibility of the special grants with the system
Earmarking as an ineffective instrument of control
Recommendation
82
83
83
85
86
4.3
Social affairs
87
4.3.1
4.3.1.1
Basic benefits and placement services for jobseekers
Consolidation of unemployment benefit and social assistance
in a uniform benefit
Details of a “new” system of basic benefits and placement
services for jobseekers
Audit findings of the Bundesrechnungshof
Framework conditions for a reorganisation of basic benefits
and placement services for jobseekers
87
4.3.1.2
4.3.1.3
4.3.1.4
4.3.2
4.3.2.1
4.3.2.2
4.3.2.3
Federal legislation on granting benefits
Social indemnification law
Child Support Advance Payment Act
Conscripts and Dependants Support Act
79
81
88
90
92
96
97
98
103
108
8
4.3.3
4.3.3.1
4.3.3.2
4.3.3.3
4.3.3.4
4.3.3.5
4.3.3.6
Agricultural social security system
Oversight and financing responsibility in the
social security system
Agricultural social security system
Weaknesses of the 2001 organisational reform
Interconnection as the cause
Further development of the organisational reform
Options for eliminating overlaps
112
112
113
114
114
115
116
4.4
Domestic security and protection of legal rights
118
4.4.1
4.4.1.1
4.4.1.2
4.4.1.3
4.4.1.4
4.4.1.5
Mobile police forces
Tasks of the mobile police forces and funding practice
Federal funding responsibility
Interconnection in practice
Need for the overlapping funding responsibilities
Recommendation
118
118
119
120
121
122
4.4.2
4.4.2.1
4.4.2.2
4.4.2.3
4.4.2.4
Protection of the Constitution - Domestic intelligence service
Structure of the domestic intelligence service
Existing parallel responsibilities
Need for parallel mission performance
Recommendation
123
123
124
125
126
4.4.3
4.4.3.1
4.4.3.2
4.4.3.3
Civil defence and disaster relief
Legal bases
Delimitation problems in practice
Conclusion
127
127
128
128
4.4.4
4.4.4.1
4.4.4.2
4.4.4.3
4.4.4.4
4.4.4.5
4.4.4.6
Supervision of nuclear facilities
Responsibility for regulation and implementation
Implementing legislation as an annex to regulatory power
Conflict of interest and lack of regulatory output
Weaknesses of nuclear safety regulations
Interconnection as the cause
Options for eliminating overlaps
129
130
131
132
133
135
138
4.5
Society
143
4.5.1
4.5.1.1
4.5.1.2
4.5.1.3
Culture and sport
Legal basis
Extensive cultural promotion by the Federal Government
Extensive sports promotion by the Federal Government
143
143
145
147
4.5.2
4.5.2.1
4.5.2.2
Families, senior citizens, women and young people
Legal basis
Extensive promotion by the Federal Government
148
148
149
9
4.5.2.3
4.5.2.4
Exceeding constitutional responsibilities
Conclusion
150
151
4.6
Budget, fees, liability
152
4.6.1
4.6.1.1
4.6.1.2
4.6.1.3
Modernisation of public-sector budgeting and accounting
Eliminating the weaknesses of cash-based accounting systems
Approaches to modernising the government accounting system
Requirements for a transparent government budget and
accounting system
152
152
153
4.6.2
4.6.2.1
4.6.2.2
4.6.2.3
Fees
Legal basis
Problem areas
Recommendations
155
156
156
158
4.6.3
4.6.3.1
4.6.3.2
4.6.3.3
4.6.3.4
4.6.3.5
Liability in the relationship between the Federal Government
and the Länder
Legal basis
Findings
Prospects for a future implementing law
Conclusion
Recommendations
159
159
161
164
164
167
5
FINAL COMMENTS
169
Annex I
Types of administration provided for under the Basic Law
170
Annex II
List of selected audit findings (annual reports 2000-2006)
180
Annex III
Federal structures abroad
204
Annex IV
Administration on federal commission: an agency theory view
213
Annex V
Acts granting benefits in the field of social indemnification
219
Annex VI
Impact of structural change on the agricultural
social security system
222
Model for a reorganisation of the agricultural
social security system
224
Annex VII
BIBLIOGRAPHY
154
225
10
ABBREVIATIONS
AG
AO
ASFINAG
AtG
AUD
BAnz.
BGB
BGBl.
BHO
BMF
BR-Drs.
BT-Drs.
BverfG
BverfGE
BverwG
BverwGE
DBW
GDR
DM
DÖV
Drs.
DVBl.
DVPW
FPR
FVG
GG
GMBl.
IPSAS
K-Drs.
KTA
LAK
LBG
LKK
plc
German Tax Code (Abgabenordnung)
Autobahnen- und Schnellstraßen-Finanzierungs-Aktiengesellschaft
Atomic Energy Act (Gesetz über die friedliche Verwendung der
Kernenergie und den Schutz gegen ihre Gefahren – “Atomgesetz”)
Australian dollar
Federal Gazette (Bundesanzeiger)
German Civil Code (Bürgerliche Gesetzbuch)
Federal Law Gazette (Bundesgesetzblatt)
Federal Budget Code (Bundeshaushaltsordnung)
Ministry of Finance (Bundesministerium der Finanzen)
Bundesrat publication (Drucksache des Bundesrats)
Bundestag publication (Drucksache des Bundestags)
Federal Constitutional Court (Bundesverfassungsgericht)
Rulings of the Federal Constitutional Court (Entscheidungen des
Bundesverfassungsgerichts)
Federal Administrative Court (Bundesverwaltungsgericht)
Rulings of the Federal Administrative Court (Entscheidungen des
Bundesverwaltungsgerichts)
Die Betriebswirtschaft (journal)
German Democratic Republic
Deutsche Mark
Die Öffentliche Verwaltung (periodical)
Printed papers (Drucksache)
Deutsche Verwaltungsblatt (periodical)
German Political Science Association (Deutsche Vereinigung für
Politische Wissenschaft)
Familie, Partnerschaft, Recht (journal)
Financial Administration Act (Gesetz über die Finanzverwaltung
– Finanzverwaltungsgesetz)
Basic Law (Grundgesetz)
Gemeinsames Ministerialblatt (periodical)
International Public Sector Accounting Standards
Commission printed papers (Kommissionsdrucksache)
Nuclear Safety Committee (Kerntechnischer Ausschuss)
Agricultural pension fund (Landwirtschaftliche Alterskasse)
Agricultural employers' liability insurance association
(Landwirtschaftliche Berufsgenossenschaft)
Agricultural health insurance scheme (Landwirtschaftliche
Krankenkasse)
11
LPK
LSVMG-E
LSVOrgG
NJW
NVwZ
RGBl.
SGB
SGB I
SGB II
SGB V
SGB VIII
SGB X
StVO
TÜV
USG
UVG
VwGebG-E
VwGO
WaStrG
WiST
ZfB
ZSG
Agricultural long-term care insurance scheme (Landwirtschaftliche
Pflegekasse)
Draft bill to modernise the law on agricultural social security (Entwurf
eines Gesetzes zur Modernisierung des Rechts der
landwirtschaftlichen Sozialversicherung)
Act on Organisational Reform of the Agricultural Social Security
System (Gesetz zur Organisationsreform in der landwirtschaftlichen
Sozialversicherung)
Neue Juristische Wochenschrift (journal)
Neue Zeitschrift für Verwaltungsrecht (journal)
Reich Law Gazette (Reichsgesetzblatt)
Social Code (Sozialgesetzbuch)
Book One of the Social Code (General)
Book Two of the Social Code (Basic insurance for jobseekers)
Book Five of the Social Code (Statutory health insurance scheme)
Book Eight of the Social Code (Child and youth services)
Book Ten of the Social Code (Social administration procedures,
social data protection)
Highway Code (Straßenverkehrs-Ordnung)
Technical Inspection Association (Technischer
Überwachungsverein)
Conscripts and Dependants Support Act (Gesetz über die Sicherung
des Unterhalts der zum Wehrdienst einberufenen Wehrpflichtigen
und ihrer Angehörigen – Unterhaltssicherungsgesetz)
Child Support Advance Payment Act (Gesetz zur Sicherung des
Unterhalts von Kindern alleinstehender Mütter und Väter durch
Unterhaltsvorschüsse oder -ausfalleistungen –
Unterhaltsvorschussgesetz)
Draft administrative fees bill (Entwurf eines
Verwaltungsgebührengesetzes)
Rules of the Administrative Courts (Verwaltungsgerichtsordnung)
Federal Waterways Act (Bundeswasserstraßengesetz)
Wirtschaftswissenschaftliches Studium (periodical)
Zeitschrift für Betriebswirtschaft (periodical)
Civil Defence Act (Zivilschutzgesetz)
12
0
EXECUTIVE SUMMARY
At the request of the joint Commission of the two Houses of the German
Parliament (Bundestag and Bundesrat) on the modernisation of the financial relations
between the Federal Government and the Germany's constituent states (Länder)
(section 1.1), this study, issued by the Federal Performance Commissioner, highlights
weaknesses in the cooperation between the Federal Government and the Länder. Its
statements and recommendations are essentially based on findings developed by
Germany’s Supreme Audit Institution, the Bundesrechnungshof.
The issues dealt with in this study go beyond the aspects on which the
Commissioner and the German SAI have already commented preliminary to and in
connection with the first stage of the reform of federalism. Apart from the exemplary
issues concerning the fiscal administration and federal long-distance roads, this
opinion, therefore, also deals with local public transport (Art. 106a of the German
Constitution) the administration of federal waterways, issues of social security
(‘unemployment benefit II’, federal legislation granting benefits, the agricultural
social security system), the supervision of nuclear facilities, civil defence, disaster
relief services, the areas of culture, sports and young people as well as domestic
security issues (mobile police forces of the Länder and domestic intelligence service).
This is the first time in the context of the reform of federalism that the Commissioner
expresses his opinions on the modernisation of public-sector financial management
and accounting, on the law of fees and on questions of liability in relations between
the Federal Government and the Länder.
On the whole, the German SAI’s audit findings show the following:
Since the entry into force of the present German Constitution (‘Basic Law’),
there has been a strong trend to interconnect tasks, responsibilities and financial
obligations between the Federal Government and the Länder (sections 2.1 and 2.4). In
many cases, these interconnections have led to an organised lack of responsibility.
The current structures increasingly impair governmental mission performance. The
obligation laid down in the Constitution and Acts of Parliament to optimise
government performance does not have the intended effect.
The Commissioner, therefore, advocates restructuring the allocation of
responsibilities, tasks and funding obligations between the Federal Government and
the Länder and creating conditions under which government action can be successful
and efficient. The key challenge is to do away with a cumbersome and excessively
bureaucratic system involving monitoring and supervision across different levels of
government and to substitute it by a framework which ensures that each level of
government responsibly manages its own affairs.
The best way to enhance mission performance is for each acting party to focus on
its own interests and be endowed with the appropriate authorisations to this end. With
a view to the different levels of government, this means that:
Both the Federal Government and the Länder must be given more autonomy and
separate spheres of responsibility. In contrast to the current situation, it will be
13
necessary to concentrate tasks, powers and financial responsibility in one and the
same hand, i.e. at a single level of government. This helps to more clearly define
independent profiles of responsibility and to abolish procedures that involve more
than one level of government.
0.1
Need for eliminating overlapping responsibilities
This opinion follows the guiding idea of eliminating overlaps (section 3) in line
with the federal system embodied in the Constitution, which requires compliance with
the fundamental principles of subsidiarity (section 3.3.1), democracy (section 3.3.2)
and transparency (section 3.3.3).
The Commissioner considers these principles to be a powerful source of
momentum for enhancing government performance. Persons or entities seek to
enhance performance whenever they benefit from doing so. Government structures
encourage responsible and efficient public management wherever they strengthen the
autonomy and the self-interest of the entities concerned. In the German framework of
‘interconnected federalism’, less attention has been given to that idea in the last few
decades.
What we need is a structure of government that rewards good performance. To
achieve this, high performance has to be linked to the self-interest of the acting
parties in ways that promote the public good. The guiding principle is to ensure that
each government entity performs its functions by means of its own financial
resources, under its own responsibility and within a transparent system of
accountability. Where governments at each level discharge their respective functions
with their own funds, i.e. resources flowing from their own revenues which they
manage autonomously, they become more sensitive to the need to use these resources
appropriately. This is confirmed by findings generated and lessons learnt through
audit work.
0.2
Taxes
Federal tax legislation is largely executed by the Länder. However, because they have
to transfer a large portion of the tax revenue to the Federal Government, the Länder
do not have sufficient incentive to collect the taxes completely and in a timely
manner. Owing to the executive role of the Länder in tax matters, federal tax laws are
not applied consistently to citizens and businesses throughout Germany. Cumbersome
liaison structures governing the relationship between the Federal Government and the
Länder require coordination efforts that result in poor performance. These structures
impede the introduction of modern IT systems and good cooperation within the
European Union.
The Commissioner recommends establishing a federal tax administration (section
4.1.10). This recommendation is supported by the structural principles of the
Constitution, lessons learnt from the operation of the federal system, aspects of tax
14
equity and financial benefits. The Länder should only levy those taxes whose
revenues entirely flow into the Länder budgets.
Should introducing a federal tax administration turn out to be impossible, an
alternative remedy would be to strengthen the Federal Government’s powers to issue
obligatory guidance to the Länder. Any further requirement to obtain the Länder’s
consent would then have to be abolished. The Commissioner recommends that such a
‘lesser solution’ be backed up by an amendment of the Constitution.
0.3
Transport infrastructure
The allocation of responsibilities for transport infrastructure should be brought
more in line with the principle of subsidiarity by means of relevant legislation that
assigns regional tasks to the Länder. Doing so will remove conflicts of interest
between the Federal Government and the Länder, reduce the need for oversight
across different levels of government and improve performance. Case studies:
Federal long-distance roads (section 4.2.1)
Under current constitutional law, the Länder build and manage the federal longdistance roads (federal motorways and federal roads) on behalf of the Federal
Government. Given that there is now a dense network of motorways, federal roads
primarily serve regional traffic and are hardly relevant for the Federal Government’s
task of providing the infrastructure for long-distance transport.
Inefficiencies in the management of federal long-distance roads are generated
particularly by conflicts of interest arising in the cooperation between the Federal
Government and the Länder. This applies especially to planning roadworks,
downgrading federal roads and the construction of bypass roads.
The Commissioner therefore recommends concentrating the responsibilities for
federal motorways (both funding and management) at the Federal Government level.
The Länder should assume sole responsibility (both funding and management) for
former federal roads and receive appropriate financial compensation not linked to any
obligation to use the additional revenues thus received for any specific purpose.
International experience has shown that reallocating responsibilities in an endeavour
to abolish the previous interconnections within the federal system can enhance
transparency and performance in roadworks management.
Federal waterways (section 4.2.2)
The Federal Government is responsible for inland waterways significantly
frequented by passenger and cargo vessels. However, traffic by cargo vessels has
significantly declined on many inland waterways. Many of these are now largely used
by leisure craft and some passenger vessels.
The Commissioner recommends amending the Constitution to authorise the
Federal Government to transfer to the Länder the property, management and funding
of those inland waterways that no longer serve (nationwide) cargo transport, against
15
payment of compensation not linked to any obligation to use the additional revenues
thus received for any specific purpose.
Local public transport (section 4.2.3)
Since 1996, the Länder have received special payments from the Federal
Government to fund local public transport. These payments are designed to increase
to around €7.3 billion annually by 2014. Thus, the Federal Government is funding a
task for which the Länder have original responsibility. The Federal Government is
hardly in a position to verify whether the funds have been used for the earmarked
purposes.
Art. 106a of the German Constitution should be repealed to confer to the Länder
the sole responsibility for funding local public transport services. Responsibility for
providing the services and for funding them will thus be united at a single level of
government. To ensure that the Länder have adequate financial resources to perform
their tasks, the apportionment of tax revenues between the Federal Government and
the Länder and / or the system of revenue equalization between the Länder need to be
changed accordingly.
0.4
Social affairs
Tasks and powers in the field of social security should be linked as closely as
possible to the funding responsibility, in order to empower the acting entities
accordingly and to reduce the largely ineffective, bureaucratic need for ’vertical’
coordination and supervision across different levels of government.
Basic security for job seekers (section 4.3.1)
Local authorities and the local branches of the Federal Employment Agency have
set up 356 cooperation units to administer the programme to provide basic security
for job seekers. Programme delivery is supervised by the Länder in consultation with
Federal Ministry of Labour and Social Affairs. In addition, the Legislature has
stipulated an experimental provision, under which 69 local authorities were
authorised to manage the basic security programme for job seekers. In these cases,
oversight lies exclusively with the Länder.
Federal expenditure on the basic security programme in 2007 has been estimated
at €35.9 billion, making the Federal Government the major funding institution.
Nevertheless, the Federal Government has insufficient means of steering the
regularity, efficiency and effectiveness of programme delivery. This applies to the
work of both the 69 authorised local authorities and the cooperation units between
local authorities and the local branches of the Federal Employment Agency.
The experimental provision allows for the practical success of the organisational
models "cooperation units" and "authorised local authorities" to undergo interim
testing.
16
The Legislature’s subsequent decision about allocating the tasks and the funding
responsibilities should, to the greatest extent possible, avoid any interfaces at either
programme delivery or supervisory levels, and thereby eliminate complicated and
error-prone coordination procedures. At both levels, tasks and powers should be
linked as tightly as possible to the funding responsibility and the acting entities
accordingly empowered.
Federal legislation granting benefits (section 4.3.2)
The Länder implement federal laws granting benefits under their own
responsibility (e.g. Act on Compensation for Victims of Violent Crime, Federal War
Victims' Compensation Act) or on behalf of the Federal Government (e.g. Military
Pensions Act). The cost of providing the benefits is shared by the Federal
Government and the Länder. These have to fund the administrative expenditure
involved in delivering the benefits.
In the field of legislation granting benefits, the Commissioner advocates that the
responsibilities for performing tasks and for funding be consolidated at a single
government level. In this way, conflicts of interest between the Federal Government
and the Länder could be eliminated, as would the overlapping of tasks across
different levels of government. Moreover, a clear and exclusive allocation of
responsibilities for particular functions to individual levels of government enhances
the democratic legitimacy of the exercise of government powers vis-à-vis the citizens.
Agricultural social security system (section 4.3.3)
The Federal Government grants about €3.7 billion annually to the entities that
administer the agricultural social security system. By means of a restructuring
programme launched in 2001, the Legislature intended to adjust the structure of the
agricultural social security system to the sustained structural changes in agriculture.
At the same time, the restructuring programme was designed to strengthen the
Federal Government’s influence on the entities administering the agricultural social
security system. According to the findings developed by the Bundesrechnungshof, the
restructuring steps taken are not adequate for the necessary reorientation of
organisational structures.
The Commissioner recommends fully transferring administrative responsibilities
for the agricultural social security system to the Federal Government. Bringing
together responsibilities for mission performance and for funding gives the Federal
Government powers that are commensurate with its funding responsibilities and
clarifies accountability. Another argument for centralising responsibilities is the
declining number of persons liable to pay contributions to the agricultural social
security system.
17
0.5
Domestic security and protection of legal rights
The current arrangements for funding by the Federal Government of mobile
police forces of the Länder provide for overlapping responsibilities that are contrary
to a sound federal system. In the interest of good government performance, the
functions related to the protection of the Constitution (domestic intelligence service)
as well as those related to civil defence and disaster relief services should be
reallocated between the Federal Government and the Länder. This will result in the
elimination of unnecessary interfaces and impediments to good performance. A
reallocation of administrative responsibilities in the field of nuclear supervision
should pave the way for creating a new regulatory framework for nuclear safety.
Mobile police forces (section 4.4.1)
The Federal Government funds the provision of command, control and
operational equipment to the mobile police forces of the Länder. These federal grants
to the Länder are unnecessary. They contradict the structural principles of the
Constitution and should therefore be terminated.
A suitable tool for addressing overlaps in this field would be an agreement under
the legislative project for Stage II of the reform of the federal structure of Germany.
This could pave the way for a clearer definition of the ‘unwritten funding
responsibility’ of the Federal Government and its alignment with the structural
principles of the Constitution. Such an agreement should comply with the strict
criteria on ‘uncodified federal funding responsibilities’, according to past rulings of
the Federal Constitutional Court.
Protection of the Constitution (domestic intelligence service) (section 4.4.2)
Both the Federal Government and each Land maintain their own offices for the
protection of the Constitution. At present, a workforce of 1000 is involved in
information exchange and parallel work. The existing decentralised structure of the
services for the protection of the Constitution was created in response to the
experience with the totalitarian state under National Socialism and is no longer
necessary under Germany’s present constitutional system based on liberty and
democracy.
The Commissioner recommends that the functions related to the protection of the
constitution be concentrated at the Federal Government level, since extremist
activities do not stop at the boundaries between the Länder and attacks against the
constitutional order are usually directed against the Federal Republic as a whole and
against the constitutional system based on liberty and democracy.
The efficiency reserves thus released could be used for improving mission
performance and for generating other savings.
18
Civil defence and disaster relief (section 4.4.3)
Disaster relief as a responsibility of the Länder primarily aims at averting
dangers to the health and lives of human beings. Such dangers may rise from extreme
weather conditions or major accidents.
In a state of defence, the Federal Government is responsible for the protection of
the civil population (civil defence). The Länder then act on behalf of the Federal
Government.
The Federal Government and the Länder jointly perform civil protection and
disaster relief functions. Unclear delimitations of responsibilities lead to weaknesses
such as inadequate information exchange and inefficiency. The Commissioner
therefore advocates the elimination of overlapping responsibilities and a clear
allocation of functions between the Federal Government and the Länder. The relevant
legal (and constitutional) provisions should be amended accordingly.
Supervision of nuclear facilities (section 4.4.4)
The Länder approve nuclear facilities and supervise their operation (nuclear
supervision). They discharge these functions on federal commission. The Federal
Government has legal and technical oversight functions over the exercise of these
functions by the Länder.
For years, the Federal Government and the Länder have failed to reach
agreement on a regulatory framework for nuclear safety, which is indispensable for
guaranteeing nuclear safety and efficient enforcement.
The Commissioner advocates a clear and unambiguous allocation of
responsibility. At least, the Federal Government should be given the authority,
without the need to seek the consent of the Länder, of promulgating the regulatory
framework for nuclear safety to be applied by the Länder (lesser solution). Further
options would be to confer to the Federal Government those supervisory functions in
the field of nuclear safety so far incumbent to the Länder (regulation and enforcement
in one hand) or, vice versa, abolish federal oversight over the administrative
operations of the Länder in this field, thereby giving the Länder exclusive
enforcement responsibility.
0.6
Society
Concerning the promotion of cultural activities and sports, the delimitation of
responsibilities between the Federal Government and the Länder should be improved
in line with the relevant constitutional provisions. Given the strict constitutional limits
and the prevalence of local factors, the Federal Government also should largely leave
to the Länder and local authorities the tasks relating to supporting families, senior
citizens women and young people.
19
Cultural activities and sports (section 4.5.1)
The Federal Government promotes the arts, cultural activities and sports to an
extent which is incompatible with its constitutional responsibilities. In doing so, it
partly performs functions for which the Länder are responsible.
In the Commissioner’s opinion, the Federal Government should withdraw from
those activities that go beyond its constitutional responsibilities. If, as an exception,
the Federal Government would continue with the promotion of the arts, cultural
activities and sports outside the nation’s capital, this should be clarified by an
amendment of the Constitution and supplemented, where appropriate, by an
implementing Act or a binding agreement between the Federal Government and the
Länder. The relevant provision should aim at avoiding any form of co-funding,
assigning all ambits of responsibility to a single level of government. The ambit of
federal responsibilities should be determined in accordance with the strict rulings of
the Federal Constitutional Court relating to ‘unwritten federal responsibilities’.
Families, senior citizen, women and young people (section 4.5.2)
The Federal Government grants benefits to and / or delivers social services for
children and young people as well as promoting families, senior citizen and women.
These activities go beyond the Federal Government’s constitutional responsibilities.
The Commissioner holds that one essential cause of the extensive interpretation
of the scope of the Federal Government’s administrative and funding responsibilities
is the provision of Art. 83.1 Book VIII of the Social Code. The wording of that
provision inadequately implements the strict limits imposed by the Federal
Constitutional Court concerning an ‘unwritten’ federal responsibility. Therefore, the
Federal Government is able to interpret the scope of its responsibilities broadly,
providing a wide range of services and benefits. Given the predominant influence of
local factors, functions related to granting benefits to and / or delivering social
services for children and young people as well as functions designed to support
families, senior citizens and women can best be performed by the Länder, i.e. either
by each Land alone or by several Länder in cooperation. Federal responsibilities,
therefore, should be restricted to the few issues for which a national solution is
absolutely necessary in the absence of other options. A binding limit of
responsibilities should be ensured either by legislation or agreement, strictly in line
with the relevant constitutional provisions.
0.7
Budget, fees, liability
To achieve greater transparency and a stronger link between tasks and resources,
public-sector budgeting and accounting need to be reformed. National and
international comparability is to be ensured by the consistent presentation of data.
The allocation between the Federal Government and the Länder of the responsibility
for legislation on fees should be flexibly adjusted so as to unite administrative
20
operations, revenues and the power to legislate at a single level of government.
Problems on liability in connection with the relationship between the Federal
Government and the Länder may be minimised by reducing the number of interfaces
between these two levels of government by means of a clear demarcation of the
administrative tasks of the two levels. Unambiguous legislation about mutual
liabilities should be developed for the remaining cases of interlocking responsibilities.
Modernisation of public-sector budgeting and accounting (section 4.6.1)
The principle of authorisation and autonomy of the different levels of
government implies that the acting government entity, in each case, is accountable to
the citizens for the input of resources and their efficient use. At present, budgeting
and accounting systems at the federal and Länder level are still largely cash-based. As
a result, the actual costs of policy decisions can frequently not be identified.
Therefore, efforts to modernise budgetary and accounting systems should be
encouraged and continued. As the Länder and the Federal Government adopt
different approaches, there is need for harmonisation. According to the
Commissioner, an advance budget and accounting system must be based on uniform
principles in order to ensure that – despite different modernisation approaches
adopted by different government entities – public budgets remain transparent and
comparable across the various levels of government so as to provide fundamental data
for developing key budgetary ratios. Considering Germany’s public-sector as whole,
it appears desirable that the Federal Government and the Länder agree on either an
expanded system of cash-based budgeting and accounting or an accrual-based
budgeting and accounting system.
Fees (section 4.6.2)
Large overlaps exist between federal and Länder responsibilities in the field of
administrative fees. The result is a lack of transparency and an unclear demarcation of
responsibilities.
In the Commissioner’s opinion, it is, therefore, imperative to assign the power to
legislate on or regulate fees to the government entity that delivers the respective
administrative services. That entity should also be entitled to receive the revenue
from fees. When implementing federal legislation either under their own authority or
on federal commission, the Länder should be free to regulate the fees charged for the
administrative services their authorities provide.
To achieve transparency concerning the consumption of resources, the Federal
Government, Länder and local authorities should waive any mutual exemption from
fees amongst their entities. Sensitivity about the cost of using public services will be
enhanced if the beneficiaries are charged with the related cost.
21
Liability in the relationship between the Federal Government and the Länder (section
4.6.3)
The Länder perform many administrative functions on behalf of the Federal
Government and, in this context, attend to the budgetary interest of the Federal
Government. This applies, for example, to the assessment and collection of taxes.
This is one of the fields where the Federal Government and the Länder are liable to
one another for ensuring proper administration (Basic Law Art. 104a.5).
Owing to systemic weaknesses, the law concerning liability in the relationship
between the Federal Government and the Länder is hardly effective in practice.
The clear demarcation of powers and responsibilities in the relationship between
the Federal Government and the Länder should be a prime objective of reform efforts.
Accomplishing this objective will empower all government entities and will minimise
the potential for conflicts.
Where overlapping responsibilities cannot be fully abolished, efforts should
address adopting legislation to implement the above-mentioned constitutional
provision as a supplementary step, thereby regulating the details of enforcing mutual
liability.
Government entities should be enabled to systematically and reliably prevent the
materialisation of liability risks and to identify damage occurred. However, this
should be achieved without creating any excessive Federal Government bureaucracy
designed to supervise the administrations of the Länder.
0.8
Conclusion (section 5)
The reallocation of functions recommended in this opinion aim to eliminate
overlapping responsibilities in the administrative relations between the Federal
Government and the Länder. Depending on the issues in question and the objectives
defined in the Constitution or in ordinary legislation, it may appear imperative to
concentrate powers and responsibilities either at the Länder or the federal level. The
existing vertical overlaps of responsibilities, supervisory powers and funding
obligations should be eliminated as much as possible. The Federal Government and
the Länder should perform their respective functions entirely under their own
responsibility and with their own funds and be fully and exclusively accountable for
their use of resources. This is contingent upon each government entity being provided
with the financial resources they need to perform their functions.
22
1
INITIATIVE FOR AND SUBJECT
OF THIS STUDY
1.1
Request for a study from the Commission on Federalism
On 15 December 2006, the two Houses of Parliament, Bundesrat and Bundestag
formed a joint Commission to modernise financial relations between the Federal
Government and the Länder (Commission). 1 Its task is to develop proposals for
adapting financial relations between the Federal Government and the Länder to the
changed framework circumstances. These proposals, in turn, are to strengthen the
direct responsibility of the Länder and ensure they have adequate financial resources
for their tasks. Furthermore, they are to identify possibilities for eliminating
overlapping responsibilities and reducing regulation in the field of public
administration, in order to enhance its mission performance and efficiency. 2
The Commission has divided its topics for consideration into two main blocks,
financial issues and administrative issues. The Commission held a public hearing on
the financial issues on 22 June 2007 in Berlin. 3 A second public hearing on the
administrative issues is scheduled for 8 November 2007.
The two Chairmen of the Commission, Dr Peter Struck (Chairman of the SPD
Parliamentary Party) and Minister-President Günther H. Oettinger, have asked the
President of Germany's Supreme Audit Institution, the Bundesrechnungshof, to draw
up a study in preparation for the hearing and to assist the Commission in its further
consideration of the administrative issues.
In his capacity as Federal Performance Commissioner (FPC), the President of the
Bundesrechnungshof accordingly submits the present study on modernising
administrative relations between the Federal Government and Germany's constituent
States.
1.2
Concept, structure and earlier auditing findings
1.2.1
Earlier external audit work on the matter
The Federal Performance Commissioner relies extensively in this study on the
audit findings developed by the Bundesrechnungshof. According to these findings,
weaknesses in the division of tasks and distribution of financial resources within the
federal framework occur repeatedly and in the most diverse areas. The
1
2
3
Cf. BR-Drs. 913/06 (resolution); BT-Drs. 16/3885 and minutes of the plenary proceedings 16/74,
p. 7410 (D). The Bundestag and Bundesrat each appoint 16 members to the Commission.
Cf. the open collection of issues, annex to BR-Drs. 913/06 (resolution).
On the public hearing on financial issues, cf. K-Drs. 011 (questionnaire) and the verbatim record
of the 4th Session of the Commission of the Bundestag and Bundesrat on Modernisation of the
Financial Relations between the Federal Government and the Länder (Commission Proceedings
no. 4).
23
Bundesrechnungshof accordingly informed the two Houses of Parliament on selected
weaknesses of the federal government system in its 2005 annual report. 4
Subsequently, in the framework of Federalism Reform, the President of the
Bundesrechnungshof was appointed as expert for the public hearing on “Finance,
Budget and Economy”. 5 In his written opinion 6 , oral opening statement and answers
to the subsequent questions, he presented the position of the Bundesrechnungshof on
key elements of the reforms from the point of view of external government auditing. 7
Both the Commissioner and the Bundesrechnungshof argued that in the impending
reforms of the relationship between the Federal Government and the Länder it was
necessary to bring together function, authority and financial responsibility, i.e. to
consolidate these at a single level of government, in order to avoid inefficient action
and strengthen the direct responsibility of each level of government.
The Commissioner continues to hold this view with regard to the impending
further reforms. In his opinion, renewed reflection on the principles of subsidiarity,
democracy and transparency underlying the Basic Law (the German Constitution),
and the implicit requirement to eliminate overlapping responsibilities, can generate
valuable criteria for modernising the administrative relations between the Federal
Government and the Länder. The structure of the present study also follows these
basic considerations.
1.2.2
Concept and structure
Chapter 2 begins by outlining the legal basis in the practice of executive
interconnection within the federal system and how it has evolved. The reflection on
the origin of the federal system of government in Germany, its specific structure as a
system with separation of powers, and a brief review of the key evolutionary lines of
the excessive overlapping in all the core functions of government action (regulation,
implementation, financing) leads to the question of how administration can be
modernised in the relationship between the Federal Government and the Länder, and
with what general measures.
4
5
6
7
Cf. 2005 Annual Report of the Bundesrechnungshof, BT-Drs. 16/160, no. 3. “Need for reallocating
responsibilities between federal and state levels”; key points were: Implementation of tax laws, cofunding, local authority road works and local public passenger transport, long distance roads. The
Public Accounts Committee of the Bundestag’s Budget Committee received the “Federalism
Annual Report” with approval in its 2nd Session (16th legislative period) on 27 January 2007.
Joint public hearing of the Bundestag’s Committee on Legal Affairs and Bundesrat’s Committee
on Home Affairs on 31 May 2006 in Berlin.
Statement by Prof. Dr. Dieter Engels of 8 May 2006 to the public hearing of the Bundestag’s
Committee on Legal Affairs and the Bundesrat on Federalism Reform, general area “Finance,
Budget and Economy”. In addition to the weaknesses already cited in the Federalism Annual
Report (cf. fn. 4), the statement also referred to the areas “National stability pact” and “Criteria for
liability in cases of violations of supranational law and EU financial corrections”.
Cf. verbatim record of the 18th Session (16th legislative period) of the Bundestag’s Committee on
Legal Affairs on 31 May 2006, 4B-5D (opening statement) and 23B-24A, 27D-28C, 41B-D and
46C-47A on the session for questions.
24
A possible answer in the view of the Commissioner is suggested in Chapter 3 of
the study. The elimination of overlaps as a basic principle is seen as a purifying and
structuring tool which can show a way out of the dysfunctional overlaps in the
administrative relations between the Federal Government and the Länder. It is
deliberately rooted in the principles governing the Basic Law, and which, in the view
of the Commissioner, also provide indications - in specific instances of overlapping on how to optimise the relationship between the Federal Government and the Länder
and their respective scope for action and autonomy, or, if necessary, to reorganise
these completely. Chapters 2 and 3 accordingly constitute the general part of the
study, and attempt to establish a common basis for the individual audit findings, and
specifically the options for eliminating overlaps in the audited areas.
Chapter 4 forms the bulk of the study, as the detailed section. This is a
presentation of the weaknesses of administrative federalism which have been
identified by the external government auditors. At the same time, it attempts to
develop recommendations for correcting the weaknesses.
The detailed section covers areas beyond those already covered in the
contributions by the Commissioner and Bundesrechnungshof to the deliberations
surrounding Federalism Reform I. 8 Besides the areas of tax administration and trunk
roads, which the Commissioner is addressing again because of their outstanding
importance, the audit part of the study addresses a wide range of other administrative
weaknesses in the federal government system.
In the field of transport infrastructure, for example, local passenger transport
(Basic Law Art. 106a) and the Federal waterways are further elements in addition to
the long distance roads already mentioned. However, there are also administrative
weaknesses in the areas of social security (unemployment benefit II "Hartz IV",
federal legislation on social benefits, agricultural social security), protection of legal
rights (supervision of nuclear facilities, civil defence and disaster relief services) and
in the field of culture, sports and youth. Dysfunctional overlapping can also be found
in the administrative relations between the Federal Government and the Länder in the
area of domestic security (mobile police forces of the Länder and domestic
intelligence service). With reference to the principles of democracy and transparency
developed in the general part of the study, the Commissioner indicates the need to
modernise governmental budget and accountability systems. Finally, the study looks
at the continuing legislative gap with regard to the regulation of liability between the
Federal Government and the Länder (Basic Law Art. 104a, para. 5).
8
Cf. section 1.2.1.
25
2
ADMINISTRATIVE INTERCONNECTIONS IN THE
FEDERAL GOVERNMENT SYSTEM:
LEGAL BASES AND EVOLUTION
2.1
The federal government system and interconnection
The Federal Republic of Germany is a democratic and social federal state (Basic
Law Art. 20 para. 1). The principle of the federal state is specifically protected by the
“perpetuity clause” of the constitution (Basic Law Art. 79 para. 3). The federal
government system is, as a result, a central feature of German statehood under the
Basic Law which cannot be amended by even legislators amending other aspects.
In constitutional reality and government practice, numerous distortions and
incrustations have evolved since the entry into force of the Basic Law which reduce
the efficiency of government action within the framework of the German federal state
system and result in inefficient action. This applies to all government functions, and
covers not only the legislative power at federal and Land level (legislation) but also
the funding of government functions, and specifically their administration 9 at each
government level.
This conclusion is uncontested today, and there is also essentially agreement on
the evolutionary stages in past decades which have led to the dysfunctional
interconnection between the Federal Government and the Länder. At the same time it
is helpful to re-visit these lines of evolution, as they can suggest approaches for
eliminating overlaps and modernising the German federal government system.
2.2
Origin of the federal system of government
The choice of the federal principle by the creators of the Basic Law follows a long
German tradition. The Holy Roman Empire of the German Nation had marked federal
traits. 10 The subsequent confederations (Rhine Confederation, German Confederation)
also had a multilevel organisation. The North German Confederation and, finally, the
German Empire of 1871 were explicitly established as federal states, the Weimar
Republic adopted the federal system, even though its constitution no longer contained
the term “federal state” and the “Reich” still had an extensive range of powers
compared with the Länder.
The choice by the Parliamentary Council in 1948/49 of a Federal Republic for
Germany can be seen as a conscious development and continuation of these historical
9
10
The administrative weaknesses of the federal government system – based on the audit findings of
the Bundesrechnungshof – are presented in the fourth chapter of the study.
In his 1667 essay “De statu imperii germanici”, Pufendorf describes the empire as an irregular
body resembling a monster (“monstro simile”); criticism of multilevel state or similar systems is
clearly as old as their emergence.
26
models. Of course, this choice was also decisively affected by the negative experience
with the National Socialist unitary state and by the influence of the Occupying Powers
on the new government system. Wishing to separate powers and constrain the power
of central government the Occupying Powers demanded a federal system for
reconstructing a government system in Germany. The Parliamentary Council
accordingly adopted a strict separation of the government functions of the Federal
Government and the Länder in the legislative, executive and judicial branches,
stressing the federal aspect of the government system.
2.3
Functional separation
This was the context within which the Basic Law clearly divided state powers
between the Federal Government and the Länder right from the start.
Basic Law Art. 30 followed the principle of subsidiarity in dividing powers,
stating that the exercise of state powers and the discharge of state functions is a matter
for the Länder (rule), except as otherwise provided or permitted by this Basic Law
(exception). The specific divisions of power for legislation and administration follow
this general model. For example, under Basic Law Art. 70 para. 1 the Länder have the
right to legislate (rule) insofar as the Basic Law does not confer legislative power on
the Federal Government (exception). The same applies to the implementation of the
laws.
The Länder execute their own laws. 11 Under Basic Law Art. 83 para. 1, the
Länder execute the federal laws in their own right (rule) insofar as the Basic Law
does not provide or permit otherwise (exception). The two exceptions are where the
Länder execute federal laws “on federal commission” (Basic Law Art. 85) or the
Federal Government executes laws through its own administrative authority or
through federal corporations or institutions established under public law (Basic Law
Art. 86). In the first case (execution on commission) it is still a matter for the Länder,
and it only becomes a matter for the federal government level where the Federal
Government has its own administrative structures. This means that the Basic Law
ultimately provides for three types of implementing federal laws:
•
•
•
11
12
by the Länder in their own right,
by the Länder on federal commission,
by the Federal Government. 12
As there is no provision for execution of Land laws by the Federal Government, the basic rule of
Art. 30 Basic Law applies, making enforcement of Land laws the exclusive responsibility of the
Länder themselves.
Annex I shows the three types of administration provided for under the Basic Law in detail.
27
2.4
Lines of interconnection in constitutional reality
The principle of the separation of powers as established in the Basic Law then and
still applicable today gives the Länder (and the Federal Government) their own
functional sovereignty and responsibility. The Basic Law provides for a separation of
the responsibilities between the Federal Government and the Länder. Each party is
required to respect the autonomy of the other. 13
The basic structure of this hierarchy of responsibility clearly established by the
constitutional legislators still applies. However, this conflicts with the finding referred
to earlier of extensive dysfunctional interconnection between the Federal Government
and the Länder in the three areas of government action (legislation, administration
and financing). This contradiction – which is only apparently so – may be derived
from three lines of evolution.
2.4.1
Legislation
In practice, the focus in legislation has shifted clearly from the Länder to the
Federal Government. The exception has become the rule.
The Federal Government has extensively asserted not only the legislative powers
assigned exclusively to it by the Basic Law, but also its powers in the area of
concurrent legislation, largely blocking the Länder from enacting their own laws. 14 In
German constitutional practice since 1949, concurrent legislation has become almost
entirely a matter for the Federal Government. 15 While the amendments of concurrent
legislation adopted in the Constitutional Reform 16 of 1994 had the goal of rolling
back the primacy of the Federal Government in the field of concurrent legislation 17 ,
their practical effect fell short of expectations. The 2006 Federalism Reform further
amended Basic Law Art. 72. 18 It remains to be seen whether the amendment will
achieve its goal of eliminating the overlap between the Federal Government and the
Länder in legislation once it has been fully implemented. 19
13
14
15
16
17
18
19
Cf. Isensee, in: ders./Kirchhof, HStR IV, 1st ed., section 98 MN. 93 and 114 et seq.
The legislature introduced one possibility for the Länder to weaken to some extent the blocking
effect of federal regulation in the case of concurrent legislation in the course of Federalism
Reform I through Art. 72 para. 3 Basic Law, cf. Constitutional Amendment Act of
28 August 2006, Arts 22, 23, 33, 52, 72, 73, 74, 74a, 75, 84, 85, 87c, 91a, 91b, 93, 98, 104a, 104b,
105, 107, 109, 125a, 125b, 125c, 143c (BGBl. I, p. 2034.).
Cf. Helms, in: Jahrbuch des Föderalismus 2006, p. 121.
Constitutional Amendment Act(Arts 3, 20a, 28, 29, 72, 74, 75, 76, 77, 80, 87, 93, 118a and 125a)
of 27 October 1994 (BGBl. I, p. 3146).
BT-Drs. 12/6000, p. 32.
Constitutional Amendment Act (Arts 22, 23, 33, 52, 72, 73, 74, 74a, 75, 84, 85, 87c, 91a, 91b, 93,
98, 104a, 104b, 105, 107, 109, 125a, 125b, 125c, 143c) of 28 August 2006 (BGBl. I, p. 2034).
Art. 72 Basic Law now contains several subcategories of concurrent law which have different
requirements and legal consequences: legislative priority of the Federal Government (without
necessity clause), power of the Federal Government in case of urgent need (with necessity clause),
and power of the Länder to enact divergent legislation (in selected areas of the Federal
Government’s legislative priority). If the Länder exercise their power to enact divergent
legislation, whichever act is later takes priority in the relationship between federal and Land law;
28
A further problem is that the legislators amending the Basic Law 20 have
repeatedly extended the list of powers of the Federal Government in the field of
legislation since the entry into force of the Basic Law. This applies to both concurrent
and exclusive legislation by the Federal Government. However, the legislators have
reversed the trend with the Constitutional Reforms of 1994 21 and 2006 (Federalism
Reform I) 22 .
Finally, the scope of the Federal Government’s power to legislate has been
steadily expanded – with the approval of the Federal Constitutional Court – from an
early stage using the instruments of responsibility for the substantive issues 23 and the
nature of the issue 24 to go beyond the written list of responsibilities of the Federal
Government on certain points 25 .
2.4.2
Administration
In the field of administration, the responsibility of the Länder has centred on
implementing federal laws, in line with the narrow scope left for the legislative power
of the Länder. However, in contrast to the legislative field, the basic principle under
which the Länder have the task to administer has actually remained the rule. Much of
the responsibility for implementing the laws lies with the Länder (and local
governments) implementing federal laws in their own right (Basic Law Art. 83
para. 1) or on federal commission (Basic Law Art. 85 para. 1). Except in the few areas
where it has its own administrative structures (Basic Law Art. 87) 26 , the Federal
Government accordingly relies on the administrative activities of the Länder (and
local governments). The Länder accordingly predominate in the field of
administration.
20
21
22
23
24
25
26
the Federal Government can accordingly always override divergent legislation by the Länder.
Art. 72 Basic Law is accordingly still redolent of interconnection; on the possible problems of the
amended version in legislative practice, see Papier, NJW 2007, 2145 (2147 et seq.).
With the consent of the Länder collaborating on the (constitutional) legislation in the Bundesrat
and the necessary two-thirds majority in the Bundestag and Bundesrat.
Constitutional Amendment Act(Arts 3, 20a, 28, 29, 72, 74, 75, 76, 77, 80, 87, 93, 118a and 125a)
of 27 October 1994 (BGBl. I, p. 3146).
Constitutional Amendment Act (Arts 22, 23, 33, 52, 72, 73, 74, 74a, 75, 84, 85, 87c, 91a, 91b, 93,
98, 104a, 104b, 105, 107, 109, 125a, 125b, 125c, 143c) of 28 August 2006 (BGBl. I, p. 2034).
On the principle, BVerfGE 3, 407 (421); further statements on the legislative power by virtue of
ancillary legislative competence in: BVerfGE 8, 143 (149 et seq.); 12, 205 (237 et seq.); 22, 180
(210); 26, 281 (300); 61, 149 (202 et seq.); 97, 228 (251 et seq.); 98, 265 (299 et seq.); 106, 62
(115).
Fundamental, BVerfGE 11, 89 (98 et seq.); further BVerfGE 12, 205 (251 et seq.); 26, 246 (257);
98, 218 (249).
As a typical instance of application the Federal Constitutional Court in what is known as the “first
broadcasting ruling” [BVerfGE 12, 205 (240 et seq.)] viewed the authority of the Federal
Government to regulate certain aspects of the broadcasting system (which lie within the exclusive
responsibility of the Länder) in connection with questions of political party law (federal
responsibility under Art. 21 para. 3 Basic Law) in allocating broadcasting times or in connection
with copyright law, which is also a federal responsibility under Art. 73 para. 1 no. 9 Basic Law.
Further matters for federal administration arise out of Arts 87a, 87b, 87d, 87e, 87f, 88-90, 108 and
120a Basic Law.
29
(1) However, here too – in the enforcement of laws by the Länder – ties and
involvements have become institutionalised between the two levels of government. 27
This is due to the fact that in both types of enforcement of federal laws by the Länder
– i.e. in their own right under Basic Law Art. 83 f. or on federal commission under
Basic Law Art. 85 – the Federal Government can influence the Länder administration
in enforcing federal laws. In the case of enforcement by the Länder in their own right,
this influence is exercised through the Federal Government’s oversight (Basic Law
Art. 84 para. 3) and the other instruments listed in Basic Law Art. 84, while in the
case of enforcement by the Länder on federal commission, the Federal Government
has a right of oversight extending to legality and appropriateness (Basic Law Art. 85
para. 4) and the other instruments under Basic Law Art. 85 (e.g. right to issue
instructions to the Länder, require reports from the Länder, issue general
administrative rules). 28
(2) The Federal Government has made frequent use in the past of this right of
intervention, and specifically of the right to issue guidance with the consent of the
Bundesrat on the administrative procedures of the Länder and the establishment of
their authorities.
The findings of the Commissioner and the Bundesrechnungshof show that the
regulatory effects of the Federal Government’s influence on the administrative work
of the Länder have often failed to have the desired effects in terms of orderly,
efficient, consistent and nationally uniform enforcement of federal laws. Instead, the
involvement of the Federal Government in the administration of the Länder has
repeatedly had adverse effects in practice (e.g. bureaucratisation, intransparency,
inertia, inefficient use of resources and financial losses to the Federal budget). This is
demonstrated by the weaknesses described in the fourth chapter of this study, and also
by many cases from audit practice in recent years, as the following three individual
examples show: 29
•
27
28
29
30
31
In the case of enforcement by the Länder of the Federal Housing Allowance
Act, several Länder determined the allowance, half of which is borne by the
Federal Government 30 without adequate justifications, allowing claims in
situations where housing allowance was not or was no longer paid. The
consequences were not only a financial drain on the federal budget from
unlawful payments, but also nonuniform enforcement of the law. This happened
although the Länder provided administrative services in managing housing
allowances on behalf of the Federal Government 31 , and the Federal Government
Participation by the Länder in federal legislation is intermediated through the Bundesrat (Art. 50
Basic Law).
For details of the supervisory rights, cf. Annex I (section 3.3).
Others are given in the overview of selected individual audit findings of the Bundesrechnungshof
in Annex II (2000-2006).
Under section 34 para. 1 Federal Housing Allowances Act the Federal Government reimburses a
Land for half the housing allowances it pays.
As the Federal Government pays half the expenditure for these purposes (see preceding note), the
Länder execute the law on federal commission under Art. 104a para. 3 sentence 2 Basic Law.
30
had the strongest form of administrative oversight available to it under the Basic
Law. 32
•
In the case of administration of retirement pension contributions, the Länder
paid federal subsidies for sheltered employment for the handicapped without
adequately checking the returns submitted. In 2003, the Bundesrechnungshof
established in its audits that the overwhelming majority of the Länder (14) only
checked the statements for arithmetical accuracy and did not even carry out
random sample tests to see if they were factually correct. At the same time, one
Land which actually checked the reports at 88 workshops discovered
considerable discrepancies. 33
•
The Federal Government has made grants to the Cultural Foundation of the
Länder, which under an agreement in 1987 is responsible for promoting artistic
and cultural projects of national importance in its own right. Although, under the
agreement, the Federal Government was represented on the Board of Trustees, it
involved itself in the technical and material review of the grants, resulting in
unnecessary administrative workload and inefficient duplication of work. 34
(3) In the view of the Commissioner, the administrative practice of the Federal
Government and the Länder shows – despite the fundamentally clear division
between their respective responsibilities – a degree of overlap which frequently fails
to achieve the goals of interconnection, e.g. ensuring uniform, orderly and efficient
enforcement of a federal law in all the Länder, and also has further negative side
effects.
Bearing in mind the principle of the Länder executive power as an element in the
federal separation of powers 35 (both in Basic Law Art. 84 para. 1 and, although to a
lesser extent, in Basic Law Art. 85 para. 1), the legislature in Federalism Reform I
reacted to this by limiting the power of the Federal Government to regulate the
establishment of the Länder authorities and the administrative procedures they are to
follow in a number of ways, in favour of the organisational sovereignty of the
individual Länder. 36
32
33
34
35
36
For the details of the case see 2000 Annual Report of the Bundesrechnungshof, BT-Drs. 14/4226,
no. 51; a similar case is the basis for no. 61 in the 2000 annual report (false settlements by the
Länder at the expense of the Federal Government for war graves maintenance); for details of the
types of administration and the supervisory rights of the Federal Government, see annex I.
Cf. 2006 Annual Report of the Bundesrechnungshof, BT-Drs. 16/3200, no. 17.
Cf. 2000 Annual Report of the Bundesrechnungshof, BT-Drs. 14/4226, no. 5.
The Basic Law attaches special importance to the enforcement of laws by the Länder (in their own
right) within the federal system of powers and as a counterweight to the domination of the Federal
Government in legislation, as the constitutional reservation of powers in Art. 83 Basic Law makes
clear; cf. Dittmann, in: Sachs, Grundgesetz, Art. 83, MN 11.
One of the primary goals of the amendment to Art. 84 para. 1 Basic Law was also to reduce the
quota of (federal) legislation requiring consent from up to 60% to around 35-40%, in order to
create more scope for action at the federal level (in legislation) and to accelerate decision making
31
It is the view of the Federal Performance Commissioner that this initial effort
towards eliminating overlaps in the field of administration should be consistently
followed by next steps. 37
2.4.3
Financing
A further line of overlap is due to the weakening of the principle of separation of
functions between the Federal Government and the Länder as a result of the major
financial reforms in 1969. The goal of the reforms was to integrate the tasks already
jointly financed by the Federal Government and the Länder outside the framework of
the Constitution into the system established by the Basic Law, while preserving the
principle of the federal government system. The reforms 38 introduced joint tasks and
financial assistance 39 enabling the Federal Government to participate in the
performance of administrative functions properly belonging to the Länder, and
resulted in breaching – now constitutionally permissible – the principle of separation
of powers and its inherent prohibition of joint administration and cofunding. 40
(1) The Federal Government and the Länder subsequently made extensive use of
these instruments of interconnection. In government practice, however, this resulted
in numerous dysfunctional effects, as stated in detail by the Commissioner, on the
basis of the audit findings of the Bundesrechnungshof, in his 2002 report on financial
relations between the Federal Government and the Länder in cofunding under Basic
Law Art. 91a, 91b and 104a para. 4. 41
The key weaknesses of cofunding, which in practice led to a wide range of forms
of joint administration as a result of the joint planning, coordination and management
work by the Federal Government and the Länder, were, in the view of the
Commissioner:
•
that all the cofunding investigated had resulted in relatively inflexible permanent
cofunding by the Federal Government of the functions of the Länder,
•
that nearly all
37
38
39
40
41
administrative procedures lacked the flexibility to respond
(cf. BT-Drs. 16/813, p. 14 et seq.); the aim was to reduce the increased overlapping in federal
legislation between the Federal Government and the Länder via the Bundesrat.
Cf. the general considerations following section 3 and the individual recommendations in
section 4.
21st Act amending the Basic Law (Financial Reform Act) of 12 May 1969 (BGBl. I, p. 359).
The joint tasks were included in the Basic Law in a new section VIIIa, which covers the individual
joint tasks listed in Art. 91a and the promotion of research in Art. 91b; the Federal Government’s
power to grant financial assistance is regulated in a separate provision in Art. 104a para. 4; Art.
104a para. 3 also creates the possibility for the Federal Government to cofund laws providing
pecuniary benefits.
On the manifestations of cooperation between the Federal Government and the Länder prior to the
constitutional reform, see the preparatory study on financial reform in the Federal Republic of
Germany from 1966 (“Troeger Report”), section 28 et seq.
Series of publications by the Federal Performance Commissioner (“Schriftenreihe”), vol. 9: Report
on financial relations between the Federal Government and the Länder, cofunding under Arts 91a,
91b and Art. 104a para. 4 Basic Law www.bundesrechnungshof.de)
32
appropriately to the different and changing needs,
•
that the allocation of funds by the Federal Government and the division of funds
between the Länder were rigid and not accurately aligned with the purpose for
which they had been appropriated, and
•
that as a result, considerable bureaucratic effort was being invested in what were
ultimately faulty and inefficient incentives.
(2) On cofunding, the Commissioner (in his 2002 report) and subsequently the
Bundesrechnungshof (in its 2005 annual report 42 ) accordingly recommended
abandoning these forms of interconnection and instead ensuring good mission
performance by the Länder in sectors jointly funded by the Federal Government. by
allocating adequate revenue, which also strengthens the autonomy of the Länder.
In the course of the parliamentary deliberations on Federalism Reform I, the
President of the Bundesrechnungshof reaffirmed this position in his capacity as expert
providing testimony at the public hearing on “Finance, budget and economy”. 43
The measures adopted by the legislature in Federalism Reform I 44 embody these
recommendations in important areas. The elimination of “university construction” and
“educational planning” as joint tasks and the termination of the financial assistance
for “local public transport” and “social housing” marked a successful beginning to the
elimination of overlaps, although the legislature excepted individual areas from this
by preserving the joint tasks of improving regional “economic and agrarian
structures” (Basic Law Art. 91a), promotion of “research institutions and projects”
(Basic Law Art. 91b) and financial assistance for promoting “urban development”.
The Federal Performance Commissioner consistently pursues the efforts
undertaken to eliminate overlaps in the remaining areas of cofunding. The guiding
principle should be to enable tasks to be performed in the simplest, most transparent
way possible, free from largely ineffective regulations and unnecessary coordination
and management processes. 45
42
43
44
45
Cf. 2005 Annual Report of the Bundesrechnungshof, BT-Drs. 16/160, no. 3.2.2.
Statement by Prof. Dr. Dieter Engels of 8 May 2006 to the public hearing of the Bundestag’s
Committee on Legal Affairs and the Bundesrat on Federalism Reform, general area “Finance,
Budget and Economy” (www.bundestag.de/parlament/gremien/foederalismus).
Constitutional Amendment Act (Arts 22, 23, 33, 52, 72, 73, 74, 74a, 75, 84, 85, 87c, 91a, 91b, 93,
98, 104a, 104b, 105, 107, 109, 125a, 125b, 125c, 143c) of 28 August 2006 (BGBl. I, p. 2034) and
the Concomitant Act to the Federalism Reform of 5 September 2006 (BGBl. I, p. 2098).
For the details the Federal Performance Commissioner refers to the cited audit findings and
statements; with regard to cofunding by the Federal Government for the public local transport of
the Länder, see below, section 4.2.3.
33
3
MODERNISING FEDERAL ADMINISTRATION BY
ELIMINATING OVERLAPS
3.1
The changing challenges
Any federal government system with two or more levels faces the basic question
of how to divide, limit and – where inevitable - interconnect the responsibilities and
functions of government action. Like any state system or any organisation, federal
government systems are not static structures.
The Federal Republic of Germany of 2007 is no longer the Federal Republic of
Germany created by the founders almost 60 years ago. The key fundamental decisions
by the founders, and specifically the values enshrined in the Basic Law like
democracy, the rule of law, human rights and a federal system of government, have
been retained, and are indeed irrevocable (Basic Law Art. 79 para. 3).
However, there have been fundamental changes in both the external influences
and challenges and the social conditions which the practice of the federal system of
government is required to respond to. The motives of the founding legislators of the
Basic Law were still strongly affected by the idea of basing the federal separation of
powers between the Federal Government and the Länder on a decentralised power
structure which constrained the central power and prevented the development of an
overpowerful level of government. Today, the focus is on the challenges arising
particularly out of Germany’s integration into Europe, its integration into the
international network of a global economy, and the new threats to state, economy and
society. Whereas yesterday the division of responsibilities between the Federal
Government and the Länder may still have been reasonable for efficient and effective
mission performance, today, as in the areas of civil defence and disaster relief for
example, this no longer applies.
