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reliability requires that revenues and expenditures are estimated as precisely as possible, which can be verified provided a detailed uniform budget classification system is in place (see Federal Ministry of Finance, 2000).

3. Legal basis for the establishment and the powers of the actors in the budget system

3.1. The executive and the legislature

3.1.1. Overview

The 1949 Constitution (The Basic Law, Grundgesetz, GG) establishes a twochamber Parliament for the federal government, composed of a Bundestag with 603 members elected by universal suffrage and a Bundesrat, which represents the interests of the 16 Länder at federal level. The Bundestag makes and changes the Constitution, federal laws, and the annual budget. The Federal Chancellor is the head of government and the political leader. The President, who is head of State, has limited powers. He/she is elected by the Federal Convention, composed of both chambers of Parliament.

Germany is a federal State, divided into three tiers: federal, Land and municipal (Gemeinden). Länder have their own governments (elected by Länder parliaments), administrative authorities and independent judiciaries, laid out in Länder constitutions. Each Land and municipality is a public entity with its own authority. The 16 Länder possess considerable law-making powers and are responsible for the administration and implementation of many federal laws.

3.1.2. Roles and responsibilities of the Cabinet and individual ministers

Three principles are embodied in the federal Constitution establishing the federal executive: the chancellor principle, the departmental principle (Ressortprinzip), and the cabinet principle (Derlien, 1995, p. 78). The government consists of the Federal Chancellor and ministers (GG, Art. 62). The Federal Chancellor is elected, without debate, by the Bundestag (GG, Art. 63) and is formally appointed by the President. The Federal Chancellor selects his/her ministers, who are formally appointed and dismissed by the President (GG, Art. 64). The Federal Chancellor sets government policy guidelines within which the federal ministers run their departments on their own responsibility (GG, Art. 65). An important facet of the departmental principle is that, as part of their responsibility, individual ministers report to, or appear before, Parliament, answering questions and taking the blame for any failures. This is seen as a legitimate expression of political supremacy over administrative affairs (Döhler and Jann, 2003, p. 99). The Constitution does not explicitly refer to a “Cabinet” (of ministers). It states that “the government decides on differences of opinion between ministers”, implying the existence of a collegial body for deciding government business – the collegial principle.

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The number of ministers is not limited by law. Rather the number of ministers depends primarily on the political exigencies to accommodate party interests and to co-opt forces within the parties of the government coalition. Besides the Federal Chancellor’s Office, in 2004 there were 13 ministries. Traditionally, there has been a Minister of Finance and a Minister of the Economy, although the role of the latter in budgetary matters has diminished over time.

3.1.3. Establishment of ministries and executive branch agencies

Spending ministries. Ministries do not need a law for their establishment. Cabinet decisions create, merge, or abolish ministries. For example, in 2002, the Ministry of the Economy was merged with the Ministry of Labour by executive decree. Since the federal government has tasks at a national level, it has a greater number of ministries than Länder governments. However, since the Constitution assigns administration mainly to the Länder, the size of federal ministries is relatively small and, apart from a few exceptions (for example, Customs), there are no regional offices of federal ministries.

The internal structure of ministries is determined by ministerial order. Each spending ministry has its own budget department. The finance officer – responsible for preparing the budget – plays a powerful role in budget negotiations (Sturm and Müller, 2003, footnote 2).

Executive agencies (federal level). The Constitution allows for “independent federal authorities under public law to be established under public law. Where new functions arise for the Federation in matters on which it has the power to legislate, federal authorities may be established with the consent of the Bundesrat and a majority of members of the Bundestag” [Art. 87(3)]. There is no framework law establishing various types of federal agencies. The Administrative Procedure Act 1976 provides a somewhat circular definition of these semi-autonomous bodies, namely that each unit that carries out functions of public administration is a public authority (Döhler and Jann, 2003). The main distinguishing feature of “public authorities” is the type of law under which they are constituted (Box 2). Public law “independent authorities” are distinguished according to whether they are directly or indirectly governed by supervising ministries. At federal level, there were about 114 direct agencies and 330 indirect ones in 2001 (British Council, 2001).

Unless there are specific provisions in the enabling law establishing a public law agency, all such agencies are under the oversight of a ministry. This hierarchical structure is derived from the constitutional principle of ministerial responsibility. In principle, ministers are provided with unlimited rights, including over the agencies’ budgets, staffing, and policies. However, in practice, the degree of supervision varies. For example, the Bundesbank is an

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Box 2. Germany: Public agencies

Characteristics and types

●Agencies are under either public law or private law.

●Agencies under public law are either direct or indirect (federal) agencies.

●Direct agencies generally cover core government functions.

●Indirect agencies, including many social security and employment administrations, have their own legal identity.

●Agency types are not distinguished by function (for example, by classifying them according to whether they are policy-making, service delivery, or regulatory authorities).

●Private law entities are mainly entrepreneurial and have less ministerial oversight.

Governance structures

A collegial governing board is rare for direct public law agencies, less rare for indirect public law agencies, and frequent for private law bodies.

The federal or Länder government ministers generally appoint directors (who are responsible for representing the agency) and deputy directors (who are often responsible for internal management).

