Accounting tricks

Auditors take Berlin to task over budget

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In Germany, bean-counters use peas. Source: Imago

In recent years, Germany’s Federal Audit Office has criticized numerous public authorities for what it sees as shortcomings in their fulfillment of duty — be it the European Central Bank over banking supervision, the customs office over insufficient staffing to fight money laundering, or the employment agency over poor oversight of funding for refugees’ language courses. Now it’s the governing coalition’s turn.

In an internal report obtained by Handelsblatt, the auditors lambasted the federal government for using off-budget items such as the government’s special fund to promote digital technologies. “The trend towards (…) budgeting and management of budget funds outside the core budget is progressing,” the auditors said. Fundamental principles such as completeness and clarity “have been abandoned or impaired,” the report said.

The auditors also sharply criticized the make-up of the budget. While the share of social expenditure in the federal budget would rise to 51.6 percent by 2022, investment would stagnate at a “low level” of 11 percent. Rather than invest more, Berlin plans to spend more on benefits such as Baukindergeld, a new family housing subsidy due to come into effect this fall. “Numerous tax benefits” should have been subjected to a critical review, the report said.

Making use of the good times – perhaps

Germany’s pensions policy is also on the wrong track, the auditors found. By fixing the state pension level at 48 percent of salary until 2025, the governing coalition risks “considerable additional burdens for pension insurance.” The decision was problematic as pension outlays are already rising, the report said.

Despite a good economic backdrop, Germany’s budget faces a number of challenges, including on the European level – such as Brexit and high sovereign debt levels in some EU member countries. The federal government must now use the good times to pay off its debts. But Berlin didn’t even intend to repay €19 billion ($16.5 billion) channeled into a special emergency fund during the financial crisis, the auditors noted.

Martin Greive is a Handelsblatt correspondent in Berlin. Jeremy Gray, an editor at Handelsblatt Global, adapted this story into English. To contact the author: greive@handelsblatt.com

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