3.2
Need for structural modification
To ensure the functionality of the federal government system and sustainably
preserve this for the future, structural modifications are inevitable. The numerous
federal weaknesses described in the following fourth chapter of the study underpin
this conclusion developed in the course of the Bundesrechnungshof’s audit work.
In many areas of government activity, from tax administration to transport
infrastructure and from social and domestic security to culture, youth and protection
of legal rights, it is clear that the outdated division of responsibilities between the
Federal Government and the Länder, their administrative interdependence and their
practice are often no longer adequate for meeting today’s challenges. Based on the
lessons learnt from audit work, the Commissioner has reached the following general
conclusion:
34
The more decision makers (administrators) involved, the greater the input required
for processes of coordination and consultation, and the more rigid and detailed the
regulations to be complied with, make it all the more cumbersome to prepare and
implement measures in the relevant field of administration, until finally the
(presumed) benefits of closer cooperation and interconnection between the Federal
Government and the Länder become nullified or outweighed by the drawbacks. In the
process, the original purpose of interconnection, such as ensuring uniform
administrative practice, is often no longer achieved. In individual instances this may
be due to a weakness in application of the tools available, but often the weaknesses
seem to be systemic.
3.3
Separation as a fundamental principle
Both the Commissioner 46 and the Bundesrechnungshof 47 argued that it would be
necessary in the impending reforms of the relationship between the Federal
Government and the Länder to bring together function, authority and financial
responsibility, i.e. to consolidate these at a single level of government, in order to
avoid inefficient action and strengthen the direct responsibility of the two levels of
government.
The Commissioner continues to hold this view with regard to the impending
further reforms. In his opinion, re-visiting and reflecting on the principles which have
a key influence on the Basic Law, i.e.
• subsidiarity,
• democracy, and
• transparency,
can also suggest valuable criteria for enhancing the specific areas of administration.
3.3.1
The principle of subsidiarity
In the relationship between levels of government, subsidiarity gives the smaller
unit priority over the larger one and forbids the higher level from taking tasks away
from the lower level which the latter can perform with its own resources. 48 In line
with this, Basic Law Art. 30 states the principle of the authority of the Länder and
limits intervention by the Federal Government to the instances exceptionally and
explicitly provided for by the Basic Law. 49
46
47
48
49
Cf. written statement by Prof. Dr. Dieter Engels to the public hearing of the Committee on Legal Affairs of the
Bundestag and Bundesrat in Berlin on 31 May 2006, section 1.3 (www.bundestag.de) and the verbatim record
of the 18th session of the Committee on Legal Affairs of the Bundestag (16th legislative period), 4(B)-5(D).
2005 Annual Report of the Bundesrechnungshof, BT-Drs. 16/160, no. 3.
Cf. Isensee, in: ders./Kirchhof, HStR IV, 1st ed., section 98 MN. 242.
Cf. section 2.3 above.
35
(1) The principle of subsidiarity addresses the question of authority and direct
responsibility of the levels of the government 50 . It obliges each higher level in the
federal structure of government to justify why an (administrative) task cannot be
performed at the lower (decentralised) level. Reassignment to the upper level is only
justified if two basic conditions are met:
•
the goals of the measures under consideration cannot be adequately achieved
at the lower level and
•
the goals can accordingly be achieved better through measures at the higher
level. 51
The principle of subsidiarity sets a limit to intervention by the higher level in the
areas of responsibility of the lower level which can only be crossed in justified
individual instances. Conversely, it secures the direct responsibility of the lower level
by assigning areas of decision making and activity, i.e. areas of autonomy for its own
performance. At the same time, the principle of subsidiarity establishes an obligation
on the lower level of government to perform these activities on its own responsibility
and without instructions and directions from the higher level. As such, subsidiarity
and autonomy are two sides of the same coin.
(2) Apart from the specific provisions dividing authority in Basic Law Arts 30, 70 et
seq., however, no general principle can be derived under which the Basic Law
consistently gives areas of responsibility (measures and decisions) at the lower level
priority over areas at the higher level. 52
In fact, the constitutional legislators never understood the principle of subsidiarity
as a characteristic of the government system. This is immediately apparent from the
system of division of authority between the Federal Government and the Länder in
the Basic Law. 53 In the federal government system laid down in the Basic Law, which
provides for a state with two levels, 54 the Federal Government (as the upper level) is
instead both a member and a guarantor of the whole system. The tasks affecting the
whole are accordingly tasks for the Federal Government.
At the same time, the basic idea inherent in the principle of subsidiarity acts to
secure freedom by allowing stakeholders to participate in decision making. The
smaller the decision making unit, the easier this is to achieve. 55 As a rule, the same
50
51
52
53
54
55
The question of the direct responsibility of the citizens (what is a private responsibility?) as distinct from a state
responsibility (what is a public responsibility?) is deliberately left aside in the present study. The subsidiarity
principle is raised solely in connection with the delimitation between the state levels of the Federal Government
and the Länder.
The European Union has explicitly applied the principle of subsidiarity as an instrument of rational, case-bycase justification for limiting the exercise of authority by the higher level (Art. 5 para. 2 EC Treaty) and has
developed this in detail in no. 5 of Protocol no. 21 to the EU Treaty on the application of the principles of
subsidiarity and proportionality.
Cf. Huber, Klarere Verantwortungsteilung, D 43 et seq.
Cf. section 2.3 above.
Cf. Isensee, in: ders./Kirchhof, HStR IV, 1st ed., section 98 MN. 81 et seq.
Cf. Huber, Klarere Verantwortungsteilung, D 43.
36
applies to the relationship between the Federal Government and the Länder and their
executive interconnection. Subsidiarity can accordingly provide initial orientation and
guidance on the question of how administrative responsibilities could be reassigned in
the individual sectors in the German federal multilevel system, and how unavoidable
interfaces between the levels could be organised to safeguard autonomy.
(3) The principle of subsidiarity forces us to consider whether a concrete task cannot
be just as well performed by the lower level (with less impact on autonomy) than by
the higher level. It brings the lower level into the equation and obliges rationality to
be the guiding principle behind the assignment of tasks. It forbids and avoids reflexes
that assign priority to one or the other level without due consideration and
justification. It also counters interconnections inimical to autonomy which indirectly
call into question yet again an assignment already made which is justifiable and even
justified, for example where an administrative task has initially been assigned to the
lower level as part of its area of autonomy, but at the same time is put back in play by
a seamless net of management, control and supervision by the higher level. The
principle of subsidiarity promotes diversity without hindering unity, and as such can
be seen as the ideal federal rule (unity in diversity).
The principle of subsidiarity and its associated need for areas of autonomy
providing the opportunity for (and risks of) independent performance of tasks,
accordingly require that overlaps between levels be eliminated – wherever possible
and as far as possible – and demand a clear and separate assignment of tasks to these
levels. Depending on the subject at issue, and the goals set by policy and the
(constitutional) legislature, these may be assigned to the lower or upper level. Where
a task is assigned to the lower level, this level should be able to perform the task in a
way which preserves its autonomy as far as possible.
(4) This paradigm of subsidiarity coincides with the actual conclusion reached by the
Commissioner and the Bundesrechnungshof in the investigations and audits.
Based on the experience and results of these audits, where an (administrative) task
is not regarded as “a proper task”, is not paid for with the level’s money (or not
exclusively), and is seen as not performed under external direction rather than
autonomously, i.e. subject to supervision, instruction and control, there is a tendency
towards inefficient behaviour and administration marked by conflicts of interest – in
short, to dysfunctional disincentives between the levels of government.
This is shown by the major areas of administration of taxation and transport
infrastructure (long distance roads), and also by more recent but no less important
areas of interconnection in the field of social security (unemployment benefit II Hartz IV). 56
56
For all three areas cited, cf. the detailed analysis in chapter 4 of this study (section 4.1, 4.2.1 and 4.3.1).
37
Solutions which avoid such constellations of interconnection can, in the view of
the Commissioner, create positive management incentives for the levels of
government responsible, in terms of efficient use of public funds and also of effective
mission performance guided by the actual legislative goals.
3.3.2
The principle of democracy
The principle of democracy is closely associated with the principle of subsidiarity
and its focus on separation, clarity, direct responsibility and autonomy. It is central to
the Basic Law (Art. 20 paras 1, 2 Basic Law), and – like the federal system of
government itself – is under the special protection of the perpetuity clause (Basic Law
Art. 79 para. 3).
(1) This makes the principle of democracy particularly important when it comes to the
issue of modernising the federal system of government and adapting it to changing
environments. 57 The other reform goals, such as strengthening the direct
responsibility of the Länder and local authorities and clear assignment of political
responsibilities, which can be seen as catalysts for deregulation, boosting efficiency
and an overall improvement in the capacity of the Federal Government and the
Länder 58 , are also closely associated with the basic statements of the principle of
democracy and its guidelines.
Democracy is the “free self determination of all citizens”. 59 All government
authority is derived from the people (Basic Law Art. 20 para. 2, sentence 1); it is
exercised by the people through elections and other votes and through specific
legislative, executive and judicial bodies (Basic Law Art. 20 para. 2 sentence 2). The
people is the sole source of legitimacy for all three power of the state; not only
legislation but also enforcement of the law must be subject to democratic legitimation.
(2) This is not the full extent of democracy, which requires more than just the formal
act of legitimation through elections. The principle of democracy also requires that an
elected parliament must have the necessary powers to implement the decisions taken
through the election (by the majority) 60 , not just through formal resolutions (policies
turned into legislation) but in everyday reality, through the enforcement and
administration of the decisions taken. The act of voting is not just a choice by citizens
of a specific programme of policies and personalities: for a given outcome of the
57
58
59
60
These are the basic and overarching goals of the entire process of reforming the relations between the Federal
Government and the Länder from the Federalism Reform Commission (Bundesstaatskommission, 20032004) through Federalism Reform I (2005-2006) to the current Federalism Reform II (2006-2007), as reflected
in the individual Bundestag and Bundesrat resolutions appointing the commissions [on the Federalism Reform
Commission cf. BT-Drs 15/1685 and BR-Drs. 750/03 (resolution); on Federalism Commission II cf. BT-Drs.
16/3885 and BR-Drs. 913/06 (resolution)] and the Coalition Agreement of 11 November 2005 (on Federalism
Commission I).
The actors in the reform process assume this, as shown by the list of reform goals in the resolutions appointing
the commissions (see the preceding note).
BVerfGE 44, 125 (142); 107, 59 (92).
BVerfGE 89, 155 (171 et seq. and 182).
38
election, it is also a vote for implementing the necessary measures in everyday life
(setting standards, enforcement, funding) within the scope of autonomy proper to the
specific level of government (Federal Government or Länder). This is why
developments and interconnections between the levels of government which
complicate or even frustrate the possibilities of implementation from the start, because
one level is unable to modify and shape the realities of life without the other, are a
matter for concern. They involve the risk of making elections and votes “degenerate
into empty rituals” 61 .
(3) In the German federal system of government marked by the lines of
interconnection described above 62 , the assignment of responsibility is complicated by
the wide range of interconnections between the levels of government. This applies not
only to legislation but also in the same way to the various areas of administrative
interconnection in enforcement. 63 The guiding impulses from democratic elections are
muted in an intertwined web of responsibilities. Voters have difficulty in finding out
why their vote – despite a majority in the relevant parliamentary chamber – has not
resulted in the change (or continuation) that they supported, and the implementation
of the political programme and its goals that they voted for. As a result, it is virtually
impossible for them to reconsider their vote rationally in the next act of legitimating
state authority – i.e. the next election – because it is not clear who is responsible for
the success or lack of success of the political programme and individuals they elected.
As a result, voting as an act of democratic legitimation is in danger of losing its
rational dimension and acceptance.
(4) The principle of democracy can accordingly be used to infer an explicit focus on a
clear division of responsibilities between the Federal Government and the Länder.
The principle of democracy requires the elimination of overlaps 64 , not
interconnections. It requires accountability and clear areas of autonomy. It prohibits –
at least in terms of the key conditions for turning the fundamental rights and values of
the Basic Law into reality 65 – recourse to consensual entities 66 enmeshed in both
levels, whose output or lack of output cannot ultimately be attributed clearly to any
party. In this, it opposes an attempt by the actors of state authority – not only
legislators, but also the executive and their administrations – to hide from their own
decisions, which ultimately have to be legitimated by the people in the regular
electoral process.
61
62
63
64
65
66
Cf. Huber, Klarere Verantwortungsteilung, D 34.
Cf. section 2.4 above.
On the lines of interconnection generally, see section 2.4 above, on the specific areas of interconnection see the
following chapter no. 4.
Ruled and decided: Huber, Klarere Verantwortungsteilung, D 40 and D 138.
On the principle of materiality cf. BVerfGE 77, 170 (230 et seq.); 98, 218 (251); 111, 191 (216 et seq.).
These are by their nature informal bodies where representatives of the Federal Government and the Länder
meet in advance of or in place of the instruments actually provided for controlling administrative enforcement
(e.g. general administrative regulations, ordinances or instructions) to achieve agreement on the interpretation
of laws and other questions of application which are significant for administrative practice, cf. also the
individual examples in section 4.1 (tax administration) and section 4.4.4 (atomic energy administration).
39
(5) The audit findings of the Bundesrechnungshof show that interconnection, which is
a fact of administrative reality, often violates this last requirement. For example, in
the field of regulating the atomic sector, it has not been possible, despite years of
effort, to promulgate the binding and current nuclear regulatory code needed to
enforce the Atomic Energy Act. This has been prevented by a flight by the Federal
Government into consensual committees with the Länder and a simultaneous refusal
of these to reach a consensus. The question of responsibility for this weakness, with
its relevance for security, accordingly remains unclear in a regulation of the atomic
energy sector characterised by the interconnection of the Federal Government and the
Länder. 67
3.3.3
The need for transparency
The need for transparency and clear delimitation of responsibilities is closely
related to the above principles of subsidiarity and democracy. Transparency and
responsibility are the keys to sensible action by those at the relevant levels of
government. Responsibility is a condition and consequence of the freedom to decide
our own affairs.
(1) Based on the audit findings of the Bundesrechnungshof, the Commissioner
believes that clearly defined, clearly recognisable and full responsibility is the best
basis for management. It creates incentives for state action which is effective,
efficient, resource-conserving and legitimate.
In the view of the Commissioner, the basic requirements for transparent
responsibility are:
• unity of responsibility and mission performance,
• clear and undivided assignment of responsibility, and
• easy identification of those responsible.
In the field of administration, this means that the administrative responsibility of
the territorial entity involved should be undivided. Horizontal or vertical influence
should be excluded as far as possible. As a matter of principle, administrative tasks
are performed where they arise, and interfaces are avoided.
(2) By their nature, administrative services provided by the Länder on behalf of the
Federal Government 68 fail to meet these requirements in many ways. These provide
for extensive “rights of intervention” 69 by the Federal Government with respect to the
Länder. Responsibility for the issue itself and for performance is divided between the
Federal Government and the Länder. Expenditure is also divided, with the Federal
Government responsible partly or wholly for the expenditure for specific purposes,
67
68
69
For details, see section 4.4.4 below.
For details see annex I (section 3).
The German term “Ingerenzrechte” is derived from the Latin “ingerere”, to intervene in a (foreign) area.
40
while the Länder finance the administration. 70 As the Länder are forced to respect
interests of the Federal Government which to some extent conflict with their own
concerns, they are naturally limited in the extent to which they are good custodians of
federal interests and need close supervision as trustees for the Federal Government’s
expenditure and revenue. 71 This requires considerable investment in control and
management, which in turn creates inefficient bureaucratic structures. As a result,
many administrative areas (e.g. taxation, trunk roads, atomic energy, social affairs)
are characterised by an impenetrable diversity of Federal Government-Länder
committees for coordinating administrative implementation 72 , individual instructions
and numerous disputes over their admissibility, and a wealth of directives, manuals
and administrative regulations which are formulated in a time-consuming consensual
process involving high personnel inputs on both sides (Federal Government and
Länder).
(3) At the same time the control and coordination structures often fail to achieve the
desired results, as the audit findings of the Bundesrechnungshof have repeatedly
shown. Based on the audit experience of the Bundesrechnungshof, the idea that the
Federal Government can use the supervisory instruments to exercise even roughly
effective control over all the administrative areas of the Länder involved in enforcing
federal laws is mistaken. The Federal Government lacks the resources for this, and the
legal instruments themselves are not designed for broadly based control. For example,
while the Federal Government has a right to issue instructions to a Land providing
administrative services on its behalf, this is limited to the individual instance (Basic
Law Art. 85 para. 3 sentence 1). 73 General administrative regulations require the
consent of the Bundesrat (Basic Law Art. 85 para. 2 sentence 1 and Art. 84 para. 2),
both where the Länder are providing a service on behalf of the Federal Government
and where they are doing so in their own right; here again, the picture is one of
interconnection of administrative levels 74 which, at the least, considerably
complicates any clear assignment or responsibility in practice, as the example of
regulating the atomic sector cited above (section 3.3.2) shows.
70
71
72
73
74
This goes even further in the administration of basic benefits and placement services for job seekers
(unemployment benefit II - Hartz IV), where the Federal Government also bears the costs of administration, for
detail see section 4.3.1 below.
For the rationale of this effect see the explanatory model of agency theory in annex IV.
For tax administration alone the Federal Ministry of Finance currently estimates some 50 committees of the
Federal Government and the Länder; for details on the audit findings in the area of tax administration, see
section 4.1 below.
Even so a practice has emerged, e.g. in the area of tax administration (section 4.1.1) under which instructions
are issued for a large number of individual cases. However, the constitutional admissibility of the “general
instruction” as a supervisory tool of the Federal Government for administrative services provided by the
Länder is disputed, and no final ruling has been given on this to date, cf. annex I (section 3.3.2).
Although the Bundesrat is a federal organ, the Länder participate through it in the “administration of the
federation” (Art. 50 Basic Law), where the promulgation of general administrative regulations is concerned.
41
3.4
Guideline
On the basis of the above and in the framework of the impending second stage of
Federalism Reform, the Commissioner maintains his previous position that tasks,
authority and financial responsibility need to be consolidated more at a single level,
and that this should serve as a guiding principle in modernising relations between the
Federal Government and the Länder in the field of administration.
Based on his audit experience and the audit findings of the Bundesrechnungshof,
this is a suitable approach to avoiding inefficient action and strengthening the direct
responsibility of the state levels in the Federal Government and the Länder.
The requirement of eliminating overlaps by separating responsibilities is rooted in
the fundamental principles of the Basic Law (subsidiarity, democracy and
transparency) and establishes the right management incentives by promoting the
effectiveness and efficiency of state action at the various levels.
The Commissioner is aware that the principle of delimitation cannot always be
achieved in every instance or in its pure form in constitutional reality and state
practice. Ultimately, the system of functional separation on which the federal system
of government in the Basic Law is based always involves points of contact between
the levels of government; this is an intrinsic property of the system. A model of
vertical delimitation in which the level having substantive legislative power also
finances the issues it is regulating with its own funds and administers them through its
own authorities and institutions (dual federalism) is the only ideal form offering the
possibility of largely avoiding interfaces. 75 However, German federalism was never
conceived as dual federalism in this form at any time, and always – necessarily – had
elements of interconnection.
This does not, however, rule out the possibility of eliminating the dysfunctional
effects which have evolved in the executive interfaces between the Federal
Government and the Länder in many areas over the years and decades, and of
following a paradigm of clear assignment of responsibilities to reduce to the minimum
possible the number and degree of interconnections in these pockets of inefficient
action.
It is this federal framework that the Commissioner follows in the options for
eliminating overlaps in the various administrative areas described in the following
chapter.
75
The concept of dual federalism has its origin in US constitutional law, where it was the dominant doctrine until
the New Deal in 1937. In its pure form, however, it is seen even in the USA, its country of origin, as failed
(cf. Kramer, Weiler in: Schneider, Wessels, Föderale Union – Europas Zukunft?, pp. 145 et seq.). For an
international comparison of the various expressions of federalism, see annex III.
42
4
WEAKNESSES OF ADMINISTRATIVE
FEDERALISM IN AUDIT PRACTICE
4.1
Taxes
Core statement
The present division of authority under the Basic Law provides for the federal tax
laws to be essentially executed by the Länder. This has resulted in significant
weaknesses in fiscal administration.
•
The constitutional rules governing public finances mean that the Länder, as
the executive level, do not have an adequate direct interest in collecting taxes
in a full and timely manner. This has an adverse effect on the state’s revenue
base.
•
The tax laws are not uniformly applied to citizens and businesses.
Consequently, equity in taxation is not ensured.
•
Bureaucratic liaison structures have evolved between the Federal Government
and the Länder. These involve inefficient coordination efforts and do not
result in effective management of the tax administration.
•
Federalism in the tax sector hampers the introduction of modern IT systems
and cooperation within the European Union.
In the framework of Federalism Reform I, the Federal Government’s possibilities
to intervene were strengthened exclusively in legislative terms, in order to improve
the functionality of the system. While these measures are a step in the right direction,
they will probably not be sufficient to create an effective structure of fiscal
administration.
The Commissioner accordingly recommends a fundamental change of system for
Federalism Reform II. The Basic Law should be amended to create a federal tax
administration. This promises a return in efficiency and is more suitable for collecting
taxes throughout Germany, in full, using the same criteria and without regional
influences.
4.1.1
Division of tasks under the present constitutional rules
In its work on the Basic Law, the Parliamentary Council originally planned a
federal fiscal administration. However, it was unable to overcome the objections of
the Military Governors of the time, who wanted a stronger federal system. 76 The
Parliamentary Council then chose a middle way, leading to the present constitutional
rules for public finance.
76
On the evolution of the German constitutional rules, cf. the report of the Academic Advisory Council at the
Federal Ministry of Economics and Labour of 8 July 2005 “Zur finanziellen Stabilität des deutschen
Föderalstaates”, section I.4.
43
Under these rules the Federal Government has concurrent responsibility for tax
legislation (with the exception of local taxes on consumption and expenditure).
The revenue from specific taxes goes to either the Federal Government alone, to
the Länder alone, or to the local authorities alone. The revenue from the so-called
common taxes (income tax, corporation tax, VAT) goes to the Federal Government
and Länder, and in part also to local authorities.
Basic Law Art. 108 para. 1 provides for administration by the federal revenue
authorities of taxes on consumption regulated by a federal law, including VAT on
imports. Other taxes are administered by the revenue authorities of the Länder. If the
taxes accrue wholly or partly to the Federal Government, Basic Law Art. 108 para. 3
provides for the revenue authorities of the Länder to act on federal commission, i.e.
the Federal Government has oversight of the legality and appropriateness of the
administrative action. 77 Under Basic Law Art. 108 para. 7, the Federal Government
can also issue general administrative rules with the consent of the Bundesrat.
For the common taxes generating substantial revenue (income and corporation
tax, VAT), this leads to the following interconnection:
77
78
79
80
•
The Federal Government passes tax acts with the consent of the Bundesrat.
These are executed by the Länder, although they only receive part of the
revenue from the taxes.
•
The Federal Government can issue general administrative rules only with the
consent of the Bundesrat. The Federal Government can also issue individual
instructions within the framework of Länder activities performed on federal
commission. How far the Federal Government can issue general instructions
which cover a large number of cases is a matter of dispute between the Federal
Government and the Länder. 78 In 1970, the Federal Government and the
Länder reached an agreement (Staatssekretärsvereinbarung) under which the
Federal Ministry of Finance (Federal Ministry) can issue general instructions
in the form of letters to the finance ministers of the Länder, if it has previously
given the Länder a hearing and the majority of the Länder have no objection.
The Act accompanying the Federalism Reform of 5 September 2006 has
embodied this in legislation. 79
•
The structure and staffing of the Land fiscal authority are a matter for the
Länder, which also bear the costs. This also applies for the most part to the
organisation of procedures. 80
On the types of administration under the Basic Law generally, cf. section 2.3 and annex I.
For the general state of the dispute, cf. annex I (section 3.3.2).
For details of the results of Federalism Reform I for the tax sector, cf. section 4.1.8.
However, the Concomitant Act to the Federalism Reform provides for the possibility for the Federal
Government to establish uniform administrative principles and common implementation goals, unless a
majority of Länder object. For details, see section 4.1.8.
44
4.1.2
Interconnecting structures between the administrative levels
In the case of income and corporation tax and VAT, administration by the Länder
on behalf of the Federal Government necessitates cooperation between the Federal
Government and the Länder and between the Länder themselves.
Because of the complexity of tax law and the rapid flow of amendments,
interconnection in the tax sector in particular leads to inefficient bureaucratic
coordinating structures. 81
Uniform practice throughout Germany (e.g. in directives, manuals and
administrative rules) has to be agreed in a time consuming manner involving
considerable personnel input. Since 1998, the Federal Ministry of Finance (BMF) has
issued 1,276 new “BMF letters”. These letters try essentially to ensure uniform
interpretation of the tax acts. In 2006, 4,427 such letters were in force.
A large number of committees of the Federal Government and Länder are
responsible for this coordination process. The Federal Ministry itself estimated in
2004 that around 50 such committees exist.
Tax administration is accordingly characterised by consensual committees linking
the levels. This structure conflicts with the principle of democracy, as the decisions
on interpretation, which are particularly important in tax law, cannot be clearly
assigned to either level of government. 82
The following sections further show that the practice of tax administration reveals
virtually all the disadvantages of interconnecting responsibilities which are generally
used to justify the Basic Law’s principle of the division of authority. 83
4.1.3
Interconnecting structures have inadequate controlling effect
According to the audit findings of the Bundesrechnungshof, the elaborate
structures of coordination between the Federal Government and the Länder result in
inadequate controlling.
(1) In several instances, the Federal Government is not able to assert its interpretation
of federal tax regulations, as it cannot always prevail in the coordination committees.
This is shown by an example from VAT law. There, the Federal Ministry argued
that services for a fee provided to each other by legal entities under public law are
subject to VAT. This is correct, as any other treatment puts private competitors at a
disadvantage and is incompatible with the law of the European Union. However, the
Heads of Division (tax) of the supreme fiscal authorities of the Federal Government
81
82
83
In the field of administrative services on federal commission, the high level of coordination at both federal and
Länder level is a typical consequence of interconnection, cf. section 3.3.3 (2).
On the importance of clear assignment of administrative responsibility for the principle of democracy, see
section 3.3.2 (4).
Cf. section 3.3 on the general reasons underlying the principle of separation in the Basic Law.
45
and the Länder decided, with the votes of the Länder, to allocate such services to the
sovereign sector, which is not subject to tax. The Federal Ministry sees no possibility
of having this decision annulled against the majority of the Länder. 84
(2) The functionality of the system is also impaired because the Länder do not follow
the decisions of the consensual committees in individual cases.
This is shown by the example of exemption orders for capital gains. Taxpayers
have been able to file such exemption orders with the banks since 1993 in the amount
of the tax allowance on savings (“Sparer-Freibetrag”) and flat rate tax allowance for
income-related expenses ("Werbungskosten-Pauschbetrag”). To avoid abuse, the
banks send control notices to the Federal Central Tax Office. This in turn forwards
control notices to the Länder if the capital gains paid free of tax exceeds the
allowances. The Bundesrechnungshof has established that five Länder have deviated
from the decisions of the Tax Code Heads of Section on evaluating these notices.
These Länder have introduced different limits which, in some cases, raise the levels
below which notices are treated as negligible or as not to be acted upon. In this way,
cases for review are reduced by up to 80%. 85
4.1.4
Interconnecting structures do not ensure uniform law enforcement
The existing interlocking structures between the Federal Government and the
Länder do not result in adequately uniform law enforcement, as the following
examples from the Bundesrechnungshof’ audit practice show.
(1) Before a contract award for a defence project, a local tax office in north
Germany and another in south Germany issued binding statements to the competing
companies containing different information on VAT treatment of the same situation.
This led to a violation of equity of taxation, distortions of competition and loss of
taxes amounting to around 47 million Euro. 86
(2) Numerous agricultural and forestry businesses do not file tax statements and
statements of taxable profit, although they are required to do so by law. The tax
offices do not enforce these obligations uniformly and estimate profits. The
Bundesrechnungshof has established that the fiscal administrations of the Länder
apply varying estimating procedures for this purpose, and record actual income in an
inadequate and unequal manner. 87
(3) After the introduction of a withholding tax and an advance levy on interest
income, taxpayers used German banks to invest money and securities abroad,
84
85
86
87
2002 Annual Report, Bundesrechnungshof, BT-Drs. 15/60, no. 77, 2007 Annual Report,
Bundesrechnungshof (publication: 22 November 2007).
2007 Annual Report, Bundesrechnungshof (publication: 22 November 2007).
2002 Annual Report, Bundesrechnungshof, BT-Drs. 15/60, no. 76.
2007 Annual Report, Bundesrechnungshof (publication: 22 November 2007).
46
removing the income from the reach of the German tax authorities. However, the
Bundesrechnungshof established that when these cases were discovered by the Land
fiscal criminal investigation offices, they were treated in entirely differently ways. 88
4.1.5
Interlocking structures hamper modernisation efforts
The constant evolution of information technology (IT) and advancing
globalisation pose special challenges for tax administration.
According to the audit findings of the Bundesrechnungshof, the existing structures
make it difficult to respond to these challenges in a timely manner.
(1) The complexity of the tax acts and the limited resources of the tax
administrations require the use of risk management systems to enable IT-based
identification of those cases of assessment which are high-risk and accordingly merit
audit. 89 However, the federal structure complicates the development and use of
national risk management systems. Several Länder, for example, have already
developed their own different systems that are already in use in some cases.
Moreover, there is a danger that the Länder will base their systems on the available
personnel rather than on the potential risk of the tax cases.
(2) The Bundesrechnungshof has been pressing for years to standardise the IT
processes in the Länder, so as to make tax administration more efficient. 90 The Heads
of the Organisation Section in the tax administrations also called, in 2001, for the
modernisation and standardisation of the taxation process. For example, they tried to
introduce a self-assessment procedure for all assessed taxes and to speed up
implementation of the FISCUS 91 project for establishing a nationwide uniform data
processing system. The problems of implementing this system within existing
structures were made clear when FISCUS finally failed in 2005, after 13 years of
efforts by the Federal Government and the Länder and almost 400 million Euro in
costs. Convinced of the need for nationally standardised software, the Federal
Government and the Länder are now making another attempt with the KONSENS 92
project.
(3) Since the introduction of the European Single Market, intra-Community VAT
fraud by internationally active criminal associations has been an ongoing problem.
Improved exchange of data between the various EU member states is aiming to
counter this. However, according to the audit findings of the Bundesrechnungshof,
perpetrators benefit in Germany from the fact that VAT monitoring and fighting VAT
88
89
90
91
92
2004 Annual Report, Bundesrechnungshof, BT-Drs. 15/4200, no. 34.
The cases not meriting review are then assessed as declared by the taxpayer.
2000 Annual Report, Bundesrechnungshof, BT-Drs. 14/4226, no. 66.
FISCUS = Federal integrated standardised computer-assisted steering system.
KONSENS = Coordinated software development within the fiscal administration.
47
fraud is the responsibility of the Länder. 93 Furthermore, one single Land on its own
lacks the necessary potential to carry out such investigations and does not possess the
knowledge necessary to undertake successful action against internationally active
criminal associations. The Federal Government itself has a coordinating function in
this sector 94 but no power to issue instructions. 95 Annual tax losses in the billions as a
result of intra-Community VAT fraud can only be countered in cooperation with the
other EU member states by nationally coordinated and implemented measures.
4.1.6
Interconnecting structures create negative management incentives
(1) A clear delimitation of responsibilities creates positive management incentives
if the responsible level of government handles the administrative tasks with its own
funds. 96 In contrast, interconnecting structures create dysfunctional disincentives not
only in providing state services but also in collecting revenue.
These drawbacks are visible appear in tax administration from the fact that the
own interests of the Länder adversely affect their readiness to cooperate.
The own interests of the Länder are determined
• by the nature of the current financial equalisation mechanism, which motivates
both donor and recipient Länder to spare their own tax base,
• by efforts to promote the Land’s own economy through taxation,
• by the obligation by the Länder to provide personnel and material inputs to
perform tax administration on behalf of the Federal Government.
Because of the effects of the financial equalisation mechanism, the Federal
Ministry cannot rely on adequate motivation on the part of the Länder to tap sources
of taxation to the maximum possible. The Federal Government only has limited
supervisory rights over the Länder in the fields of organisation, including IT,
personnel and budget.
The adverse consequences of these disincentives for the state’s revenue base are
demonstrated by the following audit findings of the Bundesrechnungshof.
(2) In one Land where tax revenues in 2006 could only cover less than half of its
total expenditure and which received several hundred million Euro through the
financial equalisation mechanism – even without supplementary federal grants – the
tax administration was instructed to favour “aspects of improved business and citizen
93
94
95
96
For example, in a joint audit with the Czech Court of Audit the Bundesrechnungshof established that, because
of divided responsibility, the German procedure was inferior to the Czech system in quality and speed of data
for the VAT information sharing system.
The Federal Central Office coordinates VAT audits by the Land tax authorities in cross-border and
supranational cases (section 5 para. 1 no. 15 FVG).
In the Netherlands it took the introduction of a coordination function with right to issue instructions to the Tax
Information and Criminal Investigation Service (FIOD) to combat VAT fraud effectively.
The positive incentives associated with the direct interests of the level of government in question, accordingly
also provide an economic argument for the principle of separation underlying the Basic Law, cf. section 3.3.1
(4).
48
orientation”. These provide for “appropriate law enforcement” which has “no place
for a purely fiscal view in assessing and collecting taxes”. The administration was
also required to follow an “extensive waiver of vouchers and unnecessary controls”.
The business groups affected were notified of these “aspects”. To counter any
concern, the Land finance ministry told the staff of the tax administration in a letter:
“As long as decisions are appropriate and well founded, there is no reason for the
widespread concern that the tax official would commit an obstruction of justice, or
similar”.
(3) Auditing of individuals with significant income in excess of 0.5 million Euro is
also inadequate. Under a national ordinance, such individuals should be regularly
subjected to an external audit by the tax offices. Where external audits were carried
out, these resulted on average in additional revenue of 135,000 Euro. Nevertheless,
the federal average audit ratio was only 15%. In five of the Länder investigated by the
Bundesrechnungshof in 2004, it varied between 10% and 60%. The external audits
were also delayed because taxpayers did not submit any vouchers. The period
involved ranged from a few days to several months. In this situation, one tax office
refused to carry out any further audits of such individuals because they made the audit
statistics look bad. The wide difference in audits meant that in one Land the majority
of such individuals are audited while in another they are likely to be subjected to an
external audit once every 30 years, statistically speaking. 97
(4)
The interests of the Länder also contribute to the ineffectiveness of special
VAT audits, which the Bundesrechnungshof has criticised since 1998. 98 Besides a
lack of support with IT and inadequate exchange of information, the lack of
commitment by the Land administrations is apparent in the low national audit quota,
averaging just 2%. Businesses registered for VAT are subjected to a VAT special
audit on average once every 50 years. The audit ratio varies from one Land to another,
and in 2004 ranged from around 3.5% in Saxony-Anhalt to around 1.3% in Bavaria
and 1.35% in Hesse. 99 In recent years the Federal Ministry has repeatedly reminded
the Conference of Finance Ministers of the need to increase the audit ratio for VAT
special audits. Despite this, there has been no increase to date.
(5) The disincentives in the system are particularly apparent in the staffing of the
Land tax administrations. The Bundesrechnungshof has established the number of
cases handled by each officer in 21 tax offices. There was wide variation in the
workload, particularly concerning assessments of employees, ranging from 972 cases
to 2,720 cases a year. Even taking specific organisational features into account, these
differences are substantial. To escape from the pressure of the statistics, individual tax
offices have adopted the practice of declaring “Green Weeks” or “Free Pass Days”.
Internal lower limits or a superficial review are used to “clear” assessment arrears.
97
98
99
2006 Annual Report, Bundesrechnungshof, BT-Drs. 16/3200, no. 57.
1998 Annual Report, Bundesrechnungshof, BT-Drs. 14/29, no. 79.
2006 Annual Report, Bundesrechnungshof, BT-Drs. 16/3200, no. 49.
49
This cannot be reconciled with the obligation to assess taxes equitably in accordance
with the laws.
4.1.7
A model for a federal tax administration
(1) The highly developed interconnection between the Federal Government and the
Länder results in unclear responsibilities in the field of taxation and intransparent
coordination processes; it does not satisfy the principle of democracy in the Basic
Law. Overall, the audit findings of the Bundesrechnungshof support the conclusion
that the existing structures have an adverse effect on full and timely collection of tax
revenues and the uniformity and equity of taxation throughout Germany. 100
It is accordingly necessary to eliminate the overlaps. Under the principle of
subsidiarity this can be done by transferring the activity to the higher level of
government, if the goals of state activity cannot be adequately achieved through
measures at the lower level and are better achieved by consolidating the functions at
the higher level. 101
The audit findings presented above show that the existing responsibility of the
Länder is not leading to satisfactory mission performance.
• Despite an extensive coordination and control effort, it is not possible to
manage tax administration in Germany in accordance with its goals or to
ensure uniform enforcement of the laws. 102
• Having responsibility in the hands of Länder creates incentives for incomplete
tax collection. The fragmented structure of the fiscal administration also
hampers efforts to modernise administration and complicates cooperation
within the European Union. 103
To eliminate overlaps by focusing on the Länder is accordingly out of the
question. Instead, the audit findings suggest that the task could be better performed at
the level of the Federal Government. The Bundesrechnungshof accordingly
recommended in 2000 the elimination of the current interconnection and the creation
of a federal tax administration.
(2) The Commissioner recently conducted an extensive examination of the legal and
practical problems of tax enforcement in his study entitled “Problems in enforcing the
tax laws” 104 , with specific regard to their causes in the federal system. In the study he
called for administrative responsibility for common taxes to be transferred from the
Länder to the Federal Government through an amendment to the Basic Law.
(3)
100
101
102
103
104
This opinion accords with the position of the Federal Ministry of Finance. The
2005 Annual Report, Bundesrechnungsho, BT-Drs. 16/160, no. 3.2.1.
Cf. section 3.3.1 (1)
Cf. section 4.1.3, 4.1.4
Cf. section 4.1.5, 4.1.6
Series of publications by the Commissioner, vol. 13: Probleme beim Vollzug der Steuergesetze
(www.bundesrechnungshof.de).
50
ministry had already stated in a position paper of 11 May 2004 that tax federalism in
Germany was an obstacle to tax administration, creating frictional losses with
significant financial consequences.
The Federal Ministry’s diagnosis of the status quo agrees extensively with the
audit findings of the Bundesrechnungshof. Among other things, for example, the
Federal Ministry notes:
• Fragmentation into 16 independent tax administrations means differences in
enforcement, and that personnel assignment, technical equipment, audit
frequency and focus all vary between the Länder.
• The German tax administration shows efficiency deficits due to the special
interests and focus of the Länder administrations.
• There is a danger that the Länder will neglect enforcement of the tax acts due
to their lack of direct financial interest. The financial equalisation mechanism
distorts the interest of the Länder in tax revenue, accordingly creating a
temptation for them to regulate the intensity of tax collection in line with
dubious local political interests.
• The incompatibility of the data systems complicates exchange of information
between the Länder and the Federal Government, and bolsters large-scale
VAT fraud.
• The existing constitutional regulations on the financial system complicate
flexible and consistent negotiations by Germany within the European Union.
4.1.8
Results of Federalism Reform I for the tax sector
The Act Amending the Basic Law 105 does not include any structural changes in
the field of tax administration. Federalism Reform I leaves tax administration to be
performed by the Länder on federal commission. However, the Concomitant Act to
the Federalism Reform provides for amendments to the Fiscal Administration Act
(“Finanzverwaltungsgesetz”, FVG) that are intended to strengthen the Federal
Government’s rights in tax administration by the Länder. 106
Under this, the tasks of the Federal Central Tax Office will include:
• issuing binding notification on the tax treatment of exactly defined but not yet
realised facts and circumstances, 107
• assisting the Land fiscal authority in preventing and investigating tax crimes
of cross-border, international or major importance and with charges of tax
crimes, 108
• collaborating on external audits by Land fiscal authorities. 109
105
106
107
108
109
Constitutional Amendment Act (Arts 22, 23, 33, 52, 72, 73, 74, 74a, 75, 84, 85, 87c, 91a, 91b, 93, 98, 104a,
104b, 105, 107, 109, 125a, 125b, 125c, 143c) of 28 August 2006 (BGBl. I, p. 2034).
Art. 12 of the Concomitant Act to the Federalism Reform of 5 September 2006 (BGBl. I pp. 2098, 2101).
Section 5 para. 1 no. 27 FVG in combination with section 89 para. 2 sentence 3 AO.
Section 5 para. 1 no. 28 FVG in combination with section 116 para. 1 AO.
Section 19 para. 1 FVG.
51
The Federal Ministry can
• direct the nationally uniform use of a specific data processing program, unless
a majority of the Länder object (in the event of such a directive being issued,
the Länder are obliged to create the technical and organisational conditions for
use 110 );
• with the consent of the supreme fiscal authorities of the Länder, establish
common administrative principles, common goals of enforcement and
regulations on the cooperation between the federal and the Länder fiscal
authorities and issue general technical instructions (consent is deemed to have
been given unless a majority of the Länder object 111 ).
The Commissioner regards the measures in the Concomitant Act to the Federalism
Reform as a step in the right direction. It is too early for any audit findings on the new
responsibilities and instruments. However, based on experience to date with the
interconnecting structures, it is not to be expected that merely legislative measures
will adequately and finally eliminate the weaknesses identified in the enforcement of
the tax acts. The Federal Government still remains dependent on the cooperation of
the Länder.
For example, the Federal Government is dependent on voluntary cooperation by
the Länder in the case of national uniform use of data processing programs,
particularly if a majority of the Länder object to an instruction given by the Federal
Ministry.
The same applies to the possibility created for the Federal Ministry to establish
uniform administrative principles, common goals for enforcement and regulations for
cooperation between the Federal Government and Länder, and to issue general
technical instructions. Here again, the Federal Government is ultimately unable to
prevail if a majority of the Länder object to the proposed measures of the Federal
Ministry. In other respects, the proposed amendments are unlikely to solve the general
problems, e.g. the labour-intensive coordination of directives, manuals and
administrative rules.
4.1.9
Study by Kienbaum consultants
In a study of December 2006 the consulting firm Kienbaum, in cooperation with
the University of Bochum, calculated the efficiency gains possible with various
models for reforming tax administration. 112 Efficiency gains are not synonymous here
with administrative cost savings, and take into account particularly the improved
110
111
112
Section 20 para. 1 sentences 2, 3 FVG.
Section 21a para. 1 FVG.
Kienbaum Management Consultants GmbH in cooperation with the Department of Tax Law at the University
of Bochum (Prof. Dr. Roman Seer and Dr. Klaus-Dieter Drüen): Quantifizierung der im Falle einer
Bundessteuerverwaltung bzw. einer verbesserten Kooperation, Koordination und Organisation der
Länderverwaltungen zu erwartenden Effizienzgewinne, Berlin, 28 December 2006.
52
recording of tax revenues The authors of the study presented and compared four
different models:
(1)
Optimised Länder model (improved cooperation)
In this model, tax administration performed by the Länder on federal commission
is retained. However, some legislative amendments would be necessary to implement
the model. Cooperation between the Länder and coordination with the Federal
Government would have to be strengthened. This would include specifically the
national introduction of reform projects by individual Länder (new strategy for onsite
audits of businesses, performance comparisons between tax offices, core key ratios,
risk management procedures in tax assessment, IT projects) and the improvements
already introduced in the Tax Administration Act by the Concomitant Act to the
Federalism Reform.
For this model the experts anticipated a return of 5.8 billion Euro per year for the
long term. 113
(2)
Federal Government and Länder model
This model would also retain tax enforcement by the Länder. However, there
would be transfers of responsibilities from the Länder to the Federal Government. In
many areas, for example, responsibility for decisions and implementation would be
transferred. The Federal Government would have power to issue instructions without
the right of objection by the Länder, and would take over major and group onsite
audits of businesses (particularly in cases of foreign investment). In addition the
Federal Government would be responsible for the computer centres (including
hardware and software) and training and upgrading.
This model is expected to produce a return of 8.4 billion Euro per year for the
long term.
(3)
Federal tax administration of common taxes
This model provides for administration of common taxes (income tax, corporation
tax, VAT) by a federal tax administration.114 The Land taxes115 would continue to be
the responsibility of the Länder.
A financial return of 11.4 billion Euro per year was calculated for this model for
the long term.
113
114
115
The experts do not distinguish between the individual levels of government for the possible financial benefits.
All models accordingly show only the total gain in efficiency for the Federal Government and the Länder.
A federal tax administration would also be responsible for the insurance tax, which under Art. 106 para. 1 no. 4
Basic Law belongs solely to the Federal Government.
Land taxes are trade tax, real estate tax, vehicle tax, real estate transfer tax, inheritance and gift tax, betting tax
and lottery tax, casino duty and fire insurance tax.
53
(4)
Federal tax administration of common taxes and Land taxes
In this model, the Federal Government is responsible for administering not only
the common taxes but also those Land taxes which are uniform throughout
Germany. 116 This would unite legislative authority and administrative responsibility.
The right to revenue from tax would continue to differ, but the tables would be turned
(meaning that the Federal Government would have administrative responsibility for
some types of tax but would not have the right to the revenue).
For this model, the authors calculated annual efficiency gains of 11.5 billion Euro
per year for the long term.
4.1.10
Options for eliminating overlaps
(1) Ultimately, not only the structural principles of the Constitution and practical
experience with the federal system, but also the financial benefits to be expected
according to the authors of the study argue in favour of establishing a federal tax
administration. The Commissioner accordingly stands by this proposal. The Federal
Ministry also emphasised again in 2007 that it had not abandoned the goal of a federal
tax administration. 117
The Commissioner is aware that such a reform is not easy to implement.
However, the factual arguments for this “grand solution” are so weighty that it should
be included as a serious option in the further deliberations on reorganising the federal
system.
As the material and personnel costs, including pension commitments for a federal
tax administration, would have to be borne by the Federal Government, it would be
necessary to redistribute tax revenues between the Federal Government, Länder and
local authorities. 118 To minimise the financial risk to the federal budget, this
redistribution could consider distributing tax revenues between the Federal
Government, the Länder and local authorities only after deduction of the material and
personnel costs of the administration.
A federal tax administration would be better able to ensure that taxes in Germany
are assessed according to uniform criteria and without regional influences. However,
merely transferring administrative responsibility to the Federal Government is not
enough to optimise administrative procedures. On assuming this responsibility, the
Federal Ministry would have to make extensive organisational changes. Specifically,
it would be necessary to create uniform national organisational structures in the tax
offices, which is something the Länder have so far felt unable to do. In addition,
116
117
118
Under this model, the federal tax administration would again be responsible for the insurance tax.
Cf. reply of the Federal Government to the minor interpellation “Bundesverantwortung für den Steuervollzug”
BT-Drs. 16/4302, p. 2.
The Länder employed a total of about 114,000 staff in 2005 at the highest tax authorities, the regional tax
offices and the local tax offices. The clear majority of staff were assigned to collect common taxes.
54
supporting 574 tax offices nationwide would require corresponding increases in
staffing in the Federal Ministry and the Federal Central Tax Office.
(2) If a federal tax administration is created, a point for clarification is whether this
should also collect Land taxes, or whether the Länder should administer these taxes in
their own right.
The Kienbaum study calculated an almost identical efficiency return for both
models. 119 Generally, there are arguments for and against both approaches.
• Limiting the federal tax administration to the area of common and federal
taxes would more clearly separate the administrative relations between the
Federal Government and the Länder. It is not clear that the Federal
Government could collect the Land taxes better. The principle of subsidiarity
accordingly favours leaving this task with the Länder.
• However, a separate tax administration for the Federal Government and the
Länder would have disadvantages to taxpayers as two tax administrations
would be responsible for enforcement.
The federal structural principles of the Basic Law favour the Länder
collecting Land taxes themselves. The Commissioner accordingly believes
this model is preferable, provided that practical administrative measures can
limit the additional effort to the taxpayer.
(3) If the creation of a federal tax administration proves infeasible, further changes
are required within the system of administration performed by the Länder on federal
commission. The position of the Federal Government vis-à-vis the Länder should be
strengthened in addition to the present new provisions of the Concomitant Act to the
Federalism Reform. 120 The Kienbaum study describes such an approach as a Federal
Government and Länder model. 121 A necessary core element is a right of instruction
by the Federal Government without the need for consent by the Länder. According to
the audit findings of the Bundesrechnungshof, such a right is particularly necessary in
combating VAT fraud, in the field of data processing and with risk management
systems. In addition the auditing service for company groups, companies with grouplike structures, international subsidiaries and other major companies should be
transferred to the Federal Government. There are also various arguments in favour of
the proposal in the Kienbaum study of transferring the computer centres to the Federal
Government as part of a “lesser solution”. The central importance of uniform data
processing for improvements in the field of tax administration is clear from the audit
findings of the Bundesrechnungshof pertaining to the failed FISCUS project. 122
119
120
121
122
11.4 billion per year with a federal tax administration for common taxes and 11.5 billion per year with a federal
tax administration for common taxes and a uniform national regulation for Land taxes; cf. section 4.1.9 (3) and
(4).
For these new regulations, cf. section 4.1.7.
Cf. section 4.1.9 (2).
Cf. section 4.1.6 (2).
55
The Commissioner recommends that such a “lesser solution” be backed up by an
amendment to the Constitution. The Commissioner and other expert witnesses have
already noted at the public hearing on 31 May 2006 123 that there are problems in
establishing a Federal Government right in section 21a FVG to issue general
instructions by legislation alone. 124 Basic Law Art. 108 para. 7 and Art. 85 para. 2
provide that the Federal Government can only issue administrative regulations with
the consent of the Bundesrat. It can also issue individual instructions under Basic Law
Art. 85 para. 3. If section 21a FVG now creates the possibility of issuing general
instructions without the consent of the Bundesrat, this requires a third category of
"general instructions" between "individual instructions" and "administrative
regulations". 125 However, being abstract instructions covering a large number of
cases, it is virtually impossible to distinguish this category from "administrative
regulations". 126 Consequently, there is much to support the idea that a constitutional
amendment is needed to establish a clear right of the Federal Government to issue
general instructions.
4.2
Transport infrastructure
4.2.1
Federal trunk roads
Core statement
Joint administration of federal motorways and highways by the Länder on federal
commission is no longer adequately accounting for the varying functional importance
and the diverging interests of the Federal Government and the Länder in terms of road
maintenance and development. The Commissioner accordingly recommends
transferring administration and development of the federal motorways to the Federal
Government and assigning the federal highways to the Länder.
The Länder construct and administer the federal trunk roads (federal motorways
and highways) on federal commission. When the Federal Republic of Germany, was
created, long distance transport used the federal highways together with the motorway
network (which still had gaps). Since 1950, the length of the motorway network has
increased sixfold, and largely taken over the long distance transport function. By
contrast, the federal highways today largely have regional transport functions, and
have little importance for the Federal Government’s responsibility of providing for
long distance transport.
123
124
125
126
Cf. verbatim record, Bundestag, Committee on Legal Affairs, 18th session (16th legislative period), 5C and
28 A-C (expert witness Engels), 9A (expert witness Kluth), 31C and 49 A-B (expert witness Seer).
On the right of instruction in section 21a FVG, cf. for details section 4.1.7.
For the general state of the dispute, cf. annex I (section 3.3.2).
This problem is also rooted in the agreement of 1970 on the basis of which the Federal Ministry of Finance
issues its BMF letters to the Länder, cf. section 4.1.1. The expert witness Kluth noted in the public hearing that
this practice is not in accordance with the Constitution (cf. verbatim record, Bundestag, Committee on Legal
Affairs, 18th session (16th legislative period), 9A).
56
At the same time, the outdated division of responsibilities in constructing trunk
roads is becoming increasingly problematic because of the different interests of the
Federal Government and the Länder. The Länder frequently pursue Land policy goals
at the expense of the Federal Government, particularly in planning road construction
measures, downgrading federal highways and constructing bypasses.
The Commissioner accordingly recommends reorganising the administration of
the federal trunk roads. To this end, he also proposes amending the Basic Law. The
Federal Government should restrict itself to constructing and administering federal
motorways, with its own separate administration. The Länder should take over the
current federal highways, receiving in return an appropriate non-earmarked financial
equalisation. This could consolidate administrative power and financial responsibility,
create transparency and clearly show political responsibilities.
4.2.1.1 Basis, causes and evolution of administrative services provided by the
Länder on behalf of the Federal Government
(1) In 1933 the Reich transferred the construction and maintenance of Reich
motorways to a subsidiary of the Reich railway corporation (“Deutsche
Reichsbahngesellschaft“)
by
means
of
the
Reich
Motorway
Act
(“Reichsautobahngesetz”). In 1934 it also took over the most important highways as
Reich highways, but without setting up a direct Reich Road Administration. For cost
reasons, the existing Länder administrations administered the Reich roads. 127
At the foundation of the Federal Republic of Germany there was much
controversy about a future Federal Trunk Road Administration. 128 A key basis for the
decision of the Parliamentary Council was the contribution of an expert at the start of
December 1948. In his view, the distinction between Reich motorways and Reich
roads was artificial and completely unjustified. He argued for federal administration
of all “long distance transport roads”, with at least federal authority to issue
instructions; subsequently he argued decisively for future federal highways to be also
under administration on federal commission. He believed that this was the only way
of ensuring the construction of major transit roads for transport throughout the federal
territory. 129 The Parliamentary Council agreed with this in principle. The draft Basic
Law accordingly contained almost exactly the wording which applies today.
(2) Under Basic Law Art. 90 para. 1, the Federal Government is the owner of the
former Reich motorways and highways; para. 2 establishes administration on federal
commission by the Länder 130 of the federal motorways and other federal highways
127
128
129
130
Ibler, in: v. Mangoldt, Klein, Starck, Basic Law III, 4th ed., Art. 90 para. 2 MN. 46 et seq.
v. Doemming, Füsslein, Matz, in: Leibholz, v. Mangoldt, JöR vol. 1 (1951), part VIII – Die Ausführung der
Bundesgesetze und die Bundesverwaltung, pp. 657-661.
Expert witness Prof. Frohne in the 21st session of the Committee on Responsibility of the Parliamentary
Council on 7 Dec. 1948, verbatim record pp. 27, 29.
For the basic issues of administrative services provided by the Länder on behalf of the Federal Government,
see annex I.
57
used by long-distance traffic. The Basic Law talks explicitly of long-distance traffic
here. This refers only to traffic travelling long distances. 131 If a federal highway no
longer performs a long-distance transport function, it logically belongs in the
responsibility of the Länder (Basic Law Arts 30, 83). 132
The Federal Trunk Roads Act 133 proceeds on the basis of the division of federal
trunk roads into federal motorways and federal highways. It establishes that federal
trunk roads
• form a connected transport network and
• serve or must be designed to serve long-distance transport.
The necessary density of a federal trunk road transport network is not indicated by
the legislative provisions. The density of the network is “ultimately a political
decision which cannot be taken in the same way for every area at all times by the
responsible entity.” 134
(3) The bulk of road transport is handled by non-local roads – federal motorways
and highways, Land highways and district highways. In 1950, the network of nonlocal roads covered 127,600 km. 135 By 2005 this network had been expanded by 81%
to 231,480 km 136 (see table 1). 137
Increase
Road category
1950
Federal motorways
2,100
12,363
10,263
489 %
Federal highways
24,300
40,983
16,683
69 %
Federal trunk roads (subtotal)
26,400
53,346
26,946
102 %
Land roads
49,300
86,553
37,253
76 %
District roads
51,900
91,581
39,681
76 %
127,600
231,480
103,880
81 %
Total non-local roads
2006 absolute
relative
Table 1: Growth in length of non-local road network in the Federal Republic of
Germany
131
132
133
134
135
136
137
Gröpl, in: Maunz, Dürig, Grundgesetz, vol. V, Art. 90 MN. 34.
Cf. also Herber, in: Kodal, Krämer: Straßenrecht, chapter 9, MN. 9.21.
Federal Trunk Roads Act (Bundesfernstraßengesetz – FStrG) in the version of 20 Feb. 2003 (BGBl. I p. 286).
Kodal, in: Bartlsperger, Blümel, Schroeter, Straßengesetzgebung, p. 507 (511).
Federal Ministry of Transport (eds.), Verkehrsinfrastrukturfinanzierung, final report of 5 Sep. 2000, p. 10.
Federal Ministry of Transport (eds.): Straßenbaubericht 2006, Cologne 2006, p. 7.
The statistics include the new Länder following their accession.
58
The growth of the non-local road network since 1950 shows clearly that the
network of federal motorways has been expanded disproportionately compared to
non-local roads as a whole, and specifically to federal highways. While the federal
motorway network has increased almost sixfold in length since 1950, the federal
highway network grew only around 69% in the comparable period.
This is particularly clear if you compare the status of the motorways in 1949, 1969
and 2001. 138
•
In 1949 the federal motorways linked a few important regions. However,
only in combination with the federal highways did they form a federal trunk
road network.
•
In April 1969 the federal motorways already constituted a separate federal
motorway network. This covered over 9,000 km, including the stretches
under construction or in planning for the pre-unification Länder.
•
In December 2001, the federal motorway network, with a total length of
around 11,700 km, linked all the important parts of the country throughout
the entire Federal Republic of Germany.
138
See also the maps of the federal motorway network on the following page.
59
Federal motorway network
Status: 31 Dec. 1949
Status: 1 April 1969
Status: 31 Dec. 2001
60
The annual number of kilometres driven (vehicle kilometres –vkm) also shifted
to the federal motorways, in line with the growth in length (see table 2):
Increase
Road category
Federal motorways
Non-urban federal
highways
1975
network length
2005
absolute
relative
5,981 km
12,269 km
6,288
105 %
annual km driven
55 bn vkm
216 bn vkm
161
293 %
network length
25,439 km
32,117 km
6,678
26 %
57 bn km
107 km
50
88 %
annual km driven
Table 2: Annual kilometres driven on federal motorways and non-urban federal
highways in 1975 139 and 2005 140
Annual vehicle kilometres driven in
bn vkm
While annual kilometres driven on the non-urban federal highways almost
doubled from 1975-2005, the figure increased fourfold on the federal motorways
(see also diagram 1 below).
