This section describes the main characteristics of Germany’s management control structure. In order to provide a format that facilitates the comparison of practices in different countries, the introduction focuses on six basic areas.
Authority for management controls
In Germany there is no general responsibility for developing and promulgating standards for management control systems in government organisations. Each part of government and each government organisation is responsible for its own management control and for creating its own management control systems. However, given the structure of the German administration (described below), the main and decisive responsibility for developing and promulgating standards for management control systems in government organisations may be placed at a higher level of the administration.
Development and promulgation of management controls
Management control standards are not laid down in legislation. They may be defined by the administration concerned, depending on its level of authority. Because the German administration is hierarchical, the authority to make such decisions is divided among the different levels of the administration. Thus, management control systems can be established by some lower-level authorities within their area of responsibility, by a government organisation at a higher level for those administrations subordinate to it, or by a ministry for all the government organisations it supervises. Thus, the management control systems are defined by the administration concerned, either for its own use or for all subordinate administrations.
The hierarchical structure also influences the introduction of management control systems. A higher-level authority is usually in a position to instruct lower-level administrations to introduce specific management control systems and to supervise their application.
This system generally leaves the heads of government organisations sufficient flexibility to adapt the standards to their own management needs. To date, lower-level administrations have been free to add management control systems on their own initiative, and so far there have been no major complaints about lack of flexibility.
Role of the central agencies
The Bundesrechnungshof, the Federal Court of Audit (FCA), Germany’s supreme audit institution, is not legally in a position to issue orders or instructions to the administration as a result of an audit. It verifies management control systems in its normal audits, and it may carry out specific audits in this respect. In the course of its audits, it verifies whether there are sufficient effective management control systems and whether they are applied properly. These audits also verify whether the administration itself is using its management control systems to monitor its own performance against the standards concerned. The FCA also verifies the application of various important standard accounting rules, the management of human resources, and the integrity of the automated data processing systems.
On the basis of the outcome of the audits, the FCA makes recommendations to the administration audited and/or the ministry concerned. The decision to follow these recommendations or not is up to the administration. In serious cases, when the recommendations are not followed, the FCA will inform Parliament either through its annual report or in a special report to Parliament or a parliamentary committee. Generally, central agencies such as the budget office or the Ministry of Finance do not have more power in this respect than the FCA. They are more concerned with budgeting and accounting and less with actual work performance and the monitoring of performance through management control systems.
Adherence to INTOSAI Guidelines
Generally, the INTOSAI Guidelines for Internal Control Standards have been fully implemented by the German administration. Of course, there are always cases where management control systems are insufficient or not fully implemented. Some of these are presented below. However, to the knowledge of the FCA, there are no areas completely lacking in the management control systems required under the INTOSAI Guidelines.
Monitoring and evaluating management control systems
Management is the main user of the management control systems. Therefore, in the first instance, management itself has to monitor the performance of these management control systems. In addition, internal audits look into the application of the management control systems in the course of their audit. The role of the external audit carried out by the FCA is described above.
The FCA has no mechanism for overseeing the various management control systems in the German administration. In addition, it has no specific section responsible for questions of management control systems. Thus, each audit section is responsible for the management control systems in the administration it audits. However, on the basis of various audits, the general impression is that the management control systems in Germany are efficient and cost-effective as well. The FCA has not yet encountered really ineffective or expensive management control systems, and there appears to be no reason to criticise the administration in this respect.
Resources, skills, and training for implementing management control systems
Each administration has to ensure that managers and staff have the necessary resources, skills, and training programmes to operate effective management control systems. If there is a lack of staff, this has to be brought to the attention of the higher-level administration, which will bring it to the attention of the ministry concerned. If the ministry concerned is also of the opinion that more staff is required, it must include a request to this effect in the budget proposal for the following year. Training programmes are usually also the responsibility of the administration concerned. Various government institutions or private companies subsidised by government offer sufficient and efficient training for civil servants.