Source: Döhler and Jann, 2003.

indirect public agency and in principle the Ministers of Finance and the Economy could be board members or sit at its meetings. This does not happen, in part because the Bundesbank Act 1992 stresses it “is not subject to instructions from the federal government” (Art. 12).

As a general rule, public law agencies are part of the budget of their overseeing department – their budget is allocated top-down from the department, which reviews the legal use of money allocated. A few agencies raise substantial revenues. The law requires these to be included as revenues in the federal budget. The federal government budget only approves transfers to bodies such as the Labour Market Administration (for paying unemployment benefits) and the Social Security Administration (for paying pensions).

The Joint Procedural Code [s. 4(6)] was amended in 2000 to require ministerial departments, inclusive of agencies under them, to prepare mission statements, goal agreements, and new financial, personnel and quality controls on an experimental basis. In general, federal agencies have a distant relationship with Parliament. Agency officials may be called upon to give

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testimony to parliamentary committees. However, in practice, officials from the supervising ministry provide evidence to Parliament.

Public authorities established under private law have company status. Many are State enterprises, including utility companies and publicly owned banks. Some are research institutes or cultural bodies. There are two types of private law entities (for details, see Döhler and Jann, 2003, p. 102 and Annex). “Charged administration” agencies are generally the most free from ministerial oversight.

3.1.4. Responsibilities of senior civil servants

There are no special laws specifying the roles and responsibilities of senior civil servants in budget formulation and execution. However, all public servants’ responsibilities and rights are fully specified in law. The main distinction is between civil servants and public employees. The former are governed by civil service public laws, whereas the latter are governed by contractual arrangements under private law. All senior civil servants are in the first category.

The Constitution authorises the Federation to enact framework legislation for Länder laws concerning the legal status of persons in the public service of the Länder, Gemeinden and other corporate bodies established under public law (GG, Art. 75). A framework law has been adopted, notably the Act Defining the Scope of Civil Servants’ Rights and Duties (Beamtenrechtsrahmengesetz). The Act on Federal Civil Servants (Bundesbeamtengesetz) elaborates on the rights and responsibilities of federal civil servants. The law provides civil servants at all levels of government with life-time employment and benefits, in exchange for loyalty and professionalism. Tenure requires meeting certain criteria, of which training in law is one. Government employees who do not have civil service status – who represent over 60% of all government employees (Lüder 2002, p. 226) – generally do not have these privileges in their employment contracts.

The Constitution requires that “civil servants employed in the highest federal authorities are drawn from all Länder in appropriate proportions” (GG, Art. 36). This requirement is not strictly binding, although the administration pays attention to it.

The Federal President appoints and dismisses all federal civil servants, although he/she can delegate this function (GG, Art. 60). In practice, the minister of the concerned ministry appoints high-level appointments. German ministries traditionally have had no political staff (Derlien, 1995, p. 79). However, the State secretaries and the heads of ministerial departments can be appointed or dismissed for political reasons. This provision does not apply to the heads of semi-autonomous agencies under ministries, who, in most cases, are career civil servants appointed by the relevant minister. For some indirect

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agencies, the laws establishing them specify the non-application of civil service laws to their employees.

3.1.5. Establishment and roles of parliamentary committees

The Constitution establishes three permanent parliamentary committees

– for EU matters, for foreign affairs and defence, and for petitions (Art. 45). A permanent committee relating to public finances is not mentioned in the GG. However, under its Rules of Procedure, the Bundestag has the authority to create permanent committees. In 2003, there were 21 permanent committees, including a Budget Committee, a Finance Committee, and an Economic Affairs Committee (see Bundestag, 2003). Other specialist parliamentary committees are established in the Bundestag, broadly in accordance with the departmental jurisdictions of the executive.

The Budget Committee of the Bundestag plays an important role in approving the draft annual budget. By convention – not stated in the Rules of Procedure of the Bundestag – the chair of the Budget Committee is filled by a member from the opposition (Wehner, 2001). At the beginning of each parliamentary term, rapporteurs are appointed for each departmental budget. Given the four-year parliamentary cycles, these rapporteurs develop in-depth knowledge of the aims and financial plans of the corresponding ministry. The rapporteurs, along with the chair, share the responsibility for drawing up the results of deliberations and proposing amendments to the Bundestag.

Besides the role of proposing amendments for the plenary session’s second reading of the draft budget law, there are two other important functions of the Budget Committee. First, its sub-committee, the Auditing Committee, ensures that the recommendations made in the annual report of the Federal Court of Audit are introduced into the budgetary processes. This sub-committee can request the Federal Court of Audit to examine particular aspects of budget execution, accounts, or procedures. Second, under rule no. 96 of the Rules of Procedure, the Budget Committee is asked, after the first reading of any bill that entails higher public expenditure, to investigate whether the proposed bill is compatible with the budget situation. Unlike comments from other committees, the Budget Committee’s report is addressed directly to the plenary for the second reading, not to the chair of the responsible specialist committee, that is, the committee responsible is not free to accept or reject the Budget Committee’s views. Under the constitutional provision that budget revenues and expenditures must be balanced (GG, Art. 110), the plenary must ensure that cover is provided for new expenditures. The Budget Committee submits a recommendation for cover; failure to find budgetary cover would result in the bill not being adopted.