GREEN: FEDERAL MOTORWAYS
RED: FEDERAL HIGHWAYS
Diagram 1: Increase in annual vehicle kilometres driven (bn vkm) on federal
motorways and federal highways between 1975 and 2005 141
139
140
141
Federal Highway Research Institute (eds.): Verkehrsentwicklung auf Bundesfernstraßen 2002,
Jahresauswertung der automatischen Dauerzählstellen, vol. V115, table 2, p. 13. The network lengths shown
are for 1 July of each year.
Federal Highway Research Institute (eds.): Verkehrsentwicklung auf Bundesfernstraßen 2005,
Jahresauswertung der automatischen Dauerzählstellen, table 4, p. 13.
Federal Highway Research Institute (loc. cit.), table 4, p. 13.
61
Although
the
35%
31%
federal
motorways
30%
account for only around
25%
5% of the total non18%
20%
16%
local road network,
15%
vehicle traffic (and
10%
particularly
freight
5%
5%
traffic) is concentrated
0%
on
the
federal
Federal Motorways
Federal Highways
motorways. Of the total
Share of non-local road network
of some 684 bn vehicle
Annual kilometres driven
kilometres
(vkm)
driven on non-urban
Diagram 2: Federal motorways and highways –
roads in 2005, over comparison of share in non-local road network and
31% were on federal annual kilometres driven in 2005
motorways (216 bn
vkm). The non-urban network of federal highways, which amounts to around 18% of
the total non-urban road network, accounted for about 16% (107 bn vkm) of annual
kilometres driven in 2005 (see diagram 2). 142
142
Federal Ministry of Transport (eds.): Straßenbaubericht 2006, Cologne 2006, p. 9.
62
4.2.1.2 Systemic weaknesses in federal trunk road administration
Where administration services are provided by the Länder on federal commission,
the tasks are divided between the Federal Government and the Länder. The Federal
Government is responsible for the basic and overarching tasks in road construction.
Federal tasks involve primarily funding road network design, the extension
programmes and the production of traffic route plans. In addition, the Federal
Ministry of Transport, Building and Urban Affairs (Federal Ministry) exercises legal
and technical oversight over the Länder. The Länder construct and administer the
federal trunk roads on federal commission. This involves a large number of tasks,
such as planning, implementation of planning laws, preparation for construction,
construction, accounts settlement, operation and maintenance. The way in which the
provision of administrative services on federal commission is structured in federal
trunk route construction, and particularly the growing regional importance of the
federal trunk roads, clearly shows that the Federal Government and the Länder have
different interests in the administration of federal trunk roads. Conflicts of interest
between the Federal Government as owner and supervisory authority and the Länder
as the implementing authorities in federal trunk road construction also arise out of
other contractual relationships. This organisational model has been investigated
empirically in organisation theory, and is covered by so-called “agency theory”. 143
The problems resulting from a contractor-client-like relationship, which
characterises the situation when the Länder provide services on federal commission,
are illustrated by the following descriptions of key problem areas, which take
particular account of published audit findings of the Bundesrechnungshof. They show
that the systemic weaknesses that organisational theory would predict for
administration performed by the Länder on federal commission 144 are very largely
also apparent in practice, at the Federal Government’s expense.
4.2.1.3 Weaknesses in the administration of federal trunk roads
(1)
Planning road construction measures
The development and new construction of federal trunk roads for a reasonable
period (approx. 15 years) is summarised in a needs plan after consultation between the
Federal Government and the Länder. The needs plan is passed by the Bundestag as
an attachment to the Trunk Road Development Act, and forms the basis for planning
and – where budget funds are available – implementing the individual road
construction projects. There is extensive coordination between the Federal
Government and the Länder involved in the individual construction measures.
Generally, the road works administrations of the Länder plan the Federal
Government’s road works measures. For new construction and development measures
143
144
For details, see annex IV.
Cf. annex IV.
63
for federal trunk roads with total costs of 10 million Euro and more, they submit draft
planning to the Federal Ministry via the responsible Land ministry. To document its
agreement with the planning, the Federal Ministry stamps this as “reviewed”, possibly
incorporating special conditions or obligations. The Federal Ministry reserves the
right of approval for other measures as well, depending on the size of financing.
Responsibility for planning drifts between the Federal Government and the Länder
and cannot be clearly assigned. Affected citizens cannot transparently recognise
which level of government is responsible for decisions.
The system of administration by the Länder on federal commission assumes that
the Land administration acting on behalf of the Federal Government will protect the
interests of the Federal Government. This is why the Federal Ministry primarily
influences planning and construction of major road works measures through the
“reviewed” stamp and the conditions linked to approvals. However, the Federal
Ministry does not have any information of its own about which alternatives the
Länder have considered and reviewed. It cannot check on the basis of its own
information whether the solution is the most beneficial one from the viewpoint of the
Federal Government, and relies almost exclusively on the documentation
submitted. 145 Given the large number of road works measures, the Federal Ministry’s
regional and technical divisions do not have the staff to track all measures and
intervene where necessary. 146 The Länder have “generally superior knowledge of the
issues involved in the planning and an effective monopoly of information regarding
the individual projects”. 147
For example 148 , the Land Brandenburg planned to develop a priority network of
federal highways, known as the “Blue Network”. The costs for the development of the
“Blue Network” with a total length of approx. 880 km were to be 1.6 billion Euro. In
its planning, the Land followed the Federal Government’s basic specifications,
planning cost-intensive standards for the entire network such as three-lane crosssections 149 , split-level junctions 150 and motor roads. 151 To reach these development
standards the Land retroactively modified the planning already approved for the
individual projects, without informing the Federal Ministry. With other projects, the
Land was able to plan independently according to these development standards,
despite the basic specifications being laid down by the Federal Government, because
there was no provision for submitting plans to the Federal Ministry.
145
146
147
148
149
150
151
See also Garlichs, Grenzen staatlicher Infrastrukturpolitik, pp. 112, 130.
Similarly, Rinke, in: Bundesanstalt für Straßenwesen, Rechtsfragen der Bundesauftragsverwaltung, p. 18 (26).
Garlichs, Grenzen staatlicher Infrastrukturpolitik, pp. 127, 128.
For further audit findings, see the overview in annex II.
One lane in each direction. In some sections, there are three lanes, alternating two in one direction and one in
the other for safe overtaking.
Junctions, as with motorway junctions with bridges, ramps and merge lanes so that transient traffic does not
have to slow down.
Motorways may not be used by certain types of vehicles, specifically bicycles and tractors. Additional parallel
lanes must then be constructed.
64
The Bundesrechnungshof regarded the development standards as excessive.
Specifically, it criticised that the high costs of meeting these development standards
resulted in an excessively low return on the federal funds used. The
Bundesrechnungshof called for a rise in the total return on the budget appropriations
for the “Blue Network”. For this, a new traffic survey should be carried out for the
“Blue Network” using current assumptions about economic and population growth,
and the planned road works measures should be revised on the basis of the results.
Specifically, the cost-intensive development standards should not be applied to the
entire “Blue Network”. Following this, the Federal Ministry commissioned an open
traffic study.
Based on the results of the traffic study, the road works administration now plans
to limit the “Blue Network” to 702 km. In addition, the development standards will be
lowered. This reduces investment costs by 0.4 billion Euro to around 1.2 billion Euro.
At the same time, the overall benefits from the planned budget appropriations are
significantly increased.
(2)
Downgrading federal highways
The conflicting interests of the Federal Government and the Länder are also clear
in the classification of a road by its traffic function. The classification of a transport
route as a federal trunk road is based on traffic volume and the configuration of the
network. For example, with the development of the federal motorway network,
federal highways running parallel with the new federal motorways lost their
importance for long-distance traffic. However, the importance for traffic of some
individual Land roads also became similar to that of a federal trunk road. The
administration responded to these changes by downgrading federal highways and
upgrading the regional Land roads (reclassification).
From 1960 onwards, over 6,000 km of regional Land roads were upgraded to
federal highways, even though the Federal Government and the Länder did not prove
that the requirements of the Federal Trunk Roads Act – long-distance transport need,
network configuration – had been satisfied.
In response to a question posed, the Bundesrechnungshof in 1993 answered that
federal highways running parallel to federal motorways no longer serviced longdistance traffic. It indicated that in the near future, 2,050 km of the 2,900 km of
federal highways running parallel to federal motorways in the pre-unification Länder
should be downgraded. It further criticised the fact that around 360 km of these
federal highways, with an estimated construction volume of some 1.3 billion Euro,
had been incorporated in the 1992 needs plan, despite the fact that under the Federal
Trunk Roads Act the Federal Government should no longer have borne the expenses
of the road works. 152 Based on the comments of the Bundesrechnungshof, the Federal
Ministry developed a “Federal downgrading concept (1995)” under which a total of
152
See also 1993 Annual Report of the Bundesrechnungshof, BT-Drs. 12/5650, no. 28.
65
4,680 km of federal highways were to be downgraded “immediately” and “later”.153
The Federal Ministry estimated the financial burden on the Federal Government at
around 100 million Euro a year for as long as the Federal Government was
responsible for construction and maintenance of the federal highways to be
downgraded. However, a federal trunk road which has lost its importance for longdistance traffic can only be downgraded to a road under Land law by agreement with
the future entity liable for construction and maintenance. 154 This involves substantial
future road works costs for the Länder, districts or local authorities, which is why the
Länder are slow to downgrade roads.
According to estimates by the Commissioner, the Länder are less concerned with
a reclassification to obtain a clear legal classification of the roads but rather with
avoiding financial burdens for themselves in road infrastructure at the Federal
Government’s expense.
The continuing resistance to downgrading by the entity taking over responsibility
for construction and maintenance has led to a situation where, on an increasing scale,
the Federal Government is maintaining and administering roads which do not serve
long-distance traffic. Another result of this is that the roads are developed on the basis
of the cost-intensive parameters for federal trunk roads – e.g. split-level junctions,
wide radius curves and cross-sections – although lower standards would suffice for
the actual and future transport function. 155
(3)
Planning and constructing bypasses
Another example which clearly shows the different interests of the Federal
Government and the Länder and the resulting problems in administrative action is the
planning and construction of bypasses. Consequently, bypasses on federal highways
relieve local roads of through traffic, improving the quality of life. They accordingly
meet the wishes of the overwhelming majority of locally affected people. Bypasses
accordingly have high political importance. This is clear, amongst other things, from
the fact that the 2003 Federal Traffic Infrastructure Plan contains over 700 bypasses
as priority needs, with a total length of almost 3,000 km and a financial volume of
around 11.5 billion Euro. This scheduled financing volume represents 62% of planned
needs for federal highways.
When deciding on the routing and junctions for a bypass, the road works
administration has to balance conflicting interests. The interest of the Federal
153
154
155
5,113 km acc. to 1995 downgrading concept and 4,719 km acc. to continuation of 30 April 1998, 4,680 km
acc. to continuation of 1 January 2000. The Federal Ministry intends to revise the downgrading plan on the
basis of the new demand plan.
On the downgrading of federal highways, the Federal Constitutional Court ruled that an instruction by the
Federal Government to downgrade a federal highway to a road under Land law is not compatible with the
constitutional regulations on the administration of federal trunk roads (BVerfGE 102, 167) by the Länder. The
Federal Constitutional Court did not, however, question that a federal trunk road can lose its importance for
traffic, and that this has fundamental consequences.
For further audit findings, see the overview in annex II.
66
Government, which lies primarily in efficient and optimal routing of long-distance
traffic, must be balanced against the concerns affected by the road works measure.
This applies particularly to zoning and environmental protection and nature
conservation. Considerations also have to cover the interests of the affected residents,
other traffic routes (other roads, railway lines and waterways), historic monuments,
areas preserved from urban development, and many other factors.
Because of the large number of stakeholders with conflicting interests that affect
road works administration with different degrees of intensity, a set of regulations
would be of little help in determining how interests should be weighted. The road
works administrations, therefore, enjoy considerable scope in planning bypasses.
According to the audit findings of the Bundesrechnungshof, routing of long-distance
traffic plays a relatively subordinate role in Land and local authority decisions on
bypasses.
It is understandable, therefore, that the road works administration, as part of the
Land administration, frequently gives priority to local interests in its considerations.
Land and local authorities want to strengthen the regional economy and connect
industrial centres, vacation, leisure and recreation areas as directly as possible to the
bypass, even if this means that the line is extended and the number of junctions
increased. This is why the construction of bypasses should be a responsibility of the
Länder. 156
(4)
Other weaknesses
According to the findings of the Bundesrechnungshof, other areas, e.g. diversions,
allocation of costs of intersections, development of urban connectors and
administrative costs and expenditure for specific purposes 157 , regularly generate the
same problems (varying interests of the Federal Government and the Länder, unclear
responsibilities, lack of information by the Federal Government, implementation of
specific Land interests at the expense of the Federal Government, excessive standards,
inefficient use of funds). 158
4.2.1.4 Federal weaknesses in federal trunk road administration
The problems presented concerning the construction of federal trunk roads can be
attributed to the specific structure of the provision of services by Länder on federal
commission. The extensive shift in responsibilities to the administrations providing
156
157
158
However, the Federal Government has an interest in having the bypass follow the shortest route, with a small
number of junctions. A large number of junctions also reduces traffic safety, and lower speed limits needed at
crossroads adversely affect long-distance traffic.
Cf. the report of the Federal Performance Commissioner on reorganising administration in federal trunk road
construction of 11 Oct. 2004, pp. 30 et seq. (www.bundesrechnungshof.de) and the series of publications by
the Commissioner, vol. 11 Bundesfernstraßen – Planen, Bauen und Betreiben, pp. 18 et seq.
(www.bundesrechnungshof.de); the findings are confirmed by the current audit work of the
Bundesrechnungshof .
Further individual audit findings of the Bundesrechnungshof are shown in the overview in annex II.
67
these services, all of which have their own direct interests, and the lack of suitable
control systems, are leading to a situation where the direct interests of the largely
unconstrained Länder are taking priority over the interests of the Federal
Government. This is confirmed by the audit findings of the Bundesrechnungshof. The
Federal Ministry does not have any suitable control system to protect the interests of
the Federal Government in individual road works measures. The Länder can exploit
their advantage in information to satisfy their own interests.
The road works administration is responsible for balancing the conflicting
interests in planning and implementing road works measures. In doing so, it should
preserve the interests of the Federal Government and the Länder simultaneously. The
interests of the Land are not separate from those of the local authorities and districts,
which have a clear influence on road works administrations. This interconnection
leaves citizens uncertain which administrative level is responsible for a decision.
The road works administration has considerable freedom in implementation. In
addition, it interprets how regulations are to be applied. In complex planning
processes with diverse interests, the regulations can only provide a general
framework. The road works administration must carry out the review process itself.
This administration is also responsible for weighting the different interests, giving it a
great advantage in terms of information.
The common interests of the Federal Government and the Länder in the
construction of federal trunk roads are overlaid in the process by the specific interests
of the Länder and the given road works administration, independent of whether these
goals are in line with federal trunk road planning or not. 159 An article on
administration by the Länder on federal commission in the field of federal trunk road
construction 160 accordingly states:
“Administration by the Länder on federal commission is particularly rife with
political conflict because of the division of responsibility for funding (Federal
Government) and administration (Länder). There is nothing more pleasant than
making local policy at someone else’s expense.”
4.2.1.5
Proposal for eliminating overlaps in the federal trunk road administration
(1) To achieve the key goals of Federalism Reform, i.e. improving decision making
capacity of Federal Government and Länder, clearer assignment of political
responsibilities and enhancing the appropriateness and efficiency of mission
performance, the Commissioner recommends amending Art. 90 Basic Law:
• The Federal Government restricts itself to responsibility for the federal
motorways with a separate administration.
• The Länder take over the property and administration of the former federal
highways and receive non-earmarked financial equalisation funds in
159
160
Garlichs, Grenzen staatlicher Infrastrukturpolitik, p. 109.
Rinke, in: Bundesanstalt für Straßenwesen, Rechtsfragen der Bundesauftragsverwaltung, p. 18 (26).
68
exchange for their new burdens.
This would abolish the administration of federal trunk road construction being
performed by the Länder on federal commission, replacing it with clear division of
tasks, legislative powers and financial responsibilities situated at the level of
government involved. Such a division of tasks is in line with the principle of
subsidiarity in the Basic Law under which the Länder should be responsible for
performing state tasks. The responsibility of the Federal Government is restricted to
the road network whose primary importance is traffic between the Länder and
between Germany and the rest of Europe. A supraregional road network which takes
into account national and international considerations is easier to plan and construct in
a hierarchical decision making structure than through the process of self coordination
by the Länder. 161 All other roads are the responsibility of the Länder, including those
covering roads of primarily regional importance.
The Federal Ministry does not regard the problems described in federal trunk road
construction to be a fault in the provision of services by the Länder on federal
commission, but merely as weaknesses in execution which it could counter if it had
possibilities for control and intervention and was able to carry out reviews with
greater intensity. By contrast, the Commissioner feels that further developing service
provision by the Länder on federal commission in this sector is not a suitable way of
eliminating the structural conflicts of interest between the Federal Government and
the Länder which are inherent in the system, and hence at the root of the problems
identified.
(2) The Commissioner’s proposal aims to create a new and manageable
constitutional definition which permits a clear delimitation between federal and Land
tasks. The Commissioner feels that his view is confirmed by a number of studies and
reports which essentially also call for clear delimitation between federal and Land
responsibilities in federal trunk road construction. 162
Moreover, experience from Austria shows that the reallocation of responsibilities
between the Republic of Austria (responsible for federal motorways and urban
motorways through the federal corporation ASFINAG) and the federal Länder
(administration of the other federal roads) has made road works administration more
transparent and efficient. 163
161
162
163
Cf. Garlichs, Grenzen staatlicher Infrastrukturpolitik, pp. 114-115 and Wolst, Die Bundesauftragsverwaltung
als Verwaltungsform, p. 131.
Seebohm, Die Verwaltung der Bundesstraßen, Straße und Autobahn 1953, pp. 334 et seq.; Wolst, Die
Bundesauftragsverwaltung als Verwaltungsform, pp. 130 et seq.; Garlichs, Grenzen staatlicher
Infrastrukturpolitik, pp. 112, 130; Federal Ministry of Transport (eds.): Thesen und Empfehlungen der
Regierungskommission Verkehrsinfrastrukturfinanzierung, 2000, p. 1, no. 8 and Federal Ministry of Transport
(eds.), Kommission Verkehrsinfrastrukturfinanzierung, Schlussbericht of 5 Sep. 2000, p. 35, no. 4.3.1 para. 4
and p. 45, no. 4.3.2.5; Academic Advisory Council of the Federal Ministry of Transport, Neuorganisation der
Zuständigkeiten im Bereich der Bundesfernstraßen, Zeitschrift für Verkehrswissenschaft 2006, 81-104.
On the reorganisation of road construction administration in Austria, see annex III (section 2.2.1).
69
The delimitation between federal motorways as a federal responsibility and the
present federal highways as a Land responsibility permits appropriate allocation to the
various road categories. Federal motorways are defined in the Federal Trunk Roads
Act and are subject to particular road transport regulations 164 which make possible
clear distinction from federal highways. The Federal Government and the Länder
would be separately responsible for planning road works measures within the scope of
their separate responsibilities. Construction of bypasses, which is primarily important
in regional politics, will be the sole task of the Länder. Disputes between the Federal
Government and the Länder over upgrading and downgrading federal highways – and
which can be mainly reduced to the allocation of funding – would be eliminated.
Conflicts between the Federal Government and the Länder would be reduced, and
road works funds would be more efficiently used.
(3) Financial equalisation funds for the Länder for their taking over federal
highways should not be subjected to federal earmarking. This would conflict with the
clear assignment of political responsibilities. The administration of “federal”
highways accruing to the responsibility of the Länder is a task which they must
perform with their own financial resources. The Federal Government accordingly is
not called on to decide how the Länder must use these funds. Allocation of earmarked
funds by the Federal Government would also eliminate the unity of financial and
material responsibility which, along with the clear separation of the spheres of
influence of the Federal Government and the Länder, is the aim of the proposal.
4.2.2
Federal waterways
Core statement
The different interests of the Federal Government and the Länder in administering
inland waterways which are primarily used by recreational shipping result in
expenditure which is not economically useful. The Commissioner recommends
transferring these inland waterways to the Länder (ownership, liability and
administration) and that an appropriate financial equalisation be paid.
The Federal Government is responsible for an inland waterway if it has significant
traffic by passenger and cargo shipping. The shift of cargo traffic means that many of
the Federal Government’s inland waterways have lost substantial importance. They
are now largely used by leisure craft and by some passenger vessels. The Federal
Government’s administrative powers are accordingly limited to the use of several
recreational waterways for passenger shipping; the Länder are responsible for other
concerns, such as tourism, water management, nature conservation and landscape
conservation. In the case of recreational waterways which, by virtue of their traffic,
have little or no significance for the Federal Government, the responsibilities of the
Länder have overwhelming importance. As the Federal Government has to reach
164
Specifically section 18 StVO.
70
agreement with the Länder on the administration of inland waterways, the Länder are
able to assert their claims – e.g. for tourist use or historic monument preservation – at
the Federal Government’s expense. An attempt to transfer 164 waterways or parts of
these, with a length of about 1,100 km, in exchange for compensation failed because
of opposition by the Länder.
The Commissioner recommends amending the Constitution to enable the Federal
Government to transfer to the Länder the ownership, management and funding of
those inland waterways that no longer serve (supraregional) cargo transport (and
hence the Federal Government’s mission performance), in exchange for nonearmarked compensation. This would specifically satisfy the subsidiarity principle, as
a regional task (recreational waterways) would also be assigned regionally at the level
of the Länder, and responsibility would be limited to one entity.
4.2.2.1 Transfer of waterways to federal administration
(1) The most important waterways were originally owned by the Länder. The
Weimar Constitution included in Art. 97 para. 1 165 the constitutional mandate to
transfer the waterways used for general traffic to the ownership and administration of
the Reich. In 1921 the Reich concluded a state treaty 166 with the Länder on the
transfer of waterways. To provide uniform administration and development of a
network of important cargo traffic waterways, the Reich took over from the Länder all
the waterways used for general traffic. These waterways had been used before
World War I to transport a specific average annual tonnage of approx. 50,000 t. 167
Waterways which met these conditions and were transferred to the Reich were listed
in an annex to the state treaty.
(2) After the foundation of the Federal Republic of Germany the Federal
Government under Basic Law Art. 89 para. 1 became the owner of the former Reich
waterways, which it administered through its own authorities, the Federal Waterways
and Shipping Administration. After reunification, the waterways of the former
German Democratic Republic (GDR) listed in the annex to the Water Act 168 were
transferred to the Federal Government on the basis of the Unification Treaty 169 and
transferred to its Federal Waterways and Shipping Administration. Due to the time
pressure in the reunification, this was done without regard to the importance of the
individual waterways for cargo traffic.
165
166
167
168
169
The constitution of the German Reich “Weimarer Reichsverfassung” of 11 August 1919.
State treaty on the transfer of waterways from the Länder to the Reich of 29 July 1921 (RGBl. p. 961).
Explanatory memorandum to section 1 of the state treaty on the transfer of waterways from the Länder to the
Reich, Drs. des Reichstags 1920/24, vol. 367, no. 2235.
Water Act of GDR of 07 Feb. 1982 (DDR-GBl. I p. 467).
Ordinance of 13 Nov. 1990 on the transfer of federal waterway law to Berlin (West) and the area cited in Art. 3
of the Unification Treaty of 31 August 1990 (BGBl. I p. 2524) in combination with Art. 8 of the Unification
Treaty and the announcements of 16 October 1990 (BGBl. II p. 1360) and 29 Sep. 1990 (DDR-GBl. I p.
1988).
71
4.2.2.2 Extent and importance of federal inland waterways
(1) The legislature in the Federal Waterways Act established that federal inland
waterways used for general traffic are listed in annex 1 to section 1 para. 1 WaStrG.
When including the inland waterways in the annex to Federal Waterways Act, the
importance of the individual waterways for cargo traffic was no longer decisive.
Following the introduction of Federal Waterways Act “general traffic” is understood
as significant traffic by passenger and cargo ships, but not traffic by small ships or the
mere suitability of the waterways for navigation. 170 The definition of “general traffic”
has accordingly become unclear, as the term is no longer limited to cargo traffic. After
reunification, the annex of inland waterways was supplemented with the waterways of
the former GDR.
(2) The federal inland waterway network comprises waterways with a length of
7,354 km (see figure 1). Of these, waterways with a length of 6,775 km are listed as
federal waterways in annex 1 to the Federal Waterways Act. The Federal Government
acts here in its sovereign capacity. On the other federal waterways with a length of
579 km, the Federal Government has rights and duties as the owner. The appropriate
Land laws apply to the administration, e.g. to water management issues or
environmental protection.
(3) The inland waterways are classified into seven waterway classes 171 depending
on their importance. The main network with international importance (waterway
classes IV-VIII) covers 5,068 km, and includes the main arteries Rhine (including
tributaries), Danube, Weser and Elbe, and the connecting canal stretches to the Oder.
Waterway classes I-III are only of regional importance. Inland waterways in classes I
and II and the other federal waterways are around 1,862 km in length. This also
includes inland waterways which are only used by passenger ships or sports boats,
subsequently described as recreational waterways. These inland waterways, which are
assigned to the notional waterway class 0, include e.g. the Lahn between Wetzlar and
the estuary, and the Fulda between Kassel and Hannoversch-Münden.
170
171
Friesecke, Bundeswasserstraßengesetz, section 1 MN. 5.
System of classification of European domestic waterways in March 1993, introduced by the sponsoring
government department for the scope of the Federal Waterways Act.
72
Figure 3: Overview of federal waterways 172 (blue and red); waterways or sections
marked red should be handed over by the Federal Government to the Länder.
172
Source: Federal German Waterways and Shipping Administration (www.wsv.de).
73
4.2.2.3
Administrative overlap in the case of recreational waterways
In administering the federal waterways, the Federal Government is required to
take into account the responsibilities of the Länder (Art. 89 para. 3 Basic Law). In all
measures, specifically development and construction of new waterways, it is obliged
to assure the requirements of land improvement and water management in agreement
with the Länder. 173 In the event of conflicting interests, the federal administration and
relevant Land administration must negotiate until they reach a compromise acceptable
to both parties.
The further administrative powers of the Federal Government for inland waterways
and the Länder responsibilities to be taken into consideration are regulated in the
Federal Waterways Act. The administrative powers of the Federal Government extend
solely to the inland waterways as transport routes. The responsibility of the Federal
Government is limited to maintaining the inland waterways, as transport media, in a
condition required for navigation.
All other administrative functions to be performed with regard to the inland
waterways are a matter for the Länder. These include specifically general water
management issues, all other areas of environmental protection and nature and
landscape conservation, and soil protection. 174 In the case of recreational waterways
where from the Federal Government viewpoint use as a transport route is secondary,
the emphasis moves to the specific responsibilities and interests of the Länder. This
means that in the case of the recreational waterways the Länder, by virtue of their
responsibilities in their region, have a dominant influence on the Federal Waterways
and Shipping Administration.
173
174
Agreement means complete unity of intent; however, this does not apply generally to all Länder, but only to
the Länder whose territory is affected by the relevant federal administrative measure; cf. Sachs, ibid.,
Grundgesetz, Art. 89 MN 35.
Friesecke, Bundeswasserstraßengesetz, introduction MN. 9.
74
4.2.2.4
Audit findings on the recreational waterways
According to the audit findings of the Bundesrechnungshof the predominance of
Land responsibilities has led to a wide range of problems with the administration of
recreational waterways by the Federal Government.
(1)
Lahn federal waterway
The Lahn is an example of the high expenditure on
recreational waterways. The Lahn federal waterway
flows through the Länder Hesse and RhinelandPalatinate for 148 km (see figure 2 175 ). Since the end of
commercial cargo transport some 25 years ago, the
Lahn has been used almost exclusively for tourist and
recreational purposes. Despite the predominant Land
interest in its use, the Federal Government is
responsible for operation and maintenance. Given the
scale of maintenance, the Federal Waterways and
Shipping Administration is dependent on agreement
with the Land administrations. The Land
administrations impose on the Federal Waterways and
Shipping Administration, requirements pertaining to
for historical monument preservation, nature
conservation and landscape preservation, etc.
Figure 2: Lahn federal
waterway
The Federal Waterways and Shipping Administration gives the following figures
for the Federal Government’s expenditure in 2003 and 2004 on maintaining leisure
shipping and the measures in response to Land requirements:
Year
Expenditure
on investment
chapter 12 03
Expenditure for
operation and
maintenance
chapter 12 03
Expenditure for
administration
chapter 12 03
Total
expenditure
2003
2004
€238,000
€752,000
€4,929,000
€4,863,000
€1,685,000
€1,689,000
€6,852,000
€7,305,000
Table 1: Federal Government expenditure on the Lahn
175
Source: Federal German Waterways and Shipping Administration (www.wsv.de).
75
(2)
Federal waterway Ems lateral canal
The Ems lateral canal is a particularly good example of how the different interests
of the Federal Government and the Länder can lead to expenditure which is not
economically expedient.
The Ems lateral canal starts at the Oldersum lock and runs for 9 km in parallel to
the well developed Ems shipping route (see figure 3 176 ). Due its poor state of
maintenance, the lock is due to be replaced or dismantled. Because the Ems lateral
canal was no longer used for general traffic, the Federal Waterways and Shipping
Administration intended to declassify the federal waterway and transfer it to the Land
Lower Saxony. As the negotiations failed, the Federal Waterways and Shipping
Administration renovated the lock in its old dimensions with a lock length of around
100 m and a breadth of 10 m in 1997. This cost around 7 million Euro. Impending
water management measures coming under the responsibility of the Land were
neglected. 177
Figure 3: Ems lateral canal at Emden
In 2005 the Oldersum lock handled a total of 1,170 sports boats and 67 official
boats. Currently, cargo traffic no longer passes through the Oldersum lock.
If the Ems lateral canal had been transferred to the Land, this would have been
able to waive the rehabilitation of the lock and concentrate on the water management
measures. As the Ems lateral canal is a federal waterway, the Land can require the
Federal Government to restore navigation, even if this no longer makes economic
sense.
176
177
Source: Federal German Waterways and Shipping Administration (www.wsv.de).
1998 Annual Report, Bundesrechnungshof , BT-Drs. 14/29, no. 31. Declassification of federal waterways.
76
(3)
Other inland waterways: Finow canal
The example of the Finow canal in Brandenburg shows clearly how the Federal
Government is also financing measures which exclusively serve tourism.
As a result of the commissioning of the larger-capacity parallel Oder-Havel
waterway, the Finow lost its significance for cargo traffic in 1914. Because of its low
economic significance, maintenance of the Finow canal was cut to a bare minimum.
As a result of the maintenance backlog, the waterway was no longer fully navigable
from 1992. In 1998 the Finow canal was reclassified from a federal waterway to the
category "other federal inland waterway". In view of this declassification the Federal
Waterways and Shipping Administration – which no longer had any sovereign
authority – worked on reducing the goal, nature and scope of maintenance.
In the same year, the Federal Government entered into a framework agreement
with Brandenburg on the “restoration of the full navigability of the Finow canal” as a
tourism promotion measure. It committed to assuming a major share (some 16 million
Euro) of the total expected expenditure of about 21 million Euro. The Land undertook
to fund expenditure of about 5 million Euro. The Barnim district government also
participated. The Bundesrechnungshof regarded the scope of the measures for a
waterway serving only leisure traffic as unreasonably high.
Figure 4: Finow canal in Brandenburg at Eberswalde 178
(4)
Federal waterway Landwehr canal
The current example of the Landwehr canal shows clearly how the influence of
Land Berlin relating to recreational waterways complicates the mission performance
of the Federal Government.
The federal waterway Landwehr canal, which has no importance for cargo traffic,
runs through metropolitan Berlin in parallel to the River Spree federal waterway (see
figure 5).
178
Source: Federal German Waterways and Shipping Administration (www.wsv.de).
77
Figure 5: Landwehr canal in metropolitan Berlin179
The canal banks dating back to the 18th century
were undermined and no longer offered adequate
stability. For safety reasons, the Landwehr canal
was closed to shipping at times in 2007. The
urgently needed rehabilitation of the banks
necessitated felling those trees close to the banks
which were threatening to fall, most of which
belong to Land Berlin. This evoked resistance from
riverain residents and the nature conservation
authorities. The water management authorities
refused to permit a narrowing of the waterway
Figure 6: Temporary
proposed by the Federal Waterways and Shipping
securing of trees on the
Administration, because they were concerned that
Landwehr canal
water quality would further deteriorate. The historic
monuments authority wanted to see the original state restored with trees further from
the banks. The Federal Government, which as owner of this recreational waterway
has no interest in transport, is required to take into account the justified concerns of
the Land authorities in its measures. As no agreement has been reached yet with the
Land authorities, the Federal Waterways and Shipping Administration has
temporarily secured the trees for the present time (see figure 6).
179
Source: Federal German Waterways and Shipping Administration (www.wsv.de).
78
4.2.2.5
No agreement between the Federal Government and the Länder on
recreational waterways
(1) The Bundesrechnungshof has established that there is little or no significant
commercial shipping traffic on numerous inland waterways, such as the Aller, the
lower Ilmenau, the Munitz-Elde waterway, the Finow canal and Ems lateral canal. It
concluded that these waterways no longer serve general traffic within the meaning of
the Federal Waterways Act. As the status of "federal waterway" is no longer required,
the Federal Government should declassify these waterways and transfer them to the
Länder. Under the Federal Waterways Act this first requires an agreement between
the Federal Government and the Land affected. However, such an agreement regularly
fails to emerge, as no Land is prepared to assume the substantial financial
maintenance burdens involved in taking over a waterway.
The Bundesrechnungshof has recommended to the Federal Ministry of Transport,
Building and Urban Affairs (Federal Ministry) to incite the Länder to agree through
financial concessions, which should not, however, worsen the position of the Federal
Government. The recommended upper limit for an equalisation payment to a Land for
taking over a waterway should be based on the maintenance cost less any revenue
(e.g. rent for quays, water withdrawal, fishing rights). 180
(2)
This proposal for declassification is based on the principle of subsidiarity:
The inland waterways of supraregional or international importance which handle
significant cargo traffic should be administered within the context of the network, i.e.
supraregionally and uniformly nationwide. This is ensured by the Federal Waterways
and Shipping Administration. Federal waterways primarily used for recreational
shipping should be administered by the Länder.
The state treaty on the transfer of the waterways from the Länder to the Reich was
already based on the fundamental idea of subsidiarity. The Reich only took over those
waterways from the Länder which were significant for cargo traffic, and hence for the
Reich as an economic area generally (cf. section 4.2.2.1). By contrast, the Länder
retained waterways of minor (i.e. at most regional) importance for cargo traffic.
Today, the Länder are still owners of a range of Land waterways which correspond to
class I and II inland waterways (only of regional importance). Länder waterways
navigable for sports boots and networked with each other have an estimated length of
2,500 km.
The current division between these “recreationally oriented” Land waters and the
federal waterways which are also primarily used by leisure shipping is accordingly
not based on any substantial considerations. The Federal Government administers
these recreational waterways merely because they had historical importance for cargo
traffic. However, with the shift in cargo traffic to larger waterways with bigger and
more efficient ships or to other modes of transport (road and rail) this significance no
180
1998 Annual Report, Bundesrechnungshof, BT-Drs. 14/29, no. 31: Declassification of federal waterways.
79
longer exists. Today, these waterways are primarily used for regionally limited tourist
purposes. 181
(3) In this situation the responsibilities between the Federal Government and the
Länder in this area should be disentangled.
Responsibility, authority and financial responsibility for all recreational
waterways should be consolidated at the level of the Länder. The Federal Government
would be eliminated entirely as an administrative level. For the citizens the waterways
would obviously be under the exclusive responsibility of the Länder and the Land
organs would be politically responsible.
(4) Based on the audit findings of the Bundesrechnungshof in 1999, the Federal
Ministry commissioned the Federal Waterways and Shipping Administration with
surveying inland waterways as to which can be transferred to the Länder. The list was
available in December 2001 and contained 164 waterways and stretches with a total
length of some 1,100 km. 182 These inland waterways are shown in red in figure 1
(section 4.2.2.2). The Federal Ministry notified the Länder in November 2002 that it
intended to transfer inland waterways no longer needed by the Federal Government to
the Länder. In the following year the Federal Waterways and Shipping Administration
approached the Länder and asked if there was basic interest in taking over these or
any other waterways not in the list. The amount of compensation to be paid by the
Federal Government was not mentioned. In the event of interest on the part of the
Länder, the compensation should be determined jointly with the Land in question, on
the basis of the necessary maintenance expense.
All Länder rejected a general takeover of the waterways or stretches offered,
despite the prospect of compensation. Several Länder refused to answer the letter
from the Federal Waterways and Shipping Administration.
Since 1972 the Federal Waterways and Shipping Administration has only
succeeded in transferring stretches of waterways to the Länder or local authorities in
isolated cases, e.g. the Ems-Altarm to Rhede; the ancillary stretches of the Trave in
Lübeck harbour, and finally in 2005 the Ginsheim Altrhein to the local authority
Ginsheim-Gustavsburg.
181
182
Touristic development of a region as an important economic factor is, however, primarily in the interest of the
Land and district in question, cf. Land Brandenburg Ministry of Economic Affairs (eds.): Grundsätze zur
weiteren Ausgestaltung des Tourismus im Land Brandenburg, Potsdam (no year).
Of these, 525 km are federal waterways, 574 km are other federal domestic waterways.
80
4.2.2.6
Option for eliminating overlaps
(1) History shows that the Federal Government should administer a uniform
network of federal waterways with its own administration, needed primarily to ensure
nationwide cargo transport. Where these federal waterways can also be used by tourist
ships and sports boats, responsibility remains with the Federal Waterways and
Shipping Administration.
However, the Federal Government should not own and administer directly any
waterways which are predominantly used for recreational shipping. These recreational
waterways predominately serve regional interests of the Länder in terms of water
management, tourism, historical monuments, environmental protection and nature
conservation. However, the constitutional requirement for agreement (Art. 89 para. 3
Basic Law) gives the Länder the opportunity to assert their interests vis-à-vis the
Federal Government, particularly since the concerns about transport routes (which the
Federal Government is responsible for) do not apply to recreational waterways. This
also explains why the Länder currently have no interest in taking over the
responsibility for and burden of recreational waterways. In state practice, they can
fully assert their Land interests vis-à-vis the Federal Government without at the same
time being burdened by the administration and duties of an owner. The Länder reap
the benefits, the Federal Government carries the burdens. The Länder also exploit
their opportunities to obtain funding for measures on federal recreational waterways
which are not expedient from the macro-economic viewpoint, because they generate
no benefit for the supraregional transport function of the national waterways network.
(2) The Commissioner accordingly favours amending the Basic Law and rewording
Art. 89 with the goal of limiting the responsibility of the Federal Government
(ownership, administration, financing) to federal waterways which are primarily used
for cargo transport, and hence important for the economy as a whole. In the case of
federal waterways which no longer meet these requirements, the Federal Government
should be given the constitutional power to transfer these waterways to the Land or
Länder in question, in exchange for payment of compensation based on the
maintenance cost. In this way, the Federal Government could respond better to
dynamic changes in the economic cycle rather than making a one-off static adjustment
of the Federal Government’s portfolio of inland waterways at a specific date in time.
Should other inland waterways lose their cargo transport function in future, the
Federal Government would also be able to use its constitutional power to transfer
these to the Länder for a compensation to be agreed with the Land.
The proposed option for eliminating overlaps reflects the underlying principles of
the Basic Law (subsidiarity, democracy and transparency). 183 The Federal
Government would continue to be responsible for an effective and coherent network
of inland waterways crossing Land boundaries. This coherent network of remaining
183
For details, see above, sections 3.2-3.4.
81
inland waterways (shown in blue in figure 1) would not be affected by transferring the
164 waterways and stretches (marked in red in figure 1). 184
The Länder would be responsible for all waterways predominantly used by
recreational shipping. In the event of these waterways being taken over from the
Federal Government, the function, authority and financial responsibility would be
consolidated. The Länder would themselves be financially responsible for all issues,
and specifically the transport function, tourism promotion, water management issues,
environmental protection for all recreational waterways.
(3) The compensation to be paid in the event of the handover of waterways by the
Federal Government to the Länder should not be earmarked for a specific purpose.
Restricting its purpose would conflict with the clear assignment of political
responsibilities. The transfer of recreational waterways (currently still under federal
ownership and administration) would place them in the original area of responsibility
of the Länder and they would become a task for the Land, to be financed by Land
resources (from the compensation payments). The Commissioner believes that the
Federal Government should accordingly not intervene in how the Länder use these
funds by earmarking them. Federal earmarking would also eliminate the unity of
financial and material responsibility which, along with the clear separation of the
spheres of influence of the Federal Government and the Länder, is the aim of this
proposal. Audit experience also teaches that auditing earmarked funds requires a high
input of resources and consequently the establishment of bureaucratic monitoring and
evidentiary structures.
In addition, the democratic principle underlying the requirement to remove
overlaps makes it desirable in future for the level of government responsible to obtain
greater and more clearly attributable legitimation concerning expenditure on
recreational waterways. The Länder could then decide for themselves whether to use
funds for recreational waterways or other areas of policy (e.g. direct economic
promotion, education or budget restructuring). This clarity is currently missing, as the
requirement for agreement means that the Länder demand maintenance of waterways
by the Federal Government for tourist purposes regardless of the benefits to the
economy as a whole, and can prevail in this without having to bear the costs.
4.2.3
Local public passenger transport
Core statement
Since 1996 the Länder have received special payments from the Federal
Government for funding local public passenger transport; these payments are
scheduled to increase to around 7.3 billion Euro per year by 2014. The Federal
Government is accordingly funding a task for which the Länder have original
responsibility. It is virtually impossible for the Federal Government to monitor
184
Cf. figure 1 in section 4.2.2.
82
whether these funds are used for the intended purpose, and the special payments under
Basic Law Art. 106a contradict the system of constitutional rules governing public
finance.
Art. 106a Basic Law should be repealed to make the Länder responsible for
funding local public passenger transport. This would consolidate responsibility for
providing the services and for funding them at a single level of government. A new
distribution of tax revenues between the Federal Government and the Länder and/or a
system of financial equalisation between the Länder is required to ensure that the
Länder have adequate financial resources to perform their tasks.
4.2.3.1
Special financial equalisation under Basic Law Art. 106a
The railways structural reform transferred responsibility for local rail transport to
the Länder as of 1 January 1996. 185 By way of equalisation, Basic Law Art. 106a was
created, giving the Länder the right to an allocation of federal tax revenues for local
public passenger transport. Details are regulated in the Regionalisation Act on Local
and Regional Passenger Rail Services (State Subsidies) (RegG). 186 Under current
planning, the regionalisation funds are due to increase further, reaching an annual
amount of about 7.3 billion Euro by 2014. 187
The Länder can dispose of the funds allocated by the Federal Government under
Basic Law Art. 106a within the framework of the earmarking provided for by the
Regionalisation Act. 188 However, the earmarking is very vague. Under section 1 of
the Regionalisation Act, an adequate public passenger transport service is to be
ensured to the population. The Länder can accordingly use the funds to invest in local
public passenger transport plant, and place contracts with the carriers for specific
public passenger transport services – e.g. the operation of specific rail routes. The
Regionalisation Act does not provide for any monitoring authority by the Federal
Government or sanctions in the event that earmarked funds are used for other
purposes.
4.2.3.2
Incompatibility of the special grants with the system
Provision of local public passenger transport services is a classic example of a
service of public interest. 189 After the railway structural reform eliminated special
185
186
187
188
189
Constitutional Amendment Act of 20 Dec. 1993 (BGBl. I, p. 2089).
The Regionalisation Act dates from 27 Dec. 1993, and was passed together with the amendment of the Basic
Law (BGBl. I p. 2378). The Act was amended in 2002 (BGBl. I p. 2264) and 2006 (BGBl. I p. 1402), but the
basic structure was unchanged.
Draft bill of the Federal Government, Cabinet document E 14/32.01.34-05/6 Va 07 of 14 May 2007,
introduction section B.
Cf. Siekmann, in: Sachs, Grundgesetz, Art. 106a MN. 7; Hidien, DVBl. 1997, 595 (596 et seq., 600).
For this classification of the task, see also section 1 para. 1 ReBasic Law.
83
responsibilities of the Federal Government the principle of Basic Law Art. 30 applies,
i.e. the task accrues to the Länder. 190
The railway structural reform was accordingly initially aligned with the principle
of subsidiarity. 191 Local public passenger transport services are part of regional
services of public interest which can typically be provided decentrally, at the level of
the Länder. The correct place for decision-making about the services provided is
accordingly the Länder, i.e. the lowest level of government which can perform the
task adequately.
However, the railway structural reform did not fully follow the principles which
shaped the Basic Law. On the one hand, responsibility for local public passenger
transport was left with the Länder. On the other hand, however, Basic Law Art. 106a
justified earmarked special Federal Government grants for local public passenger
transport.
This created a structure of interlocking responsibilities which constrains the autonomy
which the Länder are entitled to in performing a Land task. One purpose of the
principle of subsidiarity is to release positive controlling effects, in the sense that the
level of government in question only uses those funds for a task which are seen as
justified in competition with other tasks.192 Such control incentives are, however, only
created if the Länder are financing the task with their own funds, and not receiving
earmarked payments from some other level of state decision making.
The involvement of another level of government also confuses the political
responsibilities. The principle of democracy 193 demands clear accountability for
decisions, which is not given in the current situation. It is true that the Länder decide
which local public passenger transport services are to be funded with the special
Federal Government grants or their own funds. However, if the Länder are faced with
a population desiring better local public passenger transport services, they can claim
politically that the Federal Government is “doing too little”, or try to get the special
grants increased.
Just like other interconnections, the regulation in Art. 106a Basic Law also leads
to a perpetuation of certain financial flows, effectively limiting parliaments' future
freedom to decide on the allocation of state funds. Under the present draft legislation
on the Regionalisation Act, the funds will be set to grow annually until 2014. The
Federal Government is attempting to evaluate needs and review funding levels, at
least for the period from 2015. However, the Länder, who will have to consent to the
amendment of the Regionalisation Act in the Bundesrat, are already voicing
reservations. 194
190
191
192
193
194
Cf. Hidien, DVBl. 1997, 595 (596).
For this principle as a formative principle for the Basic Law, cf. section 3.3.1.
On the positive economic incentives of a clear allocation of responsibility, cf. section 3.3.1 (4).
On the significance that separate performance of responsibilities by the levels of government has for the
democratic process on the other level, cf. above section 3.3.2 (1)-(3).
Draft bill of the Federal Government, Cabinet document E 14/32.01.34-05/6 Va 07 of 14 May 2007.
84
4.2.3.3
Earmarking as an ineffective instrument of control
The earmarking established in Art. 106a Basic Law cannot compensate for the
lack of control given by clear assignment of responsibilities.
As early as 1996, the Federal Ministry of Finance (BMF) tried to determine, on
the basis of the Länder budgets, whether these had replaced the Land funds previously
used for local public passenger transport by Federal Government regionalisation
funds. However, the review did not lead to any reliable conclusions, as the funds were
not uniformly identified in the Länder budgets or funds for local public passenger
transport were not designated as such. The Federal Ministry of Finance was also
unable to check existing indications that one Land had possibly used funds for a
different purpose.
The Bundesrechnungshof is unable to present an informative statement of the use
of funds, as this falls in the area of responsibility of the Land courts of accounts. At
the request of the Bundestag’s Budget Committee, the Bundesrechnungshof asked the
Land courts of accounts in 2006 for information about the use of regionalisation funds
in the period 2003-2005. Due among other reasons to the different structure of the
Land budgets, the results did not provide any comprehensive picture of the use of
regionalisation funds nationwide. In the last few years, the Land courts of accounts
have also primarily audited investments in vehicles and infrastructure which the
Länder financed not only with regionalisation funds but also with their own funds.
However, such investments comprised only a minor share of the regionalisation funds
disbursed.
The relatively ineffective earmarking under Art. 106a Basic Law is to be
strengthened in the impending amendment of the Regionalisation Act. Section 6
para. 2 of the draft provides that the Länder must report to the Federal Government
annually on how the funds are used “transparently on the basis of jointly agreed
criteria”. 195
This is an attempt to ensure efficient use of funds within the existing system.
However, the weakness of the approach is evident from the fact that the Act contains
neither a deadline nor minimum requirements for the reporting obligation. There are
also no defined criteria for success in terms of service parameters (e.g. number of
passengers). 196
The expansion of the reporting obligation in terms of content and procedures must
accordingly be established again in consensus between the Federal Government and
the Länder. In practice, we can expect that the use of funds will be debated in a
195
196
Draft bill of the Federal Government, Cabinet document E 14/32.01.34-05/6 Va 07 of 14.05.2007.
The Federal Performance Commissioner noted this weakness in his statement on the draft legislation
(cf. Az. III 3 – 2007 – 1091 of 25 April 2007).
85
Federal Government and Länder committee, and as a result of the consensus principle
is very unlikely to lead to consequences or even sanctions. 197
Accordingly, the intended amendment of the Regionalisation Act will not
eliminate the disadvantages from the interconnection between the Federal
Government and the Länder based on Basic Law Art. 106a. Instead, audit findings of
the Bundesrechnungshof have established in the widest possible range of cases that
control and coordination structures between the Federal Government and the Länder
do not lead to the desired results, and actually contribute to intransparency. 198
4.2.3.4
Recommendation
Art. 106a Basic Law created a technically unnecessary interconnection which
satisfies neither the fundamental idea of subsidiarity nor the principle of democracy in
terms of clear responsibility for a specific level of government.
Payments under Art. 106a Basic Law are neither earmarked grants by the Federal
Government whose appropriate use can be verified, nor do they justify a genuine
share of the Länder in tax revenue under Art. 106 Basic Law. 199 The partial
elimination of overlapping tasks in the railways structural reform was obtained at the
expense of installing a financial tie in the form of a vertical financial transfer which is
alien to the constitutional system. 200
Practical experience confirms the deficiencies of the regulation, as the vague
earmarking has not proved an effective instrument for ensuring efficient use of funds.
The Commissioner is not opposed to attempts to strengthen earmarking by imposing a
reporting obligation on the Länder. However, the audit findings of the
Bundesrechnungshof show that such control instruments have little effect ultimately.
In addition, no attempts to improve the system can change the fact that Art. 106a
Basic Law is a “constitutional mistake”. 201
The Commissioner accordingly recommends a comprehensive solution to the
problems associated with the Regionalisation Act by repealing Basic Law Art. 106a.
197
198
199
200
201
The problems to be expected are already apparent in the fact that the Länder are rejecting the reporting
obligation under section 6 para. 2 of the amendment to the ReBasic Law; cf. Cabinet document E 14/32.01.3405 of 22 Aug. 2007 with the statement of the Bundesrat and the counterstatement of the Federal Government.
Cf. section 3.3.3 (3). Another example of the ineffectiveness of earmarking as a control tool is provided by the
payments by the Federal Government scheduled to continue to 2013 in continuation of financial aid to improve
the transport situation in local authorities. Section 5 para. 5 of the act eliminating overlapping responsibilities
[Entflechtungsgesetz, Art. 15 of the Concomitant Act to the Federalism Reform of 5 Sep. 2006 (BGBl. I pp.
2098, 2102)] requires evidence of use from the Länder and provides for sanctions if funds are not used for the
relevant purpose. The corresponding procedure is, however, designed in the ordinance on the
Entflechtungsgesetz – issued with the consent of the Bundesrat – in such a way that reductions in funding by
the Federal Government are virtually impossible. If funds were not used appropriately in its opinion, the Land
can designate a substitute project, retroactively establishing appropriate use [section 4 of the implementing
ordinance for the Entflechtungsgesetz of 18 Dec. 2006 (BGBl. I p. 3222)].
Cf. Siekmann, in: Sachs, Grundgesetz, Art. 106a MN. 6.
Cf. Hidien, DVBl. 1997, 595 (596).
This is also Hidien’s overall opinion, DVBl. 1997, 595 (602).
86
Under the fundamental rule of Basic Law Art. 104a para. 1, the Länder would have to
bear the cost of providing local public passenger transport services. Under the
principle of having financial resources adequate to the tasks, this would have to be
taken into account in determining the apportionment of tax revenue under Basic Law
Art. 106 and possible financial equalisation under Basic Law Art. 107. 202 This
solution within the system of the Basic Law would result in complete elimination of
overlaps in the field of local public passenger transport. The Regionalisation Act or
other provisions designed to “regulate” cooperation between the Federal Government
and the Länder would become redundant.
4.3
Social affairs
4.3.1
Basic benefits and placement services for jobseekers
Core statement
The current system for administering and financing basic benefits and placement
services for jobseekers confuses responsibilities and creates openings for inefficient
action. The large number of administrative levels involved and unresolved
distribution of powers contribute to a situation where comparable facts and
circumstances are often treated unequally or even unlawfully.
Effective as of 1 January 2005, unemployment benefit and social assistance to
employable persons were consolidated in a single form of state assistance: basic
benefits and placement services for jobseekers. The individual benefits are handled by
the Federal Employment Agency (Federal Agency) with its local offices and by the
districts and towns constituting districts (local authorities).
In order to consolidate the benefits in a single source, the local authorities and
local employment offices have set up 356 "cooperative units". Programme delivery is
supervised by the Länder in consultation with the Federal Ministry of Labour and
Social Affairs. In addition, the legislature has included an experimental provision.
Under this, 69 local authorities were permitted, on application, to assume full
responsibility as service providers for the benefits. In these cases, oversight lies
exclusively with the Länder.
Federal expenditure on the benefits and placement programme in 2007 has been
estimated at 35.9 billion Euro, making the Federal Government the major funding
institution.
Nevertheless, in the case of the 69 authorised local authority providers the Federal
Government has no means of controlling the regularity, efficiency and effectiveness
of programme delivery, and only inadequate means in the case of the cooperative
202
Siekmann also believes this is the alternative in accordance with the system to Art. 106a Basic Law,
cf. Siekmann, in: Sachs, Grundgesetz, Art. 106a MN. 10.
87
units. The Federal Government and the Länder have differing views regarding the
legal powers of the Federal Employment Agency's local offices and the local
authorities in the cooperative units. This leads to unresolved relationships between the
cooperative units and the providers and between the two providers.
Numerous attempts by the Federal Government to improve the administrative and
control mechanisms have been without success. This shows that the identified
deficiencies in enforcement are primarily inherent to the system and due to the
interconnection between the different levels.
The legislature has reserved the right of ultimate decision on the division of
responsibilities for the basic benefits and placement services for jobseekers. The
experimental provision is accordingly being used to evaluate the practical results of
the organisational models of the cooperative units and authorised local authorities.
The Federal Ministry of Labour and Social Affairs is to report to the legislature by
31 December 2008 on the results of this evaluation.
On completion of the experimental phase, a new legislative decision will have to
be made on the service provision and funding responsibilities. Uniform, lawful
decision-making practice on key requirements for benefit must be ensured nationwide.
The current interfaces at provider and oversight levels should be avoided, in order to
eliminate complicated coordination procedures which are vulnerable to error. At both
levels, tasks and powers should be linked as closely as possible to the funding
responsibility, in order to enhance the direct responsibility of the actors. As part of
this direct responsibility, services required for mission performance but possibly not
available to the providers may be sub-contracted to outside sources.
4.3.1.1 Consolidation of unemployment benefit and social assistance in a
uniform benefit
The Commission “Modern services in the labour market” (“Hartz Commission”,
referred to below as “the Commission”) appointed by the Federal Government in
February 2002 submitted its recommendations for comprehensive reform of the
labour market and employment promotion in August 2002. It proposed among other
things that unemployment benefit and social assistance to employable persons should
be consolidated in a new benefit called “basic benefits and placement services for
jobseekers” under a single entity. It argued that the then coexistence of two taxfunded forms of state assistance under different agencies and with different contact
offices for applicants has proved inefficient, intransparent and hardly citizen friendly.
The lack of coordination and responsibility between the Employment Agency and
Social Services Office resulted in an extended placement period. Some recipients of
assistance also became "lost" between the two systems. In addition, there was
undesirable shifting of costs among the providers.
The proposed consolidation of the two systems of transfer payments also
corresponded to a key result of the “Commission for Reforming Local Authority
88
Finance” appointed by the Federal Government in March 2002. A working group on
“Unemployment and social assistance” formed by the Commission presented several
models for service providers and funding agencies in April 2003, aiming to rapidly
and accurately integrate benefit recipients into the labour market.
Model projects promoted by the then Federal Ministry of Labour (now Federal
Ministry of Labour and Social Affairs) and carried out in 2000-2003 in cooperation
with the former Federal Employment Service (now Federal Employment Agency) and
the local authority central associations had already provided practical evidence of how
to successfully consolidate the organisational and technical resources of the
employment offices and local authority social security offices. 203
Based on these recommendations the Federal Government submitted a draft
“Fourth Act for Modern Services on the Labour Market” on 1 October 2003. In the
three preceding Labour Market Acts it had already implemented part of the
Commission’s recommendations which it felt were suitable for achieving a
sustainable reduction in unemployment. The Federal Government was concerned to
create a uniform structure of responsibility for service provision and funding for the
benefits consolidated in the basic benefits and placement services for jobseekers.
These were to be provided by the Federal Agency on federal commission and funded
by the Federal Government. The Federal Agency’s remit was particularly to “ensure
nationwide, uniform application of the law for comparable facts and
circumstances”. 204 In addition, the Federal Agency’s technical expertise in the field of
job placement and the national network were to assist in integrating employable needy
persons into the normal labour market.
By contrast, the CDU/CSU parliamentary group in the Bundestag intended to
transfer the new benefit to the local authorities under its own draft legislation. 205 This
proposal reflected the view that long-term unemployed frequently have a number of
barriers to placement. The emphasis, accordingly, should not be on placement
activities, but rather on comprehensive social support services. The group argued that
the local authorities have the core competence for this responsibility. Supporters of
this proposal also anticipated that the decentral organisation and responsibility would
lead to competition between the 439 districts and towns constituting districts for the
best reintegration strategies for the long-term unemployed. The resulting financial
burden from taking over the costs of the former unemployment benefit and other
benefits to be borne by the Federal Government was to be reimbursed to the local
authorities through the Länder by the Federal Government on a specific Land basis. 206
203
204
205
206
These included shared contact offices, improving the staffing plan, and intensive customised support to
employable needy in the framework of case management.
BT-Drs. 15/1638, p. 2.
Draft bill to secure a minimum standard of living of 8 Sep. 2003, BT-Drs. 15/1523 and 15/1527, and BR-Drs.
