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reporting requirement. They have to prepare accounts as close as possible to those of federal ministries (BHO, s. 87).

4.5. External audit17

The Federal Court of Audit (Bundesrechnungshof), including its nine regional audit offices, performs the external audit functions at federal level. The legal basis for the Federal Court of Audit and its working procedures are mainly contained in the Constitution, the BHO and the 1985 Bundesrechnungshof Act. Independent courts of audit also exist at Länder level – they perform at Länder level a role similar to that of the Federal Court of Audit at federal level. Their legal basis is established in Länder constitutions and laws; these are not covered in this sub-section.

4.5.1. Managerial, financial and operational independence

The Federal Court of Audit is not part of the legislative, judicial or executive branches of government. It has an independent status and is subject only to the law. This special feature distinguishes the external audit body from internal audit bodies that are integrated into ministries and various agencies. Functionally, the Federal Court of Audit provides assistance to the federal Parliament and the federal government (Bundesrechnungshof Act, s. 1).

Upon a proposal of the federal government, Parliament elects the president and vice-president of the Federal Court of Audit, for a non-renewable period of 12 years (Bundesrechnungshof Act, s. 5). The staff of the Federal Court of Audit – about 700 established posts – is made up of members (president, vice-president, senior audit directors and audit directors), audit managers, auditors and support staff. The Constitution specifies that the members of the Federal Court of Audit enjoy the same independence as judges (GG, Art. 114). In respect to their duties, they are governed by the same regulations as those applied to the judges of federal supreme courts (Bundesrechnungshof Act, s. 3). Internally, decisions are made collegially, including by “colleges” and a “senate”, whose composition and functions are outlined in the Bundesrechnungshof Act.

In the budget preparation procedure, the budget of the Federal Court of Audit enjoys the same protection as the budgets of other constitutional bodies. If a draft budget adopted by the federal government diverges from the estimates of the Federal Court of Audit without the latter having agreed to the changes, the estimates of the Federal Court of Audit must be presented to the Parliament unchanged (BHO, s. 29.3). Parliament is thereby informed of the differences of opinion between the Federal Court of Audit and the federal government. The accounts pertaining to the annual budget of the Federal Court of Audit are examined each year by the two chambers of Parliament, who grant discharge (BHO, Art. 101).

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The president of the Federal Court of Audit is responsible for general management (Bundesrechnungshof Act, s. 6), including recruitment of staff. However, members must be qualified for a career in audit and at least onethird of members must be qualified to hold judicial office (s. 3).

4.5.2. Institutional coverage of audits

The Federal Court of Audit has very broad audit responsibilities, covering “the entire financial management of the Federation, including its separate property funds” (BHO, s. 88). This authority covers nearly all public law corporations and social security institutions established under federal law,18 and enterprises established under private law in which the Federation is a stakeholder (HGrG, ss. 53 and 55; BHO, ss. 104 and 111). In addition, the Federal Court of Audit may audit bodies outside the federal administration if they implement parts of the federal budget or have been reimbursed by the Federation, or receive federal grants (BHO, s. 91). The Federal Court of Audit may restrict its audit coverage at its own discretion. Joint audits with Länder audit courts take place when responsibilities overlap (BHO, s. 93).

4.5.3. Types of audit

The Constitution requires the Federal Court of Audit to audit the accounts and determine whether public finances have been properly and efficiently administered (GG, Art. 114). Audits examine whether the regulations and principles of correct financial management have been observed (BHO, s. 90). The BHO specifies:

●financial audits (“whether the budget act has been adhered to”);

●compliance audits (“receipts and payments have been properly substantiated by vouchers”);

●value-for-money audits (“funds are administered efficiently and economically” and “functions might be performed with fewer human or material resources, or more effectively by other means”).

Besides audit, the Federal Court of Audit is charged with advisory responsibilities. First, it has to be consulted prior to the issuance of administrative regulations for implementing the Federal Budget Code (BHO, s. 103). This affects particularly regulations concerning financial transactions and accounting systems. For their part, the federal authorities are required to inform the Federal Court of Audit, without delay, whenever there are new federal regulations relating to the management of federal budget funds or affecting federal receipts and payments (BHO, s. 102). Second, the Federal Court of Audit participates in budget negotiations between the Federal Ministry of Finance and departments [BHO, s. 27(2)]. Third, the Federal Court of Audit provides testimony to Parliament in the course of preparatory talks with

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the chairs of the parliamentary Appropriations Committee and during that committee’s deliberations. There is no legislation requiring this involvement of the Federal Court of Audit in the parliamentary deliberations on the budget, which represents a special case of advising the Parliament. The Federal Court of Audit serves as a valuable source of information for the Appropriations Committee, as it informs and advises the rapporteurs of all the parliamentary political parties in a professional and politically neutral manner.

4.5.4. Powers of investigation

The Federal Court of Audit is authorised to obtain all the necessary information for carrying out its functions: all documents must be provided within the prescribed time periods (BHO, s. 95).

4.5.5. Reporting obligations and publication

The Constitution requires the Federal Court of Audit to submit an annual report directly to the federal government as well as to the Bundestag and the Bundesrat (GG, Art. 114). The BHO elaborates: “the Federal Court of Audit shall compile annual observations for the two chambers of Parliament, including the results necessary for the discharge of the federal government in respect to the budget and capital accounts.” Any confidential observations shall be transmitted to a more limited audience (BHO, s. 97). Besides an annual report, the Federal Court of Audit may at any time inform both chambers of Parliament of matters of particular importance, provided it informs the federal government at the same time (BHO, s. 99). The law does not require publication, although as a rule, these reports are disclosed to the public. In addition to reports to Parliament, the Federal Court of Audit carries out about 600 audit missions each year, providing relevant report findings to the audited bodies.

4.5.6. Enforcement of findings

The Bundestag shall, with due regard to the comments of the Bundesrat, ascertain the substantial matters raised in the annual report of the Federal Court of Audit and shall decide on the action to be taken (BHO, s. 114). The Federal Court of Audit has no independent powers to enforce its findings – it must convince parliamentary committees by the force of its arguments. Parliament must ensure follow-up: the Bundestag sets a date by which the federal government must report back to Parliament on the action taken. When such action has failed to achieve the desired result, either chamber may take up the matter again (BHO, s. 114). As a practice (not a legal requirement), the Federal Court of Audit issues an audit impact report stating whether and how the audit recommendations have been supported by Parliament and what remedial action has been taken.