653/03 and 654/03.
Draft bill to amend the Basic Law (insert Art. 106b) of 8 Sep. 2003, BT-Drs. 15/1527.
89
This was intended to reflect the different costs to the Länder of unemployment
benefit. The Bundesrat adopted this approach. 207
4.3.1.2 Details of a “new” system of basic benefits and placement services for
jobseekers
It proved impossible to implement any of the proposals for a clear assignment of
responsibility for the organisation – either to the Federal Agency or the local
authorities – in the legislation. Finally, the Federal Government and the Länder
agreed in conciliation proceedings on a completely different system. The Fourth Act
on Modern Services on the Labour Market of 24 December 2003 consolidated
unemployment benefit and social assistance for employable persons in the Social
Code (Social Code II) for basic benefits and placement services for jobseekers, and
assigned the various individual benefits either to local authority organisations or the
Federal Agency as the responsible service provider. 208 Central questions on mission
performance by the two providers were tackled again before the entry into force of
basic benefits and placement services for jobseekers on 1 January 2005 through the
Local Authority Option Act (“Kommunale Optionsgesetz”) of 30 July 2004. 209
Subsequently, the structure of the basic benefits and placement services for jobseekers
was as follows.
4.3.1.2.1
Agencies providing basic benefits and placement services for jobseekers
The agencies providing the basic benefits and placement services for jobseekers
are the Federal Agency together with the towns constituting districts and districts
(local authorities). The Federal Agency with its employment offices is responsible for
services for maintenance (unemployment benefit II, social assistance) and services for
integration into work (job placement, qualification upgrading and job creation
measures). The local authorities are specifically responsible for services for
accommodation and heating and the flanking integration services (such as child care,
home care for relatives, debtor counselling and addiction counselling).
4.3.1.2.2
Financing basic benefits
The costs of the services and the administrative costs are borne by the Federal
Government and local authorities for those services which they provide. As an
exception to this principle, the Federal Government provides earmarked funds for the
services for accommodation and heating provided by local authorities. In doing this,
the Federal Government is seeking to ensure that the local authorities are relieved by
the Fourth Act for Modern Services on the Labour Market, taking into account the
207
208
209
BT-Drs. 15/1638, p. 10.
Cf. BGBl. (2003) I p. 2954.
Gesetz zur optionalen Trägerschaft von Kommunen nach dem Zweiten Buch Sozialgesetzbuch (Kommunales
Optionsgesetz) of 30 July 2004, BGBl. I p. 2014.
90
savings to the Länder under the Act of 2.5 billion Euro a year. In 2005 and 2006 the
Federal Government bore 29.1%. From 2007 its share is 31.8 %. In subsequent years
until 2010 this will be adjusted for the changes in the number of households in need of
welfare.
The cost share of the Federal Government is regardless of the organisational form
under which the tasks of basic benefits and placement services for jobseekers are
performed.
Implementation of basic benefits and placement services for jobseekers affects
some 7 million claimants. As most of the services are provided by the Federal
Agency, the Federal Government bears the overwhelming share of the costs. It will
probably spend 35.9 billion Euro in 2007 for basic benefits and placement services for
jobseekers.
4.3.1.2.3
(1)
Organisation of basic benefits
Cooperative units
To implement the provision of services from a single source as intended by the
consolidation of unemployment benefit and social assistance, section 44b para. 1
Social Code II provides (as a general case) that the service providers establish
cooperative units through agreements under private or public law. The “cooperative
unit” is a new institutional organisation for cooperation and interconnection between a
federal authority (Federal Agency) and local authority organisations. The cooperative
unit provides a common roof and premises which bring together the agencies
providing basic benefits and placement services for jobseekers. It is not a service
provider itself, but, in the framework of a statutory contractual relationship. acts
externally on behalf of the two “underlying” service providers (local office of the
Federal Agency, local authority service provider). The administration and
management of mission performance within the cooperative units is to follow the
separation of provision and funding. The director represents the cooperative unit in
outside dealings. The most important organ is the agency meeting. Here, the two
service providers have the same number of votes, regardless of the extent of financial
and material responsibility. The local offices of the Federal Employment Agency and
local authorities had established 356 cooperative units by mid-2007.
(2)
Authorised local authorities and divided mission performance
Under an experimental provision, the Local Authority Option Act allowed 69
local authorities, on request, to replace the local offices of the Federal Employment
Agency and take over all the tasks of basic benefits and placement services for
jobseekers as the responsible service provider. The experimental provision is intended
specifically for “testing (…) alternative models of integrating jobseekers in
91
competition with the integration measures of the local offices of the Federal
Employment Agency” (section 6a para. 1 sentence 2 Social Code II).
In the areas covered by 19 local offices of the Federal Employment Agency and
local authorities unable to agree on cooperation in the cooperative units, the local
offices and local authorities provide the services separately.
4.3.1.2.4
Oversight
In the field of basic benefits and placement services for jobseekers, the Federal
Employment Agency is subject to the legal and technical oversight by the Federal
Ministry of Labour and Social Affairs. Oversight of the cooperative units is performed
by the responsible supreme Land authority in agreement with the Federal Ministry.
Oversight of the authorised local authority providers is exercised by the
responsible Land authorities.
4.3.1.2.5
The experimental provision and impact research
The evaluation of the experimental provision provided for by law is aimed at
observing provision of basic benefits and placement services for jobseekers in
competition by the various organisational forms (authorised local authority provider
and cooperative unit), analysing their impact and identifying causes for relationships
between impacts. The central task is to use microeconometric effectiveness and
efficiency analysis to investigate which of the models achieves the goals of the Act
better and more cost effectively, and what factors are decisive in detail. The study also
covers the macroeconomic effects. This involves analysis of labour market, structural
and social policy effects and evaluation of predatory, knock-on and substitution
effects.
The Federal Ministry of Labour and Social Affairs is to report to the legislative
bodies of the Federal Republic by 31 December 2008 on experience with the
experimental provision. In the coalition agreement of 11 November 2005, the
CDU/CSU and SPD parties agreed to extend the prevailing statutory regulations for
authorised local authorities by a further three years beyond 31 December 2010,
although the coalition partners drew differing evaluations and conclusions.
4.3.1.3 Audit findings of the Bundesrechnungshof
According to the audit findings of the Bundesrechnungshof, the detailed
formulation of the administrative and financing systems for basic benefits and
placement services for jobseekers has led to a wide range of dysfunctional effects
which
•
complicate equal application of the law to comparable facts and
circumstances,
•
hamper control and oversight of the Federal Government as the funding
92
•
•
agency for cooperative units, and render this impossible for authorised local
authorities,
blur responsibilities of the levels involved, and
create inadequate incentives for efficient action.
(1) For example, key factual requirements and the extent of promotion of numerous
basic benefits and placement services for jobseekers were interpreted inconsistently
and in some cases unlawfully. In the case of labour market integration services this
resulted in “free ride” knock-on effects which often distorted competition. This
weakened the integrative success of labour market policy instruments. At the same
time, opportunities to participate in labour market policy measures varied throughout
the country, regardless of different regional labour market conditions.
Labour market policy measures were frequently not awarded in competition. This,
plus the lack of networking of the cooperative units and authorised local authorities,
led to a lack of possibilities for comparing prices and content when buying in services
for integration measures.
According to the audit findings of the Bundesrechnungshof, the unequal treatment
of benefit recipients and the inefficient and in part unlawful use of federal funds were
also due to deficiencies in processing by inadequately trained employees and startup
difficulties. However, major deficiencies are attributable to organisational and
management shortcomings in the organisational structures.
The key decision-making body for the cooperative units is the provider meeting.
In these, the local offices of the Federal Employment Agency and the local authorities
have the same number of votes, although the Federal Government finances most of
the services. In many provider meetings, differences occurred at an early stage
between the local offices and the local authorities. The subjects were important policy
decisions, e.g. from promotional priorities to integration services, the use of funds or
general technical instructions relating to mission performance. Because of the
stalemate in the provider meetings, the dispute over authority intensified.
To determine clearly the powers of the local authorities and the Federal Agency in
the cooperative units, the Federal Ministry of Labour and Social Affairs, the Federal
Agency and local authority central associations reached a framework agreement in
August 2005. 210 Under this, the local authorities can assume management of the
cooperative units. If they explicitly waive this, the local offices of the Federal
Employment Agency take over management.
The framework agreement also redefines the technical possibilities for the Federal
Agency to exert influence, and gives it guarantor responsibility. Under this, it has to
ensure the legality of service provision and use of funds and the achievement of the
goals jointly agreed with the Federal Ministry. Conversely, the cooperative units have
implementation responsibility. They determine the concrete local implementation of
210
Framework agreement on further development of the principles of cooperation between institutions of basic
social security in the cooperative units, of 1 August 2005.
93
the services largely independently, and can establish measures for reaching goals
autonomously.
In its 2006 annual report the Bundesrechnungshof noted that the framework
agreement as an “organisational repair measure” has further complicated the
system. 211 The choice given to one administrative level of whether to manage a
specific task or not is unusual in German administrative practice, if not unique.
In the view of the Commissioner, the cooperative units were not improved as an
organisational model by giving the local authorities the option of taking over
management. Even then, responsibilities for administration and funding remain
separated. The interests of those involved do not give reason to expect that federal
funds will be efficiently used in future.
The newly introduced distinction between guarantor responsibility and
implementing responsibility also further confuses responsibility, and promotes legal
uncertainty on the part of those involved. Although the federal level is intended to
ensure legal and efficient use of funds and consistent application of the law to
comparable facts and circumstances, it does not have adequate rights of instruction
vis-à-vis the operational administration. It is also doubtful whether the development
of management by objectives is leading to improved use of funds. According to the
audit findings of the Bundesrechnungshof, target criteria are frequently vague and
inappropriate. In addition, the Federal Employment Agency has no possibility for
asserting national goals in the cooperative units.
(2) According to the audit findings of the Bundesrechnungshof, the organisational
defects of the implementation level are continued in the field of oversight. 212
Oversight of the cooperative units is performed by the responsible supreme Land
authority in agreement with the Federal Ministry of Labour and Social Affairs. 213 In
addition there is technical and legal oversight of the Federal Employment Agency by
the Federal Ministry of Labour and Social Affairs. 214 However, through its local
offices, the Federal Employment Agency is not only a partner in the cooperative units,
but as a service provider (as described above) also ensures legal and efficient use of
funds.
In the view of the Commissioner, this division is inappropriate. The oversight
function consists of reaching a clear decision in cases of conflict, ensuring uniform
procedure and assigning ultimate responsibility. Where oversight functions are
divided, this is not ensured. There are also no effective mechanisms for cases of
conflict in which no agreement can be reached between the Federal Government and
the Länder about intervention by a supervisory authority.
211
212
213
214
2006 Annual Report, Bundesrechnungshof, BT-Drs. 16/3200, no. 3.5.2.
2006 Annual Report, Bundesrechnungshof, BT-Drs. 16/3200, no. 3.5.3.
Section 44b para. 3 sentence 4 Social Code II.
Section 47 para. 1 sentence 1 Social Code II.
94
(3) According to the audit findings of the Bundesrechnungshof, there are also
control problems in the organisational variations in the authorised local authorities. 215
Oversight of the authorised local authority provider is exercised by the responsible
Land authorities. 216 As the Länder (with the exception of Bavaria) have transferred
the tasks of basic benefits and placement services for jobseekers to authorised local
authorities as autonomous tasks, the Land ministries predominantly have only legal
oversight, with no possibility of issuing technical oversight instructions. The Federal
Government has no direct control possibilities, although it bears the costs of basic
benefits and placement services for jobseekers, except where inherently local
authority tasks are involved. The authorised local authorities have little incentive to
perform the tasks with economical use of funds.
To ensure orderly and efficient use of funds, the Federal Government has entered
into administrative agreements with the authorised local authorities. However, this is
not enough to overcome the lack of opportunities for exerting influence. The
Bundesrechnungshof has repeatedly established that the authorised local authorities
and the cooperative units apply different criteria in providing integration and financial
services. The Bundesrechnungshof attributes this to the differences in oversight in the
field of basic benefits and placement services for jobseekers. The Länder do not
coordinate their oversight of the authorised local authorities with the Federal
Government, and have little direct financial interest in efficient working by the
authorised local authorities.
(4) According to the audit findings of the Bundesrechnungshof the current
procedure for settling administrative costs caused high administrative and control
inputs. It could not be ruled out that the Federal Government had been charged
multiple times for administrative costs by providers of basic benefits and placement
services for jobseekers. The reason for this was the lack of transparency in the
administrative costs billed by the Federal Agency and local authorities. An additional
consideration is that administrative costs can be billed as both flat rates and in detail.
Clear attribution was often not possible.
The local authorities represented in the cooperative units and the authorised local
authorities for the most part did not accept the flat rate of 12.6% offered by the
Federal Ministry for the local authority financing share. They mostly deducted a
significantly lower local authority financing share without corresponding
documentation. As a result, the Federal Government was advancing funds for
inherently local authority services.
(5) Through a range of administrative measures, the Federal Government has tried
to improve the control and management mechanisms (e.g. through a role paper on the
content and realisation of guarantee and implementation responsibility by the
215
216
2006 Annual Report, Bundesrechnungshof, BT-Drs. 16/3200, no. 3.5.3.
Section 47 para. 1 sentence 3 Social Code II.
95
cooperative units and the creation of audit groups at the Federal Ministry of Labour
and Social Affairs). According to the audit findings of the Bundesrechnungshof, this
can reduce processing deficiencies, but at the cost of higher administrative expense
without eliminating the structural deficiencies identified.
The role paper was also an attempt by the Federal Ministry of Labour and Social
Affairs and the Federal Employment Agency to clarify their powers in the cooperative
units. Under this, the Federal Ministry of Labour and Social Affairs could instruct the
Federal Employment Agency to exercise its powers as a client in a statutory
contractual relationship with the cooperative units through its local offices. The local
offices could then impose their view on the cooperative units and would have a right
to require information (section 44b para. 3 sentence 1 Social Code II, sections 93, 89
paras 3, 5 Social Code X). Where local authority services are involved, the local
authority providers would have corresponding powers.
The Federal Ministry of Labour and Social Affairs forwarded the role paper to the
responsible Länder ministries and ministers. The Länder do not share the view
expressed in the role paper, and have rejected the Federal Ministry’s opinion in a joint
statement.
4.3.1.4 Framework conditions for a reorganisation of basic benefits and placement
services for jobseekers
In creating the cooperative units and authorising local authorities, the Federal
Government failed to follow the types of administration in the Basic Law. 217 It also
created a construct which went far beyond previous state practice in terms of
complexity and the extent of interconnection between various levels.
The legislature was aware of the complexity and extent of the interconnection
between the parties involved. It accordingly reserved for itself the final decision on
the tasks and funding agencies of basic benefits and placement services for
jobseekers. The impact study on the experimental provision (section 6c Social Code
II) is intended to create the necessary basis for this. 218
It remains to be seen whether the impact study (based on in-depth analysis of the
structure and employable needy persons' closeness to the labour market) can identify
clear relationships between the organisation and the costs and successes of the
activation and integration work, which make possible a (politically feasible) decision
on future undivided responsibility for basic benefits and placement services for
jobseekers.
217
218
On the types of administration generally, cf. section 2.3 and annex I.
The instrument of cooperative units is also the subject of local authority constitutional complaints to be decided
(2 BvR 2433/04, 2 BvR 2434/04). Following the ruling by the Federal Constitutional Court this may make it
necessary to reform the organisation of basic social security for jobseekers before the results of the impact study
are available at end-2008.
96
In any case, the legislature should eliminate the identified dysfunctional effects
and consider the following:
•
Basic benefits and placement services for jobseekers currently secure a
livelihood for some 7 million people. They have central importance in
establishing equitable living conditions and preserving legal and economic
uniformity throughout the Federal Republic of Germany. This, together with
the principle of legality in administration, requires uniform application of
laws. There must be national, lawful uniformity in decisions on the criteria
which are material for the concrete provision of benefits.
•
In order to enhance the direct responsibility of the actors, the tasks and power
of the provider or providers and oversight by managing entities should be
linked as closely as possible with financial responsibility. Interfaces between
different providers in administrative implementation and interlinked or joint
oversight responsibilities should be avoided. Where resources are needed for
mission performance which are not available to the provider(s), these should
be obtained by subcontracting. In contrast to the current cooperation model
with the cooperative unit, in which partners with equal rights often have
conflicting interests, sub-contracting makes it possible to buy in competences
and bundle them without interrupting the clearly defined responsibility of the
provider or providers. Complicated coordination and administrative
procedures which are vulnerable to errors can be eliminated in this way, and
openings for inefficient action reduced.
4.3.2
Federal legislation on granting benefits
Core statement
The Länder implement federal laws granting benefits in their own right (e.g. Act
on Compensation for Victims of Violent Crime, Federal War Victims' Compensation
Act) or on behalf of the Federal Government (e.g. Military Pensions Act). In some
cases, the Federal Government and the Länder share in financing benefits (earmarked
spending), in others the Federal Government finances the earmarked expenditure by
itself. In addition, the Länder have to fund the administrative expenditure involved in
enforcing the laws. Weaknesses in implementing legislation by the Länder lead to
avoidable charges to the budgets of the Federal Government and the Länder. The
Federal Government cannot effectively protect its interests in proper enforcement
through increased influence on the Länder. Specifically, the oversight powers granted
the Federal Government by the Basic Law do not serve the purpose of ensuring
nationwide monitoring of law enforcement by the Länder.
The Commissioner supports consolidating the implementing and funding
responsibility for the federal legislation granting benefits at a single level of
government. This approach would eliminate the systemic conflicts of interest resulting
from the separation of the two areas of responsibility, and would satisfy the
97
elimination of overlaps called for by the principles of subsidiarity and transparency in
the division of tasks between different levels of government. Clear assignment of
tasks under direct responsibility also enhances democratic legitimation of sovereign
activities for the citizenry.
4.3.2.1 Social indemnification law
Wrong decisions by the Länder in implementing acts granting benefits in the field
of social indemnification are at the expense of the Federal Government, which is
unable to counter them directly. In future, administrative and financial responsibility
should be assigned exclusively to the Länder.
4.3.2.1.1
Regulatory system
The social indemnification law regulates benefits in the case of injuries to health
whose consequences society is liable for under the principles of the law on benefits. It
includes measures to maintain, improve and restore health and capability, together
with appropriate economic benefits for the injured person and their surviving
dependants (section 5 Social Code I),
The basis for this is the Federal War Victims’ Compensation Act 219 , which
regulates the claims of the war victims and their surviving dependants. The range of
benefits includes therapy and medical treatment (e.g. medical treatment, aids, spa
treatments), pensions and supplementary benefits (e.g. assistance with care,
supplementary living allowance, child care assistance). The other acts in social
compensation law, namely
• Act relating to Support for Persons held in Custody for Political Reasons in
Territories outside the Federal Republic of Germany (“Häftlingshilfegesetz220 “)
• Act on Compensation for Victims of Violent Crime
221
(“Opferentschädigungsgesetz“ )
• Rehabilitation of Criminals Act (“Strafrechtliche Rehabilitierungsgesetz222 ”)
• Administrative Rehabilitation Act (“Verwaltungsrechtliches
Rehabilitierungsgesetz 223 ”)
• Military Pensions Act (“Soldatenversorgungsgesetz224 ”)
• Civilian Service Act (“Zivildienstgesetz225 ”)
219
220
221
222
223
224
In the form of the announcement of 22 June 1982 (BGBl. I p. 21), most recently amended by the ordinance of
14 June 2007 (BGBl. I p. 1115).
In the form of the announcement of 2 June 1993 (BGBl. I p. 838), most recently amended by Art. 3 of the Act
of 16 May 2007 (BGBl. I p. 748).
In the form of the announcement of 7 Jan. 1985 (BGBl. I p. 1), most recently amended by Art. 2 of the Act of
19 June 2006 (BGBl. I p. 1305).
In the form of the announcement of 17 Dec. 1999 (BGBl. I p. 2664), most recently amended by Art. 1 of the
Act of 3 Aug. 2005 (BGBl. I p. 2266).
In the form of the announcement of 1 July 1997 (BGBl. I p. 1620), most recently amended by Art. 2 of the Act
of 22 Dec. 2003 (BGBl. I p. 2834).
In the form of the announcement of 9 April 2002 (BGBl. I pp. 1258, 1909), most recently amended by Art. 10
of the Act of 20 July 2006 (BGBl. I p. 1706).
98
include as ancillary laws independent requirements in terms of facts and
circumstances. However, the nature and scale of benefits are determined in
accordance with the Federal War Victims’ Compensation Act. 226
The financing share of the Federal Government in expenditure on benefits under
the Federal War Victims’ Compensation Act and ancillary legislation ranges from
40% to 100% (earmarked expenditure). In the 2007 financial year, the funds for
services from the federal budget for war victims and similar benefits under the
ancillary laws totalled some 2.6 billion Euro. According to the bill of the Federal
Government, some 2.3 billion Euro were scheduled for the financial year 2008. 227
The Länder carry out the laws either in their own right (Basic Law Arts 83, 84) or
on federal commission (Basic Law Art. 85). They bear the administrative
expenditures associated with enforcing the laws. The Federal Ministry for Labour and
Social Affairs (Federal Ministry) exercises the oversight rights of the Federal
Government with respect to implementation of the laws by the Länder under Basic
Law Arts. 84, 85. 228
4.3.2.1.2
Weaknesses in implementing legislation
The Bundesrechnungshof in its audits has identified wrong decisions by the
Länder in implementing benefit acts relating to social indemnification, which are at
the expense of the federal budget in its share of financing.
•
The pensions administrations of the Länder approved excessive
balneological therapy at “their” Land’s spa facilities, in order to fill capacity
there.
•
The pensions administrations of the Länder were not careful enough in
reviewing the conditions for benefits to war victims, of which the Federal
Government funds 80%.
•
One Land made use of the possibility for obtaining an advance for benefits
from the Federal Government, even though the conditions for this were not
satisfied.
•
One Land booked revenue from refunds in favour of the Land budget for
years, without forwarding the Federal Government‘s share.
•
The costs of filing and enforcing claims for repayment of wrongly paid
benefits are borne by the Länder, but the Federal Government is entitled to
part of the revenue. The Länder do not always pursue the claims
energetically enough.
•
The Federal Government reimburses the Länder 40% of the pecuniary
benefits under the Act on Compensation for the Victims of Violent Crimes.
225
226
227
228
In the form of the announcement of 17 May 2005 (BGBl. I p. 1346), most recently amended by Art. 4 para. 3
of the Act of 17 Dec. 2006 (BGBl. I p. 3171).
For details of the acts, see annex VI.
Departmental budget 11, section 1110.
For details, see annex V.
99
The Länder finance benefits in kind themselves. In opposition to a circular
from the Federal Ministry stating otherwise, several Länder treated certain
benefits in kind as pecuniary benefits and claimed a refund from the Federal
Government. The Bundesrechnungshof noted similar problems with the
Administrative Rehabilitation Act.
4.3.2.1.3
Interconnection of levels as cause
The division of responsibility for action and funding leads to a splitting of
interests between the Land authorities responsible for implementation and the Federal
Government responsible for partial or full funding of the expenditure for this purpose.
The Länder, which bear the administrative costs of implementation and perform tasks
on federal commission, are caught between the duty to implement the laws properly
and the effort to do so in a way that saves their resources. This intrinsically inevitable
clash of interests colours both the administration on federal commission and the direct
Land administration in carrying out measures cofinanced by the Federal Government.
To assert its interests, the Federal Ministry responsible for oversight of the
implementation of social indemnification law primarily relies in practice on
instruments of informal cooperation. Inaccuracies and scope for interpretation
regarding the individual facts and circumstances under the acts are explored in the
responsible Federal Government – Länder coordination committees, and the results
are forwarded as general recommendations in a circular from the Federal Ministry to
the implementing Land offices. 229 The coordination effort in formulating
recommendations together with the Länder is considerable; as it lacks binding status,
Federal Government oversight of compliance of legal and technical issues is difficult
to perform (Basic Law Arts. 84 para. 3, 85 para. 4).
Even increased use of the instruments of monitoring and control provided by the
Basic Law will are not likely to solve the problem of execution. The issue of
administrative instructions by the Federal Government (Basic Law Arts. 84 para. 2,
85 para 2) has not resulted in any general improvement. Legal oversight by the
Federal Government under Basic Law Art. 84 para. 3 is not a permanent control of
legality, but only permissible where there are concrete indications of a violation of the
law. 230 Indeed, instructions as a tool in the provision of services by the Länder on
behalf of the Federal Government give the Federal Government extensive possibilities
for intervening in the legality and appropriateness of the function. The powers of
instruction and associated powers of oversight, which have so far been exercised in
only a restrained manner 231 are limited to facts and circumstances of individual
229
230
231
E.g. http://www.bmas.bund.de/BMAS/Navigation/Soziale-Sicherung/Soziale-Entschaedigung/ rundschreiben2007.html.
Pieroth, in: Jarass, Pieroth, Grundgesetz, Art. 84 MN. 13
Dittmann, in: Sachs, Grundgesetz, Art. 85 MN. 36.
100
cases 232 , and are not intended to ensure broad control by the Federal Government of
implementation of the acts by the Länder. 233 Finally, the limited possibilities for
sanctions in exercising the oversight measures weaken the Federal Government’s
position vis-à-vis the Länder, specifically as long as liability for proper administration
is limited under Basic Law Art. 104a para. 5 sentence 1 to intent and at most gross
negligence. 234
Overall, the possibilities for control and management are not suitable for ensuring
implementation of the laws which protects the justified financial interests of the
Federal Government and avoids additional administrative expense. The
interconnection between administrative implementation at a number of levels and the
transfer of parts of management of implementation to consensual committees
spanning levels further complicate accountability for the success or failure of
administrative action, and so contradict the constitutionally based principles of
transparency and democracy.
4.3.2.1.4
Options for eliminating overlaps
The negative effects of the identified interconnection on administrative
implementation can, in the view of the Commissioner, be corrected by eliminating the
separation of administrative and financial responsibility between the Federal
Government and the Länder. Decisions would involve a direct financial burden to
those responsible, who would not be able to pass this on.
(1) Responsibility for funding social indemnification should be transferred to the
Länder and associated with responsibility for implementing the acts. The Länder
would bear responsibility for administration and expenditure for these specific
purposes, ensuring congruence of interests in performing the tasks. This approach to
eliminating overlaps would be in line with the functional separation of legislation and
execution embodied in the Basic Law (Arts. 70, 83). There is no obligation under the
Basic Law for the Federal Government to cofund pecuniary benefits paid by the
Länder; Basic Law Art. 104a para. 3 sentence 1 is explicitly worded as an optional
provision. Ending financial involvement by the Federal Government would mean a
return to the constitutional financial principle that the Federal Government and the
Länder each separately finance the expenditures arising out of the discharge of their
responsibilities (Basic Law Art. 104a para. 1).
Direct discharge of responsibilities by a level of government without interference
from interests which must be respected but are set by others corresponds to the
constitutional principle of subsidiarity. For the citizens, clear assignment of
responsibilities permits democratic legitimation of administrative implementation.
232
233
234
Trute, in: v. Mangoldt, Klein, Starck, GG III, 5th ed., Art. 85 MN. 23.
For the dispute over whether general instructions are permissible in execution by the Länder on federal
commission, cf. annex I (section 3.3.2).
Hellermann, in: v. Mangoldt, Klein, Starck, GG III, 5th ed., Art. 104a MN. 216 with further references.
101
For the Länder, it would also increase the scope for decision making in
implementing the laws. Overall, it would also eliminate the administrative and
monitoring effort in settling the share of the Federal Government and the associated
sources of error. Equalisation for the transfer of the current federal share to earmarked
expenditure by the Länder could be ensured through provision of adequate financing.
This could be done e.g. through a per capital lump sum. 235
With regard to the burdens resulting from the war under the Federal War Victims
Compensation Act, this solution would also be compatible with the regulatory
purpose of Basic Law Art. 120 para. 1 sentence 1. The requirement that the Federal
Government should bear the expense of burdens resulting from the war is based on
the idea that funding the burdens resulting from the war is a task for the entire state,
requiring a federal distribution of burdens which avoids an excessive burden on the
Länder affected more than average by the results of the war. 236 The Länder should not
obtain any financial benefit from the fact that the Federal Government bears the
expense. 237 As a result, the expenditure by the Federal Government under Basic Law
Art. 120 will be borne in mind when dividing revenue from taxation between the
Federal Government and the Länder. 238 This expresses the fact that the system of
finances between the Federal Government and the Länder must be considered as a
whole. If it is felt that the solution of transferring financial responsibility together with
adequate funding for the tax is infeasible because of the explicit requirement of a
specific regulation for federal laws in the current version of Basic Law Art. 120
para. 1 239 , this provision could be amended without contradicting its basic idea.
(2) Because of the close relationship with comparable issues for regulation, it is
advisable to include processing of claims for pensions under the Military Pensions
Act 240 and Civilian Service Act 241 in the existing structure of Federal Defence and
Civilian Service Administration.
The Bundesrechnungshof has established that because of the military obligation to
secrecy, the Federal Defence Administration feels unable to date to provide the
pension administrations of the Länder with the information they need to make
decisions under the Military Pensions Act about pensions for former soldiers injured
235
236
237
238
239
240
241
In determining this amount it should be considered that the number of recipients of benefit under the Federal
War Victims Compensation Act is decreasing, so that the financial equalisation needs to be determined every
year. This could be done by taking a representative period from the past and using the number of recipients of
benefit and the actual expenditure by the Federal Government to calculate a per capita amount to be multiplied
by the number of recipients of benefit.
Siekmann, in: Sachs, Grundgesetz, Art. 120 MN. 4; Schaefer, in: von Münch, Kunig, Grundgesetz,
Art. 120 MN. 2; Muckel, in: v. Mangoldt, Klein, Starck, GG III, 5th ed., Art. 120 MN. 7.
Muckel, in: v. Mangoldt, Klein, Starck, GG III, 5th ed., Art. 120 MN. 7; Schaefer, in: von Münch,
Kunig, Grundgesetz, Art. 120 MN. 2
Siekmann, in: Sachs, Grundgesetz, Art. 120 MN 10; Muckel, in: v. Mangoldt, Klein, Starck, GG III, 5th ed.,
Art. 120 MN. 7.
Axer, in: Friauf, Höfling, Berliner Kommentar, Art. 120 MN. 17; and BVerfGE 9, 305 (317 et seq.).
In the form of the announcement of 9 April 2002 (BGBl. I pp. 1258, 1909), most recently amended by Art. 10
of the Act of 20 July 2006 (BGBl. I p. 1706). 241
In the form of the announcement of 17 May 2005 (BGBl. I p. 1346), most recently amended by Art. 4 para. 23
of the Act of 17 Dec. 2006 (BGBl. I p. 3171).
102
in the line of duty. Such problems with implementation could be eliminated by
consolidating responsibilities for decisions with the Federal Defence Administration.
Under the current state of the law, claims for pensions by soldiers during their active
service are implemented by the Federal Defence Administration in its own capacity.
The pension authorities of the Länder only become active on federal commission after
the end of the period of active service. 242 Transferring responsibility for pension
benefits under the Military Pensions Act as a whole would not essentially create any
new task for the Federal Defence Administration. The question also arises as to how
far the current divided administrative process leads to additional coordination effort
because of the involvement of different administrative responsibilities at different
levels. 243 Overall, consolidating responsibility at the level of the Federal Government
would achieve the goals of the statutory provision more efficiently. This solution is
accordingly based on the values reflected in the principle of subsidiarity.
Consolidating technical and financial responsibility also avoids a misalignment of
interests in mission performance.
Comparable considerations apply to pensions for civilian service conscripts. The
Federal Office of Civilian Service is already responsible for welfare and care services
to civilian service conscripts. Processing pension claims under the Civilian Service
Act would fit into this range of tasks and makes it possible to provide benefits to
civilian service conscripts from a single source.
Overall, consolidation of mission performance to a few offices within the federal
administration is also advisable because of the declining number of military and
civilian service conscripts. 244
In addition to expenditure on benefits which it already bears, the Federal
Government would also assume expenditure on administration. To what extent
allocation of adequate revenues would be considered has to be examined. Under Basic
Law Art. 87b para. 2 administrative responsibility could be transferred to the federal
administration 245 by a legislation, which requires the consent of the Bundesrat. An
amendment to the Basic Law would not be required.
4.3.2.2 Child Support Advance Payment Act
In the Länder, the local authority Youth Welfare Offices are responsible for the
Child Support Advance Payment Act. The Bundesrechnungshof has established that
the Youth Welfare Offices have for years neglected enforcing claims against single
parents liable to pay child support. This has resulted in a loss of revenue to the Federal
Government and the Länder running into the hundreds of millions. The Federal
242
243
244
245
Section 88 para. 1 Military Pensions Act.
E.g. minor interpellation BT-Drs. 14/3421, p. 15.
Military service: 144,647 (2000), 68,428 (2005), source: www.bundeswehr.de.
Civilian service: 119,445 (2000), 68,392 (2005), source: www.zivildienst.de.
Cf. for the Federal Office of Civilian Service: BT-Drs. 34 of 30 Nov. 1957 (Explanatory memorandum on
section 1 Civilian Service Act).
103
Government bears one third of total expenditure under the Law of some
800 million Euro a year. It also receives one third of amounts collected,
some 50 million Euro per year. In practice, the Federal Government has no influence
on administrative implementation by the Länder. It should terminate cofunding under
the Law and take the financing share of the Federal Government into account in
supplying funds to the Länder.
4.3.2.2.1
Regulatory system
The Act to Secure Child Support of single parents by making advances
payments 246 has the goal of dealing with single parents and the children in financial
distress. If the parent not living with the family avoids support obligations to a
dependant child or is partly or wholly unable to meet these, the dependent child
receives an advance from public funds. Entitled children must be under 12 years of
age and entitlement lasts for 72 months at most. As the support payments assumed by
the state are not intended to relieve the parent not living with the family who is liable
for support, the claim in the amount of the advance passes to the Land. 247 The Land
must enforce the claims in full and in a timely manner against the person liable to pay
child support in accordance with the provisions of the budget law. 248 As the liability
to pay a support depends on ability to pay, the Land must check this on the basis of
the income and assets of the parent liable, enforce the claim and collect it, if necessary
by recourse. If no enforcement is possible, the benefit becomes a deficiency payment
which the state is forced to assume in full.
The Federal Government bears one third of the earmarked expenditure under the
Law and is also entitled to one third of the revenue from recourse proceedings. Eleven
Länder have made use of the possibility of dividing the share in financing and
revenue from recourse proceedings between themselves and their local authorities. 249
The Länder implement the Law in their own right and have transferred legal
implementation to the local authority Child Welfare Offices. The administrative
expense associated with implementing the Law is borne by the local authorities. The
Federal Ministry for Family Affairs, Senior Citizens, Women and Youth exercises the
power of oversight over the Länder under Basic Law Art. 84 para. 3.
246
247
248
249
Of 23 June 1973 (BGBl. I p. 1184), most recently amended by Law Art. 4 of the Act of 13 Dec. 2006 (BGBl. I
p. 2915).
Section 7 para. 1 Child Support Advance Payment Act.
Section 7 para. 3 sentence 1 Child Support Advance Payment Act.
Section 8 para. 1 sentence 2 Child Support Advance Payment Act.
104
4.3.2.2.2
Weaknesses in implementing laws
While actual expense on benefits under the Child Support Advance Payment Act
has risen between 2000-2006 from about 695 million Euro to about 853 million Euro,
revenue from recourse against persons liable fell in the same period from about
156 million Euro to about 148 million Euro. Only around 21% of annual expense
returned to the Federal Government and the Länder as revenue. 250 In the past few
years, the recourse ratio for the federal budget has changed as follows:
Expense
Federal
Government
(actual)
thousand Euro 251
Revenue
Federal
Government
(actual)
thousand Euro 252
Burden
Federal
Government (net)
2000
251,587
54,4 8 6
197,101
21.6
2001
231,583
52,0 6 0
179,523
22.5
2002
226,457
50,9 4 0
175,517
22.5
2003
245,165
51,1 0 5
194,060
20.8
2004
264,244
54,3 4 5
209,899
20.6
2005
268,330
52,4 3 3
215,897
19.5
2006
284,350
49,1 7 8
235,172
17.2
Year
Recourse
ratio,
%
thousand Euro
Only part of the defaults are due to the fact that the person liable for support was
unable to pay, so that the requirements for recourse were not met. In the past few
years the Bundesrechnungshof has audited selected local authority support advance
offices and established some serious deficiencies and failures in pursuing persons
liable for support. The audit findings of the Länder Courts of Audit support this
finding. 253
The Support Advance Offices frequently neglected to file and pursue claims
transferred to the Land fully and without delay against the parent liable. In several
thousand cases where the Youth Welfare Office had ceased payments to the child
years ago, no start had been made on enforcing cases. Demands for payment and
reminders to a parent liable were not monitored, and were not pursued further for lack
of reminder dates. Lapses under the statute of limitations were tolerated. There was
lack of current overviews of the number and amount of recourse cases. In cases in
which the parent liable lived abroad, half the offices audited made no attempt at all to
take the necessary measures to pursue support claims. The offices stated that
enforcement against a parent liable living abroad were too complicated and not
250
251
252
253
Cf. also Helmke, FPR 2005, 483 (485 et seq.).
Section 1710, item 632 07.
Section 1710, item 232 07.
North Rhine–Westphalia Court of audit, 2007 Annual Report, pp. 276 et seq.; Bavarian SAI, 2006 Annual
Report, pp. 130 et seq.; Saxony Court of audit, 2004 Annual Report, pp. 343 et seq.; Saarland Court of audit,
2004 annual report, pp. 72 et seq.; Lower Saxony Court of audit, 2001 Annual Report 2001, pp. 79 et seq.
105
worthwhile when compared with the possible revenue. Because of a lack of technical
knowledge, the offices cannot tackle the often difficult task of legal processes abroad.
The Bundesrechnungshof has repeatedly criticised inadequate processing of
enforcement, which has the further consequence that the parents liable can avoid their
repayment obligation and hence their liability for support without difficulty.
Individual examples of committed Youth Welfare Offices show that revenue can be
significantly increased if the Youth Welfare Offices pursue claims quickly and
consistently.
4.3.2.2.3
Interconnection of levels as cause
In implementing the Child Support Advance Payment Act the possibilities of the
Federal Government for protecting its financial interests are once again limited. In
practice the Federal Ministry reached agreement with the Länder at the level of
informal cooperation. The lack of binding effect is not the least of problems for the
Federal Government in monitoring compliance with the mutually agreed rules for
interpretation and processing. Now that the Federal Government has reduced its
financing share 254 , to one third of the expenditure on benefits under the Child Support
Advance Payment Act and the Länder are enforcing the law in their own right (Basic
Law Art. 104a para. 3 sentence 2), the Federal Government has only the instrument of
legal oversight. In addition, enforcement of the law is ultimately carried out by local
authorities, and the Länder themselves are limited to legal and technical oversight. It
is not possible for the Länder to issue standards for the local authorities on the nature
and scale of personnel and material resources. This leaves the Federal Government
with very limited possibilities for influencing decisions which impose a financial
burden on it.
The Federal Ministry believes that cofunding by the Federal Government
strengthens its position vis-à-vis the Länder in the goal-oriented implementation of
the Law, and accordingly wants to preserve cofunding by the Federal Government;
but this is not convincing. Cofunding by the Federal Government gives the Länder no
incentive to eliminate the deficiencies identified in law enforcement. Given the
Federal Government’s limited possibilities for influence, it is also not apparent how
financial participation by the Federal Government can strengthen its position in goaloriented legal implementation.
The interconnection of three levels of government in enforcing the Child Support
Advance Payment Act further involves considerable administrative expense. The
Federal Government, the Länder and local authorities are responsible for planning,
providing and settling expense and revenues for the relevant financing level, including
processing financial records, which can involve several accounting and payment
offices. In addition there is the workload associated with the coordination,
management and control between the child support advance offices, the responsible
254
Act of 22 Dec. 1999 amending the Housing Allowance Act and other Acts (BGBl. I, p. 2671).
106
Land offices and the Federal Ministry, including coordinating guidance on
interpretation in the Federal Government – Länder meetings.
The processes are intransparent and it is impossible for the applicant to assign the
areas of responsibility clearly to a given level. For the citizen, this ultimately leads to
a lack of democratic legitimation of sovereign action.
4.3.2.2.4
Options for eliminating overlaps
The problems connected with the separation of responsibility for tasks and
expenses are illustrated in the identified shortcomings in processing enforcing cases.
The Federal Government is interested in efficient administration as a consequence of
the link between processing recourse cases and financing, however, it is not able to
manage and monitor this on a lasting basis. The local authorities who were given the
responsibility by the Länder for performing these tasks have an interest in minimising
implementation effort and expense. The separation of responsibility for performance
and responsibility for financing exacerbates this effect. The Länder courts of account
have also noted this interaction. 255 In this context, the Länder have predominantly 256
made use of the possibility associated with the amended Law 257 of integrating the
local authorities into financial responsibility so that the local authorities can develop
the, previously non-existent, direct interest in expense and revenue, and accordingly
improve their processing of recourse cases. 258
The separation of administrative and financial responsibility between the Federal
Government and the Länder should accordingly be eliminated, and – given adequate
financing – consolidated at the level of the Länder. As the Länder are already
implementing the Law in their own right and exercising technical oversight over
implementation of the Law, it would be logical and make economic sense to give
them full responsibility for funding benefits under the Child Support Advance
Payment Act. Responsibilities would then be transparently and accountably
consolidated where the tasks are performed.
The goals of the Law could be adequately achieved if mission performance was
left entirely to the Länder. Under the principle of subsidiarity, intervention by higher
levels cannot then be justified. Instead, the requirement arises to have the Länder
handle the task as a whole in their own right, avoiding the disincentives that
overlapping responsibilities create between the levels of government.
255
256
257
258
Cf. specifically Lower Saxony court of audit, annual report 2001, pp. 79 et seq. (81 et seq.).
Cf. implementing acts for the Child Support Advance Payment Act, e.g. Bremische Bürgerschaft Drs. 15/718
of 16 May 2001, p. 1.
BT-Drs. 14/1523 of 31 Aug. 1999 (Art. 4: Amendment of the Child Support Advance Payment Act,
explanatory memorandum on p. 171).
This innovation has yet, however, to establish itself nationally. There has been no detectable improvement in
administrative implementation in the Länder where local authorities share in recovered revenue. According to
the audit findings of the Bundesrechnungshof the Youth Welfare Offices still have the erroneous idea that the
revenue only goes to the Federal Government and the Länder.
107
4.3.2.3
Conscripts and Dependants Support Act
Deficiencies in implementing the Conscripts and Dependants Support Act are
directly connected to the fragmented and unsystematic division of processing in the
Länder. Implementation of the Law should be integrated into the Federal
Government’s existing administrative structures.
4.3.2.3.1
Regulatory system
No-one doing their basic military service, reserve duty training, serving on special
foreign assignment or doing civilian service should suffer unreasonable economic loss
as a result. The Conscripts and Dependants Support Act 259 accordingly gives this
group of persons a claim to special financial assistance to secure their needs during
military or civilian service.
Under the Conscripts and Dependants Support Act the Federal Government bears
100% of the expense. Some 79 million Euro have been allocated for this in the 2007
federal budget. 260
The Länder implement the Law on federal commission (Basic Law Art. 85). 261
The Federal Ministry of Defence and the Federal Ministry for Family Affairs, Senior
Citizens, Women and Youth exercise supervision under Basic Law Art. 85 para. 4
over the implementation of the regulations for the areas of military and civilian
service. The administrative expense associated with implementing the Law is borne
by the Länder.
In all, the Länder have 509 Conscripts and Dependants Support offices
responsible for implementing the Law. In the 13 Länder (excluding the city states),
the districts, towns constituting districts and major district towns perform the tasks
under the Act. In the city states of Berlin, Bremen and Hamburg responsibilities are
concentrated in a small number of offices. In Berlin, three district offices implement
the Conscripts and Dependants Support Act. 262 In Bremen, the Social Services Office
is responsible. In 2005, Hamburg consolidated processing from 16 different offices
into one single benefits authority. Rhineland-Palatinate has planned for several years
to transfer implementation of the Conscripts and Dependants Support Act to the Land
Social Affairs Offices, to consolidate processing. Besides the different authorities
involved, the benefit offices are subject to different organisational units within the
authorities. These range from the social services office through the office for special
social services to the resident registration office.
259
260
261
262
In the form of the announcement of 20 Feb. 2002 (BGBl. I p. 972), most recently amended by Art. 6 of the Act
of 22 April 2005 (BGBl. I p. 1106).
Section 1403, item 681 72 (budget: 60 million Euro); section 1704, item 681 31 (budget: 18.6 million Euro).
Section 17 para. 1 USG.
Section 3 of the ordinance governing responsibility for the implementation of individual district tasks by one or
more districts in the field of promotion of upgrading training, public welfare and conscripts’ and dependants’
support of 12 Dec. 2003.
108
4.3.2.3.2
Weaknesses in execution of the act
The Bundesrechnungshof carried out a cross sectional study of administrative
implementation by the Conscripts and Dependants Support benefit offices, and
established an error ratio of some 39% in processing applications. Overpayments are a
charge against the federal budget, which funds 100% of benefits under the Act.
Requirements for entitlement were not evidenced adequately or at all. The
Conscripts and Dependants Support benefit authorities did not clarify outstanding
questions or statements by applicants which required explanation. For example, they
neglected requiring presentation of official forms for landlord certification and
evidence of ancillary rent costs. In the event of a change of residence before starting
service, they approved rent assistance in the amount requested without adequately
checking whether the applicants had been single and were tenants of housing for at
least six months before starting service (six months clause). Conscripts and
Dependants Support benefit offices reimbursed payments by applicants to third
parties, e.g. power utilities, without requiring proof of payment.
In some cases, the benefit offices had inadequate knowledge of the administrative
regulations to be followed, with the result that they
•
did not determine the basis for calculating benefits correctly or at all,
•
failed to follow the regulation for daily calculation of benefits correctly or at
all,
•
failed to apply the regulation for calculation in the event of joint tenancy
correctly or at all,
•
in some cases did not consider opening administrative offences proceedings
against recipients who failed to notify changes relevant for the benefits in a
timely manner or at all, because they were unaware of this sanction option.
Claims for repayment were not pursued consistently enough. Distraint
proceedings for assessed repayments were initiated late.
Besides individual processing errors, the shortcomings in implementation are due
specifically to organisational weaknesses. A direct connection can be made between
processing deficiencies, lack of processing routine and the number of cases for
processing. The results of an audit of 48 Conscripts and Dependants Support benefit
offices in 2004 show that the error ratio rises as the number of applications for
processing decline. At 44 of the audited offices, a clerk dealt with on average 25 cases
a year, and the error ratio was 44.5%. By contrast, at four offices processing on
average 255 cases a year, the error ratio was only 4.5%.
109
Errors occur more frequently if the clerks are responsible not only for the
Conscripts and Dependants Support Act but for other acts as well. If the number of
cases for processing remains small, the clerks do not acquire the technical knowledge
and security in application of the laws necessary for error-free processing. The offices
also lacked competent contacts for difficult individual cases. Consolidating processing
in a small number of benefits offices results in a significant improvement in the
quality of processing compared to other benefit offices.
4.3.2.3.3
Consolidation at Land level
The errors identified could be avoided in part if responsibilities were consolidated
in the Länder. The Federal Government would have the option under the Basic Law
(Basic Law Art. 85 para. 1) to regulate the establishment of authorities in the Länder
with the consent of the Bundesrat, which also covers the power to assign
responsibilities. 263 This would allow consolidation of processing in the Länder by
federal act, consequently eliminating the local authority level of administration. The
expense of implementation due to coordination, management and monitoring could be
reduced.
This model would leave unchanged the Federal Government’s lack of oversight
and control mechanisms in an interconnected multi-level system, and also the
disparity in interests with separated responsibility for funding and administration.
4.3.2.3.4
Options for eliminating overlaps
Here again, solving the deficiencies in implementation should begin with the
separation of responsibilities, consolidating responsibility for funding and
administration at a single level. In the case of the Conscripts and Dependants Support
Act, the Federal Government, which already fully finances the benefits, should also
take over implementation of the act. It could then organise processing so that the
necessary routine and specialist knowledge could develop, reducing sources of error.
This would solve the problem of the Federal Government’s limited possibilities for
influence and monitoring. Such a clear vote for the exceptional transfer of the task to
the higher level of the Federal Government can be justified in accordance with the
principle of subsidiarity by the following considerations.
The current division of administrative implementation of the Conscripts and
Dependants Support Act is due to conditions which no longer exist in this form. With
the formation of the federal armed forces and the promulgation of the Act in 1957, the
legislature transferred administrative implementation to the Länder, which (unlike the
federal armed forces, which were in the process of formation) already had
administrative structures and could already draw on an existing administrative
263
Dittmann, in: Sachs, Grundgesetz, Art. 85 MN. 7; Heitsch, Die Ausführung der Bundesgesetze durch die
Länder, p. 190.
110
background. 264 Today, the federal armed forces and the federal offices responsible for
the civilian service conscripts and their dependants have an administrative apparatus
into which the tasks under the Conscripts and Dependants Support Act could be
integrated.
Originally, the lowest administrative level was to be entrusted with
implementation “because the local authorities are best placed to evaluate the
economic circumstances of the conscript and his family dependants.” 265 Given the
audit findings of the Bundesrechnungshof citing examples of the intensity of
processing the economic circumstances of applicants which are relevant for justifying
benefits, it is doubtful how far the advantages of local closeness serve as an argument
for responsibility by the Länder. Conscripts and Dependants Support Act benefits
today are focused predominantly on rent allowance and compensation for loss of
earnings for military and civilian service conscripts. 266 Direct benefits to family
members, e.g. general benefits to wives of military and civilian service conscripts or
assistance in the event of the birth of a child are rarely granted nowadays. This
development also shows that it is no longer necessary to maintain a local
administrative structure.
Considering the demand for effective administrative structures, it is far more
important that for processing Conscripts and Dependants Support benefits the data on
the applicants' service (e.g. release from civilian service, appointment as temporary
career volunteer soldier, call up and demobilisation of a conscript) 267 is available at
the responsible offices of the Federal Defence Administration or Federal Office of
Civilian Service. To some extent, the task of implementation is closely related
materially to the welfare and care services to military and civilian service conscripts
(e.g. service pay, travel expenses, family visits) which are handled by the Federal
Defence Administration or Federal Office of Civilian Service. Overall, in the case of
claims under the Conscripts and Dependants Support act, processing of benefits by a
single source seems advisable for efficient, error-free and hence also recipientoriented administrative implementation. It is also true for processing under the
Conscripts and Dependants Support Act that consolidation at a small number of
offices within the federal administration would reflect the declining numbers of
conscripts called up for military and civilian service. 268
For conscripts, benefits processing could be handled by the Federal Armed Forces
Service Centres of the Territorial Defence Administration, which are established
throughout the country. The Federal Office of Civilian Service, which is the supreme
federal authority responsible for civilian service, has transferred administration of
264
265
266
267
268
BT-Drs. 3210 of 19 Feb. 1957, p. 17 (explanatory memorandum to section 17 USG).
BT-Drs. 3210 of 19 Feb. 1957, p. 17 (explanatory memorandum to section 17 USG).
Expense for rent supplement and compensation for loss of earnings in 2006 for department budget 14 (military
service) were 52.3 million Euro of total expenditure of about 58 million Euro. In departmental budget 17
(civilian service), expense on rent supplement was 18.5 million Euro of the total budgeted of 19.3 million Euro.
Section 20 para. 5 USG.
Military service: 144,647 (2000), 68,428 (2005), source: www.bundeswehr.de.
Civilian service: 119,445 (2000), 68,392 (2005), source: www.zivildienst.de.
111
pecuniary and material benefits for civilian service conscripts to civilian service
groups and administrative offices which are also established regionally, and which
could take over the tasks under the Conscripts and Dependants Support Act.
The additional administrative expense to the Federal Government would be
compensated for by allocation of adequate revenues for mission performance. The
lack of statistical information makes it impossible to say anything about the size of the
expenditure. However, part of the expenditure could be refinanced by the fact that
improved processing quality would avoid erroneous payments. In addition, processing
can be integrated into existing administrative structures already dealing with related
regulations, so that the transfer would probably not be seriously complicated by
establishing entirely new structures or training staff in an unfamiliar subject matter.
Instead, the consolidation of processing at a small number of offices already dealing
with related transactions would create synergies. Under Basic Law Art. 87b para. 2,
administrative responsibility could be transferred to the federal administration 269 by a
simple legislative act, which requires the consent of the Bundesrat. An amendment to
the Basic Law would not be required.
4.3.3
Agricultural social security system
Core statement
The agricultural social security system is not funded solely from the contributions
of its members, but mostly from federal funds. Farmers’ pensions and accident, health
and long-term care insurance are mostly handled by regionally organised entities
under the supervision of the Länder. The Federal Government lacks influence on
these entities to protect its financial interests appropriately.
The Commissioner recommends a uniform agricultural social security system at
federal level. The associated concentration of systems reflects the declining number of
insured persons liable to pay contributions and reduces administrative expense. In this
way, the Federal Government would have supervisory powers in line with its share of
funding. A clear assignment of responsibilities would then be possible, by eliminating
division of tasks between different levels of government.
4.3.3.1 Oversight and financing responsibility in the social security system
Interconnection between federal and Land levels are characteristic for the social
security system generally. The entities for statutory accident, pension, health and
long-term care insurance are corporations under public law with administrations
which are organised partly on a regional basis, partly statewide, partly covering
multiple Länder and partly on a national basis. The Basic Law largely left unchanged
269
Cf. for the Federal Office of Civilian Service: BT-Drs. 34 of 30 Nov. 1957 (Explanatory memorandum on
section 1 Civilian Service Act).
112
the structures which had emerged towards the end of the 19th century, with their
indirect relationship with the state administration. The provisions of Basic Law Art.
87 para. 2 only cover institutions whose territorial jurisdiction qualifies them as part
of the (indirect) federal or Land administration. Social insurance law as a subject of
concurrent legislation is covered by federal laws; in the pensions and health insurance
system the institutions are funded by contributions from the insured and by federal
grants.
4.3.3.2 Agricultural social security system
The agricultural social security system receives the biggest share of federal
financing. There is a separate social security system for accident, health and long-term
care insurance and pensions insurance for farmers, currently with nine institutions for
each type of insurance, which have joined together at local level in administrative
collectives. These institutions are mostly under the oversight of the Länder.
The agricultural social security system is funded from contributions of the insured
and from the federal budget. In 2007 the federal grant was 3.7 billion Euro, more than
half the total expenditure of the agricultural social security system. Through its grant
to the agricultural health insurance schemes, the Federal Government makes up the
deficit on benefits of the holders 270 , for the accident insurance scheme it reduces the
burden on contributions by member through an annual grant. Under section 78 of the
Act on Old-Age Security for Farmers (“Gesetz über die Alterssicherung der
Landwirte“ – ALG) the Federal Government makes up the difference between
revenue and expenditure of the agricultural pension funds, and is accordingly liable
directly and in full for their deficits.
Germany still has around 160,000 full-time professional farms. As a result of the
structural transformation in agriculture, this number decreases by 3% a year on
average, so that there is also a steady decline in the number of persons liable to pay
contributions in the agricultural social security system. There is no sign of an end to
this trend. 271
The Bundesrechnungshof in its report of 28 May 1999 272 called for a
reorganisation of the agricultural social security system, because the system, which at
that time still had 20 administrative collectives and correspondingly small institutions,
was not efficient. Adapting the administrative structure to the declining number of
insured persons was difficult, in particular because the Federal Government had
virtually no oversight powers, regardless of its high share in financing. 273
270
271
272
273
Sections 37, 66 of the Second Health Insurance for Farmers Act (KVLG 1989) of 20 Dec. 1988, most recently
amended by Arts 7, 8 of the Act of 14 June 2007 (BGBl. I p. 1066).
Cf. annex VII.
Report under section 99 BHO on restructuring of the agricultural social security system, BT-Drs. 14/1101.
BT-Drs. 14/1101, pp. 3, 5 et seq.
113
The aim of the Act on Organisational Reform of the Agricultural Social Security
System of 17 July 2001 (LSVOrgG) 274 was to create more streamlined and
sustainable structures to reflect the declining number of insured persons and
economise on administrative costs. For this purpose the aim was particularly to reduce
the number of institutions, centralise tasks with the federal associations, and improve
the Federal Government’s ability to influence efficient use of funds by the institutions.
In another report of 30 July 2007 275 , the Bundesrechnungshof investigated the
implementation of the organisational reform of the agricultural social security system.
It established that the measures taken to date were insufficient to achieve the goals of
the Act and eliminate the defects identified by the Bundesrechnungshof in its first
report.
4.3.3.3
Weaknesses of the 2001 organisational reform
The institutions often complied with the legislature’s requirements only in formal
terms or with delay. While the 19 institutions in each line of insurance in 2001, for
example, joined together in what are now nine administrative collectives, they still
retained their 20 primary locations. The central computing centre has organisational
deficiencies; there are no common databases to form the basis for central mission
performance by the national associations. Representatives of the Federal Government
sit on the executive boards of the national associations, and the Länder approve the
budget and staffing plans of the institutions under their oversight in agreement with
the Federal Ministry of Food, Agriculture and Consumer Protection. Even so, the
influence of the Federal Government over the institutions, which are primarily under
the oversight of the Länder, has not increased significantly. The decrease in
administrative expenditure has been well short of the expectations of the legislature.
4.3.3.4
Interconnection as the cause
Even if the current organisational structures of the agricultural social security
system largely comply with the requirements of the Act on organisational reform of
social security in agriculture in formal terms, the goals of the organisational reform
have not been reached. The approach of the Act in “strengthening the links between
Land administration and federal financing” 276 has resulted in hardly any improvement
in mission performance because of the conflict of interest between the Land level,
responsible for oversight of the overwhelming majority of institutions, and the federal
level, responsible for funding.
The efforts of the Länder are primarily concerned with securing their enterprises
and institutions, and accordingly run counter to an optimal structure for the
274
275
276
BGBl. (2001) I p. 1600.
Report under section 99 BHO on the implementation and further development of restructuring the agricultural
social security system, BT-Drs. 16/6147.
LSVOrgG-E, BT-Drs. 14/5314, explanatory memorandum p. 12.
114
institutions. The direct Land institutions can hardly be expected to provide any further
encouragement in future for streamlining the administrative organisation. The Federal
Government is interested in economical and efficient use of funds, but in practice has
virtually no influence on the administrative structures and procedures of the
institutions, which mostly come under Land oversight. The influence of the Länder
responsible for approving most institutional budgets is disproportionately large in
terms of their lack of financial responsibility. As long as the Federal Government
lacks effective decision making and supervisory powers, it cannot effectively protect
its financial interests.
4.3.3.5
Further development of the organisational reform
(1) The coalition agreement of 11 November 2005 provides for “evaluation of the
organisational reform passed in 2001 and modernisation of the administrative
structures”. 277
On 22 August 2007, the Federal Government adopted a draft Bill to Modernise the
Laws Governing the Agricultural Social Security System 278 which also includes
regulations on the organisation of the agricultural social security system. To improve
management and coordination, the three national associations of the agricultural
employers' liability insurance associations, the pension funds and the agricultural
health and long-term care insurance schemes are to be merged from 1 January 2009
into a central association for the agricultural social security system. 279 The present
nine administrative collectives of the institutions will be retained, but some specific
tasks will be concentrated on the central association, which will also handle
fundamental and cross-cutting tasks, for the institutions. Among other tasks it will
issue binding guidelines for the institutions on determining staff needs, efficient
structural and procedural organisation and planning and implementing major
investment projects, and regulate the principles of funding and administration of
funds. 280 The central association will also influence the institutions to cut their
administrative costs by 20% in the first five years after entry into force of the Act. 281
The Federal Government expects to strengthen its influence through federal oversight
of the central association. 282
(2) In the view of the Commissioner, the draft bill does not show how it will
permanently eliminate the weaknesses in the organisation of the agricultural social
security system 283 which the Federal Government also sees as such. All the
institutions are preserved, and the Federal Government will continue to be without
277
278
279
280
281
282
283
Number 8.4 “Agrarsoziale Sicherung zukunftsfest gestalten”
LSVMG-E, BR-Drs. 597/07.
LSVMG-E, BR-Drs. 597/07, Art. 6.
LSVMG-E, BR-Drs. 597/07, Art. 1 no. 9, section 143e para. 1 sentence 2 nos 7, 9.
LSVMG-E, BR-Drs.597/07, Art. 1 no. 14, Art. 3 no. 4, Art. 4 no. 3.
SVMG-E, BR-Drs. 597/07, explanatory memorandum A. I. 1. b. (i.f.).
SVMG-E, BR-Drs. 597/07, explanatory memorandum A. I. 1. a. with extensive reference to 2007 Annual
Report, Bundesrechnungshof, BT-Drs. 16/6147.
115
any direct influence on the locations, budgets and staffing plans of most of the
institutions, since its oversight powers over the central association do not extend to
the institutions. The national associations of pension funds 284 and agricultural health
insurance schemes 285 have in any event always been subject to federal oversight. The
existing national associations also already form an administrative collective with
uniform management. If the central association can issue binding instructions, these
should only set a uniform framework, and not include detailed regulations. The
independence of the institutions is explicitly to be protected. 286 The central
association can only “influence” the institutions to bring about the desired reduction
in administrative costs. 287 Via its voice on the central association’s executive boards,
which will still only be advisory, the Federal Government will not be able to influence
the institutions specifically. Overall, the measures in the draft bill only increase the
ability of the Federal Government to influence the institutions in the agricultural
social security system to a minimal extent.
4.3.3.6 Options for eliminating overlaps
Streamlined organisational structures, full utilisation of efficiency reserves, and
economical use of federal funds cannot, in the view of the Commissioner, be achieved
within the existing system with its predominantly regional institutions. Consolidation
of oversight and funding is the only way to permit savings, as this would eliminate the
existing conflicts of interest inherent in the combination of oversight by the Länder
and federal financing.
As the financial burden of agricultural social security system is borne entirely by
the Federal Government, agricultural social security should be uniformly provided by
institutions with national responsibility. The Commissioner recommends creating four
national and independent corporations for retirement pensions, accident, health and
long-term care insurance with a joint administration and four regional offices 288
which will replace the current three national associations and nine regional
administrative collectives, with 36 corporations at 20 locations. Such an
organisational structure under federal oversight would provide efficient agricultural
social security at lower staff and material cost and would ensure efficient use of the
substantial federal funding.
This model, which the Bundesrechnungshof first presented in its report of
28 May 1999 289 and most recently in its report of 30 July 2007 290 was evaluated by
the Federal Government in the organisational reforms of 2001 as a comprehensive and
284
285
286
287
288
289
290
Section 54 para. 1 Farmers’ Retirement Benefit Act (ALG) of 29 July 1994 (BGBl. I p. 1890), most recently
amended by Art. 17 of the Act of 20 April 2007 (BGBl. I p. 554).
Section 214 para. 3 SGB V.
LSVMG-E, BR-Drs. 597/07, explanatory memorandum Art. 1 no. 9, section 143e para. 1 sentence 2 nos 7, 9.
LSVMG-E, BR-Drs.597/07, Art. 1 no. 14, Art. 3 no. 4, Art. 4 no. 3.
Cf. annex VII.
BT-Drs. 14/1101.
BT-Drs. 16/6147.
116
satisfactory solution for the desired objectives, but ultimately was not adopted. 291 In
the explanatory memorandum to the Act on organisational reform of social security in
agriculture the Federal Government stated that in view of the attitude of the Länder,
the chances of implementing such a solution were very doubtful. The explanatory
memorandum to the current draft bill 292 also states that no consensus is currently
possible with the Länder over a federal provider, and that the 2001 organisational
reform will accordingly be developed further, without adopting the
Bundesrechnungshof’ proposal to create a federal provider.
The Commissioner continues to regard the elimination of administrative overlaps
at federal level as the appropriate solution for consolidating responsibilities to create a
structure which reflects the decline in the number of insured persons liable to pay
contributions. In implementing the model, tasks could be usefully consolidated and
priority areas created which make possible better and more efficient mission
performance. Consolidating the organisation of the agricultural social security system
at the federal level could ensure uniformity in application of the laws and an
appropriate influence for the Federal Government. Combining financial and
administrative responsibility would satisfy the clear assignment of responsibilities
required by the constitutional principle of subsidiarity.
291
292
BT-Drs. 14/5314, p. 11.
LSVMG-E, BR-Drs. 597/07.
117
4.4
Domestic security and protection of legal rights
4.4.1
Mobile police forces
Core statement
The Federal Government funds the provision of the mobile police forces of the
Länder with command, control and operational equipment. This is justified by an
“unwritten funding responsibility”. There is, however, no material need for assistance
with equipment, and providing such assistance conflicts with the structural principles
of the Constitution.
The practice of funding the Länder responsibilities is in conflict with the system
and should be terminated. A suitable instrument for this would be an agreement
within the framework of the Federalism Commission II. This could define the limits
of the ‘unwritten funding responsibility’ of the Federal Government more clearly and
return to the structural principles of the Constitution.
4.4.1.1 Tasks of the mobile police forces and funding practice
The mobile police forces of the Länder are independent units within the Land
police forces. Currently, they have some 16,000 law enforcement officers. Their
priority task today is to support standard police work and aid the Land police force
with large-scale events, e.g. football games or demonstrations. Today, assistance to
other Länder by mobile police forces plays an important role. In 2006, law
enforcement officers of the mobile police forces assisted the police forces of other
Länder in 90 operations.
When the mobile police forces were created in 1950 the primary goal was to have
special police units available to avert dangers to the liberal democratic constitutional
system. Deployment for natural disasters and a state of defence are also part of the
responsibilities of the mobile police forces. The relevant provisions of the Basic Law
enable the Federal Government to issue instructions to the police forces of the Länder
in the event of internal emergency, natural disasters extending beyond the territory of
a single Land and in a state of defence. 293
The Federal Minister of the Interior appoints the inspector of the Länder mobile
police forces as his/her commissioner to act as a link between the Federal
Government and the mobile police forces. The commissioner has the job of ensuring
compatibility between the special police units of the Federal Government and the
Länder. For this purpose, he/she is authorised to collect information about the
readiness for deployment of the mobile police forces by visiting the Länder and
293
The individual powers to issue instructions diverge. Under Basic Law Art. 35 para. 3 sentence 1 the Federal
Government can issue an instruction in the event of natural disasters to place police forces at the disposal of
other Länder. Under Basic Law Art. 115f para. 1 no. 2 it can issue instructions to the Länder authorities in a
state of defence. Under Basic Law Art. 91 para. 2 sentence it can in the event of internal emergency place
police forces under its own orders and establish a legal situation which resembles administration services by the
Länder on federal commission (cf. Windthorst, in: Sachs, Grundgesetz, Art. 91 MN 45).
118
observing deployment. He also convenes meetings in preparation for and debriefing
after important operations.
The Federal Government has funded command, control and operational equipment
for the mobile police forces since 1950. In the last five years it spent between 14-20
million Euro per year on this.
4.4.1.2
Federal funding responsibility
Under the division of responsibility in the Basic Law, the Länder are responsible
for policing law and have executive power to avert dangers to public safety and
order. 294 The mobile police forces are part of the Land administration. The Basic Law
does not include any explicit exceptional rule which justifies funding responsibility of
the Federal Government.
Responsibility for funding the equipment of the mobile police forces can only be
derived from an unwritten responsibility based on factual circumstances. However,
according to the rulings of the Federal Constitutional Court, such responsibility based
on factual circumstances requires that funding must be “the essential condition for
performing a task which has been explicitly assigned”. 295 Possible tasks of this nature
are exercising the power of instruction in the event of internal emergency, natural
disasters and a state of defence. 296
In state practice, the Federal Government has cofunded the equipment of the
mobile police forces since 1950. As with other unwritten funding responsibilities,
however, the basis and extent of the responsibility have not been entirely resolved. To
give concrete force to these unwritten funding responsibilities, the Federal
Government and the Länder formulated a draft in 1971 for an “administrative
agreement on the funding of public tasks of the Federal Government and the Länder”.
This agreement is colloquially described as “land consolidation agreement”. It
contains a catalogue of tasks which the Federal Government can fund although it has
no codified responsibility for it in the Basic Law. According to a note in the minutes,
this includes the provisional standard equipment by the Federal Government for the
mobile police forces of the Länder. The Länder ultimately never signed the
agreement. However, the Federal Government largely follows the draft agreement in
its funding practice.
294
295
296
Principle in Arts 30, 70, 83 Basic Law. Exceptions in the area of security are in e.g. Basic Law Art. 73 para. 1
no. 9a (combating terrorism) and Basic Law Art. 87 para. 1 sentence 2 (federal police force).
Cf. BVerfGE 3, 407 (421); 12, 205 (238).
Cf. section 4.4.1.1 on the corresponding articles of the Basic Law.
119
4.4.1.3
Interconnection in practice
According to the audit findings of the Bundesrechnungshof the Federal
Government procured the following command, control and operational equipment for
the mobile police forces in the last five years.
Year of
procurement
Total amount
Individual examples
2002
€20 million
25 x trailers for transporting barriers,
3,500 x truncheons,
1,026 x two-way radios (not helmet mounted)
2003
€18 million
15 x ambulances, 28 x laptops,
360 x light body armour sets
2004
€16 million
9 x medium tractors, 167 x camcorders,
82 x waders
2005
€14 million
6 x special equipment vehicles (divers),
555 x railings, 613 x shields
2006
€14 million
32 x loudspeaker vehicles,
450 x body armour, heavy
The individual examples of procurement do not match the constitutional
justification for funding by the Federal Government. As already shown, this can only
be derived from the Federal Government’s power of instruction in specific
exceptional situations. 297 This would at most justify procurement of
telecommunications and communications equipment which would enable the
inspector of mobile police forces to command these forces.
However, many of the items procured are items of normal police equipment. With
regard to the need for funding by the Federal Government, it must be considered that
in the event of internal emergency, natural disaster or state of defence, deployment of
the mobile police forces will be by units. According to the audit findings of the
Bundesrechnungshof, the personal protective equipment of the individual police
officer (for example) will have only secondary impact on the exercise of the power of
instruction by the inspector of the mobile police forces of the Länder. The personal
equipment (helmet, truncheon, protective vest etc) can accordingly consist of products
from different manufacturers. Provided that certain minimum standards are met, a
lack of uniformity accordingly has no effect on command and control capability.
However, the current administrative agreements between the Federal Government
and the individual Länder and the corresponding documentation of equipment do not
impose any restriction to telecommunication and communications equipment. Under
these, the Federal Government procures at its own expense “command, control and
297
Cf. section 4.4.1.2.
120
operational equipment for the mobile police forces of the Land within the framework
of the budget funds available”. 298
4.4.1.4 Need for the overlapping funding responsibilities
In the history of the mobile police forces going back over 50 years, there has
never been a case of deployment in internal emergency, natural disaster or state of
defence in which the Federal Government has exercised its constitutional authority to
issue instructions.
The list of procurements includes a wide range of general equipment. The mobile
police forces can use this equipment widely in their main area of deployment,
assisting other Land police units. In the view of the Commissioner, in the field of the
mobile police forces the Federal Government is accordingly funding classic
responsibilities of the Länder.
Such funding is in accordance with the content of the administrative agreements
between the Federal Government and the Länder. However, such agreements should
not be used to blur constitutional funding responsibilities. Instead, under the structural
principles of the Basic Law, each level of government should bear the costs of
performing its own tasks. 299
Under the subsidiarity principle, government functions should be performed at the
lowest level at which this is adequately possible. 300 Under this principle, it is also
contrary to the system to create funding interconnections between the Federal
Government and the Länder which are not required to discharge the specific
responsibility.
However, no such requirement exists in the case of the Federal Government’s
authority to issue instructions in the event of internal emergency, natural disaster or
state of defence. To perform the Federal Government’s security responsibilities, it
today has the Federal Police, currently with some 40,000 police officers available for
deployment nationwide. If the Federal Government has to call on the mobile police
forces of the Länder for its responsibilities, it can ensure, by coordinating
procurement, that the Länder units have means of communication which make unitary
command and control technically possible. Questions about functional
communications will also disappear when – as planned – the police forces of the
Federal Government and the Länder switch to a common digital radio system.
Consequently, federal funding of the equipment of the Länder mobile police forces is
not a necessary condition for the Federal Government to discharge its constitutional
responsibilities.
298
299
300
Cf. section 8 of the administrative agreement between the Federal Government and the Land in question.
On this principle of separation, see section 3.3.
Cf. section 3.3.1.
121
4.4.1.5
Recommendation
Federal funding of the equipment of the mobile police forces should cease. It does
not comply with the structural principles of the Basic Law, and there is no longer any
actual need, at least today.
In implementing this recommendation, it should be borne in mind that federal
equipment of the mobile police forces has a solid tradition. The funds have been
flowing since 1950, and have been further established by the “land consolidation
agreement” of 1971 and the administrative agreements between the Federal
Government and the Länder. In the light of the division of responsibilities under the
Basic Law, such a development is not automatic, as the police, in particular, belong to
the core executive responsibilities of the Länder.
The existing tradition can, however, be explained by the fact that the departments
or administrations of the Federal Government and the Länder responsible for security
benefit from this financial interconnection, even though it is contrary to the system.
•
For the Länder police forces it is advantageous to have federal funds available
annually for new procurements. Such procurement would perhaps not be
possible from Land funds, e.g. because it could not have been pushed through
in the political competition with other Land responsibilities.
•
For the Federal Ministry of the Interior, the funding is advantageous because it
opens up the possibility for the Federal Government to “collaborate” in an area
which is allocated to the Länder under the Basic Law. In fact, the funding
enhances the position of the inspector of the mobile police forces of the
Länder, who is appointed by the Federal Minister of the Interior, and gives the
Federal Government more weight in the Federal Government–Länder
committees in the security area.
In the view of the Commissioner this is an example of how financial
interconnection contrary to the system is supported by an interconnection of interests
between the sectoral/technical executives of the Federal Government and the Länder.
The Bundesrechnungshof has called for the Federal Government to cease funding
which does not comply with the Constitution. However, given the interconnection of
interests described, it is an open question whether it will be possible to end the
assistance with equipment for the mobile police forces, or at least to get the Federal
Government to limit its funding to control and command equipment in the narrower
sense (e.g. radio systems).
Accordingly, it is suggested that in the framework of the Federalism
Commission II an agreement be reached on steps towards eliminating those overlaps,
where doing so does not require any amendment to the Basic Law. This applies to
cases where state practice has led to “unwritten funding responsibilities” (including
on the basis of the “land consolidation agreement”) which are remote from the rules
of the Basic Law.
122
A possible suitable instrument for eliminating overlaps could be an agreement on
“unwritten funding responsibilities” within the framework of Federalism
Commission II. This agreement should not only define more clearly the limits of the
funding powers of Federal Government and Länder, but also stick closely to the strict
criteria under the rulings of the Federal Constitutional Court which could justify
unlimited federal responsibility in narrowly restricted exceptional cases.
As already shown, these criteria are not met in the case of equipment of the
mobile police forces by the Federal Government. Part of a clarifying agreement
should accordingly be that the Federal Government ends its funding in this area. If
this is not feasible, the agreement should limit funding to command and control
equipment in the narrower sense of the term. In this case, funding of vehicles,
personal equipment and barriers should be explicitly excluded.
4.4.2
Protection of the Constitution - Domestic intelligence service
Core statement
The tasks of the domestic intelligence service are performed largely in parallel by
the Federal Government and the individual Länder, which each have their own
authorities. The structure has historical reasons, and is no longer justified by objective
considerations. Substantial parallel work and losses at interfaces can be avoided by
consolidating the domestic intelligence service at the level of the Federal
Government. This consolidation would release reserves of efficiency for more
effective protection of the liberal and democratic fundamental order. Personnel and
equipment could also be saved.
4.4.2.1
Structure of the domestic intelligence service
After the Second World War, deliberations on the security architecture of the
Constitution (Basic Law) were strongly affected by historical experience from the
Nazi era in which secret service structures were an integral part of a centralised
apparatus of oppression. The Parliamentary Council was accordingly dominated by
efforts to have security functions performed as far as possible by the Länder. 301 The
Allies became involved in the debate and suggested a compromise solution. 302 This
allowed creation of an office for the Protection of the Constitution at federal level.
However, following the UK model, this would not have any police powers.303
301
302
303
Cf. Werthebach, Droste, in: Dolzer, Vogel, Graßhof, BK, Art. 73 no. 10 MN. 238, 240.
Letter from the Military Governors dated 14 April 1949 no. 2, reprinted in Deutscher Bundestag and
Bundesarchiv (eds.), Der Parlamentarische Rat 1948-1949 – Akten und Protokolle, vol. 8, pp. 230 et seq. The
letter of approval of the Basic Law from the Allied Military Governors also refers to this letter on police powers
(cf. no. 3 of the letter of approval of 12 May 1949, reprinted in Dennewitz in: Dolzer, Vogel, Graßhof, BK,
intro. pp. 129-131).
On its history, cf. Becker, DÖV, 1978, 551 (552 et seq.).
123
The result was a decentralised structure. The Federal Government created the
Federal Office for the Protection of the Constitution as a domestic intelligence
service. In addition, 16 Land authorities for the protection of the constitution were set
up. Organisationally these are integrated into the Land ministries of the interior as
departments or independent Land Offices for the Protection of the Constitution under
the remit of the ministries of the interior. 304 In all, the Federal Government and the
Länder employ several thousand staff in the domestic intelligence service.
4.4.2.2
Existing parallel responsibilities
Under the legal definition of the Basic Law, the domestic intelligence service
protects the liberal democratic constitutional system and the existence and security of
the Federation or a Land.
In the field of domestic intelligence the Federal Government has sole power to
legislate on cooperation between the Federal Government and the Länder. 305 On this
basis the Federal Government has promulgated the Federal Act on the Protection of
the Constitution (BVerfSchG) 306 which divides responsibilities between the Federal
Government and the Länder as follows:
•
The Land authorities collect the requisite information and records for their
work, analyse these and forward them to the federal office and other Land
authorities, wherever necessary for them to perform their tasks. 307
•
The Federal office may only collect information in a Land with the
agreement of the Land authority in the event of activities hostile to the
Constitution which are directed against the Federal Government, and these
extend beyond the frontiers of the Länder, involve foreign affairs, or if a
Land authority asks the Federal office for assistance. 308
The “federal catalogue” poses virtually no limits to the activities of the Federal
Office. Generally, there is a feature justifying federal responsibility, as extremist
efforts are aimed at the Federal Republic of Germany’s liberal democratic
constitutional system as a whole. Significant organisations hostile to the Constitution
are also mostly active in more than one Land.
The Federal Act on the Protection of the Constitution accordingly does not define
separate areas of responsibility for the federal and Land levels, whose tasks overlap
304
305
306
307
308
There are Land Offices for the Protection of the Constitution in Baden-Württemberg, Bavaria, Bremen,
Hamburg, Hesse, Lower Saxony, Saarland, Saxony, Saxony-Anhalt and Thüringen. In Berlin, Brandenburg,
Mecklenburg-Western Pomerania, North Rhine-Westphalia, Rhineland-Palatinate and Schleswig-Holstein the
Land authorities for protection of the constitution are established as departments of the Ministries of the Interior
Basic Law Art. 73 no. 10 b).
Law governing the liaison between federal government level and the Länder on internal security
issues and via the Federal Constitutional Protection Office of 20 Dec. 1990 (BGBl. I p. 2954), most
recently amended by the Act of 5 Jan. 2007 (BGBl. I p. 2).
Section 5 para. 1 BVerfSchG.
Section 5 para. 2 nos 1-4 BVerfSchG.
124
extensively. In practice, this leads to the situation where each of the 17 domestic
intelligence authorities carries out the basic processes of collecting and analysing
information in parallel for their own purposes. Individual agreements cover observing
smaller groups hostile to the Constitution. Here, observation is mostly handled by
offices in the Land in which the groups are based. Results are brought together at the
senior levels of the services and at meetings of information collectors and evaluators.
However, in the absence of a clear division of responsibility, most of the information
is collected and analysed in parallel.
According to the audit findings of the Bundesrechnungshof, the existence of 17
independent organisations complicates operational cooperation and such a large
number of interfaces involves communication risks. The responsibilities are further
blurred by the large number of persons involved, resulting in a tendency for mutual
recrimination in the event of failures or frictions.
An example illustrating the weakness of the current system was the “NPD ban
proceedings” in 2001-2003. 309 . Fundamental deficiencies in the decentralised
structure were then revealed. Among other things, they were apparent in the fact that
none of the domestic intelligence authorities knew all the informants of the other
agencies. Even in the intelligence gathering phase of the application for a ban, none of
the Land authorities voluntarily provided full information about its own sources.
Following a procedural indication by the Federal Constitutional Court, the applicants
first had to carry out a “poll” of all the domestic intelligence services to find out if the
federal executive of the NPD included agents who had been deactivated when the
proceedings were initiated. 310
4.4.2.3 Need for parallel mission performance
Despite the practical coordination problems, the principle of subsidiarity would
justify Land domestic intelligence authorities if there were a separate core task which
could be autonomously performed at the level of a Land.
The object of the domestic intelligence service is primarily the protection of the
liberal democratic constitutional system. Under the homogeneity requirement of Basic
Law Art. 28 para. 1, the constitutional system of the Länder must also comply with
this fundamental principle of the Basic Law. 311 Accordingly no difference is apparent
in the object of protection between federal and Land level.
The domestic intelligence service further protects the existence and security of the
Federation and the Länder. 312 The objects of protection are the territorial integrity,
state autonomy and fundamental state functions of the Federal Government and the
309
310
311
312
Cf. on the application for a court order that the Nationaldemokratische Partei Deutschlands and its subordinate
organisations are unconstitutional, the ruling of the Federal Constitutional Court 2 BvB 1/01 of 18 March 2003.
Cf. ruling of the Federal Constitutional Court 2 BvB 1/01 of 18 March 2003, section 51.
The constitutional freedom of action of the Länder is limited by the fundamental principles of democracy and
inalienable fundamental rights, cf. Nierhaus, in: Sachs, Grundgesetz, Art. 28 MN. 7.
Cf. the legal definition in Basic Law Art. 73 no. 10 b).
125
Länder. 313 Under the Basic Law, however, these objects are inseparably linked at the
level of Federation and Land, because the definition of the Federal Republic of
Germany as a federal state is one of the inalterable principles of the Constitution.314
This means that activities directed against the existence and order of a Land or the
Federation which are intensive enough to merit attention by the domestic intelligence
service also always constitute an attack on the constitutional system of the other level
of government. A clear separation of tasks in the sense that the federal domestic
intelligence service protects the existence of the Federation and the Länder domestic
intelligence services of the protect the existence of the Länder is accordingly
inconceivable in Germany as a federal state. 315
The domestic intelligence service is accordingly a single function which cannot be
divided into a federal segment and the Länder segments. Therefore, the parallel work
seen in practice and the convergent activity by the domestic intelligence services not
only result from lacking coordination but, ultimately, are also due to the fact that all
17 agencies are dealing with the same connected area of responsibility.
Consequently, there is no separate area of responsibility which justifies parallel
mission performance by the Federal Government and the Länder. The historical
motives leading to the creation of 17 separate agencies are also outdated. After World
War II, the creation of “competing” domestic intelligence services in the Federation
and the Länder was a justified reaction against the centralised oppressive structures of
the Nazi era. In fact, however, Germany has developed into a stable democracy whose
security services are firmly anchored in the Constitution. Domestic intelligence
services accordingly pose no risk to the liberal democratic constitutional system
which would require outbalancing by dividing tasks among different levels of
government.
4.4.2.4
Recommendation
If there is no need for parallel mission performance, the question arises of which
level of government the domestic intelligence service should be located in. The level
of the Länder is inappropriate because extremist activities do not stop at Land
frontiers, and attacks on the Constitution are generally aimed at the Federation and the
constitutional system. This is also clear from the fact that the current rules on
responsibility contained in the Federal Act on the Protection of the Constitution pose
virtually no restriction on the activities of the Federal Office for the Protection of the
Constitution, because in practice there is almost always a feature justifying federal
responsibility. 316
313
314
315
316
Cf. Werthebach, Droste, in: Dolzer, Vogel, Graßhof, BK, Art. 73 no. 10 MN. 177-193.
The “perpetuity guarantee” arises out of Basic Law Art. 79 para. 3 in combination with Art. 20 para. 1.
Heintzen points out that the wording “of the Federation or of a Land” in the legal definition of Basic Law Art.
73 no. 10b could be replaced by “Federal Republic of Germany” without changing the meaning (cf. Heintzen,
in: v. Mangoldt, Klein, Starck, GG II, Art. 73 no. 10 MN. 95.)
For the corresponding rules in section 5 BVerfSchG and the “federal catalogue”, cf. section 4.4.2.2.
126
It is accordingly advisable to consolidate the tasks of the domestic intelligence
service at the level of the Federal Government, without abandoning the – necessary –
local operational presence. The principle of subsidiarity is compatible with such
consolidation at the topmost level of government, because a unitary task can only be
performed at the federal level. 317 Consolidation of functions at the Federal Office for
the Protection of the Constitution also complies with the principles of transparency
and democracy, as responsibility can be clearly assigned to the Federal Ministry of the
Interior. 318
This solution would substantially enhance efficiency. Currently, reciprocal
notification, the need to establish agreement between the various offices and
redundant administrative functions tie up some 1,000 staff. The efficiency gains thus
generated could be used for improving products and for savings. In addition, a single
domestic intelligence service could cooperate more effectively with other central
services, such as the Federal Intelligence Service (responsible for obtaining
intelligence abroad) or the military counterintelligence service and foreign
intelligence services.
4.4.3
Civil defence and disaster relief
Core statement
The Federal Government and the Länder jointly perform functions of civil defence
and disaster relief. Unclear delimitations of responsibilities lead to weaknesses such
as inadequate information exchange and lacking efficiency. The Commissioner
accordingly advocates eliminating overlapping responsibilities and a clear allocation
of functions between the Federal Government and the Länder. Cooperation should be
reorganised in terms of the legal (constitutional) provisions. It should comply with the
need for clear democratic responsibility.
4.4.3.1
Legal bases
The ordinance distinguishes between civil defence and disaster relief. Disaster
relief, as a responsibility of the Länder, primarily aims at averting dangers to the
health and lives of human beings. Such dangers may arise from extreme weather
conditions or major accidents. Examples are heavy rain, floods, storms or periods of
drought. Civil defence, on the other hand, covers protecting the civilian population in
a state of defence.
The Federal Government has sole legislative power over civil defence (Basic Law
Arts. 70, 73 para. 1 no. 1). The Länder, including the local authorities and local
317
318
It has already been noted in section 3.3.1 (3) that, depending on the facts and political goals, elimination of
overlapping in favour of the higher level may be indicated, and even compatible with the principle of
subsidiarity.
For the importance of the principle of transparency as an offshoot of the principle of democracy, see section
3.3.3.
127
authority associations, perform these tasks on federal commission (Basic Law Art. 85
para. 1, section 2 para. 1 Civil Defence Act). 319 They are assisted in this by the
Federal Agency for Technical Relief and the disaster relief organisations. The Federal
Government bears the costs to the Länder, except for their personnel and material
administrative costs (section 23 para. 1 Civil Defence Act). The Civil Defence Act
requires that territorial entities cooperate in implementing it.
Disaster relief, which is a matter for the Länder, is included in civil defence. The
Länder also assign the units and facilities they are required to have in readiness for
disaster relief to protect the population from the particular dangers and injuries in a
state of defence. These units and facilities are given supplementary training and
equipment (Civil Defence Act section 11). The Federal Government establishes the
nature and scope of the supplementary training in agreement with the Länder and
bears the costs (specifically for vehicles, equipment etc).
4.4.3.2
Delimitation problems in practice
Under the current division of tasks, there is no adequate assurance that the staff
involved have knowledge about reserve stocks and measures. It is not guaranteed, for
example, that the Länder and organisations will exchange among themselves and with
the Federal Government all the information on existing or missing equipment and
measures.
Terrorist attacks do not constitute a state of defence under Basic Law Art. 115a.
Defence or aid measures in the event of terrorist attacks, accordingly, are the
responsibility of the Länder, as disaster relief. Primarily, since the terrorist attacks in
the USA on 11 September 2001, the Federal Government and the Länder have taken
the position that the division of responsibility into civil defence and disaster relief
based on the cause of the damage has by now become outdated. Instead, it is
appropriate to allocate responsibilities on the basis of the scale of the damage. They
have accordingly been using the term “population protection”, which no longer
distinguishes between civil defence and disaster relief.
The Federal Government also no longer organises its measures in accordance with
a defined need for civil defence; they are intended to provide “population protection”
generally.
4.4.3.3 Conclusion
(1) The measures of the Federal Government lack a constitutional or statutory basis.
Under applicable law, the Federal Government is required to restrict itself to measures
of civil defence.
319
In the framework of implementing laws, the Federal Government is essentially responsible for administrative
tasks (section 4 ZSG); specifically, it covers the particular dangers to the population in a state of defence
(section 6 para. 1 ZSG).
128
If the Federal Government and the Länder maintain their view that federal
responsibility for protection against major damage can be justified beyond the scope
of federal aid under Basic Law Art. 35, an appropriate provision is required in the
Basic Law.
The current deficiencies in cooperation between the Federal Government and the
Länder on civil defence and disaster relief should be eliminated to provide a secure
legislative basis for collaboration between the Federal Government and the Länder on
population protection and to strengthen the direct responsibility of the territorial
entities involved. The Commissioner accordingly advocates the elimination of
overlapping responsibilities and a clear allocation of functions between the Federal
Government and the Länder. The following option could be considered.
(2) A new provision in the Basic Law obliges the Federal Government and the
Länder to create and maintain within their remit suitable structures for averting
danger in the event of major damage. This also includes protection of the population
against dangers and damage in a state of defence. The federal legislature is authorised
to regulate the details.
A corresponding federal law would provide for the Federal Government to equip
and maintain specific facilities, e.g. the Federal Agency for Technical Relief and the
Federal Police, for such major events of damage. They are obliged to cooperate with
the corresponding facilities of the Länder, e.g. by sharing information on equipment
and measures and developing population protection plans. The federal law (with the
consent of the Bundesrat) can also oblige the Länder to maintain corresponding
capacities and oblige these to cooperate with the federal facilities. Each territorial
entity should finance its capacities and measures. This would eliminate the cofunding
under which the Federal Government funds Länder resources for deployment.
Another alternative for eliminating overlapping responsibilities would be to
transfer responsibility for population protection generally (i.e. including civil defence)
to the Länder.
4.4.4
Supervision of nuclear facilities
Core statement
The conflicting interests of the Federal Government and the Länder have led to
weaknesses in implementing supervision of nuclear facilities. For years, the Federal
Government and the Länder have failed to reach agreement on a regulatory
framework for nuclear safety, which is indispensable for ensuring safety and efficient
enforcement.
The Commissioner advocates a clear and unambiguous allocation of
responsibility. The Federal Government, which has already been given exclusive
legislative power in the atomic energy sector through Federalism Reform I, should at
least be given the possibility of establishing binding and uniform regulations for the
129
Länder that are necessary for administrative implementation and important to ensure
nuclear safety without the need to seek Länder consent (“lesser elimination of
responsibility overlaps”). Use of the statutory instruments particularly deserve
consideration to this end.
In addition, the requirement of eliminating overlapping responsibilities, which is
supported by key principles of the Basic Law, also favours considering a “major
elimination of responsibility overlaps”. There are two options for this. The
implementation responsibilities for nuclear facility oversight, which are currently
assigned to the Länder, are transferred to the Federal Government (overlapping
responsibilities are removed and transferred to the higher level), or the Federal
Government’s oversight in the regulation of the atomic sector is withdrawn and
implementation placed in the sole responsibility of the Länder (overlapping
responsibilities are removed and transferred to the lower level).
4.4.4.1
Responsibility for regulation and implementation
The Länder approve and supervise nuclear facilities on federal commission
(supervision of nuclear facilities). 320 In each Land, the responsible Land ministries are
the authorities responsible for approval and oversight. The Federal Government
exercises its oversight of law enforcement by the Länder through the Federal Ministry
for the Environment, Nature Conservation and Nuclear Safety (‘Federal Ministry’).
As the Länder exercise the supervision of nuclear facilities, which is their
responsibility under the Atomic Energy Act, on federal commission, the Federal
Government has legal and technical oversight over implementation by the Länder,
and accordingly has all the supervisory rights associated with administrative
implementation services provided by the Länder on behalf of the Federal
Government. 321
Within the framework of Federalism Reform I 322 , the legislature transferred
legislative power over the generation and use of nuclear energy for peaceful purposes,
which includes the supervision of nuclear facilities to be carried out by the Länder,
from concurrent legislative power to the sole power of the Federal Government (Basic
Law Art. 73 para. 1 no. 14). In fact, this amendment made no significant difference in
comparison to earlier practice, as the Federal Government had already made extensive
use of its concurrent legislative power in the atomic energy sector, leaving no scope
for (concurrent) legislation by the Länder.
However, with this transfer of power the legislature has tacitly 323 clarified that the
sole (and exclusive) regulatory responsibility for the entire nuclear energy sector is
320
321
322
323
Cf. Basic Law Art. 87c in combination with section 24 AtG.
For details, see annex I (section 3).
Constitutional Amendment Act (Arts 22, 23, 33, 52, 72, 73, 74, 74a, 75, 84, 85, 87c, 91a, 91b, 93, 98, 104a,
104b, 105, 107, 109, 125a, 125b, 125c, 143c) of 28 August 2006 (BGBl. I, p. 2034).
No reasons for the transfer are specified in the legislation, and the explanatory note on the transfer of authority
is purely declaratory; cf. BT-Drs. 16/813, p. 12 and Heintzen, in: Starck, Föderalismusreform, MN. 87.
130
vested in the Federal Government, without the need for any kind of justification.
Through this, the legislature has declared the atomic energy sector – irrevocably and
unrestrictedly 324 – to be within the regulatory and administrative scope of the Federal
Government; in accordance with the principle of transparency 325 it has assigned the
task of setting standards and guidelines to the Federal Government clearly,
unambiguously and in its entirety.
4.4.4.2
Implementing legislation as an annex to regulatory power
(1) To perform their tasks of implementation in the field of the Atomic Energy Act,
the approval and supervisory authorities of the Länder are reliant on implementing
regulations of the Atomic Energy Act, which specify the details of the Act’s “open
standards” and makes them applicable in practice. Like all technical and
environmental legislation, the Atomic Energy Act contains numerous undefined legal
terms requiring interpretation (on the factual side) and scope for discretion (on the
side of legal consequences).
Under section 7 para. 2 no. 3 Atomic Energy Act, for example, a key requirement
for approving the operation or material modification of nuclear power stations 326 is
that “the necessary precautions have been taken in the light of the state of the art in
science and technology to prevent damage resulting from the erection and operation
of the installation”.
Concerning such implementation of a federal law by the Länder, the use of “open
standards” in the law merely means that only a federal rule of interpretation and
application can establish in binding and uniform manner for all Länder how an
undefined legal term from the Atomic Energy Act is to be dealt with in administrative
practice (of all Länder).
A possible legal instrument of the Federal Government to establish uniform
standards for implementation by the Länder would be to issue a general
administrative regulation or an ordinance. General administrative regulations binding
on authorities, ordinances are generally binding public law (substantive law). The
boundary between the two is fluid. In many cases it is conceivable that a specific
provision with the same content and effect could be issued both as an administrative
regulation or an ordinance. 327 Functionally, administrative regulations are developed
by the administration, while ordinances are delegated legislation promulgated by the
executive branch based on empowerment by the legislature.328
324
325
326
327
328
This means without the restrictive features of assignment and deviation from concurrent legislation under
Art. 72 Basic Law; cf. on this Oeter, in: Starck, Föderalismusreform, MN. 21 et seq.
Cf. section 3.3.3 above.
The Atomic Energy Act (section 7 para. 1 sentence 1 AtG) talks of “stationary installation for the
production, treatment, processing or fission of nuclear fuel or the reprocessing of irradiated nuclear
fuel”.
Cf. Maurer, Allgemeines Verwaltungsrecht, section 24 MN. 37 et seq. with further references on the
distinguishing features in detail.
Cf. Ossenbühl, Verwaltungsvorschriften und Grundgesetz, pp. 166 et seq.
131
(2) What is decisive for the practice of implementation, and also for the operators of
nuclear power plants and citizens 329 , is that both instruments (general administrative
regulations and ordinances), if issued by the Federal Government, must be observed
as binding standards and specifications by the Länder in carrying out their supervision
of nuclear facilities. Apart from the fact that under prevailing law both instruments
can only be issued with the consent of the Länder in the Bundesrat 330 , they are the
means of choice for the Federal Government for binding the Länder in the execution
of federal laws to standards set by the Federal Government and promulgated and
backed by it, creating the basic requirements for uniform enforcement of the laws in
the entire sphere of application of the Atomic Energy Act (nationally), including with
regard to those subject to the law.
Both instruments are intended to enable the Federal Government, as the
responsible entity setting standards, to ensure implementation of the basic decisions
embodied in the Atomic Energy Act in the administrative practice of the Länder,
through regulations below the level of legislation. The Federal Government is
responsible for this, as an annex to its (now exclusive) legislative power and as part of
its clearly assigned regulatory field of action, and as the regulatory executive it must
seek democratic legitimation for this. 331
4.4.4.3
Conflict of interest and lack of regulatory output
According to the audit findings of the Bundesrechnungshof, the Federal
Government has not succeeded to date in creating uniform and binding
implementation legislation in an appropriate and adequate manner for implementing
the Atomic Energy Act by the Länder. 332
Because of these different attitudes of the Länder acting on federal commission,
the Federal Government has not issued any guidance since 1999 on nuclear facility
oversight and the important preventive safety requirements. 333 The Federal
Government assumed that the necessary consent by the Länder in the Bundesrat
would not be forthcoming. 334 This is why there is still no guidance on the safety
requirements for atomic power stations and other nuclear installations.
329
330
331
332
333
334
Protection of life, health and property is an important goal of the Act, according to section 1 no. 2 AtG.
Cf. Basic Law Art. 85 para. 2 sentence 1 (general administrative regulations) and Basic Law Art. 80 para. 2
(ordinances).
Cf. section 3.3.2 above.
The Federal Ministry itself stated most recently in 2006 that the current nuclear safety regulations are urgently
in need of modernisation. It noted that Germany is also the object of international criticism, as it lacks binding
standards for operating nuclear power plants in accordance with the state of the art in science and technology.
As a result, major parts of the nuclear safety regulations (primarily formulated in the 70s and 80s) should be
updated.
Regulation on nuclear security reliability review of 1 July 1999 (BGBl. I p. 1525), most recently amended by
the Act of 21 Aug. 2002 (BGBl. I p. 3322).
Consent by the Bundesrat requires a majority of the total statutory votes of the Länder represented in the
Bundesrat (Basic Law Art. 52 para. 3 sentence 1), i.e. 35 of 69 votes, where the number of votes a Land has is
determined by Basic Law Art. 51 para. 2.
132
As far as the other instrument available to the Federal Government for
implementing the Atomic Energy Act (general administrative regulations) is
concerned, the Federal Government has, since entry into force of the Atomic Energy
Act in 1959, issued just four general administrative regulations 335 ; the last general
administrative regulation dates from 1995 336 and is more than ten years old.
The Bundesrechnungshof regards this low output of regulations in the
implementing legislation of the Federal Government as due (among other reasons) to
the fact that the basic political disagreement between the Federal Government and the
Länder meant that necessary majorities were not feasible in the past. 337 The extensive
rulings of the Federal Constitutional Court on the Federal Government’s right to issue
instructions in this area also show that the conflict of interest between the actors
involved in the Federal Government and the Länder 338 concerning the regulation of
the atomic energy sector had political effects reaching into daily implementation
work. 339
4.4.4.4 Weaknesses of nuclear safety regulations
(1) The new version of the nuclear safety regulations, which urgently need
modernising, is an example taken from the audit findings of the Bundesrechnungshof
demonstrating a conflict of interest between the Federal Government and the Länder
in the field of implementing the law on the supervision of nuclear facilities; this
example is of particular practical importance, because it relates to safety standards.
These regulations are central to the supervision of nuclear facilities. Under section 7
para. 1 of the Atomic Energy Act, the operation or material alterations to stationary
installations for the generation of atomic power can only be approved by the atomic
supervisory authority (Länder) if (inter alia) “the necessary precautions have been
taken in the light of the state of the art in science and technology to prevent damage
resulting from the erection and operation of the installation” (section 7 para. 2 no. 3
AtG).
The undefined legal term “state of the art in science and technology” and its
definition are of decisive importance for the precautionary safety standards the
operator of a nuclear power plant is required to comply with, and which the Land
atomic energy regulatory agency must require of it. There is currently no uniform,
335
336
337
338
339
In accordance with the provision of Basic Law Art. 85 para. 2 sentence 1 with the consent of the Bundesrat.
General implementing guidance on the Environmental Impact Assessment Act of 18 Sep. 1995
(GMBl. 1995 p. 671).
Cf. also Kienbaum report on the future viability of the administrative services by the Länder on federal
commission in the field of nuclear energy, 22 Sep. 2004, section 8.1.3.
Synonymous with this was the term “phase-out oriented implementation” (cf. Sendler, DÖV 1992, 181) and
the right to exercise technical authority over the Länder gained by federal regulators from the Federal
Constitutional Court in response; cf. BVerfGE 81, 310 (331) (Kalkar ruling 1990) and BVerfGE 104, 249
(Biblis ruling 2002).
The political controversy over the peaceful use of nuclear energy has spread in practice to what was for a long
time relatively “unobtrusive administrative form of provision of administrative services by the Länder on
federal commission”, cf. Ossenbühl, in: Brenner et al., Festschrift für Badura, p. 975 et seq.
133
national statement of the requirements by the Federal Government which is legally
binding on the Länder. 340
Instead, the nuclear safety regulations to be applied in accordance with the state of
the art in science and technology are currently negotiated in a complex system of
committees by the Federal Government and the Länder and outside consultants, and
are managed through directives, guidelines and other soft instruments which are
neither legally binding nor permit clear assignment of responsibilities. 341 In detail, the
practice of application of the nuclear safety regulations and their development are as
follows.
(2) State of the art in science and technology (Atomic Energy Act section 7 para. 2
no. 3) is essentially explained in the following safety “regulations”:
•
Federal Ministry of the Interior safety criteria for nuclear power plants 342 ;
•
directives of a federal ministry, e.g. on the technical knowledge required of
nuclear power plant personnel 343 ;
•
safety guidelines of the Reactor Safety Commission (RSK) 344 ;
•
rules of the Nuclear Safety Standards Committee (KTA)345 .
As these “regulations” were implemented neither through ordinances nor general
administrative regulations of the Federal Government, they are not legally binding for
the Länder. The prevailing nuclear safety regulations accordingly consist of a large
number of nonbinding individual rules; there is no legally binding and systematic
overall code. There has also been no thorough review of whether the prevailing
fragmented nuclear safety regulations still comply with the state of the art in science
and technology.
In particular, more recent developments – which can, for example, be derived
from the safety requirements discussed by the International Atomic Energy
Organisation (IAEO) – have not yet been incorporated into the German nuclear safety
regulations. These include e.g. developments in the last few years in safety
340
341
342
343
344
345
Neither in the form of an ordinance nor in the form of a general administrative regulation; on both instruments
see above, section 4.4.4.2.
This is unsatisfactory measured against the Commissioner’s guiding standard of eliminating overlaps (see
above, section 3.3) with its requirement for unambiguous and undivided assignment of responsibility (principle
of transparency), and the increased (i.e. autonomous) capacity to act of the institution dealing with the task
(principle of democracy).
E.g. safety criteria for atomic power stations dated 21 Oct. 1977 (BAnz. 1977 no. 206).
Guideline for programmes to maintain technical knowledge of shift management staff in atomic power
stations, announcement by Federal Ministry of 1 Sep. 1993 (RS I 3-13831-3/2).
E.g. RSK guideline for pressurised water reactors (original version, 3rd ed. of 14 Oct. 1981 with amendments of
15 Nov. 1996). The RKS is a committee of experts established by the Federal Ministry of Environment, Nature
Protection and Reactor Safety. Its function is to advise the Federal Ministry knowledgeably and objectively on
all aspects of safety and security of nuclear installations and the disposal of radioactive waste; cf. section 2 of its
statutes of 22 Dec. 1998 (BAnz. 1999 p. 201, www.rskonline.de).
The KTA was established in 1972 by decree of the Federal Ministry of Education and Science, on the model of
the “Deutsche Dampfkessel-Ausschuss (DDA)”. Its function is to ensure that safety regulations are drawn up
and encourage their implementation in areas of nuclear engineering where, as a result of experience, a
consensus has emerged among experts at manufacturers, assemblers and operators of atomic power plants,
independent experts (e.g. TÜV) and the authorities. Currently there are approx. 90 KTA technical regulations
(www.kta-gs.de).
134
management 346 and digital control technology. When the German nuclear power
plants were constructed, only analogue control technology was available. The digital
control technology developed in the following years should, therefore, increasingly
replace the analogue technology. The current safety regulations include no binding
statements on digital control technology and the switch to digital control technology.
Since the start of the 90s, doubts have arisen at Federal Government and Länder
level whether the nuclear safety regulations still appropriately reflect the current state
of the art and knowledge. The only part to be continuously updated are the technical
rules of the KTA 347 relating to individual safety aspects. All efforts to modernise the
nuclear safety regulations as a whole and consolidate them in a code which is legally
binding on all involved, systematic and transparent have failed.
4.4.4.5 Interconnection as the cause
(1) The following outline, which is based on the audit findings of the
Bundesrechnungshof, shows clearly that the main causes of this “failure” lie in the
divergent interests of the actors involved in the Federal Government and the Länder,
combined with the strongly interconnected structure in establishing binding
implementing law and the resulting veto possibilities.
The Commissioner is not concerned here with analysing and criticising past (and
present) conflicts of interest between the levels involved and their actors. This is
neither his task, nor would it be appropriate to the understanding of the federal
constitutional system, because in a federal multilevel system, conflicting interests are
legitimate and even inherent in the system. However, in the light of the guiding
principle 348 of eliminating overlapping responsibilities and the underlying basic
principles of democracy and transparency 349 it is a matter for concern, if the
combination of conflicting interests and excessive interconnection mean that one level
can no longer discharge its responsibilities in an autonomous and clearly attributable
manner without the other. The interconnection must then be eliminated. Appropriate
measures must be taken to enable a “resolution” of conflicting interests, however
legitimate from the point of view of the respective levels, which is compatible with
the system. This can be done by enabling the level that has assigned responsibility for
a specific area to take the material decisions in dispute autonomously. Whether the
decision as taken is right or wrong is no longer “decided” by the interconnected level
through a process of ultimately blocking the decision of the other (and actually
responsible) level by exploiting all the options of interconnection, but by the majority
of the people in the democratic process of elections.350 This is the right and only
346
347
348
349
350
Safety management includes all activities in planning, organising, managing and controlling persons and
working activities with a view to the efficient achievement of a high level of safety.
To quote one example, KTA 3101.3 "Auslegung der Reaktorkerne von Druck- und Siedewasserreaktoren;
Teil 3: Mechanische und thermische Auslegung" (60th KTA meeting, 7 Nov. 2006).
Cf. section 3.4.
Cf. section 3.3.
For details, see section 3.3.
135
legitimate source of correction, even (and, indeed, specifically) in a democratic
federal state.
Given this, according to the audit findings of the Bundesrechnungshof the
weakness of the “nuclear safety regulations” has evolved as follows due to
interconnection.
(2) On an initiative of the Federal Ministry, and with due regard to the known safety
deficiencies in the nuclear safety regulations, the KTA was asked from 1998 to
develop a new and comprehensive catalogue of regulations on the safety standards to
be met under section 7 para. 2 no. 3 AtG, which would then be for the Federal
Government to implement in a generally binding form (“KTA 2000”).
However, based on the statement of 13 March 2003 by the Reactor Safety
Commission, the Federal Ministry came to the conclusion that the draft since
produced by KTA 2000 did not reflect the current state of the art in science and
technology, as it included a very large number of exceptions and compromises. The
Federal Ministry accordingly saw the project KTA 2000 as finally failed. The
executive board of the KTA then resolved to phase out the project as of
November 2003.
The Federal Ministry then commissioned the Gesellschaft für Anlagen- und
Reaktorsicherheit (Technical Facilities and Reactor Safety Company – GRS) 351 to
develop new nuclear safety regulations, based, inter alia, on the existing working
results of the KTA, academic research and international rules and agreements
(specifically of the IAEO). The draft produced by the GRS for new nuclear safety
regulations (GRS draft) provided for a total of eleven modules on all key safety
questions and standards under the heading “Basics of safety for atomic power plants –
safety requirements based on the state of the art in science and technology (safety
requirements for atomic power plants)”.
As the Federal Ministry had, in the view of the Länder, broken off the previous
consensual process for drawing up the nuclear safety regulations by the KTA, and had
commissioned the GRS to draw up higher-level nuclear safety regulations on its sole
responsibility (GRS draft), the Federal Government, as a result, was unable to achieve
agreement on consideration and adoption of new nuclear safety rules either with the
Länder or with the operators and the other experts (all members of the KTA). The
main reasons for this were:
(3) The operators and the Länder feared that by developing nuclear safety
regulations unilaterally the Federal Ministry would establish safety requirements
through the GRS which the nuclear power installations in operation at the time would
351
GRS is a technical and academic research and expert organisation focusing on nuclear safety. It was formed in
1976 as a merger of the Reactor and Plant Safety Laboratory and the Reactor Safety Institute of the technical
inspection associations. The shareholders are the Federal Government (46%), Technical Inspection Association
(TÜV) and German Lloyd (together 46%) and the two Länder with the principal locations, Bavaria and North
Rhine – Westphalia (4% each).
136
not be able to meet. In their view, the newly commissioned regulations in the GRS
draft were intended to block approval of major modifications to installations by
reference to the nuclear safety regulations, or to set requirements so high that any
modification suitable for approval no longer made commercial sense for operators.
Currently, under the provisions of section 7 para. 2 no. 3 of the Atomic Energy
Act the Länder are in fact required to take into account the state of the art in science
and technology for approval and supervisory processes. However, they are required to
observe the principle of proportionality, if operators of nuclear power installations
already have enforceable approvals. For this reason, a modification to installations
often cannot be judged on the same basis that would be used for approving a new
nuclear power plant. 352 In the view of several Länder, the GRS draft was not helpful,
but rather reflected a hypothetical nuclear power installation built to current standards.
The GRS draft, in their view, meant that deviations had to be reviewed by the Federal
Government and the Länder in individual cases on the basis of expert opinions. They
were also concerned that individual operators would no longer voluntarily install new
safety technology if approval was needed for this. They argued that to the extent that
power plant operators were not legally obliged to replace equipment, although this
was useful for safety reasons – e.g. switching to digital control systems – there was a
danger that operators would avoid modernisation, because approval proceedings
based on the GRS regulations could lead to administrative orders requiring extra
costs.
The Länder objected particularly to the fact that the Federal Government had
discontinued the KTA 2000 system, which they felt was a good one. The system, with
adaptation to the state of the art in science and technology plus the KTA 2000
regulations, would, they claimed, have the advantage that it would draw on the
expertise of the Länder, the operators and the local experts. They felt that both the
Federal Government and the GRS were too remote from actual “local” problems.
Conversely, the Federal Ministry felt that the nuclear safety regulations should
reflect the current state of the art in science and technology. Under this view, the
Länder could consider, in the framework of their approval and supervisory practice,
whether an application for a modification to an installation which no longer meets
today’s requirements was permissible for reasons of proportionality because of the
existing operating licence. However, the Federal Government might review the
Land’s decision in the course of its supervision. If it came to a different conclusion
after this review, it could instruct the Land in question to refuse approval, with
reference to the nuclear safety regulations.
352
For example, deviations are possible from the requirements for control technology (digital) based on the latest
state of the art in science and technology in the case of older, "grandfathered" power stations, provided that the
safety of the plants is not affected.
137
(4) The Federal Ministry sees two options for introducing the nuclear safety
regulations developed by the GRS.
The management commission of the Länder Atomic Energy Committee, on which
both the Federal Government and the Länder are represented 353 , decided at its
meeting on 19 January 2006 to adopt the regulations and implement its basic elements
as ordinances or general administrative regulations of the Federal Government.
However, due to the requirement of obtaining Bundesrat consent to both
instruments 354 , this approach will only succeed if a majority of the Länder consent in
the Bundesrat. Given this, it can be assumed that the Länder will make such consent
conditional on revising the GRS draft in their favour. The Federal Ministry assumes
that it will become clear over the course of 2007 whether agreement with the Länder
is possible. However, given the failure to reach consensus on the development of the
KTA 2000 safety regulations, from the point of view of the individual Länder an
agreement will result in promulgation of an ordinance or general administrative
regulation only in a year or two – if at all.
Should agreement not be reached with the Länder, the Federal Ministry intends to
notify the Länder, the operators and the experts that the “criteria for a federal
supervisory review” will in future be the nuclear safety regulations developed by
GRS. Should the Länder fail to comply, the Federal Government will, in the
framework of federal supervision, require a Land to comply with the nuclear safety
regulations in individual approvals – if necessary, by issuing an instruction to this end.
The Federal Ministry believes that this type of introduction is compatible with the
constitutional provisions (Basic Law Art. 80 para. 2, Art. 85). At the same time, it
expects that in that event the individual Länder will bring proceedings before the
Federal Constitutional Court.
4.4.4.6 Options for eliminating overlaps
As Federal Government and Länder have so far failed to agree on common
nuclear safety regulations, and it has been impossible for years to issue ordinances
and general administrative regulations with a binding and current interpretation of the
state of the art in science and technology in a safety-related area, the administrative
relations between the Federal Government and the Länder in implementing the
Atomic Energy Act should be made more transparent, and in particular the
responsibilities should be more clearly assigned. This includes strengthening the
direct responsibility and autonomous capability of the individual levels to take
decisions and act. The requirement to eliminate overlaps in administration 355 based on
the fundamental principles of the Basic Law (subsidiarity, democracy, transparency)
support this.
353
354
355
The committee is a consensual committee of the Federal Government and the Länder, without legally binding
status.
Cf. section 4.4.4.2 above.
Cf. sections 3.3 and 3.4 (guideline).
138
In the view of the Commissioner, there are three conceivable approaches for the
elimination of overlapping responsibilities in the administrative structures in the field
of nuclear facility oversight:
(1)
“Lesser elimination of responsibility overlaps”
Overlaps are eliminated in responsibility for promulgating implementing
legislation for the atomic energy administration. According to the audit findings of the
Bundesrechnungshof, this area has proven a severe weakness in the administrative
relations between the Federal Government and the Länder, as the example of the
nuclear safety regulations shows.
The Federal Government, which already has sole statutory regulatory authority for
the entire atomic energy sector 356 is authorised to establish the necessary legislation
for implementing the Atomic Energy Act in a binding and uniform way, without the
need for consent by the Länder in the Bundesrat.
If the implementing legislation takes the form of generally binding public law as
an ordinance 357 , the Federal Government could be given this option through
appropriate authorisation in a federal act (e.g. the Atomic Energy Act). 358 If the
implementing legislation is to take the form of a general administrative regulation
binding on authorities, this would require an amendment to the Basic Law. 359 One
possible argument in favour of the ordinance for establishing binding and uniform
implementing legislation is that the consent requirement could be abolished by simple
legislation, another is that giving concrete form to the standards by ordinance is
properly a matter for the legislative branch, and the Federal Government in any case
has legislative authority for nuclear energy legislation.
In line with the principle of transparency 360 , this “lesser elimination of
responsibility overlaps” would assign the task of ensuring adequate and appropriate
implementing legislation and specifically creating appropriate safety standards for
this, clearly and solely to the Federal Government. 361 For those subject to this
356
357
358
359
360
361
Cf. section 4.4.4.1.
On the choice of instrument, see section 4.4.4.2.
Basic Law Art. 80 para. 2 allows this. The requirement of consent (“… the consent of the Bundesrat shall be
required …”) is subject to “Unless a federal law otherwise provides …”.
In contrast to Basic Law Art. 80 para. 2 for the ordinances, Basic Law Art. 85 para. 2 for the promulgation of
general administrative regulations by the Federal Government does not include any reservation; participation
by the Länder in the promulgation through the required consent by the Bundesrat is mandatory under current
constitutional law in the case of Länder provision of administrative services on federal commission, and cannot
be abolished by simple law.
Cf. section 3.3.3.
It is true that formally and legally speaking the Bundesrat is a constitutional organ of the Federation [BVerfGE
1, 299 (311); 8, 104 (120) and Reuter, Praxishandbuch Bundesrat, p. 89] and forms part of this, so that the
participation of the Länder as intermediated through the Bundesrat is implemented at a single level of
government, namely that of the Federation. In practice, however, the situation is different, as the example given
above of the weakness of the nuclear safety regulations shows, for the Länder are integrated through the
Bundesrat in the decision making process of the Federal Government, but – as intended by the Basic Law –
bring their own (Länder) interests into this.
139
legislation 362 , the responsibility for using this authorisation appropriately would also
be clearly and accountably assigned to the Federal Government as the executive
source of the regulations; responsibility for potential delivery or nondelivery of safety
standards for implementation would then incontrovertibly lie with the Federal
Government. This would be a better situation than the present one in terms of meeting
a key requirement of the principle of democracy, namely assigning responsibility
clearly and ensuring scope for autonomy by the relevant level of democratic
government (in this case the Federal Government).363 Moreover, the basic ideas of
subsidiarity also support eliminating overlaps along these lines in favour of the
Federal Government. If the goal is to regulate the peaceful use of nuclear energy
uniformly for the entire federal territory through a federal law364 , and if uniform
implementing legislation and binding safety standards for all implementing organs of
the Länder are desired, this goal cannot be adequately achieved by the lower level
(Länder) 365 , and is better achieved by the higher level (Federal Government). 366
As this solution would leave more administrative responsibility with the Länder,
the Federal Government, when formulating the implementing regulations – now
solely a matter for the Federal Government – could, through consultative committees,
include and integrate the technical operational knowledge accumulated by the Länder.
However, ultimate responsibility for the "if and how" of its actions would remain
clearly and unambiguously with the Federal Government.
(2)
“Major elimination of responsibility overlaps” in favour of the Federal
Government
The problems encountered in the practice of implementation of establishing
nationally uniform and binding implementing legislation (nuclear safety regulations as
a weakness) and successfully managing and monitoring supervision of nuclear
facilities by the Länder through the Federal Government’s technical and legal
oversight and its own supervisory rights 367 could also be overcome by transferring
implementation of the Atomic Energy Act to the Federal Government, in addition to
the regulatory authority it already has.
Authority and responsibility for the entire set of legislation (act and implementing
legislation) and implementation would then be brought together at one level of
362
363
364
365
366
367
The law applies to both the operators of the nuclear power plants in their capacity of private operators and to the
citizens as possessors of the legal rights protected by the Atomic Energy Act, namely life, health and material
assets (cf. section 1 no. 2 AtG).
Cf. section 3.3.2.
Cf. as rationale section 4.4.4.1.
For example, promulgation of implementing legislation by the Land A could only ever bind the implementing
authorities in this Land, and not those in the Länder B, C and D. Coordination of requirements through the
“third level” – i.e. the Länder among themselves – would be conceivable as a way of achieving uniformity. It
would, however, require consensus among all the Länder involved, leaving the Federal Government out of it.
Responsibility would remain divided, both horizontally and vertically.
Cf. on the subsidiarity rule section 3.3.1.
Cf. section 4.4.4.3 and the citations there as examples from rulings and literature.
140
government (the Federal Government). Structures of interlocking responsibilities
between the Federal Government and the Länder would then disappear completely in
the regulation of the atomic energy sector, and conflicts of interest would be avoided
from the start. Inefficient coordination processes, lengthy proceedings, uncertainties
on the part of operators about the approach of government oversight (Länder) and the
oversight of the oversight (Federal Government) would be things of the past. This
would be an outstanding example of compliance with the requirement to eliminate
overlapping responsibilities, particularly with regard to the two aspects of
transparency and democracy.
Considerations of goal-oriented mission performance could also be adduced for
eliminating overlaps in favour of the Federal Government, and – entirely in harmony
with the principle of subsidiarity – be used to argue for transferring administrative
authority from the Länder to the Federal Government. For example, uniform
treatment of and compliance with international standards by and throughout the entire
Federal Republic of Germany and the risks involved in nuclear power, where the
potential threats by their nature extend beyond national frontiers and can lead to crossborder damage, both argue in favour of assigning responsibility for regulation to the
Federal Government without any involvement by the Länder (direct regulation by the
Federal Government). A federal administration which takes over regulatory
responsibility for all nuclear power stations would also be better placed to bundle
expertise on specific problems.
One argument against direct Federal Government responsibility, however, is that
regulatory capacity would have to be newly created in the Federal Government in a
sensitive safety area for the period up to the nuclear power phase-out in 2021. As
such, the possibility cannot be excluded that some of the personnel currently
responsible for the supervision of nuclear facilities at the Länder cannot be transferred
to the Federal Government, so that part of the expertise might be lost, at least
temporarily. 368
(3)
“Major elimination of responsibility overlaps” in favour of the Länder
Extensive elimination of overlapping responsibilities could also be achieved by
transferring supervision of nuclear facilities entirely to the Länder, and leaving them
to implement this in their own right without technical oversight by the Federal
Government and without its oversight rights where these services are provided by the
Länder on federal commission. This would eliminate a key interface for the
vulnerability of administrative relations between the Federal Government and the
Länder.
368
On further aspects of a possible transfer of administrative responsibility in the atomic energy sector from the
Länder to the Federal Government, cf. Kienbaum report on the future viability of the administrative services by
the Länder on federal commission in the field of nuclear energy of 22 Sep. 2004, sections 7, 8
(www.bmu.de/atomenergie).
141
Direct administration by the Länder would also have the practical advantage that
the Länder are already predominantly responsible for the supervision of nuclear
facilities, and have the necessary expertise and (unlike the Federal Government)
established, decentralised administrative structures in this area. Establishing a new
federal administration would be unnecessary, particularly since the tasks of
supervision of nuclear facilities are of a temporary nature, given the decision to phase
out atomic energy. 369
However, even with this solution – if the goal of uniform and binding
implementing legislation is retained – there must be a possibility for the Federal
Government to promulgate implementing legislation without overlapping
responsibilities, as discussed above. If it were left to the Länder to establish
implementing legislation autonomously for their own areas of responsibility, uniform
standards would only be possible through voluntary coordination among the Länder,
without the possibility of the Federal Government influencing the process as sole
legislator in the atomic energy sector. This would mean an intrinsically inconsistent
division of responsibilities in the field of standardisation (law and implementing
legislation).
(4) Due to the problems and disadvantages of the two major approaches to
eliminating overlapping responsibilities outlined above (particularly in practice), the
Commissioner presently favours implementation of the lesser approach.
369
It must, however, be remembered that the decommissioning and securing of the shutdown atomic energy
plants will involve tasks for government oversight beyond the date of the phase-out agreement.
142
4.5
Society
4.5.1
Culture and sport
Core statement
The Federal Government’s promotes the arts, cultural activities and sports to an
extent which is incompatible with its constitutional responsibilities. As a result, it is
occupying part of the original scope of tasks of the Länder. In the Commissioner’s
opinion, the Federal Government should withdraw from those activities that go
beyond its constitutional remit. If, as an exception, the Federal Government is to
continue with the promotion of the arts, cultural activities and sports outside the
nation’s capital, this should be clarified in the Constitution, possibly supplemented by
an implementing act or binding agreement between the Federal Government and the
Länder. The goal should be to avoid any form of cofunding, assigning all areas of
responsibility unambiguously to a single level of government. For the federal level,
the narrow limits for unwritten responsibilities, set by the Federal Constitutional
Court, should be taken as a guideline for legal authority.
4.5.1.1 Legal basis
Except as otherwise provided or permitted by the Basic Law, the exercise of state
powers and the discharge of state functions is a matter for the Länder (Basic Law
Art. 30). According to this, the maintenance and promotion of culture and sports is the
responsibility of the Länder. This applies to legislation as well as to administration
and funding (Basic Law Art. 104a para. 1). The Federal Constitutional Court
described the cultural sovereignty of the Länder very early on as “the core of Länder
autonomy”. 370
Assignments of responsibilities deviating from the fundamental rule of Basic Law
Art. 30 can arise from written constitutional law, specifically from Basic Law Arts 73
et seq. and 87 et seq. The Federal Constitutional Court has recognised federal
responsibilities in the course of interpreting the constitution
•
by their nature, or
•
by virtue of a material relationship with a responsibility explicitly assigned
by the Basic Law.
(1)
Federal responsibility based on written constitutional law
The Basic Law does not contain any explicit provision which justifies a
responsibility of the Federal Government for promoting culture and sports. The sole
exception is the representation of the nation as a whole in the federal capital, Berlin.
This is a responsibility of the Federal Government (Basic Law Art. 22 para. 1
sentence 2). The representation can also extend to cultural affairs.
370
BVerfGE 6, 309 (354).
143
(2)
Unwritten responsibility by virtue of material relationship
The legislative power of the Federal Government sets the absolute limit to its
administrative responsibility. 371 (Unwritten) administrative responsibilities of the
Federal Government for the maintenance of art, culture and sport are conceivable only
so far as its legislative power reaches. Responsibility for these tasks is, at the same
time, a prerequisite for funding authority of the Federal Government (Basic Law Art.
104a para. 1).
Legislative power of the Federal Government to which unwritten responsibility in
the field of art, culture 372 and sport might attach, only existed in sub-areas before the
first stage of Federalism Reform. These involved framework legislation
•
on the general principles of higher education (Basic Law Art. 75 para. 1 no. 1a
in connection with Basic Law Art. 72, old version) and
•
on the protection of German cultural assets against expatriation (Basic Law
Art. 75 para. 1 no. 6 in connection with Basic Law Art. 72, old version).
In addition, the Federal Government was permitted, under certain conditions, to
assist in performing tasks of the Länder and participating in the extension and
construction of institutions of higher learning, including university hospitals (Basic
Law Art. 91a para. 1 no. 1, old version).
The power of federal framework legislation was abolished in the first stage of
Federalism Reform. The same applies to the joint task of extension and construction
of institutions of higher learning, including university hospitals.
Under the Act Amending the Basic Law of 28 August 2006 (BGBl I p. 2034), the
Federal Government has concurrent responsibility for legislation in the field of
licensing institutions of higher learning and university degrees, where the Länder can
enact deviating regulations (Basic Law Art. 72 para. 3 no. 6 in connection with Art.
74 para. 1 no. 33): The Federal Government has sole legislative power to protect
German cultural assets from expatriation under the Federalism Reform (Basic Law
Art. 73 para. 1 no. 5a). In the field of construction of institutions of higher learning,
the Federal Government and the Länder can cooperate, by agreement, in cases of
supraregional importance involving the promotion of construction of research
facilities including major equipment (Basic Law Art. 91b para. 1 sentence 1, no. 3).
The Federal Government also has sole power of legislation on foreign affairs. This
power includes support for German cultural assets abroad (Basic Law Art. 73 para. 1
no. 1). However, the exercise of the rights of the Federal Republic of Germany as a
member state of the European Union is removed from the Federal Government where
legislative powers exclusive to the Länder are involved in the fields of education,
371
372
Maunz, in: Maunz, Dürig, Grundgesetz, vol. VI, Art. 104a MN. 18 i.f.; Henneke, Ruge, in: Schmidt-Bleibtreu,
Klein, Grundgesetz, foreword on Art. 83 MN. 10; Henneke, in: Heuer, Haushaltsrecht, Art. 104a MN. 6.
In the following sections a further concept of cultural affairs is applied, cf. Steiner, in: Isensee,
Kirchhof, HStR IV, 3rd ed. 2006, section 86 MN. 1.
144
culture or broadcasting, and delegated to a representative of the Länder designated by
the Bundesrat with the participation and concurrence of the Federal Government
(Basic Law Art. 23 para. 6).
(3)
Basis in statute
Unwritten assignments of responsibility must always have a basis in statute,
because rules of responsibility by virtue of factual relationship or by their nature are
exceptions to statute. 373 The Federal Constitutional Court has stated that a lack of
financial capability on the part of the Länder does not justify unwritten funding power
by the Federal Government. Restrictive conditions 374 have evolved for tacit
administrative and funding powers of the Federal Government which must all be
met. 375
•
Implementation of federal acts by the Länder administration must be
impossible, e.g. acts whose purpose cannot be achieved by administrative
action by a Land. Considerations of appropriateness may not enter into the
assessment of this question.
•
The scope of the task must extend to the entire federal territory.
•
Actions must respect the federal concept.
4.5.1.2 Extensive cultural promotion by the Federal Government
The Federal Government bases its promotion of art, culture and sport on the “land
consolidation agreement” of 1971, which was not signed. The Federal Government
and the Länder had attempted to clarify their constitutional responsibilities in this. It
provided for greater scope of action for the Federal Government in cultural promotion
through an interpretation of the Constitution agreed between the Federal Government
and the Länder, according to which, promotion by the Federal Government would
have been regarded as permissible if it served to “represent the federal state”.
However, no agreement could be reached on a definition of this term, as the Länder
feared an extension of the Federal Government’s activities to virtually all significant
institutions of science and the arts.
In fact the Federal Government extensively expanded its promotion in the fields of
the arts and culture, even after the agreement failed to materialise. This is emphasised
by the creation in 1998 of the Office of the Federal Commissioner for Culture and
Media (BKM) and the allocation of a budget (sections 0405, 0406 and 0407).
According to the BKM, its activities cover 65 institutional grant recipients and over
500 project promotions and subsidies (some indirect).
373
374
375
Prokisch, in: Dolzer, Vogel, Graßhof, BK, Art. 104a MN. 132.
BVerfGE 12, 205 (first broadcasting ruling); 22, 180 (youth welfare).
Cf. also Prokisch, in: Dolzer, Vogel, Graßhof, BK, Art. 104a MN. 134; similarly Maunz, in: Maunz, Dürig,
Grundgesetz, vol. VI, Art. 104a MN. 18 i.f.
145
The Bundesrechnungshof has audited
• cultural promotion of minorities,
• promotion of monuments,
• promotion of the culture of displaced persons and refugees, and
• maintenance of cemeteries
among other areas. It criticised that the Federal Government adopted an extensive
interpretation of “representation of the federal state” which was its responsibility
under the draft agreement, and so breached the narrow requirements of the Federal
Constitutional Court. This was done, for example, by justifying promotion for
individual institutions by their federal importance. In practice, however, the
promotion resulted in permanent financial relief to certain Länder where, for example,
specific institutions or minorities are located.
An additional factor is that promotion by the Federal Government in the cultural
sector generally cannot be justified by exclusively federal responsibility. Instead, it
coincides with the existing responsibilities of the Länder for this sector. Frequently,
this results in joint funding by the Federal Government and the Länder, leading to
new forms of cofunding. As a result, government practice is deviating from the
provisions in Basic Law Arts. 91a and 104a para. 4. 376
Cofunding also involves further interconnection, because the levels of government
involved have to coordinate their activities, leading to additional administrative input.
As with other areas of overlapping responsibilities, cultural promotion also creates
incentives to shift burdens to other levels of government instead of acting efficiently.
For example, the Bundesrechnungshof has established that local authorities give
public facilities to minorities, with the result that the Federal Government then shares
in funding theatres and schools.
In the cases audited, the extent to which the Federal Government has exceeded its
authority has not generally evoked any serious defensive reaction on the part of the
Länder. In practice, the Federal Government’s financial involvement and the “noble
goal” of culture predominantly outrank constitutional boundaries of responsibility. 377
As a result, cultural promotion requires extensive elimination of overlapping
responsibilities. The guide for future promotion by the Federal Government must be
the narrow criteria which the Federal Constitutional Court rulings have established
that can exceptionally justify an “unwritten” federal responsibility. 378 If these criteria
are not satisfied, the Federal Government should withdraw from the relevant areas of
cultural promotion. In the few areas where – exceptionally – unwritten federal
responsibility can be justified, the Federal Government should take over promotion
completely to avoid cofunding.
376
377
378
Maunz, in: Maunz, Dürig, Grundgesetz, vol. VI, Art. 104a MN. 18.
Steiner, in: Isensee, Kirchhof, HStR IV, 3rd ed. 2006, section 86 MN. 15.
Cf. section 4.5.1.1. (3).
146
Areas for promotion can be clearly assigned to the federal or the Länder level by
amending the Basic Law. For example, promotion of monuments by the Federal
Government outside the nation's capital Berlin can be limited to individual cases, to
be specifically and finally determined in the Basic Law. It would also be conceivable
to make such determinations in an implementing law to the Basic law. Other
alternatives would be an agreement within the framework of Federalism Reform II
which the Commissioner has already recommended in other areas of “unwritten
funding responsibility” of the Federal Government as an option for eliminating
overlaps 379 . Such an agreement could also clearly define the limits of the funding
authority of the Federal Government and the Länder by unambiguously assigning the
individual areas of promotion to a level of government, with due regard to the rulings
of the Federal Constitutional Court.
4.5.1.3 Extensive sports promotion by the Federal Government
The Federal Government has been promoting sport for decades, despite unclear
and lacking administrative and funding responsibility. Every year, over 100 million
Euro are spent on promoting sport from the budget of the responsible ministry, the
Federal Ministry of the Interior. 380
The Federal Government claims funding authority for the following groups of
cases: 381
• federal representation (e.g. Olympic Games, Paralympics, world and European
championships),
• foreign relations (including sports development aid),
• promoting measures of nongovernmental central organisations which are
important for the federal territory as a whole and cannot be effectively
supported by a single Land (e.g. German Olympic Association, federal
associations for individual sports),
• tasks falling under the remit of ministries (e.g. research projects).
Although the Federal Government regards its responsibility for promotion only as
an exception and essentially relating to high performance sports 382 in terms of
national representation, it also supports elite sports 383 and mass sport 384 . In the view
of the Federal Government, elite sport not practised as high performance sport counts
as qualified mass sport, and is a responsibility of the Länder, including local
authorities. 385
379
380
381
382
383
384
385
On such an agreement, see section 4.4.1.5.
The overview of all sport promotional funds of the Federal Government shows expense for 2005 by eight
government departments totalling 216 million Euro. Cf. 11th Sportbericht der Bundesregierung (BT-Drs.
16/3750), p. 18.
Sportbericht der Bundesregierung (see preceding footnote), p. 14.
Sportbericht der Bundesregierung, foreword, p. 9, section 1.3, p. 12, part B, pp. 24 et seq.
Sportbericht der Bundesregierung, section 4, 7.
Sportbericht der Bundesregierung, part C.
Sportbericht der Bundesregierung, part C, section 1, p. 74.
147
In the framework of a public hearing on the sports promotion guidelines of the
Federal Ministry of the Interior in 2006, the Bundesrechnungshof raised the issue of
the ministry’s involvement beyond the field of high performance sport. 386
The Commissioner feels it is appropriate for the Federal Government to limit itself
to promoting high performance sport in this context. This should be clarified in the
Basic Law, an implementing law or an agreement within the framework of Federalism
Commission II. 387
4.5.2
Families, senior citizens, women and young people
Core statement
The Federal Government is active in child and youth welfare and promoting
families, senior citizens and women, which goes beyond its constitutional
responsibilities. These tasks can generally be performed better at the local level. The
Federal Performance Commissioner accordingly calls for strengthening the
administrative and funding responsibility of the Länder.
4.5.2.1 Legal basis
The Basic Law does not include any explicit assignment of responsibility for
issues relating to families, senior citizens, women and young people. Under the
constitutional division of authority, these are responsibilities for the Länder (Basic
Law Art. 30). As already discussed, within the sphere of responsibility of the Länder,
unwritten federal responsibility is only possible for sub-tasks, and then only if the
goals cannot be achieved by the Länder and the scope of the task extends to the entire
federal territory. 388 The Federal Constitutional Court has confirmed such unwritten
federal competence in the area of promoting young people, provided that the Federal
Government promotes efforts which are clearly supraregional in nature. 389 In line with
the principles described above, these must be sub-tasks which by their nature cannot
be effectively promoted by a single Land. The mere fact that it is too much for
regional financial resources is not sufficient to justify the assumption that the Federal
Government is responsible by virtue of the nature of the issue. 390
The legislature has included some aspects of the statements of the Federal
Constitutional Court in the Child and Youth Services Act (section 83 para. 1 Social
Code VIII). This states that "the supreme federal authority responsible for the field
shall encourage and promote the activity of the Youth Service where it has
386
387
388
389
390
Criticisms to this effect were the basis for the Bundesrechnungshof’s Annual Report 2005, (BT-Drs. 16/160,
no. 5: Sportwissenschaftliche Forschungsvorhaben ohne Zuständigkeit gefördert), 2002 (BT-Drs. 15/60, no.
11: Förderung hauptamtlicher Führungskräfte der Bundessportfachverbände) and 2001 (BT-Drs. 14/7018,
no. 7: Förderung der Sportakademien des Deutschen Sportbundes).
On the possibility of implementing legislation or an agreement, see also section 4.5.1.2 above.
Cf. section 4.5.1. (3).
BVerfGE 22, 180 (217).
Cf. Lerche, in: Maunz, Dürig, Grundgesetz, vol. VI, Art. 83 MN. 47.
148
supraregional significance and, alone by its nature, cannot be promoted by one Land.”
There are no statutory provisions for the areas of families, senior citizens and women.
4.5.2.2 Extensive promotion by the Federal Government
The Federal Ministry for Family Affairs, Senior Citizens, Women and Youth
(Federal Ministry) makes extensive use of the promotional possibility in the Child and
Youth Services Act. Of the general appropriations in section 1702 of the budget, just
under 30% are for promotion under the child and youth services plan alone (in 2007
around 107 million Euro). This is used to assist just under 300 clubs, associations and
other institutions, which in turn divide their grants between many programmes and
measures under the child and youth services plan. The individual grants are often less
than 10,000 Euro.
The Bundesrechnungshof audited a number of measures of cultural youth
education in 2001-2003:
•
musical events for youth (e.g. Christmas choral singing, chamber music
course, course in conducting, family music week, early music education),
•
upgrading for multipliers,
•
institutional work (e.g. costs of meetings), and
•
international youth exchange in the field of music.
The institutions promoted received further grants from the Länder and local
authorities. This resulted in parallel promotional and administrative structures.
The Federal Ministry regarded itself as responsible from the supraregional point of
view if the promoted measures were utilised by participants from a number of Länder.
It did not verify whether the Länder were able effectively to promote the measures
themselves.
The local institutions created supraregional structures, e.g. a federal association, to
facilitate performance of their local tasks through services, such as technical advice
and upgrading, or bundled promotion of joint interests. The Federal Government
regarded the federal structures as further evidence of the supraregional importance of
the measures. It derived the responsibility of the Federal Government from this.
The Federal Ministry promotes measures for families, senior citizens and women
on the same principles as the tasks of child and youth services. However, the scale of
promotion for families, senior citizens and women is significantly smaller than that
for children and young people. Specifically, there are far fewer grant recipients.
149
4.5.2.3 Exceeding constitutional responsibilities
Based on the criteria cited by the Federal Constitutional Court, the
Bundesrechnungshof argues that the promotional activities investigated often fail to
meet the conditions for federal responsibility. The fact that participants generally
come from several or even all the Länder does not by itself demonstrate the
supraregional importance of the measures. The issue of supraregionality relates to the
content of a measure, not the origins of participants.
The Bundesrechnungshof has further called on the Federal Ministry to verify
whether the Länder would have been able to promote the measures effectively
themselves. It regarded the measures promoted by the Federal Ministry as individual
measures in music for the masses and promotion of gifted children as lacking
supraregional importance. Such measures could, in its view, be left in the
responsibility of the Länder. This also applies to promotion of institutional work by
financing the costs of staff and meetings.
Designating a supraregional association of institutions in the field of child and
youth services as a federal association does not in the view of the
Bundesrechnungshof justify a responsibility of the Federal Government. Formal
criteria are not sufficient to resolve funding responsibility. Instead, the content of the
promoted measures must be investigated.
The Federal Ministry does not agree with the Bundesrechnungshof’ statements. It
based its dissenting attitude on the decision of the Federal Constitutional Court cited
above, according to which promotion by the Federal Government of efforts in the
field of youth welfare is permissible in the case of central institutions whose activities
cover the territory of the Federal Republic as a whole and for international tasks.
In the view of the Federal Ministry, support for central institutions can only be
provided uniformly by the Federal Government and not by one Land alone. The
Federal Ministry argued that following the opinion of the Bundesrechnungshof would
leave virtually no scope for the criterion of a central institution cited by the Federal
Constitutional Court, because in most cases central institutions also acted in the
interests of the Länder.
The central and supraregional character of the institutions carrying out the
measures derives, in the view of the Federal Ministry, from:
•
the structure of the membership of the federal or specialist association
promoted,
•
the general responsibility for bundling experience, developing new
guidelines and sharing these, or
•
the supraregional (in some cases also international) scope of action of the
institution carrying out the measures.
Even after intensive discussion with the Federal Ministry, it was not possible to
reconcile the opinions.
150
4.5.2.4 Conclusion
(1) Administrative practice has departed from the foundation laid down in the
constitutional division of responsibilities for assumption of supraregional
responsibility by the Federal Government, as it has failed to give sufficient regard to
the restrictive criteria developed by the Federal Constitutional Court.
In contrast with administrative practice, the fact that measures take place in
several Länder or the participants come from several Länder is not enough to mandate
a responsibility of the Federal Government to the exclusion of other solutions.
The Federal Government fails, to this extent, to recognise the possibility of the
Länder coordinating between themselves as an alternative to a uniform approach by
the Federal Government. 391
For the measures to have a supraregional character, it is not enough for the Länder
to bundle their experience, share it and develop joint guidelines. The
Bundesrechnungshof regards it as a fundamental misunderstanding to assume that it is
the Federal Government’s responsibility to organise an exchange of experience
between the Länder in areas for which the Länder are responsible.
(2) A key reason for the excessively extensive interpretation by the Federal Ministry
of the Federal Government’s administrative and funding responsibilities is the
provision of section 83 para. 1 Social Code VIII. The wording of that provision only
partly captures the strict limits imposed by the Federal Constitutional Court
concerning an ‘unwritten’ federal responsibility. In particular, the term “supraregional
importance,” as an open standard, is not sufficiently defined to ensure a narrow and
constitutional interpretation from the start. The provision accordingly permits broad
interpretation and far-reaching practice by the Federal Government which goes
beyond the narrow requirements of the Federal Constitutional Court.
Child and youth services and promotional measures in the fields of families,
senior citizens and women can, however, best be provided by the Länder – either
singly or in cooperation – because of their primarily local context. Federal
responsibilities should accordingly be restricted – in line with the basic ideas of the
Federal Constitutional Court – to the few cases where a national solution is absolutely
necessary to the exclusion of other options. A binding clarification should be issued –
either through legislation or agreement – which is strictly in line with the narrow
constitutional requirements.
391
BVerfGE 11, 89 (98 et seq.); 12, 205 (235); 26, 246 (257).
151
4.6
Budget, fees, liability
4.6.1
Modernisation of public-sector budgeting and accounting
Improving budget transparency – strengthening responsibility
The principle of direct responsibility and autonomy of the different levels of
government implies that in each case the acting government entity is accountable to
the citizens for the input of resources and their efficient use. At present, budgeting and
accounting systems at the federal and the Länder level are still largely cash-based, so
that actual costs and financial consequences of policy decisions can often not be
identified. The interconnection of levels of government and responsibilities further
complicates clear assignment of political responsibility. This calls into question
effective democratic control.
Consequently, efforts to modernise budgetary and accounting systems should be
supported. They help improve the transparency of budgets, and so strengthen the
democratic principle. The different approaches adopted by the Länder and the Federal
Government create a need for harmonisation. As a result, a fundamental consensus on
minimum standards is needed to ensure comparability of budgets and transparency
across levels.
4.6.1.1 Eliminating the weaknesses of cash-based accounting systems
To improve the transparency of government action, the existing cash-based budget
and accounting system must be modernised. 392 In recent years, wide ranging reforms
have been initiated and implemented at the level of the Länder, and particularly local
government. Comparable developments are apparent at the international level. The
Federal Government is also working towards comprehensive modernisation.
A common feature of the approaches to reform is a move away from purely cashbased budget and accounting systems with their focus on payments. The current
“input oriented” view would be replaced by task and results oriented management of
public bodies corporate. Entering expenditure and income by relevant reporting period
is intended to reflect the utilisation of resources transparently and make it difficult to
push financial burdens into the future. This is also the goal of a complete report on the
level of and changes in assets and liabilities, including future financial liabilities.
Such an approach puts the results of administrative action at the focus of
consideration. Product and performance related goals replace traditional inputoriented budget management. Currently, many of the items in the budget have little
financial significance and little or no relevance for political oversight. Of some 5,400
expenditure items shown in the 2006 federal budget, the 4,000 smallest positive
entries accounted for just 3.65% of the total budget. By contrast, the 20 largest
392
Report of 17 Aug. 2006 under section 99 BHO on modernising the government budget and accounting system
(BT-Drs. 16/2400).
152
expenditure items represented some 66% of total budgeted expenditure. In future,
legislators should no longer use a budget with thousands of items to determine which
minor individual items will have budget funds available.
Instead, an output oriented budget plan should provide resources for specific
products or tasks, to be defined by performance and quality goals. This makes it
suitable as an information and decision tool which supports budget planning,
management and control focused on strategic goals. At the same time it can act as a
basis for controlling resources and performance. Product oriented budgets demand
and enable the establishment of precise product and goal descriptions and
responsibilities. In a system like this, responsibility for the use of resources and the
achieved results is delegated to the administration taking the action, which satisfies
the subsidiarity principle to a particular degree. Action is managed on the basis of
goals for performance, impacts and input. The executive branch is given greater scope
for efficient administration. This offers legislators new opportunities to review
critically the budget planning of the government generally as well as individual
approaches and performance.
4.6.1.2
Approaches to modernising the government accounting system
The Federal Government and the Länder are largely in agreement that such a
modernisation of the budget and accounting system is necessary to meet changing
needs. However, they are taking different approaches to implementation.
(1) Individual Länder have chosen to introduce double entry accounting. This
involves a fundamental change of system. An integrated accounting system which has
proved itself in the private sector is being adopted for public sector administration.
The individual concepts differ, and are oriented more or less closely towards
conventional commercial accounting. Despite differences in detail, a double entry
accounting system tailored to the needs of public sector administration has the
following core elements. The income statement is a central instrument showing
income and expenditure for a period – in other words, it shows the use of resources
for the appropriate periods. A balance sheet shows the actual state of assets and
liabilities. A funds statement, comparable with the current income and expenditure
statement under cash based accounting, continues to show the use of funds. Cost and
performance accounting is typically integrated into a system like this, and provides
product related data relevant for decisions. Double entry accounting is a logically
complete system which integrates all the necessary data; it has little vulnerability to
error. However, the fundamental reorientation requires high investment in installation
and conversion. It may accordingly cause problems with acceptance.
In Germany, this approach is followed specifically by the Länder Hesse, North
Rhine – Westphalia, Bremen and Hamburg. At the international level, double entry
accounting is the dominant reform instrument. Switzerland, Austria, France, the UK
153
and Australia, among other countries, follow this approach. Supranational
organisations like NATO, the UN and the European Commission are also moving in
this direction.
(2) The Federal Government and individual Länder (e.g. Baden-Württemberg,
Berlin, Rhineland-Palatinate) want to modernise their budget and accounting system
with an “expanded cash based accounting system”. Augmented cash based accounting
supplements the conventional cash based system with major management accounting
elements. Besides providing product information, cost and performance accounting is
particularly important in these models to show the utilisation of resources by reporting
period and changes in assets. Without a fundamental system change and with less
resistance to change from the users affected, this system can satisfy important
management accounting requirements. However, experience shows that the
coexistence of separate accounting systems is vulnerable to error. Moreover, special
efforts are needed to ensure compatibility of data. As the management information
acquired merely supplements the existing system, there is a danger that financial
management will continue to be dominated by the “old” way of thinking.
4.6.1.3 Requirements for a transparent government budget and accounting system
To enhance budget transparency, improve the efficiency of government action,
and increase the responsibility of actors at the relevant levels, a modern government
budget and accounting system needs to meet certain requirements. The following core
assumptions are decisive:
•
Payments oriented budget planning at the micro level is not a suitable
management instrument for the legislature. As it is too remote from the
working level of the administration taking action, the legislature is unable to
make any useful connection between expenditure and performance at the
current level of detail.
•
The closely input-oriented and item-based allocation of funds prevents
legislators from exercising goal oriented control, as it has little influence on
the tasks to be performed. With the conventional budget instruments, the
legislators have little opportunity to establish binding substantive goals for the
executive.
•
For the executive branch, having a statutory definition of tasks by means of a
large number of specific individual items is a very convenient way of avoiding
responsibility. By contrast, decentralised responsibility close to the level of the
tasks and addressed by setting goals is more likely to satisfy the expectations
of modern management.
•
Government action needs effective control gaps which minimise the need for
oversight and external control and enable decision makers to discharge their
responsibility directly.
154
•
This requires clear assignment of tasks and responsibility which takes into
account the actual possibilities for action and information of the legislature
and the executive. The new management tools offer great potential for this.
•
The match between technical and funding responsibility is the necessary
condition for self awareness and self management, for critical review of tasks
and efficient action. As a result, these areas of responsibility should be
consolidated wherever possible, i.e. tasks and government expenditure should
be consolidated at the individual levels. Following the user pays principle,
necessary resources are estimated in the budget plans of the contracting
authorities, to strengthen their responsibility for costs. This helps improve the
transparency of budgets, and so strengthens the democratic principle.
In the view of the Commissioner, a modernised budget and accounting system
must have a uniform basis, in order to keep public sector budgets transparent and
comparable across levels of government. The Federal Government – Länder
committees set up for this should accordingly continue their intensive efforts to agree
uniform minimum standards. This is in accordance with the constitutional requirement
for common principles in the interest of comparability of budgets (Basic Law Art. 109
para. 3). The goal should accordingly be to ensure transparency between levels,
despite the different modernisation approaches of the territorial entities (local
authorities, Land and Federal Government), and to establish a nationally and
internationally comparable database for deriving key budget ratios. For the Federation
as whole, it would be desirable for the Federal Government and the Länder to agree
either on expanded cash based accounting or a double entry system for budgeting and
accounting.
4.6.2
Fees
Core statement
There is extensive overlapping between the Federal Government and the Länder
in the field of administrative fees. This leads to a lack of transparency and unclear
delimitation of responsibility. Reciprocal exemption from fees undermines the
principle of separate budgets and does not satisfy the responsibility for the utilisation
of resources.
Following the guiding principles of having a clearly transparent democratic
structure of responsibility and subsidiarity, it is appropriate to allocate responsibility
for administrative fees to the territorial entity providing the administrative services.
This strengthens the motivation of the actors, improves the transparency of the use of
resources, and requires the Federal Government and the Länder to set fees more in
line with costs. It can also create efficiency incentives.
155
4.6.2.1
Legal basis
The Federal Government sets fees in areas where it has legislative authority. 393
This applies without restriction in the field of federal administration and provision of
services by the Länder under federal commission. Concerning the provision of
services by the Länder under federal commission, the Federal Government sets fees
for services provided by the Länder. For example, the Federal Government sets fees
for the administrative proceedings of the Länder in the cost ordinance for the Atomic
Energy Act 394 and in the cost ordinance for air traffic control. 395
By contrast, if the Länder execute federal laws in their own right, they are
authorized to regulate procedures, and to set fees (Basic Law Art. 84 para. 1
sentence 1). Up to 31 August 2006 this Länder authority was limited where the
Federal Government promulgated its own laws. The result was that the Federal
Government generally also set fees for services of the Land authorities. The Weights
and Measures Fees Ordinance 396 is one example of this.
The first stage in Federalism Reform gave the Länder the possibility of deviating
from such federal laws on issues of procedures and fees (Basic Law Art. 84 para. 1
sentence 2). With the legislation on deviation, Federalism Reform promoted the idea
of relaxing responsibilities between the Federal Government and the Länder. The
territorial entities are getting more responsibility and autonomy for appropriate
mission performance.
4.6.2.2 Problem areas
(1)
Fee setting which is Land specific and appropriate for inputs
Where authorities of the Federal Government or the Länder provide services
which give recipients a specific individual advantage, it is necessary to check whether
a legal basis for charging fees exists or needs to be created. To identify services for
which fees should be charged, administrations are required to subject their range of
services to a full review. The only federal or Land authorities which can do this are
those that provide the services.
Identifying services of Länder authorities for which fees can be charged should be
left to the Länder. Identification by the Federal Government would violate the
principles of autonomy and independence of budgets (Basic Law Art. 109 para. 1) and
the democratic context of responsibility. Under this, it is a matter for the Länder under
393
394
395
396
The administrative fee legislation is an integral part of the administrative procedure legislation. Legislative
competence for administrative procedure (and with it administrative fees) is generally derived as ancillary
legislative competence from constitutional legislative power.
Costs ordinance to the Atomic Energy Act of 17 Dec. 1981 (BGBl. I p. 1457), most recently amended by the
ordinance of 15 Dec. 2004 (BGBl. I p. 3463).
Costs ordinance of the air transport administration of 14 Feb. 1984 (BGBl. I p. 346), most recently amended by
Art. 3 of the ordinance of 13 June 2007 (BGBl. I p. 1048).
Measuring costs ordinance of 21 April 1982 (BGBl. I p. 428), most recently amended by Art. 2 of the
ordinance of 11 July 2001 (BGBl. I p. 1608).
156
their responsibility for budget law and management, to examine the services of their
authorities to see whether fees can be charged, and be accountable for their decisions
to the recipients of services and voters.
An important criterion for setting fees is the principle of covering costs. Actual
inputs for similar services of the Länder administrations vary from one Land to
another, depending on staff inputs, salary agreements and more or less efficient
organisational structure, etc.
Federal fee regulations specify fees for official activities by Land administrations
executing federal laws which are often based on average values. Nationally uniform
fee regulations can hardly be appropriate in view of the variation from one Land to
another in the inputs required to deliver these services. For example, the Hamburg
Court of Accounts in its 2007 annual report noted that fees for official acts by the
Shipping Office would be charged on the basis of a federal costs ordinance. 397 As
these fees are too low, the Shipping Office fees in 2005 covered only 50% of costs.
Federal setting of fees increases to excess bureaucracy because it requires
elaborate consultation with the Länder. It conflicts with the requirement of having an
unambiguous assignment of responsibility for fees.
The Bundesrechnungshof has called for delegating to the authorities of the Länder
the regulation of fees for administrative services. The Bundesrechnungshof believes
that as actual administrative inputs vary between the Länder, a federal fee ordinance
would only ever be a rough approximation for assessing fees in line with inputs.
Extensive surveys of Land administrations can only be used to determine average
values at federal level, and provide only limited information about the actual inputs in
the individual Land.
Land-based fee schedules strengthen the responsibility of the Länder vis-à-vis the
recipients of the services. Also regulations for the individual Länder constitute a more
appropriate and less bureaucratic solution overall, because they eliminate the need for
elaborate coordination with the Federal Government. The Bundesrechnungshof has
accordingly recommended regionalising fee regulations.
(2)
Reciprocal exemption from fees by territorial entities
The prevailing law incorporates a basic exemption from fees for federal, Land and
local government authorities (section 8 Administrative Costs Act). This leads to a
situation where the costs of the use of services by territorial entities are not apparent.
Several Länder, e.g. Bavaria and Hesse, have already taken advantage of the
amendment of their administrative cost acts to abolish exemption of the Federal
Government and other Länder from fees.
The Federal Ministry of the Interior also intends to revisit reciprocal exemption
from fees by territorial entities in the course of amending the legislation on
397
2007 Annual Report of the Hamburg Court of audit, p. 126.
157
administrative costs. A draft administrative fees act (VwGebG-E) 398 includes the
following provision. Before reaching a decision on charging fees to a public law
corporation not funded from the federal budget, the responsible federal authority must
first determine whether the Federal Government would be obliged to pay fees for
corresponding services by this corporation (section 8 para. 2a). It must further
determine whether the corporation involved grants the Federal Government personal
exemption from fees for a similar administrative service.
The Bundesrechnungshof regards the intended new provision on exemption from
fees as impractical. It see a particular problem regarding the provision on reciprocal
exemption from fees in the light of the twelve exceptional circumstances (e.g. for the
Federal Office of Consumer Protection and Food Safety) listed in section 8 para. 4 of
the draft administrative fees act.
4.6.2.3 Recommendations
The heavily interconnected legislation on fees between the Federal Government
and the Länder should be extensively disentangled, followed by setting clear
responsibilities.
As a rule, responsibility for general provisions of fee legislation should lie with
the territorial entity providing the service in question, which should also be entitled to
the revenue. Fee legislation as part of the administrative process should be assigned to
the Federal Government and the Länder for the services provided by their own
administrative authorities. There is no need for prior structuring by the Federal
Government with possibilities of divergence by the Länder and right of rollback by
the Federal Government (Basic Law Art. 84) where federal laws are implemented by
the Länder in their own right. Even where federal laws are implemented on federal
commission, the Länder should have autonomy over fee legislation. They should set
fees themselves for administrative action by their authorities. Basic Law Art. 85
should be supplemented accordingly.
In the interests of transparency regarding consumption of resources, the authorities
of the Federal Government, the Länder and local authorities should abandon
reciprocal exemption from fees. Awareness of the costs of using public services is
enhanced if they are charged to all recipients of the services.
398
Status: 12 December 2005.
158
4.6.3
Liability in the relationship between the Federal Government and the Länder
Core statement
Owing to systemic weaknesses, the legislation and procedures for liability in the
relationship between the Federal Government and the Länder have little effect in
practice. The relationship between the Federal Government and the Länder is
regarded as sensitive, permitting limited open confrontation over issues of liability.
The Federal Government also lacks suitable instruments to purposefully identify
potential cases of liability. The existing tools of technical and legislative oversight
have proved unsuitable for this.
The Länder perform many administrative tasks on behalf of the Federal
Government. In this process they manage extensive federal funds or other federal
budget items, e.g. in assessing and collecting taxes. 399 The Federal Government and
the Länder are liable to each other for proper management.
Clear powers and responsibilities in the relationship between the Federal
Government and the Länder should be a primary objective. This strengthens direct
responsibility by government entities and minimises potential for conflicts. Total and
final sole responsibility by the Länder for affairs unambiguously and distinctively
assigned to them promotes transparency and is the best solution in terms of
subsidiarity and democratic responsibility.
4.6.3.1 Legal basis
Liability between the Federal Government and the Länder is rooted in the
financial provisions of the Basic Law. Art. 104a para. 5 states:
“The Federation and the Länder shall finance the administrative expenditures
incurred by their respective authorities and shall be responsible to one another for
ensuring proper administration. Details shall be regulated by a federal law requiring
the consent of the Bundesrat.”
The first stage of Federalism Reform added Art. 104a para. 6 400 to the Basic Law.
Implementing provisions for this are contained in the Law on the distribution between
the Federal Government and the Länder of financial burdens resulting from violations
of supranational or international obligations. 401 This regulates liability between the
Federal Government and the Länder in the event of violation of European law, and
specifically the sharing of financial burdens from EU financial corrections. For Basic
Law Art. 104a para. 5 sentence 1, second part this only leaves the administration of
funds under domestic law.
399
400
401
For the area of revenues, cf. section 4.1; for examples of expense, sections 4.2, 4.3 and 4.5.
Inserted with effect from 1 Sep. 2006 by the Constitutional Amendment Act (Arts 22, 23, 33, 52, 72, 73, 74,
74a, 75, 84, 85, 87c, 91a, 91b, 93, 98, 104a, 104b, 105, 107, 109, 125a, 125b, 125c, 143c) of 28 Aug. 2006
(BGBl. I, p. 2034).
Art. 15 of the Concomitant Act to the Federalism Reform of 5 Sep. 2006 (BGBl. I pp. 2098, 2105).
159
The legislature has yet to discharge its responsibility under Basic Law Art. 104a
para. 5 sentence 2 to regulate the details of liability by a federal law. In 1973 the
Federal Ministry of Finance attempted to get the legislature to regulate this. However,
the draft liability bill of 5 June 1973 402 never made it past the draft stage. This was
due to the unanimous objection by the Länder.
Basic Law Art. 104a para. 5 applies when responsibility for tasks and funding
diverge between the Federal Government and the Länder and an irregularity at one
level can have financial consequences at the other level. 403 Because of its terse
wording and the lack of implementing legislation, the scope of this provision has long
been contested.
Under rulings which are now established 404 , Basic Law Art. 104a para. 5
sentence 1, second part establishes a direct basis for a claim.
(1)
Criterion for liability
To avoid usurping the function of the legislature in drafting implementing
legislation, the rulings limit the direct application of Basic Law Art. 104a para. 5
sentence 1, second part to a “core of liability”, although the details have yet to be
clarified.
The 11th division of the Federal Administrative Court limited liability in its ruling
of 18 May 1994 405 to serious neglect of duty, intent and gross negligence.
In their rulings, the 2nd division 406 and 7th division 407 of the Federal
Administrative Court confirmed the core area defined by the 11th division.
By contrast, the 4th division of the Federal Administrative Court deviated from the
above rulings in its ruling of 16 January 1997408 by narrowing the scope of the core of
liability. Based on its refinement of preceding rulings, liability is only possible for
"intent". It was not necessary to convene the Federal Administrative Court en banc
under section 11 para. 2 of Rules of the Administrative Courts because of divergent
402
403
404
405
406
407
408
Unpublished draft speech of the Ministry of Finance (BMF) (I B 1/ FV 1160 – 20/73), reprinted as annex in
Seelmaecker, Die Verwaltungshaftung nach Art. 104a para. 5 GG, pp. 165 et seq.
Hellermann, in: v. Mangoldt, Klein, Starck, GG III, 5th ed., Art. 104a MN. 192; Birk, in. Wassermann, AK-GG,
Art. 104a MN. 29; Siekmann, in: Sachs, Grundgesetz, Art. 104a MN. 45.
BVerwGE 96, 45 (50 et seq.); BVerwG NVwZ 1995, 991 (992); BVerwGE 100, 56 (60); 104, 29 (32); 116,
234 (241 et seq.); BVerwG DÖV 2007, 517; ruling of BVerfG of 17 Oct. 2006 (Az.: 2 BvG 1/04, 2 BvG
2/04). The Länder had always disputed that Basic Law Art. 104a para. 5 sentence 1, second part involved a
direct basis for a claim.
BVerwGE 96, 45 (BAföG): an office director at a district office embezzled BAföG funds in the amount of
DM 310,212.
Ruling of BVerwG of 2 Feb. 1995 (NVwZ 1995, 991 – civil defence): A local authority official embezzled
funds for civil defence exercises totalling DM 122,000.
Ruling of BVerwG of 30 Nov. 1995 (BVerwGE 100, 56 – child allowance): A local authority paid its
employees unjustifiably high child allowance of DM 5,079, as a regulation in the child allowance legislation
was incorrectly applied.
BVerwGE 104, 29 (federal highway): In an expropriation measure to extend a federal highway a landowner
wrongly received an amount of DM 134,046.65 deposited with the local court as a result of incorrect action by
employees of the responsible road works office.
160
rulings, as the question of liability for gross negligence was not relevant to the
preceding rulings.
(2)
Procedural questions
Procedural questions, e.g. expiration of a claim for liability, are still unresolved.
While the Federal Administrative Court 409 recently dealt with the problem of the
statute of limitations, it did not issue any clarifying fundamental judgment.
(3)
Scope of liability
Basic Law Art. 10a para. 5 leaves open the scope of liability and the system to be
applied. 410 The overwhelming body of academic opinion, as supported by court
rulings, is that pecuniary compensation is due for financial losses in accordance with
section 249 et seq. BGB. 411
4.6.3.2 Findings
(1)
Potential liability
The Länder implement federal laws in their own right or on federal commission
and regularly manage federal funds in the process. Where the Federal Government
implements its laws in its own right, it is rarely involved in safeguarding the financial
interests of the Länder. For example, the Federal Government collects beer tax 412 ,
which under Basic Law Art. 106 para. 2 no. 5 accrues exclusively to the Länder, and
VAT on imports 413 , which the Federal Government and the Länder share under Basic
Law Art. 106 para. 3. In 2006, revenue from the beer tax was 800 million Euro 414 and
revenue from VAT on imports was 35.5 billion Euro 415 .
By contrast, the Länder perform far more administration for the Federal
Government. Their potential financial liability is significantly greater than that of the
Federal Government. Income tax on wages and VAT are managed by the Land tax
authorities on federal commission, and are shared by the Federal Government and the
Länder. In 2006, income tax on wages totalled 158 billion Euro gross 416 , VAT
(excluding VAT on imports) 111 billion Euro 417 . The Länder also administer income
409
410
411
412
413
414
415
416
417
BVerwG, DÖV 2007, 517 (520 et seq.): A Land official fraudulently conspired with a farmer and embezzled
funds from the defence funds totalling around 500,000 Euro.
Kirchhof, NVwZ 1994, 105 (106).
BVerwG DÖV 2007, 517 (520 et seq.); Seelmaecker, Die Verwaltungshaftung nach Art. 104a para. 5 GG, pp.
110 et seq.; Hellermann, in: v. Mangoldt, Klein, Starck, GG III, 5th ed., Art. 104a MN. 210; Prokisch, in:
Dolzer, Vogel, Graßhof, BK, Art. 104a MN. 344; the Länder had always argued that they were only required to
pay what they had recovered from their employees in internal proceedings.
Basic Law Arts 86, 108 para. 1 (beer tax is a tax on consumption).
Basic Law Arts 86, 108 para. 1.
Source: www.zoll.de (entry: Verbrauchsteuern, status: 2 May 2007).
Source: www.zoll.de (entry: Einfuhrumsatzsteuer, status: 18 April 2007).
Source: BMF monthly report, July 2007, p. 54.
Source: BMF monthly report, July 2007, p. 58, www.zoll.de.
161
and corporation tax 418 and funds for the construction, operation and maintenance of
federal long-distance roads 419 . Finally, the Länder manage federal laws granting
benefits (e.g. child allowance, Federal Training Assistance Act funds, housing
subsidies, maintenance advances, compensation for victims of violent crime). 420
Länder authorities take a large number of decisions that affect Federal Government
assets. For example, local tax offices in Germany process 30 million income tax cases
a year 421 .
(2)
Instances of liability
Local surveys in the Federal Government of Finance showed that the division
responsible for liability issues dealt with some 35 cases of liability without EU
connections from the end of the 80s to July 2007. This is equivalent to just under two
new cases a year.
In these proceedings, the Federal Government was almost always the claimant.
Claimed damages ranged from 1,350 Euro to around 7.8 million Euro, with the
overwhelming majority of claims lying between 50,000-250,000 Euro. The Federal
Government was only able to assert its claims against the Länder successfully in a
few isolated cases. Conversely, it made no payments to the Länder under one claim
under Basic Law Art. 104a para. 5.
Most liability proceedings arose out of administration by the Länder on federal
commission 422 , with tax administration accounting for the majority of the cases. In
addition, there were proceedings arising out of the implementation by the Länder of
federal laws in their own right, e.g. the Federal War Victims Compensation Act.
Several cases of liability were identified by the Bundesrechnungshof and its
regional offices, the Land courts of audits, local audit offices and tax office external
audits. Key facts relevant to liability were discovered in the course of public
prosecution office investigations or through information provided by Land authorities.
In rare cases, media reporting alerted the Federal Government to irregularities.
418
419
420
421
422
Revenue: about 43.3 billion Euro assessed income tax (gross); about 23.6 billion Euro corporation tax (gross),
source: BMF monthly report, July 2007, pp. 55, 56.
About 5.5 billion Euro a year; cf. series of publications by the Commissioner, vol. 11: Planning, constructing
and operating federal long-distance roads, p. 1 (www.bundesrechnungshof.de).
The totals to be borne by the Federal Government annually, broken down by the individual laws providing
pecuniary benefits, are as follows for 2006 or 2007 (all figures rounded in Euro): Child allowance, 35 billion;
housing allowance: 1 billion; housing subsidies: 0.5 billion; education support: 1.6 billion; support advances:
0.28 billion; education allowance 2 billion. (Family allowance from 2008 about 4 billion.) Sources Siekmann,
in: Sachs, Grundgesetz, Art. 104a MN. 25 et seq.; on the child allowance (2007 federal budget): departmental
budget 60, section 6001, item: 011 01-910; departmental budget 17, section 1710, title group 01.
Cf. series of publications by the Commissioner, vol. 13. Probleme beim Vollzug der Steuergesetze, p. 92,
fn. 135 (www.bundesrechnungshof.de).
Cases of liability arising out provision of administrative services by the Länder on federal commission:
administration of common taxes (Basic Law Art. 108 para. 2, para. 3 sentence 1, Art. 106 para. 3),
administration of federal trunk roads (Basic Law Art. 90 para. 2), education promotion, civil defence (sections
2, 23 ZSG), administration of child allowance under BKGG, old version (until 1995), administration of
defence burdens (until 2002), administration of unresolved property issues (section 22 Private Property and
Assets Act).
162
Federal Government oversight did not lead to the discovery of transactions
leading to liability in any of the identified cases.
Cooperation between the Federal Government and the Länder was very difficult
in some cases. There were individual instances of the Länder delaying or refusing the
necessary investigations.
(3)
Burdening the relationship between the Federal Government and the Länder
Those involved regarded the conflicts between territorial entities over facts
relevant to liability as serious, feeling that they were capable of deteriorating the
relationship between the Federal Government and the Länder. In several liability
cases, their importance was such that the top levels of the ministries were involved.
(4)
Length of proceedings and dated nature of facts
Processing liability cases has been laborious and time consuming. In the latest
proceedings before the Federal Administrative Court 423 for compensation under Basic
Law Art. 104a para. 5, which ended with a ruling dated 24 January 2007, the facts of
the case went back more than 15 years.
(5)
Finding of irregularity in administration
In the case of criminal actions by public servants, a ruling of irregular
administrative action does not involve any problems.
In many other cases it was a matter of discord between the Federal Government
and the Länder whether the administrative measures were proper under the relevant
substantive law or not.
There were recurrent differences of opinion in the evaluation of irregular actions
in administrative decisions on tax law.
(6)
Determining the degree of guilt
With the exception of transactions involving criminal penalties, assessments of the
degree of guilt always differed between the Federal Government and the Länder.
After announcement of the ruling of the 4th division of the Federal Administrative
Court 424 , the Länder repeatedly relied on the fact that their staff had acted without
intent, with the result that there was no liability on their part. In cases of alleged gross
negligence 425 , the Federal Government argued that liability of the Länder was not
ruled out from the start on the basis of the rulings of the other divisions of the Federal
Administrative Court. However, a determination of gross negligence involved
considerable difficulties.
423
DÖV 2007, 517 et seq.
BVerwGE 104, 29.
425
Cf. Heinrichs in: Palandt, BGB, section 276 MN. 14, section 277 MN. 5.
424
163
Because of the legal and factual uncertainties regarding the criterion for liability,
the Federal Government often avoided litigation, citing the existing risk of litigation
and the unsuitability as a test case before the Federal Administrative Court.
(7)
Proceedings
In many cases of liability, the length of time involved in processing and the
remoteness in time of the underlying facts raised issues of estoppel and the statute of
limitations. Because of the unresolved legal situation, the Federal Government
accordingly decided against filing suit in several cases.
Where the Federal Government claimed damages for delay, the Federal
Administrative Court consistently rejected claims because of a lack of basis. 426
4.6.3.3 Prospects for a future implementing law
(1)
Need for consent by the Länder
An implementing law for legislation on liability requires the consent of the
Bundesrat (Basic Law Art. 104a para. 5 sentence 2). The Länder rejected the draft
legislation in 1973 unanimously, with resistance directed particularly at direct liability
by local authorities and local authority associations (section 1 of the draft) and strict
liability in the event of serious neglect of duty (section 2 of the draft). The Länder felt
they were unreasonably burdened, as they would be far more active on behalf of the
Federal Government than the other way round. They believed that the Federal
Government would be in a better position if it had laws executed by the Länder
instead of implementing them itself, as a federal administration would only have
recourse against its own staff in the event of liability based on fault. The Länder
proposed that the Federal Government should only be able to claim damages to the
extent that the Länder had recourse against their staff. 427
(2)
Initiative of the Federal Ministry of Finance
Currently the Federal Ministry is not willing to take the initiative again to bring
about an implementing act. Instead, because of the differences in opinion between the
divisions of the Federal Administrative Court, it intends to bring a test case to get a
ruling from the Court en banc on the question of the criterion for liability.
4.6.3.4 Conclusion
Given the existing substantial potential for liability and the large number of
individual decisions involving federal funds by Land authorities, the some 35 liability
cases actually pursued since the end of the 80s represent an extremely small
426
427
BVerwGE 96, 45 (59); BVerwG DÖV 2007, 517 (522).
The Federal Administrative Court rejected this argument by the Länder (BVerwGE 96, 45).
164
percentage. The amount of damages is also very low in comparison with the volume
of funds administered.
In the view of the Bundesrechnungshof, the small number of proceedings, the
small value of the liability at issue, and the isolated cases where the Federal
Government has successfully pursued claims for liability all show that the law
governing liability and the procedures for enforcing liability claims between the
Federal Government and the Länder are quite ineffective and virtually nonfunctional.
This is essentially due, in its view, to the following causes:
(1)
Lack of systematic access for the Federal Government
The Federal Government lacks suitable instruments purposefully to identify
potential cases of liability. Currently, means are virtually ineffective for this purpose.
The Federal Government’s supervisory instruments are not suitable for
systematically identifying cases of liability. It is true that the Federal Government has
rights to information. However, these can only be used after knowledge of a case of
liability or initial suspicion has arisen. Conversely, systematic and broadly based
oversight of the Länder by the Federal Government is hardly conceivable or desirable.
It would involve enormous bureaucratic expense and would also burden the
partnership between the Federal Government and the Länder.
Audits by the Bundesrechnungshof and the Land courts of audit are not primarily
designed to pursue liability cases between the Federal Government and the Länder.
Statements on liability law are a by-product of audits.
(2)
Lack of reporting obligation on the part of the Länder
The Länder are bound by various supervisory obligations to report to and notify
the Federal Government. However, these often relate to statistical information on
programmes, use of funds and disbursement of funds. No special obligation on the
part of the Länder to report potential liability cases to the Federal Government is
known. At most, the principle of acting to promote the Federation, which is implicit in
the principle of the federal state (Basic Law Art. 20) 428 could give rise to such an
obligation. However, even if such a reporting obligation on the part of the Länder
existed, it would be virtually or completely impossible for the Federal Government to
monitor effectively compliance with such an obligation.
(3)
Limited willingness to cooperate on the part of the Länder
The relatively limited readiness of the Länder to report facts and circumstances
and cooperate closely on investigating these is understandable, given that the bulk of
the impact of liability under Basic Law Art. 104a para. 5 is borne by the Länder, so
428
Sachs; in: ibid. Grundgesetz, Art. 20 MN 68 et seq.
165
that the potential liability of the Länder is a multiple of that of the Federal
Government. 429
However, extensive cooperation on the part of the Länder is essential to establish
the actual chain of events. As the Länder run the risk of self incrimination, an increase
in their readiness to cooperate can hardly be expected.
(4)
Tendency of the Federal Government to resolve amicably cases of liability
Due to what has been described as a sensitive relationship between the Federal
Government and the Länder, the Federal Government tends to adopt a cautious
approach to cases of liability, accepting the possibility of not succeeding with claims.
Confrontations are avoided wherever possible, with a view to avoiding “damage”. In
some cases an untroubled relationship with the Länder is given greater priority than
pressing claims for compensation. Due, again, to the relatively restrained attitude of
the Federal Government, only a few cases have been settled out of court in the Federal
Government’s favour.
(5)
Duration of proceedings, effort involved in coordination and consultation, dated
facts
The long time taken to process a case of liability and the major effort required in
coordination and consultation can further contribute to staff losing the motivation to
pursue the claim in litigation. Because the events are frequently long past, reliable
statements by witnesses are virtually impossible to obtain. However, statements by
witnesses can seldom be dispensed with for the purpose of assessing the subjective
circumstances of liability.
(6)
Uncertain legal situation, complicated legal issues
The unresolved legal problems, such as the criterion to be applied for liability or
lapse of claims under the state of limitations, together with the difficulty in any case
of evaluating “proper administration”, all complicate quick and unambiguous
evaluation of the facts and a speedy process. This applies particularly to tax
legislation.
429
In the literature (Prokisch, in: Dolzer, Vogel, Graßhof, BK, Art. 104a MN. 305, 335 et seq.; Siekmann, in:
Sachs, Grundgesetz, Art. 104a MN. 45) the overwhelming majority of opinions justify comprehensive liability
by the Länder, as this represents the converse of the assigned freedom of action under Basic Law Art. 83 et seq.
The argument is that whoever controls the source of an error under the constitutional allocation of competence
is liable in principle for the failure to avoid the error. The Länder, in this view, are solely able to exercise
concrete influence through oversight, control, staff training etc. on the quality of the administration and prevent
injury or loss. In addition, the responsible authority is the only entity able to proceed against its employees at
fault and hold them liable.
166
(7)
Waiting for a ruling by the Federal Administrative Court en banc
The Bundesrechnungshof does not share the view of the Federal Ministry of
Finance that waiting for a suitable (test) case is a promising approach. There is no
prospect in the foreseeable future that the Federal Administrative Court will rule on
the criterion for liability in the Federal Government’s favour in such a case. More than
ten years have passed since the ruling of the 4th division. Even if in the foreseeable
future the Federal Administrative Court were to decide in the Federal Government’s
favour on the criterion for liability, this would only resolve this specific issue. There
would still be many unresolved issues and procedural obstacles (e.g. statute of
limitations, delay, recourse by the Länder against local authorities). Particularly, the
Federal Government would still have no systematic access of its own to possible cases
of liability.
4.6.3.5 Recommendations
According to the audit findings of the Bundesrechnungshof, the Commissioner
regards a fundamental evaluation of the procedure for liability as essential.
(1)
Eliminating overlapping responsibilities
The goal of establishing regulations on liability between the Federal Government
and the Länder in accordance with the commission under Basic Law Art. 104a para. 5
sentence 2 is simply not feasible given the diverging interests of the parties and the
weaknesses identified in implementation in the existing system.
The Commissioner accordingly favours consistent elimination of overlaps in the
division of financial and material responsibility between the Federal Government and
the Länder, as the Bundesrechnungshof has long suggested. 430 This would ensure that
the Federal Government and the Länder only have to protect their own assets, so that
questions of liability between levels of government would be largely eliminated.
(2)
Feasible implementing legislation
Where overlapping responsibilities cannot be fully abolished, an attempt should
be made to develop an overall package, supplemented by implementing legislation,
which establishes the details of the modalities of liability.
Implementing legislation could be based on the 1973 draft. As the framework
environment has changed since 1973 as a result of the evolution of rulings, with a
tendency in favour of the Federal Government, it would seem that consent by the
Länder should not be ruled out from the start.
430
Cf. 2005 Annual Report, Bundesrechnungshof, BT-Drs. 16/160, no. 3.
167
(3)
Flanking measures
The Commissioner believes it is necessary to enable public corporations to avoid
possible liability cases systematically and reliably. The corporations should collect
information on damage which has already occurred systematically and as
representatively as possible. It is, however, important to avoid a burgeoning
supervisory federal bureaucracy to monitor the Länder, which could ultimately
undermine the division of administrative responsibility under Basic Law Art. 83 et
seq. 431
In the view of the Commissioner it would accordingly be appropriate for the
Federal Government and the Länder to agree to apply suitable risk management
systems in areas where responsibilities cannot be separated, to manage and control
proper administrative implementation effectively using modern management and
control techniques (internal audit, quality management, controlling). The goal would
be to avoid liability cases between the Federal Government and the Länder from the
start.
431
Hellermann, in: v. Mangoldt, Klein, Starck, GG III, 5th ed., Art. 104a MN. 206; Schulze, DÖV 1972, 409
(414); Stelkens, Verwaltungshaftungsrecht, pp. 304 et seq.
168
5
FINAL COMMENTS
The wide range of interfaces between the Federal Government and the Länder in
administration, with their numerous openings for intransparent overlapping, have
resulted, in the practice of federal government, in executive weaknesses in very many
areas of state mission performance. The examples from the Bundesrechnungshof audit
practice in the preceding chapter have demonstrated this.
The Commissioner accordingly believes that the overlapping administrative
structures between the Federal Government and the Länder should be broken up. Not
only do they result in inefficient action by all the levels and actors involved, but also
adversely affect the ability of the level of government in question to take decisions
and action autonomously. They create false incentives, obscure responsibility, and
delay or even prevent necessary decisions.
The comprehensive stated goal of all reform efforts to modernise the system of
federal government and adapt it to changing circumstances requires the broadest
possible elimination of overlapping responsibilities in the administrative relationships
between the Federal Government and the Länder. Depending on the issues in question
and the objectives defined in the Constitution or ordinary legislation, it may require
consolidating powers and responsibilities at either Länder or federal level. There is no
standard solution or federal blueprint. Where practical or political considerations
(currently) render consistent elimination of overlaps and consolidation of
responsibilities impossible, the responsibilities under the existing system should at
least be clarified.
In his recommendations and suggested options for eliminating overlapping
responsibilities, the Commissioner does not overlook the fact that the necessary
adaptation of the federal system of administration to the changing conditions of state
action and management constitute a challenge for the Commission, the legislature and
all those responsible in the Federal Government and the Länder, which can only be
mastered by shared determination and efforts on the part of all concerned. The
Commissioner is also aware that his comments, which are formulated specifically
from the point of view of external government auditing, are just one element among
many other points of view and constellations of problems which the Commission has
to take into account in its deliberations. Nevertheless, the Commissioner hopes that
the paradigm of eliminating overlapping responsibilities in accordance with the
fundamental principles of the Basic Law will provide a guiding principle which the
Commission can use in its task of reorganising relationships between the Federal
Government and the Länder.
169
Annex I
Types of administration provided for under the Basic Law
1
Starting point: principle of separation
The decisive feature of the federalist principle expressed in Basic Law Art. 20
para. 1 is the division of government authority between the Federal Government and
the member Länder. In the Basic Law, this division is regulated in Art. 30, which
establishes a rule-exception relationship. In accordance with this, the basic
presumption is that the Länder have responsibility, with the Federal Government
having only the responsibilities specifically assigned to it. In their respective areas of
responsibility, the Federal Government and the Länder act autonomously and
independent of each other. The general principle of Art. 30, which applies to all state
tasks and discharge of functions, is supplemented by Art. 70 for legislative powers
and Art. 83 for administrative government activity.
2
Implementation of federal laws by Länder in their own right
According to the principle enshrined in Basic Law Art. 83, the implementation of
federal laws by the administration of the Länder, which is governed in more detail in
Art. 84, is the norm. The Länder regulate the establishment of the authorities and their
administrative procedures (Basic Law Art. 84 para. 1 sentence 1). However, since the
laws being executed are federal laws, the Federal Government has various
possibilities for exercising influence. For example, under Basic Law Art. 84 para. 1
sentence 2 it can regulate the establishment of authorities and their administrative
procedures itself through laws. Since the “first stage” of Federalism Reform 432 passed
in 2006, such federal laws no longer need the consent of the Bundesrat. However,
under Basic Law Art. 84 para. 1 sentence 2, second part the Länder have power to
enact divergent legislation.
Besides this possibility of organisational influence through federal legislation, the
Federal Government has further powers for influencing implementation of its laws by
the Länder in their own right, either proactive (promulgation of administrative
regulations or individual guidance in specific cases, Basic Law Art. 84 paras. 2, 5) or
retrospective (legal oversight, Basic Law Art. 84 paras. 3, 4). There is no power of
oversight by the Federal Government with regard to the appropriateness of the
execution of the laws (technical oversight) where the Länder do so in their own right.
432
Constitutional Amendment Act (Arts 22, 23, 33, 52, 72, 73, 74, 74a, 75, 84, 85, 87c, 91a, 91b, 93,
98, 104a, 104b, 105, 107, 109, 125a, 125b, 125c, 143c) of 28 August 2006 (BGBl. I, p. 2034).
170
With regard to the funding needed by the Länder for implementing federal laws in
their own right, the principle of coherence enshrined in Basic Law Art. 104a para. 1
applies, under which the Federal Government and the Länder separately bear the
expense arising out of their mission performance. The funding responsibility is based
on the administrative responsibility, not on who initiated the tasks and expenditure
through legislation. 433 As the Länder are generally also responsible for implementing
federal laws in their own right, under Basic Law Art. 104a para. 1 they bear the cost
arising out of performance of the administrative tasks. Under Art. 104a para. 5
sentence 1 they also bear the administrative expense, i.e. the costs of goods and
services.
3
Implementation of federal laws by the Länder on federal commission
3.1
Principles and objects of administration by the Länder on federal
commission
Compared with implementation of federal laws by the Länder in their own right,
the autonomy of the Länder in implementation on federal commission as set forth in
Basic Law Art. 85 is significantly curtailed. Administration on federal commission is
nevertheless another form of Land administration, with the Länder exercising
governmental power and their authorities acting as Land rather than federal organs. 434
The Federal Government has the possibility of using the rights of intervention under
Basic Law Art. 85 to exert administrative influence on how its laws are implemented
by the Länder, where these possibilities extend further than in the case of execution
by the Länder in their own right under Basic Law Art. 84. Administrative services
provided by the Länder on federal commission accordingly constitute an instrument
of federal control.435
In the field of administrative services provided by the Länder on federal
commission, the individual Land has inalienable authority, i.e. of action and
responsibility, vis-à-vis third parties. Technical responsibility, i.e. evaluation and
decision making, is also assigned to the Land, otherwise it would not be a case of
Land administration in any substantive sense 436 , and the responsibility for
implementation of the Länder means that they have priority in the technical
decision. 437 However, the Federal Government can claim this technical authority for
itself at any time, giving rise to a split between implementation and technical
authority. 438 The result of this split is a major restriction on the independence and
autonomy of the Länder. This in turn leads to the loss of transparency described
extensively in chapters 2 and 3 of this study, with its consequent problems and
433
434
435
436
437
438
BVerfGE 26, 338 (390).
BVerfGE 81, 310 (331).
Sommermann, DVBl. 2001, 1549 (1552 et seq.).
Sommermann, DVBl. 2001, 1549 (1550).
BVerfGE 104, 249 (265); Ossenbühl, in: Brenner et al., Festschrift für Badura, p. 975 (981, 988).
BVerfGE 81, 310 (332).
171
limitation of parliamentary responsibility of the Land executive in the field of
implementation authority.
The subjects for administrative services performed by the Länder on federal
commission are determined in either mandatory or optional form in other norms in the
Basic Law (e.g. Art. 87c, Art. 87d para. 2, Art. 90 para. 2, Art. 104a para. 3, Art. 108
para. 3), which constitutes an exhaustive list. In the area of tax administration 439 Basic
Law Art. 85 is modified in a specific way by Art. 108. 440
On the expenditure side, the administrative services provided by the Länder on
federal commission also lead to an exception to the general division under Basic Law
Art. 104a para. 1, with an apportionment of expenses. Under Basic Law Art. 104a
para. 2, the Federal Government finances the resulting expenses, which reflects its
extensive potential influence. However, even where the Länder are acting on federal
commission, Basic Law Art. 104a para. 5 sentence 1 requires the Länder to bear the
administrative cost.
3.2
History of Basic Law Art. 85
Given the interconnection of administrative levels occurring particularly in the
provision of administrative services by the Länder on federal commission and the
resulting deficiencies, it is logical to enquire into the reasons for this development and
investigate their origins. As described in chapter 2 of the study, the system of the
Basic Law was generally rooted in historical models based on the federal government
principle (section 2.2). This is also specifically true of the form of administration
under which the Länder provide administrative services on federal commission, for
which there are various possible historical origins.
3.2.1
Precursors of Länder administrative services on federal commission
There are, for example, indications that the concept of Länder action on federal
commission as established in Basic Law Art. 85 was adopted by the Parliamentary
Council from local authority law. 441
Other developments in legislative and administrative practice can also be
identified which lead to a system of administration on commission. For example, the
dominant position of Prussia in the North German Confederation led to its authorities
handling certain issues for the confederation, e.g. administration of foreign affairs,
which saved the confederation from having to establish its own administration. 442
There were also certain areas of administration in the German Reich of 1871
where the Länder, which implemented the laws of the Reich in their own right, were
439
440
441
442
Cf. the comments in chapter four of the study (section 4.1).
BVerfGE 32, 145 (151 et seq., 154), although this relates to Basic Law Art. 108 in the old version.
Cf. v. Doemming, Füsslein, Matz, in: Leibholz, v. Mangoldt, JöR vol. 1 (1951), p. 636.
Wolst, Die Bundesauftragsverwaltung als Verwaltungsform, pp. 34 et seq.
172
subject to particular influence by the Reich. For example, the relationship in the areas
of financial military administration 443 , administration of customs and taxes on
consumption and railway administration was similar to the Länder administration on
federal commission, with the Reich having certain supervisory powers. 444 If
deficiencies or violations were identified in the implementation of Reich laws, Art. 4
of the Reich constitution subjected the Länder to supervision by the Reich. This Reich
oversight initially provided for imperial reprimands and reports of deficiencies, and as
a last resort gave the Emperor, in cooperation with the Bundesrat, the right to use
coercive measures against the Länder. 445 In specific cases there was also statutory
authorisation creating direct links between the Reich and the subordinate Land
authorities circumventing the Land governments, which expanded the Reich’s
possibilities for influence beyond purely supervisory powers. 446
However, these precursors of execution by the Länder on federal commission did
not use the expression “execution … on federal commission”, which first appeared
under the Weimar Republic. 447 An important example of the reality of Länder
execution on Reich commission is the Reich waterways administration, where the
Land authorities were placed directly under the Reich ministry of transport, including
unlimited power of instruction over the Land authorities at the middle and lowest
levels. 448 This prevented any development of autonomy on the part of the central
Land authorities, and strengthened the unitary state.
3.2.2 Formulation of Basic Law Art. 85 by the Parliamentary Council
There are key differences between basing Land action on Reich commission as an
instrument of the unitary state and the provision of administrative services by the
Länder on federal commission under Basic Law Art. 85. Negative experience with the
National Socialist unitary state, the influence of the Western occupying powers, and
the strong position of the Länder based on their existing statehood led to a
government system with a strong federal element. 449 This was also reflected in the
provision on the execution by the Länder on federal commission.
443
444
445
446
447
448
449
Wolst, Die Bundesauftragsverwaltung als Verwaltungsform, pp. 33 et seq.
Mußgnug, in: Jeserich, Pohl, von Unruh, Deutsche Verwaltungsgeschichte, vol. 3, p. 186 (194 et
seq.).
Mußgnug, in: Jeserich, Pohl, von Unruh, Deutsche Verwaltungsgeschichte, vol. 3, p. 186 (199 et
seq.).
Mußgnug, in: Jeserich, Pohl, von Unruh, Deutsche Verwaltungsgeschichte, vol. 3, p. 186 (202 et
seq.); Wolst, Die Bundesauftragsverwaltung als Verwaltungsform, p. 33.
Mußgnug, in: Jeserich, Pohl, von Unruh, Deutsche Verwaltungsgeschichte, vol. 3, p. 186 (189.).
Wolst, Die Bundesauftragsverwaltung als Verwaltungsform, pp. 18, 36 et seq.; Heitsch, Die
Ausführung der Bundesgesetze durch die Länder, pp. 257 et seq.
Wolst, Die Bundesauftragsverwaltung als Verwaltungsform, pp. 18 (38 et seq.).
173
The draft of the constitutional convention at Herrenchiemsee included the
following provision for execution by the Länder on federal commission in Art. 113:
“Where the Länder implement federal laws on behalf of the Federation, the
implementing regulations of the Federal Government are subject to consent of the
Bundesrat (Senate). The organisation of the authorities shall be the concern of the
Länder within the framework of the relevant federal acts. The Land authorities are
subject to the directions of the competent supreme federal authorities”. In view of the
resulting blurring of the scope of responsibility and reduction in autonomy of the
Länder, this “Land administration on instruction” was intended to be limited to a few
instances. 450 This is why the Herrenchiemsee draft made only the administration of
the federal waterways subject to the principles of Länder execution on federal
commission, although it also provided for expanding this type of administration to
other areas, subject to consent by the Bundesrat. 451
The Parliamentary Council made the provisions on Länder execution on federal
commission even more favourable to the Länder by limiting federal authorities under
Basic Law Art. 85 para. 3 to a right to issue instructions only to the supreme Land
authorities. In its original form, the Basic Law provided for Länder execution on
federal commission only for administration of federal waterways (Basic Law Art. 89
para. 2 sentence 3) and federal trunk roads (Basic Law Art. 90 para. 2), adding
provision for it after intervention by the Occupying Powers in individual fields of
financial administration (Basic Law Art. 108). After entry into force of the Basic law,
the principles of Länder execution on federal commission were applied to the
following additional areas as either mandatory or optional: defence acts (Basic Law
Art. 87b para. 2 sentence 1), atomic energy legislation (Basic Law Art. 87c), specific
tasks in air transport administration (Basic Law Art. 87d para. 2), laws providing
pecuniary benefits where the Federal Government covers at least half the expense
(Basic Law Art. 104a para. 3 sentence 2), and equalisation of burdens acts in the area
of equalisation payments (Basic Law Art. 120a para. 1 sentence 1).
In the final analysis, Länder execution on federal commission is a feature peculiar
to the German federal government system 452 , which was not the result of purposeful
action but emerged from a long process of diverse factors. 453
3.3
The Federal Government’s rights of intervention when the Länder execute on
federal commission
As already noted, the Federal Government can at any time claim technical
authority for itself at its discretion, i.e. technical evaluation and decision making
authority. This is possible either legislatively (Basic Law Art. 85 para. 1) or
administratively (Basic Law Art. 85 paras 2-4).
450
451
452
453
v. Doemming, Füsslein, Matz, in: Leibholz, v. Mangoldt, JöR vol. 1 (1951), p. 622 (636).
v. Doemming, Füsslein, Matz, in: Leibholz, v. Mangoldt, JöR vol. 1 (1951), p. 623 (636).
Sommermann, Grundfragen der Bundesauftragsverwaltung, DVBl. 2001, 1549.
Wolst, Die Bundesauftragsverwaltung als Verwaltungsform, pp. 32.
174
3.3.1
Influence through legislation and codetermination in staff appointments
Even when the Länder execute on federal commission, establishment of the
authorities and administrative procedures are the concern of the Länder (Basic Law
Art. 85 para. 1 sentence 1, first part). However, under Art. 85 para. 1 sentence 1
second part, the Federal Government can take over the establishment of the authorities
and administrative procedures through federal law, with the consent of the Bundesrat.
(The fact that establishment of administrative procedures is not explicitly mentioned
here is regarded as an editorial oversight, as it is not apparent why the Federal
Government’s legislative power of organisation should be less extensive with regard
to administrative procedures in the case of Länder execution on federal commission –
which involves it more closely – than with Länder execution of federal acts in their
own right. 454 ) Basic Law Art. 85 para. 1 sentence 2, inserted in 2006 in the first stage
of Federalism Reform 455 , prohibits the allocation of tasks to local governments and
local government associations by federal law (as does Basic Law Art. 84 para. 1
sentence 7); such allocation is only possible through Land law.
As with execution by the Länder in their own right, the Federal Government can
issue general administrative regulations under Basic Law Art. 85 para. 2 sentence 1
with the consent of the Bundesrat. Recent rulings by the Federal Constitutional Court
providing effective protection of the Länder sovereignty with regard to their
administration state that such general administrative regulations can only be issued by
a panel of the Federal Government, with the consent of the Bundesrat, as this is the
only way that the Länder can influence the detailed elaboration of their
implementation authority through the Bundesrat. 456 Under these rulings, authorisation
of individual federal Ministers with the consent of the Bundesrat or limitation of
consent of the Bundesrat to the authorising legislation are not permissible. The
situation is no different in the field of financial administration, where Basic Law Art.
108 para. 7 gives the Federal Government the power to issue general administrative
regulations 457 , rather than the Federal Minister of Finance, as in Art. 108 para. 3
sentence 2.
The Federal Government also has limited influence under Basic Law Art. 85
para. 2 sentences 2, 3 over Länder staff. Under sentence 2, the Federal Government
can establish uniform training for officials and staff by either administrative
regulation or ordinance, depending on the external impact. 458 In addition, under
sentence 3, appointment of the directors of intermediate authorities is subject to the
approval of the Federal Government. However, the predominant opinion is that this
454
455
456
457
458
BVerfGE 26, 338 (385).
Constitutional Amendment Act (Arts 22, 23, 33, 52, 72, 73, 74, 74a, 75, 84, 85, 87c, 91a, 91b, 93,
98, 104a, 104b, 105, 107, 109, 125a, 125b, 125c, 143c) of 28 August 2006 (BGBl. I, p. 2034).
BVerfGE 100, 249 (261), distinguishing BVerfGE 26, 338 (399).
Siekmann, in: Sachs, Grundgesetz, Art. 28 MN. 35 et seq.; Heintzen, in: von Münch, Kunig,
Grundgesetz, Art. 108 MN. 48.
Pieroth, in: Jarass, Pieroth, Grundgesetz, Art. 85 MN. 4
175
applies to authorities dealing only with tasks under administrative services provided
by the Länder on federal commission, i.e. not to authorities in general
administration. 459
3.3.2
Power of instruction and supervision
As already noted, Basic Law Art. 85 para. 3 gives all the competent supreme
federal authorities, i.e. all the federal authorities not subject to any other authority,
power of instruction, which only applies to the supreme Land authorities.
Exceptionally, the instruction can also be directed to subordinate the Land authorities,
if the Federal Government considers the matter urgent (Basic Law Art. 85 para. 3
sentence 2, second part). In the field of financial administration by the Länder, under
Basic Law Art. 108 para. 3 sentence 2, the Federal Minister of Finance takes the place
of the Federal Government. Power of instruction includes the entire implementing
activity of the Land 460 and covers not only the legality of implementation but also the
exercise of discretion.
The question of whether only individual instructions or general instructions are
permissible within the framework of the Länder execution on federal commission is
controversial. 461 One side points to the different wording of Basic Law Art. 84 para. 5
sentence 1, which authorises “individual instructions” in “particular cases”, and Art.
85 para. 3 sentence 1, which only uses the term “instructions”, arguing that general
instructions should also be possible with execution by the Länder on federal
commission, in contrast to execution in their own right. The other side argues that it is
hardly possible to distinguish between general instructions and general administrative
regulations, so that permitting general instructions would circumvent the requirement
of Bundesrat consent to general administrative regulations under Basic Law Art. 85
para. 2. There seems to be no ruling by the Federal Constitutional Court as yet on the
constitutional permissibility of general instructions in the Länder execution on federal
commission. Regardless of this problem, there is also the possibility in practice of
reaching agreement between the competent federal and the Land authorities on the
implementation of specific federal laws, so that administrative action is based on
agreed criteria. 462
The Federal Government’s power to issue instructions is limited by the unwritten
constitutional principle of a reciprocal duty to act in a way which promotes the federal
government system. This means that the Federal Government must give the Land the
459
460
461
462
Pieroth, in: Jarass, Pieroth, Grundgesetz, Art. 85 MN. 5; Heitsch, Die Ausführung der
Bundesgesetze durch die Länder, p. 327.
BVerfGE 81, 310 (335); 84, 25 (31).
Cf. Heitsch, Die Ausführung der Bundesgesetze durch die Länder, pp. 279 et seq.; Sommermann,
Grundfragen der Bundesauftragsverwaltung, DVBl. 2001, 1549 (1554).
Cf. BVerfGE 100, 249 (254); Sommermann, Grundfragen der Bundesauftragsverwaltung, DVBl.
2001, 1549 (1554).
176
opportunity to state its position before issuing an instruction, must consider this
position, and must notify the Land that it is considering issuing an instruction. 463
The Federal Government’s power to issue instructions is also subject to the
requirement of clarity, i.e. the Land authority receiving the instruction must be able to
identify the objective meaning of the instruction with the aid of the means available to
it.
Otherwise, a violation of the rights of a Land by an instruction of the Federal
Government under Basic Law Art. 85 para. 3 is only possible if the assertion of the
power to issue instructions violates the constitution, where a Land by virtue of its
competence can only require the Federal Government to respect constitutional norms
which govern the impact of federal power on the constitutional life of the Länder, and
which accordingly establish a legal relationship between federal powers and Land
powers, which is not the case specifically for provisions dealing with fundamental
rights. According to the rulings of the Federal Constitutional Court, a limit arises only
in the extreme case where a competent supreme federal authority issues an instruction
to act or refrain from action in gross violation of its duty to exercise care, which
simply cannot be justified with regard to the resulting general risk or damage to
important legal rights. To this extent there is an obligation on the part of the Federal
Government, which is legally enforceable by a Land as an independent state, not to
require something from a Land which is simply outside what is reasonable. 464
Overall, the power of the Federal Government to issue instructions enables it to
correct illegal or inappropriate implementation of laws by the Länder or differences of
opinion on this. The Federal Government does not have any authorisation
permanently to assume the execution of the laws beyond its power of instruction. 465
Ultimately, the Federal Government has oversight under Basic Law Art. 85 para. 4
sentence 1 to ensure the legality and appropriateness of implementation of the laws by
the Länder. Basic Law Art. 85 para. 4 sentence 2 authorises the Federal Government
for this purpose to require the submission of reports and documents and of sending
commissioners to all Länder authorities. However, it is apparent that federal oversight
today is being replaced by other control mechanisms, and particularly by far-reaching
monitoring of legality by the administrative courts, and that it accordingly is only
regarded as having a reserve function. 466
4
Implementation of federal laws by the Federal Government
In contrast to the two forms of administration by the Länder discussed above, the
Basic Law provides in Art. 86 for execution of federal laws through the Federal
463
464
465
466
BVerfGE 81, 310 (337 et seq.).
BVerfGE 81, 310 (333 et seq.).
Ossenbühl, in: Brenner et al., Festschrift für Badura, p. 975 (988 et seq.).
Heitsch, Die Ausführung der Bundesgesetze durch die Länder, pp. 173 et seq.
177
Government’s own administrative authority, creating another exception to the
principle of Art. 83 in addition to the Länder execution on federal commission. With
this form of administration, the Federal Government has both implementing and
technical authority; the Länder are excluded from implementation of legislation.
Federal administration is direct federal administration by a legally subordinated
authority of the Federal Government, but also indirect federal administration by
institutions which are legally autonomous and separate from the Federal Government
as a legal entity, such as corporations or institutions under public law (cf. Basic Law
Art. 87 para. 2 sentence 1).
The basic rule is that the Federal Government’s legislative power sets the absolute
limit to its administrative responsibility.467 The subjects of direct federal
administration are listed in detail in Basic Law Arts. 87-90, and expanding these
requires a constitutional amendment. Where the Basic Law establishes administrative
powers of the Federal Government, Art. 86 applies to both administration bound to
legislation and administration which does not involve implementing laws.
The explicit administrative responsibilities are supplemented by unwritten
administrative powers of the Federal Government, which play quite a considerable
role in state practice. Such implicit federal powers can arise out of the nature of the
issue or out of factual circumstances. Powers arising out of the nature of the issue are
possible in areas which are necessarily allocated to the Federal Government, where
regulation by the Länder is excluded because regulation is only possible uniformly
and for the whole federal territory. 468 Powers arising out of factual circumstances
emerge where a subject allocated to the Federal Government logically cannot be
regulated without at the same time regulating another subject not so allocated. 469
There are also ancillary powers which lead to extending written powers beyond their
actual field of application, and relate to procedural handling of the subject in question.
5
Prohibition of combined administration
The unwritten federal powers do not change the fact that the bulk of
administrative powers are constitutionally allocated to the Länder. Generally, the
Basic Law provides in Arts. 83 et seq. for strict separation of the powers of the
Federal Government and the Länder, and accordingly rules out shared administration,
except where explicitly permitted for joint tasks under Arts 91a, 91b. 470 Dual
responsibility by the Federal Government and the Länder or a “shadow
administration” by the Federal Government alongside the Länder are constitutionally
not permissible, and to be avoided from the start in the field of the Länder
467
468
469
470
BVerfGE 12, 205 (229); 102, 167 (174).
BVerfGE 11, 89 (98 et seq.); 12, 205 (251 et seq.).
BVerfGE 3, 407 (421); 106, 62 (115).
BVerfGE 32, 145 (156); 39, 96 (120).
178
administration on federal commission. 471 The purpose of this is to protect the Länder
and their administrations from federal influence over their decisions, and it is also a
prerequisite for clear allocation of responsibility. Generally, neither the Federal
Government nor the Länder can go beyond the responsibilities established for them in
the Basic Law, and shifts of responsibilities between them are not possible, even with
the consent of those involved. 472
6
Diagram
The following diagram shows the general features of the different forms of
administration in executing federal laws:
Implementation of federal legislation
by the federal states
at their own discretion
under their
responsibilities,
Basic Law Arts. 83, 84
by delegation of
the Federal
Government,
Basic Law Art. 85
- by federal state authorities
- by municipal bodies and
associations of municipalities
(allocating tasks by regional
law)
- by other public law bodies
funded by the Federal
Government level
471
472
by the Federal Government level,
Basic Law Art. 86
- by federal authorities (direct
federal administration)
- by federal bodies, institutions or
public bodies funded by the
Federal Government (indirect
federal administration)
BVerfGE 104, 249 (266 et seq.).
BVerfGE 4, 115 (139); 63, 1 (39).
179
Annex II
List of selected audit findings (annual reports 2000 – 2006)
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
Summary
1
Annual report
2000, no. 5
(BT-Drs.
14/4226)
2
Annual report
2000, no. 26
(BT-Drs.
14/4226)
Annual report
2000, no. 31
(BT-Drs.
14/4226)
Cultural programmes funded jointly by Federal and Länder Governments
The Bundesrechnungshof found that the cultural programmes funded jointly by the Federal Government and the Federal States
(Länder) had a number of shortcomings.
The Federal Government and Länder did not sufficiently coordinate their actions on the basic principles of grant procedure.
The variances in funding methods and differing procedures for disbursing grants to the final recipients lead to excessive
administrative workload.
The Federal Government provides grants towards the Cultural Foundation of the Federal States, whose sole task is the
organisation and management of arts and cultural projects under an agreement dating back to 1987. Although the agreement
states that the role of the Federal Government is limited to project funding via the foundation’s council, the Federal
Government intervenes in the granting procedure and checks potential grantees’ eligibility. This inefficient procedure entails a
high workload, and duplication of work.
ERP-loans to promote vocational training
The Federal Ministry provides funding from the ERP training programme to create additional incompany vocational training
places. As a result of weaknesses in programme structures and procedures (e.g. lack of coordination with Länder promotional
programmes), major amounts of available funds have not been used for the appropriated purposes.
Grants towards war victims care at old pensioners homes
War victims living in homes for the aged and receiving benefits under the war victims relief programme, are required by statute
to contribute from their pension income towards the cost of lodging, board and care. 80 per cent of the revenue thus generated
must be paid over to the federal exchequer that bears 80 per cent of the costs for war victims relief. For years a Hessian local
war victims relief body collected the contributions and incorporated them into the local social assistance budget without
passing on the percentage due to the federal exchequer. As a result some millions in federal funds have been lost.
3
180
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
4
5
Source
Annual report
2000, no. 32
(BT-Drs.
14/4226)
Annual report
2000, no. 47
(BT-Drs.
14/4226)
6
Annual report
2000, no. 48
(BT-Drs.
14/4226)
7
Annual report
2000, no. 49
(BT-Drs.
14/4226)
Summary
Assessment of staffing needs at the Pension Insurance bodies
For numerous regional pension insurance bodies in the west German Länder, current assessments of staffing needs exist for
only a small portion of some 11,000 established posts audited. Justified staffing levels and timely adjustment to changes in the
workload are not ensured.
Landscaping along federal trunk roads
For landscaping projects carried out by the roadworks offices along federal trunk roads, distances between plants were too
small and the shrubs planted were older and higher than necessary, thereby not complying with the guidance issued by the
Federal Ministry. This caused at least DM 21 million excess spending in 1992-1998.
The roadworks offices largely failed to upkeep the planted areas, claiming that no budget funds had been provided for doing so.
This jeopardised the ecological function of the landscaped areas.
Because the works were not adequately monitored, the roadwork offices made millions of deutschmarks excess payments to
contractors.
Downgrading of thoroughfares which form part of federal roads after completion of bypasses
Legislation requires the Länder to downgrade, in accordance with state law, the thoroughfares which have become dispensable
for long-distance traffic through the construction of bypasses. Until downgraded, the cost of maintaining and operating the
thoroughfares must be borne from federal budget funds. The belated downgrading of 120 thoroughfares in the years 1994-98, a
period in which 200 new by-passes were commissioned, caused avoidable costs to the federal exchequer of more than DM 3
million a year.
Construction of a new section of federal highway 502 between Kiel and Brodersdorf
With the approval of the Federal Ministry, the roadworks office planned for part of the new federal highway 502 between Kiel
and Brodersdorf to have four lanes and for all crossings to be overhead crossings. The Bundesrechnungshof holds that much of
the about DM 70 million cost could have been saved by less elaborate planning. Furthermore, the Bundesrechnungshof
seriously doubts that it is the statutory duty of the Federal Government to maintain a highway only 19 km long which is
primarily used by local traffic.
181
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
8
9
Source
Annual report
2000, no. 50
(BT-Drs.
14/4226)
Annual report
2000, no. 51
(BT-Drs.
14/4226)
10
Annual report
2000, no. 61
(BT-Drs.
14/4226)
11
Annual report
2000, no. 64
(BT-Drs.
14/4226)
Summary
Accounting for federal public works expenditure
Errors in the accounting for construction projects implemented by the construction agencies of the federal states on behalf of
the Federal Government have led to repayments in excess of DM 20 million. The Federal Ministry took corrective action
belatedly.
Tenants relief subsidies paid by the Federal Government to the Länder
Several Länder calculate the share of tenants relief to be paid by the Federal Government without adequate documentation.
They also claim for cases where the relief is not or no longer paid. The results are financial losses to the federal budget from
improper payments and loss of interest. The Federal Ministry has not taken adequate steps so far to obtain repayment of the
excess amounts or to prevent further losses.
Expenditure on the maintenance of graves of victims of war and despotic rule under the Graves Act
Due to inaccurate reports by the Länder on the number of individual graves and the surface area of collective graves, the
Federal Government has overpaid the Länder several million DM For years, several Länder have not fully spent federal funds,
disbursed as lump sum payments, for maintenance under the Graves Act, and have accumulated multimillion DM balances (in
one Land, over DM 11 million). Although most of the war graves have been properly maintained, reserves were formed for
major maintenance measures which were not necessary. In addition, the Länder have used the lump sum grave-maintenance
payments extensively to fund other measures not covered by the Graves Act.
Federal funding for projects undertaken by the Länder
The Federal Ministry provides grants towards educational and scientific research projects and programmes without always
giving due regard to the constitutional division of responsibility between the Federal Government and the Länder. Besides
violating the constitutional requirement for orderly administrative action, this leads to avoidable expenditure by the Federal
Government.
182
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
12
Annual report
2000, no. 65
(BT-Drs.
14/4226)
13
Annual report
2000, no. 66
(BT-Drs.
14/4226)
Annual report
2000, no. 68
(BT-Drs.
14/4226)
14
15
Annual report
2000, no. 69
(BT-Drs.
14/4226)
16
Annual report
2000, no. 70
(BT-Drs.
14/4226)
Summary
Tax inspection in western Germany
Tax inspection is unable to counter the growth in tax fraud adequately because of inadequate staffing and equipment and
organisational weaknesses. In particular, there is a large backlog of outstanding work. This violates the principle of legality,
which also applies to tax crimes. Tax monitoring to detect and pursue unknown tax offences – which is part of the tasks of tax
inspection – is done only exceptionally, although the rapid growth in electronic business transactions in particular should be
monitored.
Development of IT programmes for tax offices
After many years of efforts, two IT projects to develop software for tax assessment and collection have failed. Primary reasons
for this are lacking staff support by the Länder and poor project management. Another indispensable large project, FISCUS,
which is to cover all important areas of tax assessment and collection, also seems very much at risk given the similar situation.
Intra-Community VAT fraud
Manipulations of VAT are increasingly being committed in a setting of organised crime and cause tens of billions in tax losses
annually. Perpetrators exploit the vulnerability to fraud of the VAT taxation on intracommunity deliveries by claiming input
tax refunds through shell companies but not paying the VAT due. They benefit from the fact that taxes are assessed by the
individual Länder and there is no central collection of information, e.g. by the Federal Finance Office.
Cooperation of German fiscal authorities with those of other EU member nations, notably Austria
The mutual assistance between fiscal authorities of EU member nations needs to be considerably improved. The relevant
agreement on mutual judicial assistance with the Republic of Austria, which dates from 1954, essentially provides an adequate
framework for mutual assistance between fiscal authorities. However, a joint audit revealed some deficiencies in the legal
provisions laid down in the agreement and in the latter's practical application by the fiscal authorities of the Länder.
Deduction of special expenses admitted by tax offices in eastern Germany
The local tax offices in eastern Germany do not adequately collect the evidence needed for the deduction of special expenses,
and especially deductions in advance. Errors were found in more than 90 per cent of the cases examined by the
Bundesrechnungshof. Losses of tax revenue in the amount of hundreds of millions of deutschmarks must be expected on
account the inappropriate admission of advance deductions.
183
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
17
Annual report
2000, no. 71
(BT-Drs.
14/4226)
18
Annual report
2000, no. 72
(BT-Drs.
14/4226)
19
Annual report
2000, no. 73
(BT-Drs.
14/4226)
Summary
Tax relief on architectural monuments and buildings in urban rehabilitation and urban development areas
The responsible authorities in the Länder do not issue adequate certificates for tax relief on architectural monuments and
buildings in urban rehabilitation and development areas. In more than 70 per cent of all cases reviewed, the certificates did not
give the full information required by the applicable legislation.
The tax offices regularly did not object to the incomplete and erroneous certificates issued by the authorities responsible for the
classification of buildings. Even where the certificates were missing, the tax offices often granted the tax relief sought.
Evidence suggesting that tax relief was granted inappropriately was found in 75 per cent of the cases revised. The result is a
loss of tax revenue in the range of millions of deutschmarks.
Tax inspection (field work) in eastern Germany
The field work units of the local tax offices in eastern Germany remain understaffed. In four of the five eastern German federal
states, full staffing will be achieved at the earliest in 2003. Moreover, inadequate administrative assistance by the western
German federal states prevents timely and adequate tax inspections on the premises of taxable businesses. The insufficient
number of such tax inspections in all eastern German Länder has led in turn to tax claims becoming statute barred, even with
major companies, and to gaps in inspection coverage. Failure to conduct audits and the considerably lower average amount of
retroactive additional assessments in comparison to the western Länder resulted in losses of tax revenue estimated at millions
of deutschmarks.
Review and monitoring of the deduction of input VAT by tax offices in eastern Germany
Where an enterprise has buildings of which part of the premises do not qualify for deduction of input tax, taxable businesses
used an inadmissibly simplified method for computing input tax, resulting in excessive input tax deductions. The local tax
offices did not object. In some cases, local tax offices even permitted the deduction of input VAT for parts of premises that did
not qualify for that deduction.
184
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
20
Annual report
2000, no. 79
(BT-Drs.
14/4226)
21
Annual report
2000, no. 87
(BT-Drs.
14/4226)
Annual report
2000, no. 91
(BT-Drs.
14/4226)
Annual report
2000, no. 92
(BT-Drs.
14/4226)
22
23
24
Annual report
2000, no. 94
(BT-Drs.
14/4226)
Summary
Promotion of cultural activities under the Federal Refugee Act
The Federal Government and Länder are responsible for preserving the cultural heritage of ethnic German refugees. The
Bundesrechnungshof found that activities preserving and promoting German culture in central, eastern and southern Europe
were divided between 18 institutions. Nine of these institutions are fully federally funded. The Bundesrechnungshof has called,
among other measures, for the Länder to increase the share of funding, failing which it should be considered whether the use of
federal funds for promotion is justified at all.
Reimbursement of administrative costs to the Länder
The Federal Government reimburses the Länder for carrying out its public works. One Land billed the Federal Government for
several years for not only the (agreed) personnel costs of staff dealing with federal public works projects, but also for materials
and equipment. It also billed pension expenses which the Federal Government was not responsible for.
Construction of a headquarters building for the Hamburg Regional Insurance Institute
The Hamburg Regional Insurance Institute of the State of Hamburg, which receives federal grants, planned a new headquarters
building in Hamburg. The Bundesrechnungshof noted in good time the excessive architectural standards and components
which were unnecessary or inappropriate. Suggestions for savings resulted in savings of DM 7 million.
Introduction of an opto-electronic case processing system
The Insurance Institute of Saxony-Anhalt launched a pilot project to introduce an opto-electronic case processing system.
Extending this to the entire Institute would have involved additional costs of several million DM. The Bundesrechnungshof had
repeatedly expressed serious doubts about the need for and appropriateness of the project and called for a review of its cost
effectiveness.
Federal funding of rail/road crossings
The Federal Government bears part of the cost of construction work on crossings between railways and roads. The
Bundesrechnungshof audited a random sample of measures at six roadworks offices in three Länder for the period 1994-1998.
Audit work revealed shortcomings in over 50 cases which resulted in excess federal expenditure of over DM 14 million.
185
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
25
26
27
Source
Annual report
2001, no. 5
(BT-Drs.
14/7018)
Annual report
2001, no. 7
(BT-Drs.
14/7018)
Annual report
2001, no. 8
(BT-Drs.
14/7018)
Summary
Dissolution of the Equalisation of Burdens Fund
Fifty years after the end of the war, the equalisation of burdens has been virtually completed. Apart from minor exceptions, no
equalisation tax is levied now. Dissolving the Fund completely and abolishing the representatives of the Fund’s interests could
simplify administration by the Federal Government and the Länder, resulting in savings of several million DM.
Sponsoring of Sports Training Centres by the German Sports Council
For decades, the Federal Government has sponsored the training and upgrading of sports instructors, support staff and top
management staff at the Cologne Sports Instructors Centre and the Berlin Sports Managers Training Centre. Alternative
training centres now exist in the Länder. Only 10 per cent of the coaches who received federal funding had graduated from the
Instructors Centre, and the Federal Ministry was not able to present data about the use of the Sports Managers Training Centre
by top sports managers partly promoted by federal funds. Serious shortcomings in budgeting and managing the Instructors
Centre led to excess payment of grants over the years. The Federal Office of Administration failed to fully examine the
underlying facts and figures and fully assert the federal claims.
Shooting ranges of the Federal Border Police
For years the Federal Border Police did not use some of its shooting facilities to their full capacity. Its officers completed only
part of the required practice. Despite revised, requirements the Federal Ministry failed to update the training curriculum in a
timely manner. Since uniform criteria were lacking, sizeable extra cost was incurred for building new indoor shooting ranges.
Thus the new shooting ranges differed as to design, size and shooting equipment. There was also a lack of effective
cooperation with Land police forces to make full use of existing ranges. The Federal Ministry has acknowledged several of the
identified problems and taken various measures to correct them.
186
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
28
Annual report
2001, no. 18
(BT-Drs.
14/7018)
29
Annual report
2001, no. 33
(BT-Drs.
14/7018)
30
Annual report
2001, no. 34
(BT-Drs.
14/7018)
Summary
Collection of data for purposes of tax assessment
In 1993 the Bundesrechnungshof identified considerable shortcomings by the local tax offices in the use of information returns
and other sources of tax data relevant for tax assessment. In 2000, auditors looked into this issue again and when examining
information returns on the tax assessment of partners in partnerships they found that the weaknesses stated in 1993 still persist.
Local tax offices still analysed information returns late, inadequately or not at all. Thus the tax revenues due were not collected
in a timely and complete manner. To avoid further loss of tax revenue the Federal Ministry should exercise its oversight
functions and bring pressure to bear on the highest fiscal authorities of the Länder to improve reporting and evaluation of
information relevant for tax assessment.
Need for and standard of local by-passes
The 1992 requirements plan for federal trunk roads includes the construction of by-passes of federal roads running parallel to
federal motorways, even though the federal roads in question are no longer significant for long-distance traffic. Up to 9-digit
DM amounts can be released for other purposes by waiving the construction of by-passes for roads that are immediately
downgraded instead. Further, the planning of by-passes often applies an excessively high standard, for example regarding
width or trajectory.
Service facility signs on federal trunk roads
In the past, the Federal Ministry failed to issue nation-wide guidance on efficient design and erection of service facility signs.
Thus the Länder roadworks offices were able to procure widely differing and unnecessarily elaborate service facility signs and
erect them on federal trunk roads. This causes avoidable federal expenditure.
187
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
31
Annual report
2001, no. 35
(BT-Drs.
14/7018)
32
Annual report
2001, no. 36
(BT-Drs.
14/7018)
33
Annual report
2001, no. 37
(BT-Drs.
14/7018)
34
Annual report
2001, no. 54
(BT-Drs.
14/7018)
Summary
Continued construction of the U 5 underground railway line in Berlin
In 1994 the Federal Government and the federal state of Berlin agreed to build a new underground railway line between the
new central railway station (Lehrter Bahnhof) and the Alexanderplatz within a time frame of eight years, to provide public
transport facilities for the parliamentary and governmental district. The Federal Government committed to pay some DM 295
million in excess of the amount statutorily provided for in such cases. The first 2 km section of the railway line has been
completed at a cost of over DM 300 million. DM 250 million of this was federally funded. The federal state of Berlin has not
yet started building the second section of the line, without which the U 5 would not be connected to the existing system.
Instead it decided in June 2001 to postpone the project indefinitely, so that the investment to date will not yield any return in
the foreseeable future.
Construction of the Fuhlsbüttel bypass in Hamburg and its impact on other projects
The Federal Ministry assumed financial responsibility for the Fuhlsbüttel bypass in Hamburg and provided total funding of DM
450 million. There was no legal obligation of the Federal Government to do so. As a result, no federal funds were available in
Hamburg for upgrading motorway sections with excessive traffic load. There will continue to be funding bottlenecks in
motorway construction in Hamburg in future years as well.
Allocation of costs of road crossing construction or modification
In the case of crossings between federal trunk roads and roads for which other authorities are financially responsible, the
Länder offices managing the roadworks charged (or intended to charge) costs to the Federal Government for which it is not
responsible under existing legislation. The Bundesrechnungshof estimates that the unwarranted charges to the Federal
Government amounted to an 8-digit DM amount.
Taxation of a group of associated companies
Lack of cooperation between fiscal authorities concerning the taxation of a group of associated companies caused unjustifiable
extra work at the local tax offices and different, partly inaccurate and partly incomplete tax treatment of the same issues. This
led to considerable losses of tax revenue.
188
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
35
Annual report
2001, no. 56
(BT-Drs.
14/7018)
36
Annual report
2001, no. 57
(BT-Drs.
14/7018)
37
Annual report
2001, no. 77
(BT-Drs.
14/7018)
38
Annual report
2001, no. 78
(BT-Drs.
14/7018)
Annual report
2001, no. 86
(BT-Drs.
14/7018)
39
Summary
Tax inspection fieldwork concerning insurance tax
The Federal Ministry of Finance did not adequately exercise its supervisory powers in respect of insurance tax collected by the
Länder and made no use of its participation rights. Inadequate tax inspection on insurance companies’ premises in the Länder
means that timeliness, completeness, legality and equality of taxation are not guaranteed. Considerable tax revenue was lost to
the Federal Government. Unequal treatment of insurance companies further caused distortions of competition.
Taxation of the blood donation service of a charitable organisation
When processing blood to produce medicines and selling them, the blood donation services of the regional associations of a
national charity are engaged in a taxable business activity. During an examination of the taxation of blood donation services in
1996 by the Bundesrechnungshof, the Finance Ministry of North Rhine - Westphalia failed to cooperate and refused for nearly
five years to comment on the Bundesrechnungshof’s findings. It also failed to communicate these to the competent local tax
offices until April 2001, although the findings had fundamental importance and had been adopted by the Bundestag Auditing
Committee.
Awarding of public works to a general contractor
The Contracting Rules for Awarding Public Works Contracts require awarding individual contracts for specialised work to
ensure broad competition. The Bundesrechnungshof found that one Land public works office had awarded a contract for
16 federal construction projects to general contractors. No documentation was provided for reasons and ex post verbal
explanations were inadequate. This resulted in extra costs of at least DM 10 million.
Monitoring technical facilities on civilian federal premises
Inadequate monitoring of operation of federal premises by the Länder public works offices resulted in a failure to save around
DM 120 million a year in operating and energy costs.
Interest payable under section 233a of the Fiscal Code in the eastern Länder
With regard to assessments of interest under section 223a of the Fiscal Code, the Bundesrechnungshof found that complete and
uniform assessment of taxes and interest in the eastern Länder was not achieved due to various deficiencies in processing.
189
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
40
Annual report
2002, no. 4
(BT-Drs.
15/60)
41
Annual report
2002, no. 42
(BT-Drs.
15/60)
42
Annual report
2002, no. 43
(BT-Drs.
15/60)
Summary
Implementation of the programme on Culture in the new Länder (i.e. eastern Germany)
In 1999, the Federal Government’s Commissioner for Cultural and Media Affairs launched a programme for the transitional
promotion of the cultural infrastructure in eastern Germany. The programme is to be in force until the end of 2010, and federal
funds of DM 270 million (approx. € 138 million) were allocated to the programme up to FY 2002. Preparation, conception and
implementation of the programme displayed serious deficiencies. For example, funding agreements were not honoured by the
Länder.
Real estate management by the Motorway Directorates in Bavaria
When plots of land are needed in the foreseeable future for projected trunk roads, priority is to be given to the Federal
Government’s general real estate pool. Where necessary, the Land roadworks office purchases additional plots required on
federal commission. Plots no longer needed for federal trunk road construction must be either sold by the Land roadworks
office within a limited period or conveyed back to the Federal Government’s general real estate pool. The roadworks office of
the Free State of Bavaria did not convey such land, with a total area of about 1,300 hectares and market value of about 25
million Euro, back to the general real estate pool. Where the use of plots of land is still unresolved, they must be leased for
limited periods at market conditions. The roadworks office rarely reviewed leases to see if more income could be achieved.
Processing of supplementary contracts and final invoices for construction projects relating to federal trunk roads
The Länder roadworks offices predominantly drew up supplementary contracts only after the additional work had been
performed. In some cases, additional work or modifications were settled without supplementary agreements. Both contractors
and roadworks offices delayed processing of supplementary contracts and final invoices, so that final payments were often
made many years after completion of projects. Supplementary contracts and cost overruns were not taken as a reason to look
for causes and correct them.
190
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
43
Annual report
2002, no. 44
(BT-Drs.
15/60)
44
Annual report
2002, no. 45
(BT-Drs.
15/60)
45
Annual report
2002, no. 64
(BT-Drs.
15/60)
46
Annual report
2002, no. 67
(BT-Drs.
15/60)
Summary
Planning of federal trunk roads in the Dessau-Halle-Leipzig area
When notifying projects to the Federal Ministry to update planning for federal trunk roads, the Land of Saxony-Anhalt also
notified projects which were either not needed for long-distance traffic or were not economically justifiable. The Federal
Ministry should not have recommended these projects for inclusion in the new road needs plan. Cancelling construction of one
new federal highway and upgrading another federal highway would reduce the funding need by around 52 million Euro, or the
money could be used for other urgent measures. In the Land of Saxony, the Federal Ministry is also funding construction of a
10 km stretch of highway by the year 2017 for around 48 million Euro which no longer meets the requirements for being rated
as a federal road.
Planning Bad Bramstedt bypass for federal highway B 206
Acting on behalf of the Federal Government, the roadworks office of the Land Schleswig-Holstein is planning construction of a
bypass at Bad Bramstedt as part of federal highway B 206. The project cost is estimated at 29 million Euro, and the project has
such a poor cost-benefit ratio that it must be considered as just rating construction. The Federal Ministry should re-examine the
necessity and priority of the project in view of the planned new construction of federal motorway A 20. At least, it should urge
the roadworks office to improve the cost effectiveness significantly by cutting construction costs.
Exercise of federal oversight over the Länder collection points for radioactive waste and levying final repository fees on
behalf of the Federal Government
The Länder collect volume-based final repository fees on behalf of the Federal Government for radioactive wastes delivered to
them. In July 1997, the Federal Government announced an increase effective 1 February 1998. In January 1998, one Land
certified delivery by a company of 3,400 barrels of radioactive waste and charged the lower lump-sum fee due at that time. In
fact, the waste remained on the company’s premises. The Bundesrechnungshof addressed the matter in FY 2000. The Federal
Ministry did not take initial measures to secure the federal claim against the Land for the higher fees until March 2002.
Federal grants for promoting student housing
Under a temporary special programme, the Federal Government gave grants totalling DM 250 million (128 million Euro) to the
eastern Länder and former East Berlin to promote student housing. Two Länder used federal funds of around DM 7.3 million
(3.7 million Euro) for projects not eligible for promotion under the agreements. The Länder also called the federal funds earlier
than needed. The Federal Government suffered avoidable loss of interest totalling around DM 1 million (0.5 million Euro).
191
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
47
Annual report
2002, no. 69
(BT-Drs.
15/60)
48
Annual report
2002, no. 76
(BT-Drs.
15/60)
49
Annual report
2002, no. 78
(BT-Drs.
15/60)
50
Annual report
2002, no. 79
(BT-Drs.
15/60)
Summary
Right to tax income from dependent employment, specifically income of persons resident in Germany and employed as
drivers by Luxembourg employers
Under the Luxembourg double taxation agreement, the Federal Republic of Germany has a right of pro rata taxation of wages
or salaries paid by Luxembourg employers to German residents employed as drivers, building workers, installation fitters,
travelling salesperson or business executives, in proportion to the time spent working outside Luxembourg. The same applies in
relation to many other countries with which there are similar double taxation agreements. The Länder fiscal authorities made
inadequate efforts to assert and exercise their right of taxation. This causes losses of tax revenue of several million Euro a year
to the Federal Government and the Länder.
Binding commitments in a significant individual instance
Prior to awarding a military procurement project, two local tax offices, one in north Germany and one in south Germany, made
largely binding but different commitments to competing companies on VAT treatment of the same circumstances This violated
the principle of equity of taxation and led to distortion of competition.
Although the commitments to the companies in the Länder concerned were also illegal, they became binding, resulting in
irrecoverable loss of tax revenue of 47 million Euro. The Federal Ministry of Finance was not notified of such occurrences.
Processing of appeals by the local tax offices in eastern Germany
The number of formal appeals has risen steadily at local tax offices in eastern Germany since 1990. These appeals were not
processed expeditiously and promptly, so that there has been a substantial increase in outstanding cases. Among other factors,
this is due to the fact that virtually no use is made of information technology, and even appeals ready for decision are left
unresolved for years.
Compliance by tax offices in eastern Germany with the new legal provision concerning tax-deductible interest
expenditure under section 4 para. 4a Income Tax Act
The new legal provision on tax deductible interest expenditure is ignored in the east German Länder in the overwhelming
majority of cases by both taxpayers and local tax offices. The lack of (adequate) audit of these tax cases is likely to result in
annual loss of tax revenue in the range of hundreds of millions of Euro.
192
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
51
52
53
Source
Annual report
2002, no. 97
(BT-Drs.
15/60)
Annual report
2002, no. 99
(BT-Drs.
15/60)
Annual report
2003, no. 14
(BT-Drs.
15/2020)
Summary
Reimbursement of administrative expenses
The Länder managed building works for the Federal Employment Service against reimbursement of administrative
expenditure. In one Land the Bundesrechnungshof found unjustified federal payments of 6 million Euro. The Federal
Employment Service has terminated the agreement with the Länder and will handle these tasks itself in future.
Early withdrawal of federal grant funds towards the improvement of regional economic structure
“Improvement of regional economic structure” is a joint task of Federal Government and Länder for which the Federal
Government bears half the expense. When drawing down federal funds, the Länder are allowed an unnecessarily long period of
two months before disbursing the funds, resulting in increased interest payments by the Federal Government of up to 1.5
million Euro in the five audited Länder in FY 2000. There is also no control whether excessive amounts are drawn down,
which occasionally happened.
Premature discharge of co-funding obligations of the Federal Government in connection with environmental clean-up is
not cost-effective
The Federal Government had undertaken to co-fund the clean-up of hazardous waste sites in the eastern German states. In order
to completely discharge the Federal Government’s obligations to co-fund the clean-up, the Federal Office for Special Tasks
related to National Unification agreed lump -sum payments totalling about 1.5 billion Euro to some east German Länder. The
Federal Office left it to the Länder to decide the nature and scope of the clean-up, as well as the timetable. The
Bundesrechnungshof regards the advances, which in its view were agreed on the basis of inadequate information, to be
inappropriate and inefficient. The payments result in high financing costs, which ultimately have to be borne by the Federal
Government. The Bundesrechnungshof recommends that the Federal Office for Special Tasks related to National Unification
should only enter into new agreements if their appropriateness and efficiency are adequately demonstrated.
193
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
54
Annual report
2003, no. 15
(BT-Drs.
15/2020)
55
Annual report
2003, no. 46
(BT-Drs.
15/2020)
Annual report
2003, no. 47
(BT-Drs.
15/2020)
56
57
58
Annual report
2003, no. 49
(BT-Drs.
15/2020)
Annual report
2003, no. 50
(BT-Drs.
15/2020)
Summary
Inadequate involvement of the Federal Office for Special Tasks related to National Unification in decisions about grants
from consolidating funds, despite high financial risk
The east German Länder received loans from Treuhandanstalt (the agency responsible for privatizing formerly state-owned
industry in the GDR) to promote (re)privatised businesses in acute financial need. As Treuhandanstalt’s successor, the Federal
Office for Special Tasks related to National Unification only has a veto against promotions in the grant committees of three
Länder, although it bears 80% of all default on repayments. Moreover, the Federal Office was not always adequately informed
to enable it to appropriately exercise its voting right and avoid loss.
Grants towards social sciences research projects given without legal basis
In promoting social sciences research, the Federal Ministry for Education and Research violates the agreement with the Länder
on joint promotion of research projects. The projects funded very frequently did not meet the requirements to be observed
under the agreement for research projects of national importance and scientific policy interest.
Funding for FIZ Karlsruhe
The share of federal funding for the FIZ Karlsruhe institute is too high, and does not match the actual use made of the services.
At the end of the 80s, the Federal Ministry for Education and Research negotiated with the Länder over adjusting the
apportionment of funding, without success. The Federal Ministry should accordingly take effective measures without delay to
divide funding appropriately.
Deduction of withholding tax on the transfer of software to other businesses
Under certain conditions, an entity acquiring software from foreign companies may be required to deduct withholding tax from
the agreed price and pay this to the fiscal authorities. Local tax offices are insufficiently successful in collecting the tax due
under section 50a of the Income Tax Act. Various measures are possible to correct this.
Inadequate taxation of “red light” districts
Sales and income from prostitution, pimping and the operation of brothels and comparable establishments are subject to tax.
However, with few exceptions, the fiscal authorities are unsuccessful in registering and taxing the prostitutes and pimps active
in Germany. Sales and profits of operators of brothels and similar establishments are taxed incompletely or not at all.
The Bundesrechnungshof estimates the resulting loss of tax revenue at over 2 billion Euro a year.
194
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
59
Annual report
2003, no. 51
(BT-Drs.
15/2020)
60
Annual report
2003, no. 53
(BT-Drs.
15/2020)
61
Annual report
2003, no. 59
(BT-Drs.
15/2020)
62
Annual report
2003, no. 64
(BT-Drs.
15/2020)
Summary
Avoidable loss of revenue from insurance tax
The Federal Ministry of Finance is not adequately exercising its oversight of the insurance tax administered by the Länder.
Owing to shortcomings in the tax administration, especially in tax audits, the timeliness, completeness, legality and equity of
taxation is not ensured. The Federal Government also loses considerable amounts of tax revenue. The unequal treatment of
market participants further distorts competition.
Interest losses of millions of Euros due to delayed tax assessment and inadequate tax prepayments
Local tax offices have regularly failed to follow the rule of demanding the most financially important tax cases in a timely
manner and assessing them particularly quickly. They also failed to audit and adjust advance payments on income and
corporation tax if these are too low. The cases inspected by the Bundesrechnungshof alone resulted in interest expense in the
tens of millions of Euro.
Grants to vocational training institutions and promotion centres which need no funding
Regional employment offices made grants for the establishment of vocational training and promotion centres without sufficient
information on whether the financial circumstances of the institutions required grants and if they met the other requirements for
promotion. The Bundesrechnungshof has prompted the Federal Ministry for Labour and Social Affairs to cease promotion
because the institutions have enough funding from current income. The goal of establishing vocational training and promotion
centres nationally has also been reached. Apart from this, the Bundesrechnungshof has called for proper review of the
conditions for grants.
Two Länder return excessive cost refunds
The Bundesrechnungshof identified excessive statements for administrative costs by two Länder. As a result 4 million Euro
was repaid to the federal exchequer.
195
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
63
Annual report
2004, no. 7
(BT-Drs.
15/4200)
64
Annual report
2004, no. 34
(BT-Drs.
15/4200)
65
Annual report
2004, no. 35
(BT-Drs.
15/4200)
Summary
Amendment of legal provisions on administrative charges is overdue
For several years, the Federal Ministry of the Interior has been working on an amendment to the legal provisions on
administrative charges. Processing and consultation on individual aspects of the project have resulted in repeated delays. Given
the impact that the legal provisions on administrative charges will have on the revenues of the Federal Government, further loss
of time seems unacceptable. A viable reorganisation of legal provisions on administrative charges should establish that charges
be calculated on the basis of cost and performance accounts or other suitable methods, and regularly reviewed and adjusted in a
timely manner. The Bundesrechnungshof recommends establishing a central body within the Federal Government to provide a
full overview of charges. The Länder should be responsible for establishing the charges
Differences in treatment of anonymous transfers of capital to foreign countries causes billions in losses of tax revenue
Extensive investigations by public prosecution offices and tax authorities have revealed in past years that taxpayers throughout
the nation failed to tax considerable income from capital assets which they had previously transferred abroad with the help of
domestic banks, mainly to Luxembourg and Switzerland. The Bundesrechnungshof noted that the Länder tax authorities treated
these cases differently. Inadequate investigation of anonymous capital transfers abroad caused final tax losses of billions of
Euro. The Bundesrechnungshof regards the Federal Ministry of Finance as sharing responsibility for this because it is not
exercising its legal and technical oversight of the Länder tax authorities effectively enough.
Inadequate taxation of foreign participants in sports events in Germany
German tax authorities do not appropriately tax foreign participants in certain sports events in Germany. They tax too small a
portion of the income. The result is tax losses of up to 7 million Euro a year.
196
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
66
Annual report
2004, no. 37
(BT-Drs.
15/4200)
67
Annual report
2004, no. 38
(BT-Drs.
15/4200)
68
Annual report
2004, no. 46
(BT-Drs.
15/4200)
Summary
Risk to VAT revenues in connection with export and import
Exports to countries outside the EU are in practice not subject to checks for VAT purposes. The customs administration leaves
largely unchecked whether goods with a total value of almost 300 billion Euro a year have actually left EU territory. As a result
it is not clear whether the tax authorities acted correctly in omitting to charge VAT on these shipments.
Uncoordinated procedures, incomprehensible information and stamps, lack of random samples, failure of control material to
reach the local tax offices, and inadequate cooperation between customs and tax administration result in further risks to VAT
revenue on imports and exports. Fraud or incorrectly granted tax exemption for one reason or another can accordingly be
detected at best by accident.
Tax losses as a result of inaccurate processing of special expenses refunds
In 2002, the Federal Ministry of Finance issued new guidance on the tax treatment of special expenses (e.g. church tax, social
security contributions). Under the new rules, special expenses claimed for the year in which the expenditure was actually
incurred (generally the previous year) must be reduced by a subsequent refund, if an offset with corresponding expenses is not
possible in part or in full in the year of the refund. This rule should be applied to all tax assessments for which the time limit for
assessment has not expired. According to the audit findings of the Bundesrechnungshof local tax offices in various Länder have
not followed the rule or have applied it inconsistently. The Federal Ministry of Finance as tolerated this, and there is reason to
fear that this has resulted in tax losses of around 100 million Euro.
Proper calculation and division of revenue from security charges at airports where the Federal Government and the
Länder share the revenue
Länder employees perform security tasks at 21 airports. The Federal Government bears the costs of equipment. The Länder
receive the security charges to cover their staff costs. To cover the Federal Government’s equipment costs, they are obliged to
forward 0.26 Euro for each departing passenger to the Federal Government. Several Länder failed to meet this obligation, or
only did so with considerable delays.
197
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
69
Annual report
2005, no. 6
(BT-Drs.
16/160)
70
Annual report
2005, no. 15
(BT-Drs.
16/160)
71
Annual report
2005, no. 27
(BT-Drs.
16/160)
Summary
Need for and adequacy of federal grants for an agency of the City-State of Berlin
For over 50 years the Federal Ministry of the Interior has reimbursed the City-State of Berlin around 19 million Euro a year to
run the Agency for the notification of the next of kin of members of the former German Wehrmacht who were killed in action.
The original legal bases are partly outdated, the tasks are not clearly defined. The Federal Ministry should investigate whether
the tasks are still necessary in their current nature and scope, and whether the reimbursements by the Federal Government are
necessary and of an appropriate amount. This is all the more important as the Federal Government intends to take over the
Agency.
Oversized plans for upgraded network of federal roads in Brandenburg
The Brandenburg Land roadworks administration intends to upgrade about one third of the federal roads in the State to create
an oversized network of such roads able to accommodate a high load of traffic. The Federal Government is expected to spend
more than 1.6 billion Euro on this network which is about 880 km long. The roadworks administration provided for the highest
upgrading standards for federal roads to be applied, and only afterwards commissioned a transport economics study of the
network concept. The study was based on completely outdated assumptions about economic growth and population trends. The
study did not include the environmental impact of the upgrading standards, e.g. enormous land consumption and landscape
disturbance. The excessive upgrading standards are causing cost increases many times higher than the possible improvements
in benefit. 79 new construction measures totalling 374 million Euro – substantial parts of the planned network – are not
included in the needs plan, and so are removed from the Parliament’s decision making authority.
Statutory social insurance bodies pay their staff higher salaries than those prescribed by the applicable collective
agreements
Some of the regional pension insurance bodies paid their staff covered by collective agreements higher salaries than those
drawn by comparable public service employees. Reasons were unjustified payments exceeding the collective agreement scale
or the application of internal guidelines on job evaluations which led to classifications out of line with the collective
agreements.
The Bundesrechnungshof has asked the Federal Ministry of Health and Social Security to exert pressure via the supervisory
authorities for the regional pension insurance bodies to make these bodies comply with collective bargaining law on all points
of categorisation of staff covered by collective agreements.
198
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
72
73
74
75
76
Source
Annual report
2005, no. 30
(BT-Drs.
16/160)
Annual report
2005, no. 32
(BT-Drs.
16/160)
Annual report
2005, no. 35
(BT-Drs.
16/160)
Annual report
2005, no. 38
(BT-Drs.
16/160)
Annual report
2005, no. 63
(BT-Drs.
16/160)
Summary
Inadequate taxation of illegal turnovers and revenues
Considerable tax revenues losses could be avoided, if sales and private revenues from illegal activities, e.g. receiving stolen
property, bribery, drug trafficking and dealing with other prohibited products, were taxed more effectively. This requires
improved cooperation between the authorities involved. Sales from these activities are estimated at several billion Euro a year.
Taxation of benefits in kind granted to business friends is incomplete and expensive to administer
Benefits in kind granted to business friends by businesses are not taxed accurately. The local tax offices are not able to identify
the non-declaration or inadequate declaration of such benefits. They have to rely on information returns issued by tax
inspectors who audit the businesses that have granted such benefits. However, tax inspectors on field work either do not detect
such cases systematically or only with a time lag.
Inaccurate assessment of interest charges on tax liabilities under section 233 a para. 2 a Fiscal Code
Both the Federal Government and the states have suffered considerable tax revenue losses because, in most cases, the tax
offices inaccurately assessed the interest charges in connection with the carryback of losses and with events having a
retroactive effect. The Bundesrechnungshof attributes this to inadequate IT support.
Substantial revenue losses to Federal Government and Länder due to inadequate taxation of anticipated inheritance
granted in return for a life annuity
Both the Federal Government and the states suffered considerable losses of tax revenues owing to deficiencies in the taxation
of anticipated inheritance granted in return for a life annuity. The local tax offices made mistakes in about 90% of such cases
reviewed by the Bundesrechungshof involving the assignment or conveyance of private assets in return for a life annuity. The
relevant legal provisions are so complex that even tax law specialists find them difficult to understand. Furthermore, there is a
taxation gap in respect of cross-border asset transfers.
Over 4 million Euro saved on wild animal crossings
The Federal Government is saving 4.2 million Euro by downsizing facilities for wild animal crossings in the construction of
federal highway B 178 n by the Land roadworks office.
199
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
77
78
79
80
81
Source
Annual report
2005, no. 65
(BT-Drs.
16/160)
Annual report
2005, no. 66
(BT-Drs.
16/160)
Annual report
2005, no. 67
(BT-Drs.
16/160)
Annual report
2005, no. 68
(BT-Drs.
16/160)
Annual report
2005, no. 82
(BT-Drs.
16/160)
Summary
Erroneous application of wage escalation clause resulted in refund claims totalling millions
Erroneous application of the wage escalation clause included in federal road-building contracts has led to unjustified payments.
In the cases audited, refunds totalling over 11 million Euro need to be claimed.
Proposal for reorganising the administration of federal trunk roads
In his capacity as Federal Performance Commissioner, the President of the Bundesrechnungshof submitted an opinion in which
he recommended that, in connection with the proposed reform of Germany's federal system, the administration of federal trunk
roads should also be reorganised. The Federal Government should limit itself to building and operating federal motorways. The
Länder should take over the existing federal roads and should receive adequate financial compensation for doing so.
Recommendations for cost effective planning, construction and operation of federal trunk roads
In his capacity as Federal Performance Commissioner, the President of the Bundesrechnungshof has issued recommendations
on the planning, construction and operation of federal trunk roads. These recommendations are based on audit findings of the
Bundesrechnungshof.
Eliminating unnecessary motorway bridges saves millions
Following the Bundesrechnungshof’s advice, a roadworks administration has promised that nine originally planned motorway
bridges will either not be built or will be built to smaller dimensions. This will save capital expenditure of 4.2 million Euro and
maintenance costs of 2.5 million Euro. In future, the administration will check the need for bridges or underpasses prior to
commencing the planning process.
Considerable deficiencies in the implementation of the programme for sponsoring junior professorships
The Federal Ministry for Education and Research responded to the shortcomings identified by the Bundesrechnungshof,
including in the use of grants by universities, by improving its promotional activities under the junior professorships
programme. The Federal Ministry now verifies whether the universities have used its grants for the purpose for which they
were given. It will impose clear eligibility rules for grant funding under the planned follow-up programme to prevent the
inappropriate use of promotional funds.
200
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
82
Annual report
2006, no. 16
(BT-Drs.
16/3200)
83
Annual report
2006, no. 17
(BT-Drs.
16/3200)
84
Annual report
2006, no. 24
(BT-Drs.
16/3200)
Summary
Inadequate success monitoring in connection with the Joint Task “Improvement of Regional Economic Structures”
The Federal Ministry of Economics and Technology inadequately monitored the success of the use of federal funds dedicated
to the Joint Task “Improvement of Regional Economic Structures and furnished the German Parliament with incomplete
information about the impact of the funding. No information was available from the Länder about the number of newly created
permanent jobs, which would have been needed for effective success monitoring. The report to Parliament did not include
information on failed projects, multiple funding under different programmes or the impact of infrastructure promotion. Without
this information, the German Parliament lacks important basic input for exercising its authority over the budget. Under a joint
overall plan; the Federal Government pays one half of the relevant expenditure of the Länder. During the last five years, the
Federal Government provided funding under departmental budget 09 alone totalling around 4.4 billion Euro.
New legislation for auditing rights with regard to federal grants towards pension insurance contributions
The Länder have paid out federal grants towards the pension insurance contributions of disabled persons employed in disabled
workshops without adequately auditing the workshops’ billings. An adequate audit is scarcely possible due to the short period
of time available. The Bundesrechnungshof assumes that unjustified payments at the expense of the Federal Government total
millions. The Federal Government should accordingly legislate so that the Länder can carry out audits even after the grants
have been set.
Länder and local authorities illicitly burden the Federal Government with costs for building pedestrian and cycle lanes
The Länder roadworks authorities used federal funds to construct lanes for joint use by pedestrians and cyclists on local federal
highways, although this should be the exception, since pedestrians and cyclists tend to obstruct and endanger each other. The
local authorities concerned draw benefits from this because they then do not have to fund pedestrian paths themselves. The
roadworks authorities also tolerate the refusal by many local authorities to bear their share of the maintenance costs. In the
audited cases alone, the Federal Government improperly pays maintenance costs of about 1.9 million Euro based on the
estimated useful life of these paths. The Federal Ministry of Transport, Building and Urban Affairs is not adequately
monitoring the work of the roadworks authorities.
201
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
85
Annual report
2006, no. 25
(BT-Drs.
16/3200)
86
Annual report
2006, no. 26
(BT-Drs.
16/3200)
87
Annual report
2006, no. 47
(BT-Drs.
16/3200)
Summary
Inadequate preparation of roadworks causes avoidable federal expenditure of tens of millions of Euro
The Länder roadworks authorities did not take adequate care when planning a number of major building projects. Specifically,
they failed to survey the situation adequately before starting construction or failed to investigate the soil adequately, they did
not plan measures carefully enough and accordingly contracted for work which was deficient or too elaborate, or they used an
outdated traffic forecast. This resulted in replanning and additional work, and there were disruptions in the commissioned
construction works. In the audited major projects this led to substantial increases in spending, inefficient supplementary
contracts and payments for work which would not have been required with proper preparation. In all, the avoidable additional
expenditure totalled tens of millions. The deficient performance of the roadworks authorities was encouraged by the fact that
they were working on federal commission and hence pursued other interests than the Federal Government. A further problem
was that the Federal Ministry of Transport, Building and Urban Affairs did not monitor the quality of the preparation for
construction.
Federal Government assumes financial risk of cleanup of bituminous materials from Land roads
In the period 1997-2002 the Länder roadworks authorities of the German states built more bituminous materials into federal
trunk roads than they removed. The future removal of environmentally damaging materials will result in costs of several
million Euro a year, which the Federal Government as the owner of the federal trunk roads must bear. It accordingly assumes
considerable financial risk. The Federal Government should agree with the Länder that they either cease building more
polluting materials in constructing federal trunk roads than they remove, or that they bear an appropriate share of the cleanup
costs.
Duplication of some expenses associated with disabilities
Local tax offices sometimes double count allowances for healthcare costs connected with disabilities as extraordinary expenses
Because of problems with demarcation of responsibilities they were unable to verify whether healthcare expenses covered by
the lump sum allowance were included again in the other healthcare costs. They accepted information provided by the taxpayer
without objections or queries and granted the standard allowance in addition to all healthcare expenses claimed.
202
Selected audit findings from the Bundesrechnungshof’s annual reports 2000 - 2006
(The full text of the annual reports is available at www.bundesrechnungshof.de.)
No.
Source
88
Annual report
2006, no. 49
(BT-Drs.
16/3200)
89
Annual report
2006, no. 69
(BT-Drs.
16/3200)
Summary
Audit quota too low for VAT special audits
The fiscal administration annually performs special VAT audits on only 2% of all businesses. This quota is too low to fight
VAT fraud successfully. Arithmetically, a business will be subject to special VAT audit only once in 50 years. The annual tax
audit rate differs considerably between the Länder, with businesses in one Land audited once in 35 years while businesses in
another are audited only once in 77 years. The audit quotas in the Länder should be harmonised at an equally high level.
Uniform standards must be established and risk-oriented case selection implemented.
Smaller tunnel diameters reduce building costs by 50 million Euro
The Federal Ministry of Transport, Building and Urban Affairs and the Baden-Württemberg roadworks authorities cut
emergency verges in the tunnels when planning the new “Albaufstieg” section of the A 8 federal motorway connecting
Stuttgart and Ulm, replacing them with emergency lay-bys. This follows the Bundesrechnungshof’s recommendation, and
saves 50 million in construction costs.
203
Annex III
Federal structures abroad
1
Starting point
The problem of interconnection between various levels of government is not
limited to German government practice, but arises in all federal states, including
Switzerland, Austria, the USA, Canada and Australia.
However, comparisons between the solutions there and reforms aimed at
eliminating administrative overlapping must bear in mind that the original historical
conditions and constitutional situation are very different. The size and structure of the
states also differ widely.
Accordingly, the international scene does not offer a “federal blueprint” showing
the optimal structure of a federal state. Different administrative structures and
traditions mean that other states’ solutions cannot be directly applied to the German
situation. Moreover, reform efforts in other countries have very different approaches
in some respects.
Considerations on a federalism reform can, accordingly, only begin with the
analysis of the weaknesses we have seen in German practice. Nevertheless, the
practice of federal government in other countries does offer individual parallels and
aspects which are also of interest for German work on modernising its federal system.
A look at international experience accordingly helps complete the picture.
Individual sectors of particular relevance are the administration of taxes and trunk
roads, as interesting modernisation efforts in these fields have taken place in other
countries. Several examples of international developments relating to fiscal and trunk
road administration are accordingly reviewed in detail (sections 2.1, 2.2). In 2006,
responsibility for the French network of national highways was partly decentralised.
France is, therefore, included in the trunk roads sector, although it is not a federal
state (section 2.2.2).
The main study demonstrates that in Germany there are interactions between
reforming the budget and accounting system and enhancing the autonomy of the
individual levels of government. 473 It notes that modernisation efforts of other
countries and supranational organisations can serve as a model in some respects. 474
To supplement this, the following overview describes the developments in the budget
and accounting systems in the federal states of Switzerland, Austria, the USA and
Australia (section 3.1-3.4).
473
474
Cf. section 4.6.1 of the study.
Cf. section 4.6.1.2 of the study.
204
2
Examples of reform in the administration of taxes and trunk roads
2.1
Fiscal administration
2.1.1
Austria
Austrian fiscal administration has been subject to criticism for its long
coordination processes, an excessive degree of division of labour, inconsistent
benefits and dual-track nature. After these weaknesses were confirmed in 2001 by a
study carried out by a management consulting firm, a comprehensive reform was
introduced in 2003 which affected 7,000 employees. 475
Each tax office established a central information and assessment unit. In addition,
they consolidated areas which had previously been processed separately: employee
assessment, family allowance, standard tax values and income tax for private
individuals are now consolidated in the “general assessment” area, and the accounts
office and enforcement are consolidated in the “compliance” area. The internal and
external services were integrated into business assessment and external audits,
enabling the administration to exploit synergies between these areas. The new
structure also strengthens external audits, because internal capacity, released, for
example, through the introduction of “FinanzOnline”, can be transferred to the
external service.
While the information centres staff are now required to have more general
knowledge, staff in the specialist areas are required to specialise. The fiscal
administration supports this by flattening internal hierarchies and transferring
responsibility to separate technical directors. The tax offices have areas of (partial)
autonomy. The tax office directors’ management function has been strengthened. The
directors are responsible for services, personnel, organisation, finance and other
resources of their tax office.
In 2004, the 80 tax offices were consolidated into 41 tax offices, although the
existing locations were retained. Under pilot projects, several tax offices were made
responsible for the further development of different organisational models, and
evaluated their results. Information and experience from the one-year pilot projects
went into implementation of the “New tax office” project. 476
Since 2003, there has been just one federal authority auditing wage-related
deductions such as income tax on wages, health insurance, pension insurance and
municipal tax. Previously, staff from all three administrative areas (fiscal
475
476
Austria, Federal Chancellery, Das Verwaltungsinnovationsprogramm der Bundesregierung, Ziele–
Maßnahmen–Ergebnisse, Bilanz 2006, p. 15. A detailed presentation can be found in:
Bundesministerium für Finanzen, Bewerbungsunterlagen für den 7. Internationalen Speyerer
Qualitätswettbewerb – Kategorie – Partnerschaftliche Wahrnehmung öffentlicher Aufgaben,
Vienna 2005.
Austria, Federal Chancellery, Das Verwaltungsinnovationsprogramm der Bundesregierung, Ziele–
Maßnahmen–Ergebnisse, Bilanz 2006, p. 13.
205
administration, cities and local authorities, and health insurance) audited these
deductions separately, and at different times. Now, the staff of the fiscal or social
security administrations split the audits. Findings are reported to the other institutions.
The IT systems were made compatible so as to ensure successful communication.
The Austrian Federal Government regards the reforms in the audit sector as an
important step towards simplifying administration. Cooperation reportedly eases the
workload for all concerned, as documents only have to be provided once. It also
improves contact with the businesses, because the auditing agencies would also take
on advisory functions during the audits on questions of reporting, insurance and
contributions. Although the number of audits has increased, the consolidation is
reducing administrative costs. Both the frequency and fairness of the audits has
improved, for example, local authorities had previously monitored municipal tax
irregularly and inefficiently.
2.1.2
Australia
The most important taxes are collected in Australia by the government. These
include income tax on private individuals, corporation tax on companies, tax on
employers’ fringe benefits, and goods and services taxes (comparable with VAT). The
six federal states collect taxes including stamp duty 477 , payroll tax 478 , and land tax.
Besides the statutory provisions, income tax legislation is primarily based on the tax
guidelines of the Australian Taxation Office, which is Australia’s supreme tax
authority and administers and monitors around 92% of total taxation. This also covers
field audits in business premises and tax audits.
Australian VAT is due if the taxpayer is registered or should be registered.
Anyone obliged to register must use an Australian Business Number (ABN). The
ABN is an identification number for all dealings between the business and the
Australian Taxation Office and other authorities. 479
1998/99 saw a comprehensive tax reform. 480 Among other issues, the ABN
described above and the Australian Business Register (ABR) were introduced. 481 The
goal was to minimise the number of different registrations at national and state level.
The aim is for businesses to be able to correspond with all authorities using a single
registration number, despite different topics. 482 To date, over seven million ABN have
477
478
479
480
481
482
Stamp duty is a tax on specific documents levied by federal states and territories. The tax rate
varies from state to state.
Payroll tax is a tax levied by federal states and territories. It always covers only that part of annual
wages and salaries of clerical and manual staff which exceeds a predetermined level. In the most
populated federal state, New South Wales, the limit in the 2004-2005 fiscal year above which
payroll tax was due was AUD 600,000. The tax rate was 6.0 % on each additional AUD.
Department of Foreign Affairs and Trade, Australian tax law, status: July 2007.
Cf. Treasurer of the Commonwealth of Australia, Tax reform: not a new tax, a new tax system,
1998, pp. 131 – 152.
The introduction dates back to a demand of the so-called “Bell Report”. Commonwealth of
Australia, Time for Business, Report of the Small Business Deregulation Task Force, 1996.
Bell Report (see previous footnote), pp. 100 et seq.
206
been allocated. In addition, contradictions in rules and procedures were to be
eliminated. 483 One problem with the introduction of the ABR was the limited initial
acceptance by national and state authorities. Participation in the ABR is not
obligatory. The basis is a Memorandum of Understanding (MoU) between the
Australian Taxation Office and the individual authorities; signature of the MoU is
required for the authorities to have access to the centrally kept tax data. 484
The introduction of VAT resulted in the elimination of ten types of tax, and made
it possible to repeal of 60 tax laws. 485
2.1.3
United States
In the USA, taxpayers file their own income tax returns. 98% of revenue under
federal tax administration comes from self-assessment without further action by the
federal tax administration. 486 Businesses also determine their liability for corporation
tax. 487 The filing date for tax returns is the same as the date for payment.
Monitoring of corporate taxation was reformed in 2001. Since then, corporations
no longer file their returns at regional IRS Processing Centres, but with one of two
national agencies specialising in processing these cases. 488 Increasingly, special units
are carrying out audits in specific industries, in order to accumulate industry
knowledge. The federal tax administration believes that monitoring becomes more
effective the more that tax authorities work with the company before the return is
filed. The IRS accordingly increased the resources allocated to improving the quality
of services and reduced resources for monitoring. Following the reduction of external
audits by about half in the period 1996-2002, monitoring is now being given greater
priority. There are concerns that tax honesty might decrease if it became known that
monitoring had dropped sharply. The Government Accountability Office also noted
this and made an issue of the reduction in the audit ratio. 489
483
484
485
486
487
488
489
Cf. Treasurer of the Commonwealth of Australia, Tax reform: not a new tax, a new tax system,
1998, p. 132.
Cf. Australian National Audit Office, Administration of Australian Business Number
Registrations, Audit Report No. 59 2002-03, 2003, pp. 95 et seq.
This was done through the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006.
United States Government Accountability Office, Assessment of Fiscal Year 2005 Budget Request
and 2004 Filing Season Performance, GAO-04-560T, 2004, p. 1.
Corporations do not draw up a tax balance sheet, the assessment is based on the income statement.
The commercial balance sheet is not decisive for the tax balance sheet. The reason for this is
primarily that the states have legislative power for company law and the Federal Government has
responsibility for the general income tax act (there is no separate corporation tax act for
corporations).
Haisken-DeNew et al., Einführung einer Selbstveranlagung bei der Körperschaftsteuer, p. 65.
United States Government Accountability Office, Assessment of Fiscal Year 2005 Budget Request
and 2004 Filing Season Performance, GAO-04-560T, 2004, p. 1.
207
2.2
Trunk road administration
2.2.1
Austria
In 2002, the Federal Government of Austria transferred its ownership of some
10,000 km of the approx. 12,000 km federal highways to the Länder without charge,
so that federal highways became Land highways. 490 Where previously the Federal
Government had administered the federal highways, this task has now passed to the
Land administrations. 491 The Federal Government supplies the Länder with the
funding for planning, construction and maintenance work which the federal road
works administration previously used for its tasks. 492 This succeeded in consolidating
responsibility for expenditure and funding for the regional road network at the level of
the Länder.
The state-owned corporation ASFINAG 493 , operates and manages the remaining
approx. 2,000 km of motorways and long distance roads. 494
Construction, maintenance and funding of the highway network have been
subjected to many changes in Austria. 495 In the mid-50s the federal budget funded the
motorways with earmarked funds from the petroleum products tax. In the mid-60s this
was supplemented by funding from borrowing and toll fees. At the end of the 60s, the
Federal Government formed a special funding company (Tauernautobahn AG). In
1982, it formed the current ASFINAG to speed up motorway construction. The public
limited company – conceived originally as a pure funding company – took over
funding of priority construction works for motorways and long distance roads and the
funding activities of all special companies previously formed. The Federal
Government acted as guarantor. In 1987 the Federal Parliament abolished the
earmarking of the petroleum products tax, and now ASFINAG is entirely responsible
for the funding. At the same time, the Federal Government reduced its spending on
the infrastructure of the highway network, although at the same time it expanded its
liability to ASFINAG.
The Federal Highways Financing Act finally created the opportunity to collect toll
fees regardless of distance travelled. At the same time, toll income for the federal
highways was earmarked. To ensure autonomous mission performance, in 1997 the
Federal Government transferred to ASFINAG
490
491
492
493
494
495
Federal Long-Distance Road Transferral Act 2002 (BGBl. 1 no. 50 of the Federal Republic of
Austria).
Cf. the study by the Commissioner on reorganising administration of federal trunk road works,
11 Oct. 2004, p. 40 (www.bundesrechnungshof.de).
The Federal Government negotiates the breakdown with the federal states. The Special Purpose
Grant Act is (provisionally) limited to 2008.
ASFINAG is the corporate abbreviation for the Austrian state owned motorway and long-distance
road funding company.
Austria, Federal Chancellery, Das Verwaltungsinnovationsprogramm der Bundesregierung, Ziele–
Maßnahmen–Ergebnisse, Bilanz 2006, p. 25.
Cf. Mayerl, Ramaseder, Straße und Autobahn 2006, 449 and Beckers et al., Internationales
Verkehrswesen 2006, 12.
208
•
•
•
the “right of usufruct” in the properties and facilities of the highway network
owned by the Federal Government,
5.6 billion Euro of former federal debt, and
the obligation to fund the extension, maintenance and operation of the
highway network through tolls and user fees and borrowing.
ASFINAG initially used the Länder road administrations to handle these tasks. As
a result, until May 2006 the Länder in Austria carried out operation and maintenance
of the motorways and expressways on behalf of ASFINAG under works contracts.
After this, ASFINAG took over these tasks in its own organisation and responsibility.
Whereas motorway operation was previously in the hands of 11 Länder and federal
organisations, all the tasks are now bundled in the ASFINAG group structure
(subsidiaries). Among other things, ASFINAG took over the staff of the former
Austrian truck toll operator, along with 1,500 Land administrative staff. 496
2.2.2
France
As of 1 January 2006, France has reorganised responsibilities for the French
motorway and national highway network. The goals include strengthening political
responsibility at regional level (départements 497 ) and reorganising government
administrative levels.
Of the 38,000 km of motorways and national highways for which the French
government is responsible, either directly or through concessions, it has transferred
18,000 km to the départements. This gives the départements decision making power
over regional and locally important road networks. 498 However, the management units
of the départements responsible for operation and maintenance retain their function as
a (central) government operating unit of the transport ministry. The départements can
use the services of these management units in the context of the tasks newly assigned
to them. 499
11 newly created (central government) road transport management units will in
future administer the part of the national road network retained by the central
government. They are responsible for supraregional transport links between the
départements. The transferred roads do not impose a financial burden on the
départements. Burdens are offset by cross subsidies between the central government
and départements. 500
496
497
498
499
500
ASFINAG Annual Report 2006, p. 15. With reference to the 1,500 Land staff, the company talks
about “transfer” or “partial integration”.
France is divided into 26 regions, which in turn are divided into 100 Départements.
Zimmermann-Steinhart, in: Jahrbuch des Föderalismus 2006, pp. 337 et seq.
Direction Départementale de l’Equipment – DDE.
Academic Advisory Council, BMVBS, Neuorganisation der Zuständigkeiten im Bereich der
Bundesfernstraßen, Zeitschrift für Verkehrswissenschaft 2006, 81 (97 et seq.).
209
3
Reforms in budget and accounting systems
3.1
Switzerland
The Federal Government is currently introducing the “New Accounting Model”
(NAM) in a move towards a harmonised accounting model for cantons and local
governments. It is being used for the first time to draw up the 2007 budget. NAM is
intended to help overall fiscal policy management (points of orientation include the
constitutional restraint on debt) and ensure that modern business management
techniques are applied. For overall fiscal management, the federal government first
draws up an income statement and statement of assets, and uses these to derive
financial and flow of funds statements. The focus is accordingly on how funding is
secured. The NAM also shows the (economic) success of the actions of the federal
government, i.e. whether it is adding to increasing or reducing state assets.
To make success measurable, commercial principles must be applied to the federal
government’s budget and accounting systems. The necessary data is supplied by an
integrated set of accounts with cost and performance accounting (CPA) with broad
coverage. The process finally ends in closing and opening balance sheets, which
administrative units are also required to draw up. The International Public Sector
Accounting Standards (IPSAS) apply. The federal government delegates
responsibilities to administrative units so that growing responsibility also enhances
cost awareness. For this, the federal government is also disseminating the “steering
through performance contract and global budget” model throughout the
administration. The Federal Council gives multi-year performance contracts to the
administrations and operationalises these in rolling performance agreements. The
administrations are given a global budget for this.
The Swiss reform model, therefore, is aiming at top down decentralisation within
the federal level. At the same time, it is working on harmonisation with the cantonal
system. In abstract terms, this means eliminating interconnections at the federal level
of government, with the possibility of more interconnections with the other levels. As
might be expected with a decentralised federal system of government like
Switzerland, the pressure for reform comes from the cantons and acts on the federal
government.
3.2
Austria
Austria plans to introduce an accruel 501 budget and accounting system from 2011.
Before this, there will be a four-year rolling financial framework, setting political
priorities and ceilings for expenditure (Bundesfinanzrahmengesetz). The federal
government has been introducing a CPA system in steps since 2001. Until the double
entry system has been established, the federal government is continuing to control the
501
DOPPIK = cash accounting
210
budget through cash-based accounting, i.e. expenditure oriented instead of cost
oriented.
Further planned changes relate to the restatement of the constitutional goals for
economic equilibrium and new budget principles (including output orientation, greater
efficiency). The federal level works with global budgets, within which the ministries
have their quotas. From 2011 the global budgets will be drawn up with a focus on
performance and output, with the help of CPA and double entry accounting. This
means that responsibility for resources will be linked with responsibility for results.
Predefined goals for outputs and the subsequent degree to which these are attained
will have to be incorporated into the systems for planned capital finance accounts and
financial statements. Performance management will be the responsibility of the
ministries.
3.3
United States
In the USA budgets are drawn up using cash-based accounting. However, the
Federal Government is aiming for greater orientation towards performance. The cashbased budget process leads to budget authorities, which may be permanent or for a
limited period. After the completion of the process of drawing up the budget, there is
accordingly no official budget in the USA.
In contrast to the cash-based budget process, there has been increasing use of
double entry accounting since 1990. Federal authorities submit audited (individual)
financial statements for this purpose. The Federal Government’s “consolidated
accounts” then pull together the individual financial statements. The Federal accounts
show the costs of the entire process of government, broken down by ministry and
authority level. It matches the costs and revenues (which include income and
expenditure) and shows the balance. The “consolidated accounts” also explain the
balance sheet and funding of the budget deficit or use of the budget surplus.
3.4
Australia
Since the end of the 90s, budgeting, accounting and reporting at federal level have
followed commercial principles. They reflect the use of resources, and hence the
change in federal assets. The goal of the Australian budget reform was to increase the
accountability of the ministries for their action, and to establish a long-term (three
year) budget process. For this, the Federal Government applies the measures to be
quantified in the budget process:
• The intended outcome,
• how the outcome is to be achieved (products, services, activities – output), and
• the degree to which outcome goals have been achieved.
211
This system not only tells Parliament and the government how much has been
disbursed (expenditure), but also what value of resources has been consumed by their
action (costs) and what success this is matched by (outcome). Parliament and
government use these parameters to manage the federal budget, and through this the
administrative action.
A further key feature is the “purchase-provider” arrangements. Under these, the
government purchases administrative services to perform government tasks from
authorities or agencies. To this end, it enters into purchase agreements which specify
the terms of performance. Among other things, these cover cost reimbursement to the
service provider and measurable performance packages (outputs). This helps
Parliament and government monitoring whether and how far the goals and outcomes
have been achieved. The structure of the budget follows this logic, and is broken
down by outputs and outcomes.
212
Annex IV
Administration on federal commission: an agency theory view
1
Starting point
The dysfunctional distortions described in the study (chapter 4) in the execution of
federal laws by the Länder – either in their own right or on federal commission –
display similar causal constellations in the overwhelming majority of cases, according
to the audit findings of the Bundesrechnungshof. The Federal Government and
Länder pursue their own interests, while the Federal Government’s information and
monitoring systems are often inadequate or ineffective, with the result that the
Länder’s interests lead to a failure to meet federal goals. The main causes are
accordingly diverging interests which one side seeks to advance at the cost of the
other, using its advantage in information (informational asymmetry).
Organisation theory seeks to explain this phenomenon through the so-called
agency theory. 502 Agency theory draws on a wide range of examples to show that a
cooperative relationship in which one party provides a service for another has its own
interests. Agency theory argues that appropriate information and monitoring
instruments must be available to ensure that the contractor does not follow its own
interests at the expense of the client.
Agency theory is particularly suitable in this context to identify and explain the
weaknesses found in the audits in execution of federal laws by the Länder, as a
bipolar cooperative system.
2
Areas of application
Originally, agency theory arose as an effort to explain contractual (exchange)
relationships. It deals with the behaviour of parties to a contract (client and
contractor) 503 , by trying to classify this and explore the underlying behavioural and
motivational model.
Agency theory is based on the assumption that the two parties to the contract are
not fully informed of all the circumstances of the contract and the intentions of the
other party, and at the same time want to enhance their own benefit (profit, optimal
mission performance, etc.) by performing the contract.
502
503
Also known as principal-agent theory.
The terms are not used in any technical sense here, as agency theory covers all kinds of contracts
in which in order to advance its interests one party transfers specific tasks and decision making
power to another party on the basis of an agreement, so that besides contracting in the narrow
sense it also includes e.g. contracts for work and services. Some authors talk about principal
(client) and agent (contractor).
213
Client and contractor follow conflicting goals. The client enters into the agreement
because it expects the use of the contractor’s specialist labour (knowhow) and
informational advantage (e.g. quality standards or market overview) to yield an
advantage in meeting its own goals. Conversely, the contractor tries to follow its own
interests (e.g. high compensation, dependence of the client) in performing the
agreement. The client, therefore, runs the risk that the contractor will not follow the
contract and will pursue its own interests to the client’s disadvantage. To prevent this,
the client must ensure that the contractor performs the agreement as well as possible.
For that reason, the agreement generally establishes incentives and monitoring and
information mechanisms, although these result in considerable costs (agency costs). 504
However, agency theory is not only applicable to contractual relationship, but is
applied today to the behaviour of actors in institutional administrative relationships,
whether under private law (companies) or public law (federal governments, Land,
local authorities). Wherever two parties are cooperating and have different
information, agency theory can be used as an explanatory model. 505 Agency theory
can accordingly be applied to noncontractual relationships 506 or when employing third
parties to provide public services 507 .
The results of agency theory can also be applied to statutory client-contractor
relationships 508 , e.g. the relationship between the European Union and the Federal
Government or between the Federal Government and the Länder. The administrative
relationships between the Federal Government and the Länder, whether the Länder
are executing federal laws in their own right or on federal commission, can
accordingly also be considered from the point of view of agency theory.
3
Information deficits of the client
3.1
Differing interests in the agency relationship
The basic hypothesis of agency theory is that client and contractor pursue
fundamentally different goals in cooperation, seeking primarily to increase their own
benefit, and generally do not have the same information. This typically leads to
problems in an agency relationship. For example, in drawing up agreements on
cooperation and setting goals, it is not possible to specify all the modalities of
performance precisely and comprehensively. The leeway can be utilised to pursue one
party’s goals to the disadvantage of the other, which can lead to differences of
opinion. The client, who transfers specific tasks and decision making powers to the
contractor to achieve its own interests, runs, in particular, the risk that the contractor
504
505
506
507
508
Ebers, Gotsch, in: Kieser, Ebers, Organisationstheorien, p. 247 (262, 265).
Spremann, ZfB 1990, 561 (562).
Elschen, DBW 1988, 248 (250).
Picot, Wolff, in: Naschold, Pröhl, Produktivität öffentlicher Dienstleistungen, pp. 51 (71 et seq.)
Bandelow, Das EU-Mehrebenensystem und die Regulation der Gentechnologie, pp. 4, 16.
214
will not comply with the agreement, and will follow its own interests to the client’s
disadvantage. 509
The key point here is the unequal division of information between contractor and
client. These informational asymmetries are generally divided into three basic
types: 510
•
•
•
Hidden characteristics,
hidden action, and
hidden intention.
Agency theory assumes that client and contractor will act in ways that will benefit
themselves – e.g. interpreting the contract in their own interests 511 in order to increase
their own benefits from these informational asymmetries.
The contractor has an informational advantage over the client in terms of the
technical work. In addition, the client lacks information about the contractor’s
behaviour in its own interests. Particularly with complex tasks, this significantly
complicates monitoring the efficiency of the contractor’s services.
Agency theory further assumes that contractors misappropriate personnel and
funds if the tasks do not directly meet their own interests. 512
3.2
Hidden characteristics
In the case of hidden characteristics, the contractor’s informational advantage is
that the client cannot assess exactly whether the contractor is able to deliver the
agreed service in the desired quality. The client cannot evaluate whether the technical
and human requirements for performing the agreed service are suitable. The
contractor may even be inappropriate for providing the client’s service. Over time, the
contractor’s qualification or capacity may also change, e.g. lack of continuing
training, cutbacks in technical staff. The environment or task profile may also change
(new tasks, increased requirements, revised quality standards), without the contractor
adjusting. Particularly with very long term cooperative relationships, there is the
danger that the client will not achieve its goals as desired. 513
3.3
Hidden action
In the case of hidden action, the client cannot adequately observe or evaluate the
contractor’s actions. This is particularly the case where the contractor can make other
use of the resources provided (financial and human) and monitoring by the client is
509
510
511
512
513
Ebers, Gotsch, in: Kieser, Ebers, Organisationstheorien, pp. 247 (258 et seq., 261 et seq.).
Picot, Wolff, in: Naschold, Pröhl, Produktivität öffentlicher Dienstleistungen, p. 51 (72); see also
Spremann, ZfB 1990, 561 (basic types of information asymmetry: quality uncertainty, holdup,
moral hazard).
Ebers, Gotsch, in: Kieser, Ebers, Organisationstheorien, p. 247 (261).
Ebers, Gotsch, in: Kieser, Ebers, Organisationstheorien, p. 247 (261, 264).
Picot, Wolff, in: Naschold, Pröhl, Produktivität öffentlicher Dienstleistungen, p. 51 (72).
215
inadequate. There is the risk that the contractor will act unethically (moral hazard)
and use the resources provided for its own goals, which are not in the client’s
interests.
Because of the contractor's hidden intentions, the client fails to achieve its goals,
or has to invest more money in achieving them than would have been required with
contractually agreed behaviour. Particularly in the case of a long term cooperation
with no possibility of termination – such as e.g. Länder administration on federal
commission – such behaviour is difficult to sanction. The problem is intensified if the
client has a lack of technical insight into the contractor’s work, e.g. if the work is
highly technical and specialised. 514
3.4
Hidden intentions
In the case of hidden intentions, the client does not know how the contractor will
behave over the course of the cooperative relationship. The contractor does not
disclose its intentions. As many areas of the agency relationship cannot be definitively
regulated, the contractor has broad freedom of action which it can use to its own
advantage.
The client can observe the work or the results of the contractor, but cannot always
persuade it to perform the work in the client’s interests. Particularly where the client
is dependent on the service (e.g. there are no other qualified providers for this task),
the service is unique or can no longer be taken away (e.g. because of contractual or
statutory requirements), the client has virtually no adequate options for persuading the
contractor to act in the client’s interests. The client then has no possibility for
escaping from dependence on the contractor.515
4
Problems with monitoring and controlling behaviour
The client can counter the problem of lack of information on the contractor
through appropriate incentive, monitoring and information systems. However, such
systems to offset the lack of information require investment of human and material
resources (software), resulting in additional (agency) costs to the client. Agency
theory offers three fundamental options for this:
•
514
515
516
The client has the option of setting incentives – e.g. profit sharing, enhanced
reputation – for the contractor so that achieving the contractor’s goals also
serves the client’s purposes. The incentives are aimed at bringing the interests
of client and contractor into alignment. The more the agreement between
client and contractor focuses on results, the stronger the incentive to the
contractor to consider the client’s interests.516
Ebers, Gotsch, in: Kieser, Ebers, Organisationstheorien, p. 247 (263 et seq.).
Picot, Wolff, in: Naschold, Pröhl, Produktivität öffentlicher Dienstleistungen, p. 51 (74).
Ebers, Gotsch, in: Kieser, Ebers, Organisationstheorien, p. 247 (265).
216
5
•
Another alternative is directive behavioural management. The client can agree
the contractor’s behaviour contractually, monitor compliance and sanction
violations. Under agency theory, this form of behaviour management is only
feasible to a limited degree. Formulating the corresponding provisions – e.g.
nature, extent and timetable for performance – requires a large amount of
information on the part of the client, and is virtually impossible with complex
and unstructured tasks. Directive behavioural management has the drawback
that it does not establish positive performance incentives. The contractor has
no direct interest in meeting the client’s goals. The client must accordingly
maintain a corresponding monitoring system and implement penalties
(possibly through the courts), which involve heavy costs. 517
•
The client can also reduce its information shortfall by improving its
information system to increase its knowledge of the contractor’s performance,
work and working conditions. The more information the client has about the
contractor, the more strongly will the contractor take the client’s interests into
consideration in its actions. This reduces the possibility of the contractor
hiding its self-interested actions as a result of the client’s information deficit.
Information systems which make the contractor’s actions more transparent –
e.g. accountability, reporting obligations, performance comparisons or cost
accounting systems – reduce the possibilities for deception or egotistical
exploitation of the situation. However, the contractor has no interest in
ensuring greater transparency through improved information, which is why the
information system must be combined with incentive and monitoring
mechanisms. However, the additional information systems and monitoring
result in additional costs. 518
Conclusion
The ideal situation in a contractual relationship requires full information on the
part of both parties and no costs on entering into agreements. However, this ideal is a
purely theoretical starting point. Incentive, monitoring and information systems are
intended to largely offset the deficits in the agency relationship compared to the
theoretical ideal situation. However, they cause costs in formulating, entering into,
performing and monitoring the agreement. These instruments in the agency
relationship should be efficiently designed so as to achieve specified benefits for the
client at the lowest possible costs. 519
The results of agency theory can also be used to decide whether to perform a task
directly or outsource it in an agency relationship (make or buy). In the case of tasks
which can be performed better by a contractor because of technical knowledge or
517
518
519
Ebers, Gotsch, in: Kieser, Ebers, Organisationstheorien, p. 247 (266).
Ebers, Gotsch, in: Kieser, Ebers, Organisationstheorien, p. 247 (266).
Fischer, WiSt 1995, 320 (321).
217
specialisation, and where monitoring and information systems can be implemented at
reasonable cost, outsourcing will generally be advantageous. If there is a danger that
the client’s goals will not be met to the desired quality, at a specific time or in a
specified manner, the client should perform the service itself (for the government, for
example security tasks).
The task should also be performed by the client when the resources can be used
for other purposes and when incentive, monitoring and information systems are not
resulting in satisfactory achievement of goals. 520
520
Picot, Wolff, in: Naschold, Pröhl, Produktivität öffentlicher Dienstleistungen, pp. 51 (76 et seq.).
218
Annex V
Acts granting benefits in the field of social indemnification
1
Individual factual circumstances
1.1
Burdens resulting from the war under Basic Law Art. 120 para. 1
The Federal War Victims’ Pension Act governs claims to benefits by war victims
and their dependents. In January 2007 there were 469,636 pensioners, comprising
221,506 war victims and 248,130 dependents.
Under the Act relating to Support for Persons held in Custody for Political
Reasons in Territories outside the Federal Republic of Germany, German citizens and
persons of German national origin are entitled to benefits through the corresponding
application of the Federal War Victims’ Pension Act if they were taken into custody
in territories occupied in the war and suffered injury to health. Dependents of a victim
also receive benefits. 521 In January 2007 2,085 persons were entitled to pension.
The Federal Government bears the cost of 80% of the war victims’ pension and
100% of the other benefits. 522
Under Basic Law Art. 104a para. 3 sentence 2, the Länder execute federal laws on
federal commission if the Federal Government bears at least half of the expense on
benefits under these laws. However, this provision does not apply to the Federal War
Victim’s Pension Act under Basic Law Art. 120, as Basic Law Art. 120 para. 1 takes
priority over Basic Law Art. 104a para. 3 sentence 2. 523 The Länder accordingly
execute these laws in their own right (Basic Law Arts. 83, 84).
1.2
Act on Compensation for Victims of Violent Crime
Anyone whose health is injured by deliberate criminal assault receives a pension
by the corresponding application of the provisions of the Federal War Victims’
Pension Act. Dependents of a victim also receive benefits. 524 In January 2007 15,522
persons were entitled to pension under the Act on Compensation for Victims of
Violent Crime.
The Federal Government bears 40% of the Länder expense for pecuniary benefits
under this act. 525 As the requirements of Basic Law Art. 104a para. 3 sentence 2 for
executing the act on federal commission are not met, the Länder execute the act in
their own right (Basic Law Art. 83).
521
522
523
524
525
Sections 1, 4 para. 1, section 5 Convicts Grants-in-Aid Act.
Section 1 para. 1 no. 8 First Federal Coverage of Länder Burdens Act, most recently amended by
Art. 2 no. 13 of the Act of 20 Dec. 1991 (BGBl. I p. 2317); section 13 Convicts Grants-in-Aid Act.
Siekmann, in: Sachs, Grundgesetz, Art. 120 MN. 5, 29.
Section 1 Victims Compensation Act.
Section 4 para. 2 sentence 1, Victims Compensation Act.
219
1.3
Criminal Rehabilitation Act
Administrative Rehabilitation Act
A conviction by a German state court in the territory specified in Art. 3 of the
Unification Treaty, in the period 8 May 1945 to 2 October 1990 must, on application,
be declared unconstitutional and quashed (rehabilitation) if it is incompatible with key
principles of a liberal constitutional system. If the affected person suffered damage to
health through imprisonment, they have a claim to a pension under corresponding
application of the Federal War Victims’ Pension Act. Dependents of a victim also
receive benefits. 526 The situation is comparable with administrative rulings. 527 In
January 2007, 714 persons were entitled to pension under the Criminal Rehabilitation
Act and 89 persons entitled to pension under the Administrative Rehabilitation Act.
The Federal Government bears 65 % and 60% respectively of the expense to the
Länder of pecuniary benefits under these acts. 528 The Länder accordingly execute
these laws under federal commission (Basic Law Art. 104a para. 3 sentence 2).
1.4
Military Pensions Act / Civilian Service Act
The Military Pensions Act governs the pensions under the Military Pensions Act
for former soldiers of the Bundeswehr who were injured during their service and their
dependents. 529 In January 2007 15,982 persons were entitled to pension.
The Civilian Service Act contains corresponding provisions for pensions of
former civilian service conscripts who suffered an injury during their service and their
dependents. 530 In January 2007 255 persons were entitled to pension.
The Federal Government bears 100% 531 of the expenditure on benefits under
these laws, so the Länder execute them on federal commission (Basic Law Art. 104a
para. 3 sentence 2).
526
527
528
529
530
531
Section 1 para. 1, sections 21, 22, 24 Rehabilitation under Criminal Law Act.
Section 1 para. 1, section 3 para. 1, section 4 sentence 1 Rehabilitation under Disciplinary Law Act.
Section 20 Rehabilitation under Criminal Law Act and section 17 Rehabilitation under
Disciplinary Law Act.
Sections 80 - 84 Military Staff Pension Act.
Section 47 para. 1 Conscientious Objector Service Act.
Section 88 para. 8 Military Staff Pension Act; section 51 para. 4 Conscientious Objector Service
Act in combination with section 88 para. 8 Military Staff Pension Act.
220
2
Financing shares (earmarked funds) of the Federal Government and the Länder
Social compensation
law
Expense on war
Expense on pensions
victims’ pensions (%) and therapy (%)
Federal
Land
Federal
Land
Government
Federal War Victims’
Pensions Act (BVG)
domestic
80
Federal War Victims’
Pensions Act (BVG)
foreign
Act on Compensation
for Victims of Violent
Crime (OEG) domestic
• pecuniary
benefits
• benefits in kind
Act on Compensation for
Victims of Violent
Crime (OEG) foreign
Military Pensions Act
(SVG)
Civilian Service Act
(ZDG)
Act relating to Support
for Persons held in
Custody for Political
Reasons in Territories
outside the Federal
Republic of Germany
(HHG) domestic
Act relating to Support
for Persons held in
Custody for Political
Reasons in Territories
outside the Federal
Republic of Germany
(HHG) foreign
Criminal Rehabilitation
Act (StrRehaG)
Administrative
Rehabilitation Act
(VwRehaG)
• pecuniary
benefits
• benefits in kind
100
Legal basis
Government
20
100
Section 1 para. 1
no. 8 Erstes Gesetz
zur Überleitung
von Lasten und
Deckungsmitteln
auf den Bund
100
Section 4 para. 2
sentence 1 OEG
40
60
40
100
60
100
100
100
Section 4 para. 2
sentence 3 OEG
100
100
100
100
Section 88 para. 8
SVG
Section 51 para. 4
ZDG
Section 13 HHG
80
20
100
100
100
65
35
65
35
60
40
60
40
100
Art. 1 section 20
StrRehaG
Art. 1 section 20
VwRehaG
100
221
Annex VI
Impact of structural change on the agricultural social security system
In the years 2001-2006, the number of working population liable to pay
contributions to the agricultural retirement pension system declined from 360,000 to
about 291,000, 532 i.e. by 19%. Thus, the number of insured persons dropped even
below the “worst case” of the Federal Government’s forecast: 533
Insured Persons
Trend of the numbers of insured persons in the agricultural social security system
in the period 1995-2006 and
Federal Government’s forecast up to 2015
Year
Expected numbers of insured persons according to the Federal Government’s situation reports in the years 1997,
2001 and 2005 in the “lower variant”.
Total of insured persons: Farmers within the meaning of Arts. 1.2 and 3 of the Agricultural Social Security Act, family
workers working on the farm, persons continuing to pay contributions although they do no longer work in agriculture
(Arts. 84.2 and 3 of the Act) and other voluntarily insured persons (Arts. 4 and 5 of the Act).
According to this forecast, structural change will continue in the years to come. It
is to be expected that the number of insured persons covered by the agricultural social
security system will drop to 176,000 by 2015. This would be equivalent to a further
decline of about 40% compared to 2006. At present, the persons liable to pay
contributions to the agricultural social security system is matched by a total of about 1
million beneficiaries of retirement pensions, persons exempted from compulsory
insurance, recipients of contribution subsidies and formerly insured persons.
532
533
Statistics of the Amalgamated Association of the Agricultural Pension Funds.
Federal Government’s situation report 2005 on the agricultural social security system (BT-Drs.
16/907), table B2. The Federal Government expected that the number of insured persons would be
307,000 in 2005.
222
The trend is similar for the agricultural health insurance system. Compared to
2001, when 1 million persons were insured under that system, the number of insured
persons dropped by more than 10% to about 907,000 by 2006. 534
Insured Persons
Insured Persons
Trend in numbers of insured persons/members
of the agricultural health insurance system
1993-2006
Year
Self-employed farmers
Total number of insured persons (including family members included in insurance cover)
Retired farmers and other insured persons (as of 1 October of each year under review; for 2006: 1 July and for the
years: 1993-97 annual average)
In agricultural accident insurance, the number of affiliated farming businesses also
shows a slight decline. It dropped from about 1.674 million in 2001 to 1.670 million
in 2005. 535
Farming businesses
Affiliated farming businesses
Agricultural accident insurance
1993-2005
Year
534
535
Statistics of the Federal Association of Agricultural Health Insurance Funds, total number of
insured persons as of 1 October of each year under review.
Statistics of the Federal Association of agricultural employers' liability insurance funds, affiliated
farming businesses (liable to pay contributions). Figures for 2006 are not yet available.
223
Annex VII
Model for a reorganisation of the agricultural social security system
German agricultural social security system
(DLSV)
LPK
Units
Executive management
Principle:
insured,
membership,
contribution
Regional office
Regional office
Common
tasks
Regional office
Four regional offices
Regional office
LKK
Head office
Principle:
benefit
LBG
Joint organs of the DLSV
Self-administration (four
corporations owned by the
Federal Government)
LAK
224
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